COURT FILE NO.: CV-20-1511-0000 DATE: 2023 03 20
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
MAGIL CONSTRUCTION CANADA INC. Lianne Armstrong for the Plaintiff Plaintiff
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JBELLI HOLDINGS INC., FRESHOUSE FOODS LTD., FARM CREDIT CANADA, FMMC GP INC. and FMMC PRIVATE YIELD FUND LP II Harris Khan for Freshouse and JBelli No one appearing for the remaining Defendants Defendants
A N D B E T W E E N:
FRESHOUSE FOODS LTD. Harris Khan for the Plaintiff by Counterclaim Plaintiff by Counterclaim
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MAGIL CONSTRUCTION CANADA INC. Lianne Armstrong for the Defendant by Counterclaim Defendant by Counterclaim
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TRI-CON HAID CONCRETE FINISHING LTD. No one appearing Third Party
MATTINA MECHANICAL LIMITED, SOLA ENGINEERING INC., IFAB ENGINEERING PARTNERS LTD. and INNOCON INC. No one appearing for Mattina No one appearing for Sola Emily Durst for IFAB John Margie for Innocon Proposed Third Parties
HEARD: March 7, 2023
REASONS FOR DECISION
C. Chang J.
[1] The plaintiff brings motions for the following relief:
a. an order varying the order of Fitzpatrick J. dated January 18, 2022;
b. leave to amend the third-party claim issued November 15, 2021 to address the corporate amalgamation of the third party, Tri-Con Haid Concrete Finishing Ltd. (“Tri-Con”); and
c. leave pursuant to s. 56 of the Construction Act, R.S.O. 1990, c. C. 30, as it read on June 30, 2018, (the “Construction Act”) to join the proposed third parties to this action and to amend its third-party claim accordingly in the form of the draft attached as Schedule “A” to its amended amended notice of motion dated September 14, 2022.
[2] The main action was previously dismissed as against Farm Credit Canada, FMMC GP Inc. and FMMC Private Yield Fund LP II.
[3] None of the remaining parties to the main action, the counterclaim or the third-party claim opposes these motions.
[4] Two of the four proposed third parties, being Mattina Mechanical Limited (“Mattina”) and Sola Engineering Inc. (“Sola”), also do not oppose the motions.
[5] The plaintiff and the proposed third party, IFAB Engineering Partners Ltd., (“IFAB”) have resolved these motions on the basis of a consent order for the hearing together of the main action herein with the action in CV-20-1268-0000.
Facts
[6] The material facts relevant to this motion are not disputed.
[7] The plaintiff’s lien action herein relates to a project for the renovation and expansion of a food processing facility (the “Project”) located at 71 Todd Road in Halton Hills, Ontario (the “Subject Property”).
[8] The plaintiff is the general contractor for the Project, the defendant, Freshouse Foods Ltd., (“Freshouse”) contracted with the plaintiff and the defendant, JBelli Holdings Inc., (“JBelli”) is the registered owner of the Subject Property.
[9] The plaintiff commenced its action herein by statement of claim issued June 10, 2020, in which the plaintiff claims a lien and other relief related to the collection of its unpaid invoices for the Project. By way of their pleading dated August 17, 2020, the defendants defended the action and Freshouse advanced a counterclaim wherein it claimed damages for breach of contract, negligence and delay.
[10] On November 5, 2021, the plaintiff filed a consent motion in writing for leave to join Tri-Con as a third party. Fitzpatrick J. granted the requested leave by order dated January 18, 2022.
[11] The plaintiff had its said third party claim issued on November 15, 2021 – before the January 18, 2022 order of Fitzpatrick J. had been made. That third-party claim seeks contribution and indemnity against Tri-Con respecting the counterclaim.
[12] On December 1, 2021, Tri-Con amalgamated with B-N-E Contractors Inc. and Jeff Haid Holdings Inc. into the amalgamated corporation, BNE Concrete Floors & Coatings Inc., (“BNE”).
[13] The plaintiff brought its motion for leave to join Mattina, Sola, IFAB and Innocon as third parties in August 2022.
[14] Neither documentary nor oral discovery has taken place, and no one has taken any steps in this action other than in respect of pleadings.
