Court File and Parties

COURT FILE NO.: 2168/19

DATE: 20210804

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Learmont Roofing Ltd., Plaintiff

AND

Learmont Construction Ltd., Rino Pagliaroli, 2653389 Ontario Inc. and Anthonie Boer, Defendants

BEFORE: Justice S. Nicholson

COUNSEL: D. MacKeigan for the plaintiff M. Adilman for the defendants 2653389 Ontario Inc., Anthonie Boer and Learmont Construction Ltd. R. MacGregor for the defendant Rino Pagliaroli (took no position on the issues)

HEARD: June 14, 2021

ENDORSEMENT FROM CASE CONFERENCE

NICHOLSON J.:

[1] This matter was before me during regular Friday motions court on June 4, 2021, usually reserved for shorter, simpler motions. The plaintiff sought directions and a timetable in relation to a motion for summary judgment motion that was launched on July 29, 2020. It was not possible to give the matter the consideration it required and I set a case conference under rule 50.13 for June 14, 2021. The case conference, through happenstance, was also before me.

[2] In preparation for the case conference, I had an opportunity to review all of the motion records as well as read the transcripts from the cross-examinations of each of the parties. I feel that I have a sufficient understanding of the proceeding.

[3] At the outset, this is not the summary judgment motion. The presiding judge will be entrusted with determining whether this matter is suited for resolution under rule 20. Nothing that I say here is intended to derogate from that judge’s decision-making process.

[4] The purpose of this case conference was to move this matter forward, as it has clearly gotten mired down in procedural skirmishes. The plaintiff’s representative has appeared for cross-examination on his affidavit on three prior occasions, and a fourth attendance is sought. On each occasion, there have been refusals given to questions posed, necessitating a motion for refusals to be heard by Tranquilli J. in March of 2021. A further motion is now contemplated by the defendants (other than Mr. Pagliaroli) (“the Boer defendants”). The Boer defendants then seek to amend their statement of defence and counterclaim to allege fraud, theft and/or conversion.

Background:

[5] Again, the summary judgment motion judge will be tasked with fact-finding. However, I set out my understanding of the facts briefly. I am not making any findings of fact.

[6] Mr. Chris Off and Mr. Rino Pagliaroli had worked together historically. Mr. Off was a roofer. Mr. Pagliaroli owned a construction company, Learmont Construction Inc. (“Construction”). Mr. Off had a numbered company, (“253 Ontario”) by which he carried on business. In order to secure a commercial roofing job on a project called Beaver Creek, the two men reached an agreement by which Mr. Off would submit a tendered bid of approximately $290,000. Construction would act as the general contractor on the project. Mr. Off started a new company, Learmont Roofing (“Roofing”) to be the sub-contractor and actually complete the roofing work. Essentially, Mr. Off and Mr. Pagliaroli agreed that Roofing would be paid 95% of the contract and Construction 5%. The owner of the Beaver Creek property would submit the funds to Construction who would then pay Roofing.

[7] There is an issue with respect to this alleged contract. Mr. Pagliaroli has raised as a defence that his electronic signature was affixed to the contract without his knowledge. It appears that he affirms the 95-5 arrangement but denies agreeing to the 9% interest charged on overdue amounts.

[8] In any event, Mr. Pagliaroli apparently owed money to Mr. Anthonie Boer. After Roofing and Construction entered into their agreement with respect to the Beaver Creek project, Mr. Pagliaroli transferred 60% of Construction to Mr. Boer in satisfaction of this debt. Although I do not believe the parties are in agreement on this issue, Mr. Pagliaroli indicates that Mr. Boer then became responsible for the day to day banking on behalf of Construction.

[9] The Beaver Creek project was awarded to Construction and Roofing began the work on the project. Over the course of the project, five payments were made by the owner to Construction in various amounts. 95% of the first, second, third and fifth payments were paid by Construction to Roofing in accordance with the agreement allegedly reached between Mr. Off and Mr. Pagliaroli. Mr. Off picked up a cheque representing the fourth payment, in the amount of $138,134.33 and took it to his bank. However, Mr. Boer put a stop-payment on the cheque and that sum has never been paid to Roofing.

