COURT FILE NO.: CV-628334-00A1 (Toronto) DATE: 20210315

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN :

EARTH BORING COMPANY LIMITED Plaintiff

-and-

GROUPE CRH CANADA INC./CRH CANADA GROUP INC., formerly DUFFERIN CONSTRUCTION COMPANY, A DIVISION OF HOLCIM (CANADA) INC. Defendant

Motion to Strike Paragraphs from Dufferin’s Statement of Defence and Counterclaim

Motion

[1] The Plaintiff (“Earth Boring”) is seeking to strike certain alleged scandalous and non-compliant paragraphs of Dufferin Construction Company, a division of CRH Canada Group Inc.’s (“Dufferin”) Statement of Defence and Counterclaim.

The Background

[2] The Corporation of the City of Mississauga (“City”) and Dufferin entered into a written contract dated October 2, 2014 (“Contract”), known as Contract 17 111 06104 Procurement FA.49.468-13 Torbram Road Grade Separation, to perform the described work on City lands ("Project").

[3] Pursuant to the Contract, Dufferin was to supply and deliver all labour, materials, equipment and services necessary to complete the Project, including all required roadworks and appurtenances, storm sewers and appurtenances, structures, rail, pumping station, channel diversion, roadway electrical, and Region of Peel works.

[4] Dufferin retained subcontractors to perform some of the work and services under the Contract.

[5] The work on the Project commenced.

[6] During the work on the Project, there were delays in completing the Project – reasons, responsibilities and liabilities will have to be sorted out. There are disputes regarding site conditions, design issues and other obligations - reasons, responsibilities and liabilities will have to be sorted out. There are disputed extras – the amount and liability will have to be sorted out.

[7] These and other issues caused financial issues and legal disputes between the City and Dufferin and, consequently, financial issues and legal disputes between Dufferin and some of its subcontractors.

[8] As a result, legal proceedings were commenced before the Project was completed.

[9] The Project was certified as “substantially performed” on July 10, 2020.

[10] The Project is not “complete”. Finishing and warranty work continues. Both the City and Dufferin allege continuing damages against the other.

Dufferin v. City (CV-19-3245) (“Dufferin Action”)

[11] On August 2, 2019, Dufferin commenced the Dufferin Action against the City.

[12] Dufferin claims against the City for breach of Contract, breach of collateral warranties, negligence, negligent misrepresentation and/or breaches of the duties of honest performance, good faith and fair dealing. The damages are estimated to be $45,000,000.00 at the time of the claim and also seeks additional damages and losses to be incurred to complete the Project.

[13] On or about November 15, 2019, the City delivered its Statement of Defence and Counterclaim in the Dufferin Action. The City denies liability to Dufferin. The City Counterclaims against Dufferin for damages in the amount of $10,000,000.00 which includes liquidated damages, contract administration fees, engineering fees, flagging costs, and temporary storm water pumping costs. The City claims that the liquated damages payable under the Contract are in addition to any other remedy, action, or other alternative available to the City. The City also claims continuing damages.

[14] On May 25, 2020, Dufferin delivered a Reply and Defence to Counterclaim. In its Reply and Defence to Counterclaim, Dufferin denies the City’s damages, denies the City is entitled to assert a claim for liquidated damages, and that the City’s claim for liquidated damages is unenforceable and contrary to public policy.

[15] On or about September 29, 2020, Dufferin delivered an Amended Statement of Claim. In its amended pleading, Dufferin added grounds of relief and claims (such as errors or omissions by the City in the design) and for additional damages and losses that Dufferin had allegedly continues to accrue to complete the Project.

[16] On January 15, 2021, the City delivered its Amended Statement of Defence and Counterclaim in the Dufferin Action.

Earth Boring Action (CV-19-628334) (“Earth Boring Action”)

[17] Earth Boring Company Limited (“Earth Boring”) is a subcontractor of Dufferin. Earth Boring provided grade separation work for Dufferin on the Project.