Issues
[15] The issues to be determined on these motions are as follows:
a. Should the January 18, 2022 order of Fitzpatrick J. be varied as requested by the plaintiff?
b. Should the plaintiff be granted leave to amend the third-party claim to account for the amalgamation of Tri-Con?
c. Should the plaintiff be granted leave to join Mattina, Sola, IFAB and Innocon as third parties?
Applicable Law
Motion to Vary Fitzpatrick J. Order
[16] Sections 67(1), (2) and (3) of the Construction Act provide,
67 (1) The procedure in an action shall be as far as possible of a summary character, having regard to the amount and nature of the liens in question.
(2) Interlocutory steps, other than those provided for in this Act, shall not be taken without the consent of the court obtained upon proof that the steps are necessary or would expedite the resolution of the issues in dispute.
(3) Except where inconsistent with this Act, and subject to subsection (2), the Courts of Justice Act and the rules of court apply to pleadings and proceedings under this Act.
[17] Rule 59.06 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, provides,
59.06 (1) An order that contains an error arising from an accidental slip or omission or requires amendment in any particular on which the court did not adjudicate may be amended on a motion in the proceeding.
(2) A party who seeks to,
(a) have an order set aside or varied on the ground of fraud or of facts arising or discovered after it was made;
(b) suspend the operation of an order;
(c) carry an order into operation; or
(d) obtain other relief than that originally awarded,
may make a motion in the proceeding for the relief claimed.
[18] In order to obtain relief under rule 59.06, a party must first specify which of sub-rules 59.06(1) and 59.06(2) it relies on and then it must bring itself within that specific sub-rule (see: Render v. ThyssenKrupp Elevator (Canada) Limited, 2022 ONCA 512, at paras. 6-9).
Motion to Amend re: Tri-Con/BNE
[19] Sections 174, 178 and 179 of the Business Corporations Act, R.S.O. 1990, c. B.16, provide that,
174 Two or more corporations, including holding or subsidiary corporations, may amalgamate and continue as one corporation.
178 (1) Subject to subsection 176 (5), after an amalgamation has been adopted under section 176 or approved under section 177, articles of amalgamation and any other required documents and information shall be sent to the Director.
179 Upon the articles of amalgamation becoming effective,
(a) the amalgamating corporations are amalgamated and continue as one corporation under the terms and conditions prescribed in the amalgamation agreement;
(a.1) the amalgamating corporations cease to exist as entities separate from the amalgamated corporation;
(b) the amalgamated corporation possesses all the property, rights, privileges and franchises and is subject to all liabilities, including civil, criminal and quasi-criminal, and all contracts, disabilities and debts of each of the amalgamating corporations;
(c) a conviction against, or ruling, order or judgment in favour or against an amalgamating corporation may be enforced by or against the amalgamated corporation;
(d) the articles of amalgamation are deemed to be the articles of incorporation of the amalgamated corporation and, except for the purposes of subsection 117 (1), the certificate of amalgamation is deemed to be the certificate of incorporation of the amalgamated corporation; and
(e) the amalgamated corporation shall be deemed to be the party plaintiff or the party defendant, as the case may be, in any civil action commenced by or against an amalgamating corporation before the amalgamation has become effective.
Motion for Leave to Join Mattina, Sola, IFAB and Innocon
[20] Section 56 of the Construction Act provides that
56 The following rules govern third party claims:
Subject to paragraph 2, a person against whom a claim is made in a statement of claim, crossclaim, counterclaim or third party claim may join a person who is not a party to the action as a third party for the purpose of claiming contribution or indemnity from the third party in respect of that claim.
A person may only be joined as a third party with leave of the court upon a motion made with notice to the owner and all persons having subsisting preserved or perfected liens at the time of the motion, but such leave shall not be given unless the court is satisfied that the trial of the third party claim will not,
i. unduly prejudice the ability of the third party or of any lien claimant or defendant to prosecute a claim or conduct a defence, or
ii. unduly delay or complicate the resolution of the lien action.
- The court may give such directions as it considers appropriate in the circumstances in respect of the conduct of third party claims.