[10] Mr. Boer has withdrawn funds from Construction and placed the funds in other companies he controls, including the defendant 2653389 Ontario Inc. At present, Construction appears to have no assets. Mr. Pagliaroli has since resigned as an officer of Construction.

[11] Thus, Roofing has commenced this action for payment of the $138,134.33 that it alleges is owed to it. It has brought a motion for summary judgment on the contract between Roofing and Construction to recover its 95% share of the fourth instalment.

[12] The roofing project was completed and there is no indication that the owner of Beaver Creek property is in any way dissatisfied with the work, or the costs of the project. However, Mr. Boer, in defence of this action and the motion for summary judgment, takes the position that Mr. Off and Mr. Pagliaroli told him in a meeting in March of 2019 that they had “juiced” the contract. He alleges that they admitted over-charging the sum of $40,000 so that the lead engineer on the project, an acquaintance of Mr. Off and Mr. Pagliaroli from their historical employer, could have a roof put on his own cottage property by Mr. Off.

[13] Mr. Off denies this allegation. He has produced a cheque in the amount of approximately $59,000 representing a separate payment by the engineer in relation to the cottage roof. Nonetheless, Mr. Boer is convinced, either actually or tactically, to uncover evidence of fraud on the Beaver Creek project, and now other unrelated projects, in defence of this action and motion.

[14] Importantly, if there has been fraud committed upon the owner of the project, it is not Construction or Mr. Boer whose money has been taken. No part of the $138,134.33 that was paid to Construction and appears to be in the hands of Mr. Boer’s companies has been repaid to the owner of the project. Counsel for Mr. Boer concedes that the owner has not even been advised of his concerns regarding fraud.

[15] The plaintiff commenced this motion for summary judgment. The motion was to be heard on March 29, 2021. Responding materials were filed by both Mr. Pagliaroli and by Mr. Boer. Cross-examinations on the affidavits were conducted in January of 2021.

[16] On the cross-examination of Mr. Off, counsel refused to allow him to answer certain questions and refused to agree to produce certain documentation. Mr. Boer brought a motion with respect to these refusals and to adjourn the summary judgment motion, which was heard by Tranquilli J. on March 19, 2021. In her endorsement dated March 19, 2021, Tranquilli J. adjourned the summary judgment motion and ordered the plaintiff to answer the four refusals from his March 11, 2021 cross-examination.

[17] Subsequent to that motion, Mr. Off complied with the order of Tranquilli J. and answered the refusals satisfactorily. He was then cross-examined a third time on May 6, 2021. Further refusals were made at that cross-examination, on the basis of relevancy. The Boer defendants have now signalled their intention to amend their statement of defence and counterclaim to effectively increase the scope of relevancy to include those productions. They would then want to continue with cross-examination of Mr. Off.

[18] The Boer defendants are now seeking documentation with respect to expenses and payments of expenses on Roofing projects that were ongoing at or around the same time as the Beaver Creek project, and which Construction was not involved in. They also seek a Financial Statement from Roofing that contains less redactions than what has been produced. Roofing did provide a Financial Statement that is almost entirely redacted, except for showing a loan between 253 Ontario and Roofing.

[19] Some of the documentation produced by the plaintiff appears to show that 253 Ontario paid for some of the expenses associated with the Beaver Creek project. Accordingly, the Boer defendants wish to amend their defence to allege that Roofing did not perform any of the work, 253 Ontario did the work, and thus, Roofing has no standing to advance a trust claim under the Construction Act. Roofing asserts that this is merely a financing arrangement between 253 Ontario and Roofing and has no impact on the trust provisions of the Construction Act. They liken the relationship between 253 Ontario and Roofing to a banking arrangement between a subcontractor and its bank. In their submission, where Roofing got the money to finance their business operations from does not impact their ability to assert this claim under the Construction Act.

Analysis:

[20] I harken back to rule 1.04 of the Rules of Civil Procedure which provides as follows:

1.04(1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.

(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.

