COURT FILE NO.: CV-20-637222
DATE: 2021 11 19
SUPERIOR COURT OF JUSTICE - ONTARIO
IN THE MATTER OF the Construction Act, RSO 1990, c C.30, as amended
RE: GOWING CONTRACTORS LTD., Plaintiff
- and -
WALSH CONSTRUCTION COMPANY CANADA, WCC CONSTRUCTION CANADA, ULC o/a WALSH CANADA, and THE CITY OF TORONTO, Defendants
BEFORE: Associate Justice Todd Robinson
COUNSEL: F. Bogach and P. Conrod, for the defendants, Walsh Construction Company Canada and WCC Construction Canada, ULC o/a Walsh Canada (moving parties)
R. Hammond, for the plaintiff, Gowing Contractors Ltd. (responding party)
HEARD: October 25, 2021 (by videoconference)
REASONS FOR DECISION (Refusals on Cross-Examination)
[1] Walsh Construction Company Canada and WCC Construction Canada, ULC o/a Walsh Canada (together, “Walsh”) have brought a motion for security for costs against Gowing Contractors Ltd. (“Gowing”). In advance of that motion, Walsh seeks to compel answers to questions refused during the cross-examination of Gowing’s principal, Jane Gowing, on her responding affidavit.
[2] The primary disputes are the extent to which Walsh is entitled to test statements made by Ms. Gowing in her affidavit and whether the disputed questions exceed the scope of a proper cross-examination. There is also a dispute about whether leave for this motion should be granted in the first place.
[3] Two refusals were not pursued at the motion hearing. One has been answered and there were no submissions on insufficiency of that answer. Notwithstanding Walsh’s grouping of refusals, I have grouped and addressed the remaining disputed refusals into five categories:
(a) questions about Gowing’s cessation of business;
(b) questions about Gowing’s assets, liabilities, and banking records;
(c) questions about Walsh’s bill of costs on the security for costs motion;
(d) questions about Jane Gowing’s relationship with Aron Shea (a former employee of Gowing who was hired by Walsh); and
(e) questions about whether Jane Gowing commenced human rights claims arising from allegations of discriminatory conduct by Walsh’s employees.
[4] I am granting leave for this motion, but am ordering answers to only four of the refused questions.
Leave for the refusals motion
[5] Interlocutory steps not contemplated by the Construction Act, RSO 1990, c C.30 first require consent of the court on proof that the steps are necessary or would expedite the resolution of the issues in dispute. Walsh’s security for costs motion is an interlocutory motion requiring leave of the court. This refusals motion is, essentially, an interlocutory motion within that interlocutory motion.
[6] Walsh submits that necessity of this motion is demonstrated by the necessity of its security for costs motion. Gowing opposes leave for the security for costs motion. Both parties accordingly made submissions on whether leave for the pending security for costs motion should be granted.
[7] Recent case law has held that the moving party on a security for costs motion will have demonstrated necessity of the motion if it satisfies its threshold onus. Determining if leave for Walsh’s security for costs motion should be granted involves assessing the substantive merits of the motion. Whether Walsh has met its threshold onus is seriously disputed. In my view, it is premature to engage in that assessment prior to hearing argument on the security for costs motion.
[8] Gowing submits that it would be inconsistent to find this refusals motion necessary if it is later determined that the security for costs motion is not necessary. I do not agree. This motion is necessary irrespective of whether leave is ultimately granted for the security for costs motion. It is about compelling Gowing to answer what are argued by Walsh to be proper questions that bear on disposition of the security for costs motion. Those proper questions are argued to have been improperly refused. If proper questions are asked on a cross-examination that may reasonably bear on disposition of the motion, then a refusal to answer them cannot be condoned by the court.
[9] There may be a case where leave is properly denied for a refusals motion arising from cross-examinations for a pending interlocutory motion. In this case, though, Walsh has connected each of its questions to issues to be decided on the security for costs motion. I am satisfied that assessing whether they were proper questions and, if so, ought not to have been refused, is necessary to ensuring that procedural cross-examination rights are not diminished in construction lien actions.
