COURT FILE NOS.: CV-18-607500 and CV-18-607500-A1
DATE: 2023 02 07
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: PREMFORM LIMITED, Plaintiff
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HEIGHTS RENTAL CONSTRUCTION INC., Defendant
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TESKEY CONCRETE COMPANY CORP., Third Party
BEFORE: Associate Justice Todd Robinson
COUNSEL: A. Marchioni, for the plaintiff, Premform Limited (moving party)
J. Margie and S. Sam, for the third party, Teskey Concrete Company Corp.
M. Muñoz, for the defendant, Heights Rental Construction Inc.
HEARD: January 31, 2023 (by videoconference)
REASONS FOR DECISION (Admissibility of Document)
[1] Premform Limited (“Premform”) brings this motion for directions on late production and the admissibility of its project bid estimate in this litigation and, if necessary, leave for Premform to rely on the bid estimate at trial. Premform did not disclose the bid estimate in its affidavit of documents and refused to produce it during its examination for discovery. After examinations for discovery were complete, Premform produced an expert report in support of its loss of productivity claim, which relied on the bid estimate in calculating damages and appended it. Premform’s thereafter wrote to opposing counsel to advise that, because the bid estimate had been produced, the prior refusal was “no longer in place.”
[2] Admissibility of and reliance on the bid estimate is opposed by Teskey Concrete Company Corp. (“Teskey”). Teskey takes the position that Premform made a deliberate and strategic decision not to comply with its discovery obligation to produce what was always a relevant document. Teskey submits that Premform should now be precluded from relying on it. However, if the bid estimate is found admissible, then Teskey seeks costs thrown away from its initial examination for discovery of Premform and its further examination arising from undertakings, as well as leave to conduct a further examination on Premform’s loss of productivity claim.
[3] Heights Rental Construction Inc. (“Heights Rental”) made no submissions on the admissibility dispute. Like Teskey, though, if Premform is permitted to rely on the bid estimate, then Heights Rental seeks costs thrown away from the prior examinations of Premform and an opportunity to conduct further examination based on the bid estimate.
[4] In my view, leave is required for Premform to rely on the bid estimate. I am granting that leave, but on terms that the native format copy of the bid estimate be produced and that both Teskey and Heights Rental be entitled to conduct a further examination of Preform on its loss of productivity claim, including the bid estimate, at Premform’s expense.
Analysis
[5] There are two issues to be addressed on this motion: (a) whether Premform requires my leave to tender and rely on the bid estimate; and (b) if so, whether leave should be granted.
(a) Is leave required to rely on the bid estimate?
[6] Premform’s action and the related third party proceeding have been referred to me for trial with Teskey’s related lien action. The non-lien actions are governed by the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”). Documentary and oral discoveries in all proceedings took place in accordance with my prior orders. In particular, I made a consent order for common discoveries and exchanging affidavits of documents prior to the reference and, in the course of the reference, have made further orders for examinations for discovery and additional examinations arising from undertakings.
[7] Subrule 30.02(1) of the Rules required Premform to disclose in its affidavit of documents every document relevant to any matter in issue that is or has been in its possession, control or power. The bid estimate was not produced in Premform’s affidavit of documents.
[8] Premform argues that, since the bid estimate was not considered in its calculation of damages, it was not relevant at the time of production and was thereby not captured by its production obligation. Premform further argues that, in any event, it was entitled to later produce the bid estimate under rule 30.07. I reject those arguments.
[9] It is now well-established law that relevance is determined by the pleadings. Other than the statement of claim, the pleadings were not filed on this motion. Nevertheless, although I do not have the full pleadings available to me, the allegations in the statement of claim support relevance of the bid estimate.
[10] Premform’s claim is for alleged labour, material, and administrative costs incurred by Premform arising from the removal, re-forming, and re-casting of concrete material due to an alleged defect in the concrete ready-mix supplied by Teskey. Specifically, Premform pleads, at para. 12 of its statement of claim, that the additional work was completed in approx. 27 days, which caused a corresponding delay to the balance of its contract work and thereby caused Premform not to complete its work on schedule. Premform further pleads, at para. 13, that the additional work increased the contract price by $696,785.10, excluding HST.