[21] Indeed, the very purpose of the summary judgment procedure set out in rule 20 is to permit matters to be resolved in a summary fashion in cases where justice can be achieved without a trial. The leading case on rule 20, Hyrniak v. Mauldin, 2014 SCC 7, implores judges to pave the way to timely, less expensive access to justice. Karakatsanis J. stated as follows at paras. 23-29:

[23] This appeal concerns the values and choices underlying our civil justice system, and the ability of ordinary Canadians to access that justice. Our civil justice system is premised upon the value that the process of adjudication must be fair and just. This cannot be compromised.

[24] However, undue process and protracted trials, with unnecessary expense and delay, can prevent the fair and just resolution of disputes. The full trial has become largely illusory because, except where government funding is available, ordinary Canadians cannot afford to access the adjudication of civil disputes. The cost and delay associated with the traditional process means that, as counsel for the intervener the Advocates’ Society (in Bruno Appliance) stated at the hearing of this appeal, the trial process denies ordinary people the opportunity to have adjudication. And while going to trial has long been seen as a last resort, other dispute resolution mechanisms such as mediation and settlement are more likely to produce fair and just results when adjudication remains a realistic alternative.

[25] Prompt judicial resolution of legal disputes allows individuals to get on with their lives. But, when court costs and delays become too great, people look for alternatives or simply give up on justice. Sometimes, they choose to represent themselves, often creating further problems due to their lack of familiarity with the law.

[26] In some circles, private arbitration is increasingly seen as an alternative to a slow judicial process. But private arbitration is not the solution since, without an accessible public forum for the adjudication of disputes, the rule of law is threatened, and the development of the common law undermined.

[27] There is growing support for alternative adjudication of disputes and a developing consensus that the traditional balance struck by extensive pre-trial processes and the conventional trial no longer reflects the modern reality and needs to be re-adjusted. A proper balance requires simplified and proportionate procedures for adjudication and impacts the role of counsel and judges. This balance must recognize that a process can be fair and just, without the expense and delay of a trial, and that alternative models of adjudication are no less legitimate than the conventional trial.

[28] This requires a shift in culture. The principal goal remains the same: a fair process that results in a just adjudication of disputes. A fair and just process must permit a judge to find the facts necessary to resolve the dispute and to apply the relevant legal principles to the facts as found. However, that process is illusory unless it is also accessible—proportionate, timely and affordable. The proportionality principle means that the best forum for resolving a dispute is not always that with the most painstaking procedure.

[29] There is, of course, always some tension between accessibility and the truth-seeking function but, much as one would not expect a jury trial over a contested parking ticket, the procedures used to adjudicate civil disputes must fit the nature of the claim. If the process is disproportionate to the nature of the dispute and the interests involved, then it will not achieve a fair and just result.

[22] Hyrniak has been applied outside the context of summary judgment motions as authority for the principle that our legal system must improve in providing timely and less expensive access to justice. For example, Hourigan J.A., for the Ontario Court of Appeal, in Louis v. Poitras, 2021 ONCA 49, in the context of striking jury notices during the COVID-19 pandemic, stated as follows at paras. 22-23:

[22] The accident in this case occurred over seven years ago. There was no indication when a civil jury trial might be held in Ottawa at the time of the motion. Accordingly, the motion judge found that “the real and substantial prejudice arises simply by reason of delay”: at para. 46. I agree with the statement of Brown J.A. in his decision on the stay motion that this was a legally permissible finding and that “delay in obtaining a date for a civil jury trial can, by itself, constitute prejudice and justify striking out a jury notice.” As Brown J.A. notes, the whole raison d’etre of the civil justice system, as captured in r.1.04(1), is that courts will work to provide the “most expeditious…determination of every civil proceeding on its merits.” Louis v. Poitras, 2020 ONCA 815, at para. 33.

[23] This case neatly captures the competing approaches to the crisis faced by the civil justice system. The motion judge approached this case practically, cognizant of his responsibility to the parties and the system to move cases forward and offer timely service. By contrast, the Divisional Court took the wrong approach to the new reality of the civil justice system. Implicit in its reasoning is that delay is to be expected and tolerated; it is the ordinary course. That is precisely the type of complacency that has led to the civil justice system’s systemic delay and was subject to criticism by the Supreme Court of Canada in Hryniak.