Questions about Gowing’s cessation of operations
(Refusal Nos. 15 & 20)
[10] Jane Gowing states in her affidavit that Gowing is not conducting any ongoing business operations and that “Walsh put Gowing out of business.” During cross-examination, Walsh’s counsel asked two questions directed specifically at Gowing’s cessation of business operations, which were refused, namely:
(a) when Gowing went out of business (refusal no. 20); and
(b) why Gowing stopped taking on contracts after the project underlying this litigation, known as the Humber Treatment Plant project, and another Walsh project on which Gowing was subcontracted and working concurrently, known as the Ashbridges Bay Wastewater Treatment Plant project (refusal no. 15).
[11] Gowing maintains both refusals on the basis of relevance, while noting that Gowing’s evidence is that it did not take on any new work after 2018.
[12] I need not go too far down the road of relevance to the pending motion. It is now well-established law that the scope of proper cross-examination includes questions on matters raised in the affidavit by the deponent, regardless of relevance or materiality to the motion: Ontario v. Rothmans, 2011 ONSC 2504 at para. 143.
[13] Ms. Gowing’s affidavit expressly states that Gowing is “out of business”. When Gowing went out of business was a proper question. In my view, the question about why Gowing stopped taking contracts is sufficiently connected to Gowing ceasing operations, and is thereby a proper question given Ms. Gowing’s statements. Those questions should be answered.
Questions about Gowing’s assets, liabilities, and banking records
(Refusal Nos. 1, 3, 10-14, 16-17, 21-27)
[14] Many questions posed by Walsh’s counsel seek information and productions about Gowing’s current and former assets, liabilities, and banking records, including throughout the course of the Humber Treatment Plant project and the Ashbridges Bay Wastewater Treatment Plant project. Specifically, Walsh’s counsel requested:
(a) confirmation on whether Gowing had assets (refusal no. 10);
(b) a list of any assets that Gowing had in Ontario (refusal no. 1);
(c) confirmation of whether Gowing had any tools (refusal no. 13) or any equipment (refusal no. 14), and to advise what happened to Gowing’s assets such as its machinery and tools (refusal no. 12);
(d) confirmation of Gowing’s liabilities where it owes money on other non-Walsh projects (refusal no. 3);
(e) confirmation that Walsh paid Gowing $12 million on the Humber Treatment Plant project and “where the money went” (refusal no. 21);
(f) confirmation that Gowing was paid $40 million on the Ashbridges Bay Wastewater Treatment Plant project and “where did the money go” (refusal no. 22);
(g) confirmation of Gowing’s ongoing costs (refusal no. 23); and
(h) banking records for Gowing from when the project started to when Gowing went out of business (refusal no. 24), from 2013 to the end of the project (refusal no. 25), from 2014 to the end of the project (refusal no. 26), or for any year (refusal no. 27).
[15] Walsh’s counsel also asked three questions about transferring employees and assets from Gowing to another entity, Gowing Contractors (2018) Ltd. (incorporated in September 2018 with Jane Gowing as its sole director and officer), namely:
(a) confirming if Gowing Contractors Ltd. sold any equipment to Gowing Contractors (2018) Ltd. (refusal no. 11);
(b) providing records of employees following the incorporation of Gowing Contractors (2018) Ltd. to see if they switched companies from Gowing (refusal no. 16);
(c) inquiring if there was “any agreement” with Gowing Contractors Ltd. and Gowing (2018) when Jane Gowing incorporated the new company (refusal no. 17).
[16] Walsh argues that these various questions on Gowing’s existing assets, what happened to its assets, and its liabilities bear directly on the main disputed issue of Gowing’s assets. Walsh also argues that many of its questions go to the credibility of Jane Gowing.