[21] The applicable test on a motion for leave under s. 56 of the Construction Act requires that the proposed joinder: (1) does not unduly prejudice the ability of the proposed third party, the lien claimant or the defendant to prosecute a claim or conduct a defence; and (2) does not unduly delay or complicate the resolution of the lien action (see: 1159337 Ontario Ltd. v. Saplys, 2021 ONSC 7909, at para. 11).
[22] At para. 18 in Dean Construction Co. v. M. J. Dixon Construction Ltd., Master Poilika agreed with the following dicta of Master Sandler in Domus Development Corp. v. York Condominium Corp. No. 82, [2001] O.J. No. 1479, at para. 21:
I think s. 56 2. contemplates that a court is to consider at what stage the lien proceedings are at when leave is sought, and what interlocutory steps have already been taken. For example, if leave was sought at a late stage in the action, would an already conducted discovery of an existing party have to be repeated, or alternatively, to avoid this, would the third party have to be deprived of the right to discovery? Another legitimate consideration would be whether the trial is imminent? These are the sort of concerns that a court must have when considering, under s. 56 2., the concepts of undue prejudice, and the ability of the third party to be able to fairly conduct its defence, or prosecute a fourth party claim or a counterclaim.
[Emphasis added].
Decision
[23] Based on the evidence, I find as follows:
a. the January 18, 2022 order of Fitzpatrick J. will not be varied as requested by the plaintiff;
b. the plaintiff will be granted leave to amend the third-party claim to account for the amalgamation of Tri-Con; and
c. the plaintiff will be granted leave to join Mattina, Sola, IFAB and Innocon as third parties to this action.
Analysis
Motion to Vary Fitzpatrick J. Order
[24] The plaintiff’s motion to vary the January 18, 2022 order of Fitzpatrick J. is ill-conceived and must fail.
[25] Firstly, the motion is unnecessary.
[26] It is both undisputed and indisputable that the plaintiff’s November 15, 2021 third party claim against Tri-Con was issued prior to the order granting leave to issue it. However, the only party with standing to challenge that irregularity, Tri-Con, has not done so. In fact, Tri-Con has defended both the third-party claim and Freshouse’s counterclaim.
[27] As I advised counsel during oral argument, without a legitimate challenge to the order granting leave to issue the third-party claim, I see no reason for the plaintiff to have brought this motion to vary that order.
[28] Secondly, the plaintiff has, in any event, failed to meet the requirements for the applicable relief as set out in Render.
[29] Nowhere in any of its motion materials (including its numerous notices of motion, its more numerous affidavits and its two factums) does the plaintiff specify which of sub-rule 59.06(1) and 59.06(2) it is moving under or does it bring itself under either one. This is fatal to the plaintiff’s motion.
[30] For these reasons, I am not prepared to grant the requested variance or amendment.
[31] That said, none of the above is to be taken, in any way whatsoever, as condoning, minimizing or excusing plaintiff’s counsel’s completely inappropriate conduct in having the third-party claim issued prior to obtaining the order granting leave for same. Although an explanation (i.e., inadvertence) for the said conduct was provided, that explanation is woefully inadequate, which woeful inadequacy may be relevant to the issue of costs.
Motion to Amend re: Tri-Con/BNE
[32] Given s. 179(e) of the Business Corporations Act, which deems the amalgamated corporation (i.e., BNE) to be the party named in the plaintiff’s third-party claim (i.e., Tri-Con), there is no need for the plaintiff to have sought this relief.
[33] However, given that BNE does not oppose the requested relief and for the sake of a “tidy” pleading, I am prepared to grant the requested leave to effect this minor amendment.
Motion to Join Mattina, Sola, IFAB and Innocon
[34] Despite citing rules 5.04 and 26.01 of the Rules of Civil Procedure in its motion materials, the plaintiff conceded in oral argument that its motion to join the proposed third parties is governed by s. 56 of the Construction Act and not by the Rules of Civil Procedure.
[35] As outlined above, the plaintiff’s motion to join Mattina, Sola, IFAB and Innocon as third parties is not opposed by any of the parties to the main action, the counterclaim or the third-party claim or by three of the four proposed third parties. As also outlined above, the plaintiff and IFAB settled these motions, which settlement does not provide for IFAB’s joinder as a third party.