[23] In my view, the parties to the within dispute have allowed the expense of the litigation to become disproportionate to the amount of money at stake. While I do not intend to minimize the importance of the $138,000 that is the subject matter of this dispute, that sum does not justify the number of examinations conducted to date, the volume of records being requested or the myriad of court attendances, past and contemplated in the future. I am hereby putting an end to that cycle.

[24] In order to do so, I have determined that the summary judgment motion, as presently constituted, is problematic. I agree with counsel for the plaintiff that the claim that it is asserting is the type of claim that may be amenable to resolution via summary judgment motion. Again, that determination is for the judge ultimately hearing that motion.

[25] However, the plaintiff also seeks to dismiss the Boer defendants’ counterclaim in this summary judgment motion. In that counterclaim, the Boer defendants assert claims of misrepresentation, fraud and conversion. The Boer defendants, at this case conference, indicated that they intend to amend their statement of defence to assert further such claims in relation to other projects. The plaintiff has already threatened to bring a motion for particulars in relation to the proposed amendments and wants timetables for the filing of a new affidavit by Mr. Boer in relation to the amendments to the counterclaim. This would lead to further cross-examination and, most likely, further disputes about relevance. Furthermore, the Boer defendants indicate that the particulars of the claim are solely within the knowledge of the plaintiff and would resist the motion for particulars. There is simply no end in sight for these interlocutory wranglings.

[26] It is not for me to prohibit the assertion of this proposed counterclaim by the Boer defendants. Whether it is a meritorious claim or a tactical maneuver to create the impression of a triable issue to thwart this motion for summary judgment, the Boer defendants are entitled to make those claims.

[27] On the other hand, the counterclaims appear to involve entirely separate claims from the claim being made by the plaintiff. The Boer defendants are now trying to delve into unrelated projects, some of which may have not even involved Construction, in the hopes of uncovering irregularities that may show fraud. I do not believe that the counterclaim should prevent the plaintiff from moving forward with its summary judgment motion on the outstanding amount that it says is owing to it on the fourth instalment payment. I also believe that it is unrealistic for the plaintiff to expect that the resolution of such a counterclaim could occur through the summary judgment procedure.

[28] I note, for example, the case of Cuddy Food Products v. Puddy Bros. Ltd., 35 C.P.C. (5th) 159, 2002 CarswellOnt 2722 (S.C.J.). In Cuddy Food Products, Lane J. had before him a motion for summary judgment in respect of unpaid invoices for goods sold and delivered. The defendant claimed an equitable set-off based on its having a greater claim in another action between the parties, which was also raised as a counterclaim in the action. The defendant argued that its claim for set-off was a triable issue and the motion should be dismissed, or alternatively judgment should be stayed pending the outcome of the other action.

[29] Lane J. referred to a number of cases that stood for the proposition that not every crossclaim can be deducted pursuant to set-off, but only crossclaims that arise out of the same transaction or are closely connected with it. These included Telford v. Holt, 1987 CanLII 18 (SCC), [1987] 2 S.C.R. 193 (SCC), Federal Commerce & Navigation Co. v. Molena Alpha Inc., [1978] 3 W.L.R. 309 (Eng.Q.B.), per Lord Denning, Agway Metals Inc. v. Dufferin Roofing Ltd. (1991), 46 C.P.C. (2d) 133 (Ont.Gen.Div.) and Fasco Motors Ltd. v. General Refrigeration Inc., [1998] O.J. No. 1751 (Ont. Gen.Div.). Lane J. concluded, at para. 16:

[16] In my view, there is no connection between these claims at all, beyond the identity of the parties. The claim of the defendant is based upon the 1999 agreement for the sale of equipment to debone turkeys and resale of some of the product to the plaintiff. That agreement came to an end, for practical purposes, if not legal ones, with the termination/repudiation of it in November, 1999. The subsequent sales of chicken are not connected to that agreement. One may test this by asking, in Lord Denning’s phrase, whether the defendant’s claims about the deboning agreement “go directly to impeach” the plaintiff’s claim for the price of the goods. Clearly not; the two are totally separate matters.