[17] On the pending motion, Walsh moves under Rule 56.01(1)(d) of the Rules of Civil Procedure, RRO 1990, Reg 194, namely that there is good reason to believe that Gowing lacks sufficient assets in Ontario to satisfy a costs award. Walsh argues that Gowing has opened the door to questions about its assets and liabilities by Jane Gowing’s statement that Gowing is out of business, since Gowing has tendered no evidence to substantiate that allegation. Walsh’s position is that it is entitled to test how, when and why Gowing went out of business. In order to test the statements that Walsh was responsible for Gowing going out of business, Walsh needs to know particulars of Gowing’s business before it went out of business.
[18] In addition, Walsh argues that Gowing has not yet confirmed whether it will be taking the position on the pending motion that it is impecunious, although that appears to be the position from the responding materials. Walsh submits that impecuniosity is a defence to a security for costs motion requiring the plaintiff to tender “complete and accurate disclosure of the plaintiff's income, assets, expenses, liabilities and borrowing ability, with full supporting documentation for each category where available or an explanation where not available”: Coastline Corporation Ltd. v. Canaccord Capital Corporation, 2009 CanLII 21758 (ON SC), [2009] OJ No 1790 (SCJ) at para. 7(viii). Case law does indeed support that a plaintiff asserting impecuniosity has a high evidentiary threshold to meet, requiring particularization of assets with “robust particularity.”
[19] Nevertheless, I do not agree with Walsh that Jane Gowing’s statements have put Gowing’s financial circumstances (including its assets, disposition of assets, liabilities, and banking records) in issue for the security for costs motion.
[20] I have previously held, and it remains my view, that there is no onus on a plaintiff to tender financial evidence in response to a security for costs motion or to provide particulars of its assets. The exception is where a plaintiff puts its own assets in issue by asserting it has sufficient assets to satisfy a costs award or by asserting that it is impecunious: 2232117 Ontario Inc. v. Somasundaram, 2020 ONSC 1434 (Master) at paras. 16-17.
[21] Security for costs motions are not a means to obtain asset and financial information that would typically only be available through an examination-in-aid of execution following judgment. Examination on a plaintiff’s assets is only opened where the plaintiff has tendered specific evidence on its assets. That is not the case here.
[22] In response to Walsh’s motion, Gowing has tendered no evidence of its assets, other than evidence supporting the extent of the alleged accounts receivable owing by Walsh. A relationship between Gowing and Gowing Contractors (2018) Ltd. is also not raised in Ms. Gowing’s affidavit. She states only that both Gowing and Gowing Contractors (2018) Ltd. are not conducting any ongoing business operations and that “all government payables have been paid up to date”.
[23] Jane Gowing’s statements that Gowing no longer operating are not, in and of themselves, evidence about Gowing’s assets. They are evidence that Gowing is not currently carrying on active business. In my view, that is a distinction with difference in assessing the proper scope of cross-examination. Ms. Gowing states only that “Walsh put Gowing out of business”. She does not state that Gowing went out of business by reason of financial difficulties.
[24] In my view, the only statement by Ms. Gowing dealing expressly with Gowing’s financial circumstances is in para. 39 of her affidavit, which states:
If the Court awards security for costs in the amount sought in the Bill of Costs then I expect that neither Gowing nor I will not be able to fund the security for costs award and this litigation will be stalled. It is very possible that if Walsh wins this motion and a substantial amount of security is ordered then Walsh’s threats to bury Gowing will become a reality.
[25] Walsh’s bill of costs estimates fees and disbursements of $347,261.56 on a partial indemnity basis and $434,203.19 on a substantial indemnity basis to completion of discoveries and mediation. Neither are insubstantial amounts. Ms. Gowing says that she “expects” that security in the amounts requested by Walsh cannot be funded. She does not say that they cannot be. I am not prepared to infer, without more, that Ms. Gowing has put Gowing’s assets in issue simply by stating her expectation (not certainty) that the requested amount of security could not be raised.