[36] Only Innocon opposes this motion and makes the following two arguments:
a. the issued third party claim, having been issued prior to the granting of leave, is a nullity, so there is no pleading to which Innocon can be added at a party; and
b. the plaintiff’s claim against Innocon is statute-barred pursuant to the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B.
[37] Innocon submits that the third-party claim issued November 15, 2021 is “inconsistent” with the January 18, 2022 order of Fitzpatrick J. that granted leave for the issuance thereof. Innocon acknowledges that the third-party claim for which leave was granted is substantively identical to the one that was issued; however, as the said pleading was issued before the order was made, the former is “a nullity”. Accordingly, submits Innocon, there is no existing third-party claim to which it can be made a party.
[38] This argument is ill-conceived and misconstrues s. 56 of the Construction Act.
[39] Section 56 of the Construction Act is a complete code respecting third party claims in lien actions (see: 1159337 Ontario Ltd., at para. 17) and it does not provide that parties may only be joined to actions by the amending existing pleadings. The court may grant leave to join parties under s. 56 without making any orders to amend existing pleadings. Therefore, the status of the third-party claim issued November 15, 2021 (including whether or not it is a nullity) is a completely irrelevant consideration.
[40] Innocon further submits that, in any event, leave to join it as a third party herein should be denied because the plaintiff’s claim is statute-barred under s. 4 of the Limitations Act, 2002; that claim having been discoverable more than two years before the plaintiff brought this motion. Although not framed as such in its written or oral argument, I interpret Innocon’s argument to be that it would suffer undue prejudice within the meaning of s. 56 of the Construction Act if required to defend an obviously statute-barred claim.
[41] Innocon argues that the plaintiff’s claim against Innocon was discoverable on February 14, 2020, when it received a letter from Freshouse respecting deficiencies in the floor slabs. Alternatively, Innocon argues that the plaintiff’s claim against Innocon was discoverable when it was served with Freshouse’s statement of defence and counterclaim in August 2020. Either way, argues Innocon, the applicable two-year limitation period expired before the plaintiff brought its motion for joinder in August 2022.
[42] I do not accept Innocon’s arguments.
[43] In my view, based on the evidence, the plaintiff’s claim was neither discovered nor discoverable upon receipt of the February 14, 2020 Freshouse letter. As argued by the plaintiff, that letter was a demand that the plaintiff undertake an investigation of the issues with the floor slab and this is, in fact, what happened. Indeed, various investigations were undertaken and at least two expert reports were generated and circulated before Freshouse’s August 17, 2020 statement of defence and counterclaim was served. I find that the plaintiff’s receipt of the February 14, 2020 Freshouse letter was insufficient to constitute discovery or discoverability of the plaintiff’s claim against Innocon for contribution and indemnity for the purposes of s. 5 of the Limitations Act, 2022.
[44] I also accept the plaintiff’s argument that its claim against Innocon was also neither discovered nor discoverable when it was served with Freshouse’s counterclaim.
[45] Respecting Freshouse’s counterclaim, it is well-settled law that s. 18 of the Limitations Act, 2002 does not establish an absolute limitation period start date for contribution and indemnity claims (see: Albert Bloom Limited v. London Transit Commission, 2021 ONCA 74, at paras. 22-23). Rather, s. 18 establishes a presumptive start date for the applicable limitation period, which is rebuttable by evidence of discoverability as set out in s. 5 (see: Albert Bloom, at paras. 23-24).
[46] Based on the evidence, the alleged deficiencies set out in the counterclaim relate to the design and installation of the floor slabs and not, in any way, to the quality of the supplied concrete itself. Given that Innocon only supplied the concrete, in my view, any potential claim against Innocon could not reasonably have been raised as an issue when the plaintiff received the counterclaim. Furthermore, various expert reports (dated March 6, 2020, April 9, 2020 and February 5, 2021) confirm that Freshouse’s complaints related to the design and installation of the slab floors without reference to the quality of the supplied concrete. I accept the plaintiff’s evidence that it was not until the June 30, 2022 report of GHD that an issue was raised about the concrete itself.
[47] Therefore, in my view, the evidence adduced by the plaintiff does provide a basis upon which a trier of fact could find that the litigation finger was not pointed at Innocon until sometime after Freshouse served its counterclaim and, therefore, that the plaintiff has rebutted the presumption in s. 18 of the Limitations Act, 2002.