[18] On October 1, 2019, Earth Boring commenced an action against Dufferin seeking $3,160,428.97 in damages (the “Earth Boring Action”). Earth Boring advances claims in contract, negligence and unjust enrichment against Dufferin. Earth Boring alleges that it encountered unexpected subsurface conditions (for which it claims it is not responsible) when attempting to perform certain tunneling work pursuant to the subcontract (the “Subcontract”) resulting in additional costs, expenses and delays, which led to substantial damages.

[19] On September 20, 2020, Dufferin delivered an Amended Statement of Defence and Counterclaim.

[20] On October 5, 2020, Dufferin commenced a Third Party claim against the City (“Third Party Claim”). In the Third Party Claim, Dufferin claims against the City for contribution and indemnity under the Negligence Act, at common law and in equity for any amounts which Dufferin may be found to be responsible to Earth Boring and/or in the alternative, damages for breach of contract equal to any amounts found to be owing from Dufferin under its subcontract with Earth Boring plus markups.

[21] On November 20, 2020, the City defended Dufferin’s Third Party Claim by delivering its Third Party Defence. The City did not defend the “main action”. The City refers to the Dufferin Action in its Third Party Defence and pleads that the allegations made in the Third Party Claim are duplicative, and in most cases, identical to those alleged against the City in the Dufferin Action. In addition, the City pleads that Dufferin seeks the same relief against the City as it seeks in the Dufferin Action, to which the City has fully responded.

[22] The Earth Boring Action was brought in Toronto, however, this court ordered that the Earth Boring Action be transferred to Brampton and be case managed with the other actions relating to this Project.

[23] To date no party has brought a motion to consolidate or have the proceedings tried together.

Position of the Parties

Earth Boring

[24] Earth Boring submits that the specified paragraphs should be struck because they:

a) are irrelevant and unresponsive to the Earth Boring’s claims, Dufferin’s defences or its counterclaim;

b) are duplicative of allegations made by Dufferin against the City in the Dufferin Action;

c) only relate to issues between Dufferin and the City;

d) contain no or insufficient material facts; and/or

e) re-introduce, reference and plead in response to allegations in Earth Boring’s original Statement of Claim.

Dufferin

[25] Dufferin submits its allegations are relevant and material to its defence and counterclaim to the Earth Boring’s claim in contract, negligence and unjust enrichments.

Analysis

The Law

[26] In accordance with Rule 25.06(1) of the Rules of Civil Procedure, every pleading is required to contain a concise statement of the material facts on which the party relies for the claim or defence.

[27] Rule 25.11 of the Rules of Civil Procedure provides that the Court may strike out or expunge all or part of a pleading or other document, with or without leave to amend, on the ground that the pleading or other document:

(a) may prejudice or delay the fair trial of the action;

(b) is scandalous, frivolous or vexatious; or

(c) is an abuse of the process of the court.

[28] In Jourdain v. Ontario, relying on Toronto (City) v. British American Oil Co. the court stated that the onus on the party moving to strike out a pleading:

38 While pleadings must not offend the Rules, it is well established that counsel may frame their pleadings as they deem advisable and this right should not be lightly infringed by the court. The inclusion of unnecessary detail or excessive verbosity in a pleading is not of itself a reason for striking out a pleading. It is incumbent upon the party seeking to strike out pleadings to show that he or she is prejudiced or embarrassed by the pleading or that a fair trial will be delayed by the irregularity : [….].

[emphasis added]

[29] In Abdi Jama (Litigation Guardian of) v. McDonald’s Restaurants of Canada Ltd. the court state that: “motions under rule 25.11 should only be granted in the "clearest of cases".

Earth Boring’s Claims

[30] Earth Boring’s claims against Dufferin are in contract, negligence and unjust enrichment: in contract based upon express or implied contractual terms between Earth Boring and Dufferin and includes certain references to the contract between the City and Dufferin; in tort based on an alleged duty of care owed to Earth Boring by Dufferin relating to specifications and manner of the work to be done by Earth Boring; and unjust enrichment for any monies Dufferin is to or might receive from the City for Earth Boring’s work.