[26] I agree with Gowing that it has no positive obligation to tender evidence of its assets in response to Walsh’s motion. Requiring a plaintiff to do so would make the threshold evidentiary onus on a moving party practically meaningless.
[27] On the pending motion, Gowing may take the position that has sufficient other assets in Ontario to satisfy an adverse costs award. It may also take the position that it is impecunious. However, in either case, Gowing will have the evidentiary burden of demonstrating the state of its assets. By electing not to tender evidence on its assets, Gowing also elects to assume the associated risks of not doing so: Norseman Construction & Development Ltd. v. Evdemon, [2013] OJ No 6230 (SCJ – Master) at para. 28.
[28] Since Gowing has not tendered any evidence of its assets, there is nothing in evidence on which to base a proper cross-examination on assets, liabilities, use of funds paid by Walsh, banking records, or any transfer of employees or assets of Gowing to Gowing Contractors (2018) Ltd. These questions were all properly refused.
Questions about Walsh’s bill of costs
(Refusal Nos. 4 & 18)
[29] In her affidavit, Jane Gowing comments on overlap in Walsh’s bill of costs between this lien action and a related non-lien action by Walsh against Gowing in Court File No. CV-20-637506. Walsh’s counsel asked two refused questions dealing with what Ms. Gowing views on the overlap (refusal no. 4) and whether there are amounts that Gowing could pay for security for costs (refusal no. 18).
[30] The amount of Walsh’s requested security is not a factual matter on which evidence from a witness is required. Determining a reasonable amount and the form of security, as well as the timing for paying security into court, is a matter for the court: Rules of Civil Procedure, Rule 56.04. In my view, Ms. Gowing’s statements on the inaccuracy and exaggeration of Walsh’s draft bill of costs are improper opinion and argument.
[31] The two questions asked by Walsh were properly refused as irrelevant. Ms. Gowing’s view on what litigation steps may duplicate steps in Walsh’s non-lien action has no bearing on my determination of an appropriate quantum of security (if I find security for costs should be ordered). That determination is typically based on the draft bill of costs and argument by the parties or their counsel. Similarly, what Gowing may be able to pay is, in my view, irrelevant unless Gowing elects to put its assets into issue by arguing that the justness of the case requires a reduced amount of security given Gowing’s financial circumstances. That is not the case here.
[32] In any event, it appears from submissions at the hearing that Walsh has updated its bill of costs to reduce its requested security for costs up to mediation. That would seem to render these two refusals practically moot.
Questions about relationship with Aron Shea
(Refusal Nos. 8 & 9)
[33] During Jane Gowing’s cross-examination, Walsh put two questions to Ms. Gowing about Aron Shea, a former employee of Gowing hired by Walsh. Mr. Shea is not expressly mentioned in Ms. Gowing’s affidavit, but is referenced in two exhibits.
[34] One of those exhibits is Gowing’s statement of claim in its separate lien action dealing with the Ashbridges Bay Wastewater Treatment Plant project in Court File No. CV-19-628838. At paras. 18-19 of her affidavit, Ms. Gowing states the following about the facts alleged in Gowing’s statement of claim in Court File No. CV-19-628838:
In the Statement of Claim in the Gowing Lien Action on the Ashbridges Project, there are references to various acts by Walsh. I have read the Statement of Claim and state that the facts as alleged in the Statement of Claim are true. Initially that pleading included a Human Rights Claim, but that has been deleted from the lien action on consent. However, the underlying facts and the misconduct of Walsh are real and are a central issue in all of the litigation with Walsh.
While Gowing did not repeat verbatim the issues that are expressly outlined in the Ashbridge's Claim in the Humber Action I confirm that the very same issues of Walsh's improper conduct existed on both projects and that the improper conduct of Walsh that is addressed in the Gowing Lien Action on the Ashbridges Project is not isolated to Walsh’s conduct on only that project but was in fact evident on both projects.