[48] However, for the purposes of this motion, I am neither required nor permitted to finally determine any limitations defence that Innocon may (or may not) advance if joined to this action. That determination is properly left to the ultimate trier of fact. I need only determine whether Innocon’s joinder will either: 1) unduly prejudice the parties’ or Innocon’s ability to prosecute a claim or conduct a defence; or 2) unduly delay or complicate the resolution of this lien action.
[49] In my view, based on the evidence, there is a legitimate and genuine issue respecting the applicable limitation period for the plaintiff’s claim against Innocon and there will be neither undue prejudice nor undue delay in the litigation and determination of that issue if Innocon is joined as a third party to this action.
[50] It is noteworthy that Innocon failed to adduce evidence of any applicable undue prejudice or undue delay that would result from its joinder to this action and that it dedicated none of its oral argument to either of these issues. Its written arguments on these issues were limited to its assertion that the plaintiff has failed to prove a lack of such prejudice or delay; in other words, the plaintiff has failed to prove a negative.
[51] At its highest and best, Innocon’s position is that its proposed joinder should be refused because it will be prejudiced by having to spend the time, effort and cost of having to participate in the court process and the action will be delayed as a result. I do not accept that such so-called “prejudice” constitutes anything approaching undue prejudice, undue delay or any other basis to deny the requested joinder (see: Pham et al. v. Pennant et al., 2022 ONSC 4733, at para. 21).
[52] As outlined above, none of the current or proposed parties, other than Innocon, opposes the requested relief.
[53] Based on the evidence, I find that there will be no undue prejudice or undue delay occasioned by Innocon’s joinder to this lien action. There has been no documentary discovery by way of affidavits of documents or schedule A productions. There have been no examinations for discovery. The only interlocutory steps that have been taken relate only to the pleadings. This action is in its infancy and the trial is the furthest thing from imminent. In addition, far from delaying the resolution of this matter, Innocon’s joinder could very well serve to expedite such resolution by addressing one of the issues identified by an expert as possibly having contributed to the deficiencies claimed by Freshouse.
[54] For these reasons, I am unable to find that Innocon’s proposed joinder to this action will unduly prejudice any applicable person’s ability to prosecute a claim or conduct a defence herein or will unduly delay or complicate the resolution of this lien action.
Orders
[55] I therefore order as follows:
a. the plaintiff’s motion to vary the January 18, 2022 order of Fitzpatrick J. is dismissed;
b. its motion being unopposed, the plaintiff is granted leave to amend the third-party claim to rename Dri-Con as BNE;
c. its motion being unopposed, the plaintiff is granted leave to join Mattina and Sola as third parties to its third party claim herein with no costs for or against either Mattina or Sola;
d. respecting IFAB, on consent:
i. the action herein shall be tried together with the action in CV-20-1268-0000, one after the other or as the trial judge may otherwise direct,
ii. the action herein and the action in CV-20-1268-0000 shall have common documentary and oral discoveries, and
iii. there shall be no costs for or against IFAB in respect of the plaintiff’s motions herein;
e. the plaintiff is granted leave to join Innocon as a third party to its third-party claim herein;
f. the amendments for which leave has been granted in accordance with paragraphs 54(b), (c) and (e) of these reasons shall be effected in accordance with the draft amended third-party claim that is attached as Schedule “A” to the plaintiff’s amended amended notice of motion dated September 14, 2022, which amended pleading shall be filed by no later than April 30, 2023; and
g. the leave granted in accordance with paragraphs 54(c) and (e) of these reasons shall be without prejudice to Mattina’s, Sola’s and Innocon’s ability to plead the Limitations Act, 2002 as part of their respective defences.
Costs
[56] I urge the plaintiff and Innocon to agree on costs. Failing such agreement, they shall deliver their submissions in writing (limited to two pages, exclusive of costs outlines and offers to settle) as follows:
a. the plaintiff by no later than 4:00 p.m. on March 28, 2023;
b. Innocon by no later than 4:00 p.m. on April 4, 2023;
c. there shall be no reply; and
d. the said written submissions are to be sent by email to the Milton Administration Office at MiltonSCJcourt@ontario.ca
“C. Chang J.”
Released: March 20, 2023