[31] Earth Boring claims, because of subsurface conditions, it had to use different and more expensive equipment and methods to perform the work resulting in damages including from the delays, thereby incurring additional costs of $3,160,428.97.

[32] There are several noteworthy statements in Earth Boring’s Amended Statement of Claim:

a) Earth Boring claims the benefit of a Subcontractors First Clause in the Contract between the City and Dufferin, which essentially provides that Dufferin can only advance subcontractors claims against the City after the subcontractors are paid, liability is acknowledge or found. (para. 5);

b) Earth Boring claims that Dufferin, under the Contract between Dufferin and the City, was obliged to perform subsurface investigations for the underground work required to be performed by Earth Boring. (para. 6);

c) Earth Boring claims that, in addition to an express or implied term that it could use industry standard skills and equipment, Dufferin owed a duty of care to Earth Boring to ensure such skills and equipment could be used. Earth Boring states that Dufferin breached its duty of care to Earth Boring;

d) Earth Boring claims that City and Dufferin assumed all risk for costs incurred outside of normal microtunneling procedures; and

e) Earth Boring claims that, to the extent Dufferin receives compensation from City in respect of additional compensation relating to Earth Boring’s work, Earth Boring seeks such payment based on the doctrine of unjust enrichment. (para. 75).

[33] In my view, Earth Boring’s allegations make the contractual terms and duties owed between the City, Dufferin and Earth Boring relevant.

[34] Earth Boring submits its claim is for a liquidated debt. However, the fact that it can specify the amount it claims with precision does not make it a liquidated claim. Earth Boring’s claim is unliquidated as it also seeks damages for negligence, unjust enrichment and the amount claimed is dependent on the interpretation of the contracts at issue. Dufferin’s counterclaim against Earth Boring is also unliquidated. I am not persuaded that the nature of the claims and counterclaim (whether they are liquidated or not) is a basis upon which to determine whether certain paragraphs should be struck.

[35] Let me now deal with the specific paragraphs sought to be struck by Earth Boring.

Paragraph 1

[36] Dufferin’s Statement of Defence and Counterclaim beginning with the words “and the allegations originally made” and then reference “the original statement of claim”.

[37] Earth Boring, subsequent to its “original” statement of claim, replaced it with a Fresh as Amended Statement of Claim. Earth Boring did not include, in the Fresh as Amended Statement of Claim, certain statement that it had made in its “original” statement of claim.

[38] Earth Boring submits that Dufferin’s paragraph referring to the statements in the “original” statement of claim, be struck as an abuse of process because the allegations in the “original” statement of claim were “formally withdrawn”. Earth Boring wants to distance itself from certain allegations made in its first or original Statement of Claim, but Dufferin seeks to rely on the fact that Earth Boring had previously made these statements with which Dufferin agrees.

[39] When Earth Boring sought to file a Fresh as Amended Statement of Claim, the matter came before Master Short. Master Short granted Earth Boring leave to file a Fresh as Amended Statement of Claim but also expressly permitted Dufferin, by his endorsement, to append Earth Boring’s original Statement of Claim “so as to provide a consolidated outline of what was originally asserted in the Plaintiff’s original Statement of Claim”. Master Short’s order was not appealed.

[40] It would have been futile for the Master to permit “Dufferin to annex a schedule to its Statement of Defence to the Amended Claim setting out any or all portions of the previous from the original Statement of Claim so as to provide a consolidated outline of what was originally asserted in the Plaintiff’s Original Pleading” unless Dufferin could, if it chose to, reference statements in the “original” Earth Boring pleading.