[30] The Boer defendants have enough material to put forward a theory before the summary motion judge that this is an inappropriate case to grant summary judgment. Alternatively, that motion judge may conclude that he or she is satisfied that there is no genuine issue requiring a trial with respect to the fourth instalment payment, notwithstanding the counterclaim of the Boer defendants. It would then be open to that judge to:

(a) Order that the defendant(s) pay the outstanding amount; or

(b) Stay the payment of the outstanding amount pending the resolution of the counterclaim (see rule 20.08).

[31] The motion judge can be creative in that regard. For example, a defendant can be ordered to pay some or all the money into court pending the resolution of the counterclaim.

[32] In any event, I am of the view that the counterclaim being asserted in this case should not delay the summary judgment motion. Any further delay and procedural hurdles would be dissonant with rules 1.04 (1) and (1.1).

[33] I do, however, appreciate the argument being advanced by the Boer defendants in relation to whether a trust can be imposed under the Construction Act, where Roofing has not “done the work” but rather 253 Ontario did. I obviously offer no opinion on the merits of that argument. However, in reviewing the material, it is clear that the plaintiff has acknowledged that “some of the expenses for the project (and other projects) were paid through the 253 and recorded as a loan to Learmont Roofing Ltd. 253 was the predecessor to Learmont Roofing and provided funding for operational costs, which was recorded through intercompany accounting” (see Refusals Chart from May 6, 2021 examination of Mr. Off). Similarly, the May 10, 2021 cover letter from Valente CPAs makes the same admission where it states “TOMOCO and Mr. Off funded the operations of Learmont Roofing Ltd. to complete projects and pay for ongoing operations”. Finally, Mr. Off made some admissions during one of the cross-examinations on his affidavits that “there was no reimbursement”. These answers should be sufficient for the Boer defendant to advance the argument before the motions judge regarding whether such activity disentitles the plaintiff from being able to assert a trust claim under the Construction Act. Accordingly, there is no need for any further un-redaction of the Financial Statement already produced for the purpose of the summary judgment motion.

Disposition:

[34] At the case conference, the parties agreed to schedule the summary judgment motion for November 22, 2021 for a half day. I had intended to set a schedule for further steps to be completed in advance of that motion. However, given my determination that the counterclaim ought not to delay the hearing of the motion, many of the steps contemplated are no longer necessary to complete in advance of the motion.

[35] I direct that the Boer defendants prepare their proposed Amended Defence and Counterclaim and serve it upon the plaintiff no later than August 30, 2021 if the Boer defendants intend to pursue these claims. Ideally, the plaintiff will agree to the amendments, but if not, the Boer defendants can bring a motion to amend.

[36] The Plaintiff’s notice of motion shall be amended to strike out paragraph (i) which requests an Order dismissing the Counterclaim by the Defendants, Learmont Construction Ltd.

[37] Assuming that the statement of defence and counterclaim are ultimately amended, there is no need for the Boer defendants to file any further affidavits for use on the motion for summary judgment in relation to the counterclaim, nor be cross-examined thereon. Rather, if the Boer defendants are serious about proceeding with the counterclaim, affidavits of documents will have to be exchanged and examinations for discovery conducted with respect to the counterclaim. However, there is no requirement that these occur prior to the motion for summary judgment as they involve only the counterclaim.

[38] Mr. Off is not required to re-attend to be examined on his affidavits in support of the motion for summary judgment. He will be required to attend at examinations for discovery at some point with respect to the counterclaim, but this does not have to occur in advance of the hearing of the summary judgment motion. He is not required, for the purpose of the summary judgment motion, to produce further expense summaries for the “Sheppard Avenue” job, although this may be producible for the counterclaim.

[39] As per the suggestion of both parties, the costs associated with the case conference shall be dealt with by the judge that presides over the motion for summary judgment on November 22, 2021.

[40] I am not seized of this matter. As agreed by both parties, I am also not disqualified from hearing the motion for summary judgment.

[41] The parties shall file a fresh Certificate of Readiness.

“Justice S.S. Nicholson”

Justice Spencer Nicholson

Date: August 4, 2021