[35] Further, at para. 22, Jane Gowing introduces a letter and document entitled, “Statement of Claim” sent to Walsh in January 2019 outlining alleged improper conduct exhibited toward Ms. Gowing and her company. Ms. Gowing states about them, “I believed that the letter and Statement were accurate when I delivered them to Walsh and still believe same to be true.”
[36] Alleged discriminatory conduct by Aron Shea is expressly pleaded at paras. 46, 54, 62-64, 70-71, 75, 80 of the amended statement of claim in Court File No. CV-19-628838. At paras. 6(g) and (k) of the “Statement of Claim” document, Ms. Gowing asserts that Mr. Shea made ongoing derogatory comments about her during summer 2017 and, further, that he made discriminatory statements about her.
[37] Jane Gowing has herself raised the matter of Aron Shea’s conduct by adopting as her evidence the statements made about him in Gowing’s amended statement of claim in Court File No. CV-19-628838 and the “Statement of Claim” document. By doing so, Walsh became entitled to cross-examine on Jane Gowing’s relationship with Aron Shea, which may reasonably bear on assessing his alleged conduct, regardless of whether it is ultimately irrelevant or immaterial to the security for costs motion: Ontario v. Rothmans, supra at para. 143. Refusal nos. 8 and 9 shall accordingly be answered.
Questions about human rights claims
(Refusal Nos. 6 & 7)
[38] Two refused questions deal with whether Jane Gowing and Gowing pursued human rights claims arising from the allegations of discrimination (refusal nos. 6 and 7). In my view, these questions were properly refused.
[39] Gowing’s position is that Walsh has failed to tender any reply evidence denying Ms. Gowing’s affidavit evidence of discrimination by Walsh. That has no bearing on the scope of proper cross-examination. Walsh is not obliged to tender evidence denying Ms. Gowing’s allegations as a pre-condition to testing or challenging her evidence by cross-examination. The question is whether the existence of human rights claims is a matter raised by or reasonably flowing from anything stated by Ms. Gowing in her affidavit.
[40] Jane Gowing’s evidence on discriminatory conduct by Walsh is presumably tendered for use in argument that a security for costs would be unjust. Walsh argues that whether human rights complaints or claims were pursued is relevant to the validity of the allegations and what steps were taken by Jane Gowing to enforce her rights. However, Ms. Gowing does not put the existence of human rights claims in issue simply by raising discriminatory conduct.
[41] I do not agree that whether human rights claims have or have not been commenced is relevant to an assessment of whether or not discriminatory conduct alleged by Ms. Gowing occurred and may bear on disposition of the security for costs motion. Not all discriminatory conduct results in a human rights claim, and not having commenced one (which is information presumably within Walsh’s knowledge) has little bearing on the validity of discrimination allegations. I thereby view the refusals as proper.
Further examination
[42] Relief on the motion was sought compelling re-attendance by Ms. Gowing for continued examination on questions arising from the answers to any questions that I ordered be answered. Walsh was unable to confirm if that relief was necessary without knowing which questions would be ordered answered. If Walsh seeks further examination in advance of the security for costs motion, and the parties cannot agree, a case conference before me may be arranged through my Assistant Trial Coordinator.
Costs
[43] The parties have exchanged and filed costs outlines. Rather than put the parties to further expense of written submissions or a case conference to make oral submissions, costs of this motion shall be addressed concurrently with addressing costs of the pending security for costs motion.
Order
[44] I accordingly order as follows:
(a) Gowing shall provide answers to refusals nos. 8, 9, 15, and 20 in Walsh’s refusals chart within ten (10) days.
(b) The balance of Walsh’s motions is dismissed.
(c) Costs of this motion are reserved to be determined concurrently with costs of Walsh’s pending security for costs motion.
(d) This order is effective without further formality.
ASSOCIATE JUSTICE TODD ROBINSON
DATE: November 19, 2021