[41] Earth Boring paragraphs in its original Statement of Claim were material facts. Earth Boring’s submission that Dufferin cannot adopt those material facts by referring to them, albeit in an awkward fashion, by referencing the original Statement of Claim, in its Amended Statement of Defence, makes little sense.

[42] I see no prejudice or harm to Earth Boring in permitting this paragraph to remain.

[43] This part of Earth Boring’s motion is dismissed.

Paragraphs 7-20

[44] Earth Boring submits that these paragraphs only relate to issues between Dufferin and the City and are not relevant to the Earth Boring claim.

[45] I agree that these paragraphs are primarily directed at issues in the dispute between Dufferin and the City. They appear to have been “lifted” from another pleading without specifically tailoring them to this specific proceeding.

[46] I recognize that these paragraphs are relevant in that “Dufferin intends to prove at the trial of the Earth Boring Action that it was not responsible for Earth Boring’s losses because it did not make the allegedly negligent decisions”. If Dufferin can establish that Earth Boring’s damages was due to the negligence of the City, and not Dufferin, then Dufferin may be absolved from liability to Earth Boring at least in negligence.

[47] Further, given Earth Boring’s allegations of unjust enrichment, Dufferin by necessity must refer to its dealings with the City. For example, Dufferin might avoid liability in unjust enrichment to Earth Boring if Dufferin establishes that it vigorously sought to recover those additional costs from the City but was not able or entitled to recover same from the City and hence, Dufferin has not been unjustly enriched.

[48] Nevertheless, there is clearly a problem with the wording of these paragraphs.

[49] As presently worded, these paragraphs do not tie these alleged materials facts to the claim advanced by Earth Boring against Dufferin. The paragraphs require some very generous reading of these paragraphs to discern how they could be relevant to the Earth Boring claim. Most paragraphs fail to make a clear or plausible reference or connection to the Earth Boring claim. For example, Dufferin specifies how the City breached its duty to Dufferin and how Dufferin suffered damages generally but that paragraph lacks any no connection whatsoever to the Earth Boring claims or Dufferin’s defence to these claims.

[50] To attempt to ascertain what words in or portions of these paragraphs can be connected to a Dufferin defence to the Earth Boring claim would essentially have this court redraft these paragraphs. The court should not redraft a pleading for the parties.

[51] Pleadings ought to be clear, concise and the relevance clear to the reader. This is necessary to frame the issues for the proceedings from productions to trial.

[52] These paragraphs are struck, with leave to amend, so that the amended paragraphs specifically and clearly relate the materials facts pled by Dufferin to its defence to the Earth Boring claims against Dufferin in this action.

Paragraphs 18(d), 19 and 20

[53] Having struck these paragraphs above, with leave to amend, I do not need to deal with these paragraphs.

[54] Dufferin should make the basis clear upon which it says it is not liable to Earth Boring’s claims and/or why any liability is that of the City.

Paragraph 41

[55] Earth Boring submits that Dufferin failed to plead the material facts or any particulars of what costs were imposed upon it by the City, and how or why Earth Boring’s alleged actions or inactions caused or contributed to the City incurring such costs.

[56] When read in context with the rest of the pleading, see paragraph 40 in particular, I am satisfied that it properly and clearly sets out the basis that Dufferin claims it is entitled to back charge Earth Boring.

[57] The quantum has not been particularized because the Project is not complete, and the costs back charged by the City have not yet been quantified.

[58] Earth Boring’s attack on this paragraph is dismissed.

Conclusion

[59] Paragraphs 7 to 20 of the Dufferin Defence and Counterclaim are struck with leave to amend.

Costs

[60] Any party seeking costs shall serve and file written submission on entitlement and quantum within two weeks of the release of these reasons. Written submissions shall be limited to 3 pages, with attached Costs Outline and any authorities.

[61] Any responding party shall have one week thereafter to serve and file responding submissions. Written submissions shall be limited to 3 pages with any authorities relied on attached.

[62] There shall be no reply submissions without leave.

RICCHETTI RSJ. Date: March 15, 2021