[11] In my view, the statements at paras. 12-13 put in issue the actual impact of the additional work performed by Premform. That includes Premform’s work plan on the project as compared to the actual work performed, which is reasonably necessary to assess both the alleged “corresponding delay” and Premform’s alleged inability to complete its work on schedule. Proper quantification of Premform’s claim is also engaged.
[12] The bid estimate was prepared by Premform for the internal purpose of costing and preparing its bid for the job. It contains productivity estimates for Premform’s labour on each floor of the building correlated to productivity rates per sq. ft. and hourly labour cost amounts. In my view, those aspects of the bid estimate speak directly to the above matters, irrespective of whether Premform intended to rely on the document. I am satisfied that the bid estimate was and remains a relevant document based on the pleadings and ought to have been produced in Premform’s affidavit of documents.
[13] Premform relies on rule 30.07 of the Rules in support of its position that leave is not required. That rule requires a party to serve a supplementary affidavit of documents when it comes into possession of new relevant documents or otherwise discovers that the original affidavit of documents is inaccurate or incomplete. Premform served a supplementary affidavit of documents on December 6, 2022, after this motion was scheduled. It argues that doing so brought it into compliance with its production obligations. I reject that argument.
[14] I agree with Teskey that this is not a situation where Premform came into possession or control of or obtained power over the bid estimate after its initial production of documents. It is similarly not a situation where Premform “discovered” that its affidavit of documents was inaccurate or incomplete. Premform concedes that the bid estimate was in its possession when the original affidavit of documents was prepared and served. Premform’s evidence on this motion is that the bid estimate was not produced because it was not viewed as relevant and contained confidential bid and pricing information. Put simply, Premform made a conscious decision not to produce a document that I have found ought to have been produced. Rule 30.07 does not apply.
[15] During Premform’s examination for discovery, Teskey’s request that the bid estimate be produced was taken under advisement and subsequently refused without explanation. To the extent that the refusal was on the basis of relevance (and I agree with Teskey that a reason for the refusal ought to have been given), it follows from my analysis on relevance above that the refusal to produce the bid estimate when specifically asked for it is also unsupportable.
[16] Premform also relies subrule 31.09(1) of the Rules to support that leave is not required. That subrule permits a party to correct an answer given on its examination for discovery where the party subsequently discovers that the answer was incorrect or incomplete or is no longer correct and complete. Premform submits that it produced the bid estimate (via its expert’s report) upon receiving the expert report that relied on it, which was at a time when the parties were still answering undertakings. Premform argues that its withdrawal of the refusal and production of the bid estimate complies with subrule 31.09(1). I reject that argument as well.
[17] Teskey correctly points out that the wording of subrule 31.09(1) imports a key prerequisite: the party must “subsequently discover” that the answer to a question on the examination was incorrect or incomplete or is no longer correct and complete. I reject Premform’s submission that resiling from a refusal qualifies as a correction. In my view, Premform did not give a response that is capable of being “corrected” within the meaning of subrule 31.09(1). The production request was taken under advisement and refused without providing a reason for the refusal. There was no subsequent discovery of information, other than Premform’s expert deciding to rely on the bid estimate. Premform then sought to resile from a refusal to produce what I have already found is and always was a relevant document. Subrule 31.09(1) does not apply.
[18] Subrule 30.08(1) requires that a party who fails to disclose or produce a favourable document in compliance with the Rules may not use the document at trial, except with leave of the trial judge. Subrule 31.07(2) is to similar effect. It provides that a party failing to answer a question during an examination for discovery may not introduce at the trial the information that was not provided, except with leave of the trial judge.
[19] Since production of the bid estimate is not captured by either rule 30.07 or subrule 31.09(1), Premform requires leave to rely on it.
(b) Should leave to rely on the bid estimate be granted?
[20] Granting leave in this case is governed by rule 53.08 of the Rules, which was substantively amended last year. The relevant portions of the rule now provide as follows:
53.08 (1) If evidence is admissible only with leave of the trial judge under a provision listed in subrule (2), leave may be granted if the party responsible for the applicable failure satisfies the judge that,
(a) there is a reasonable explanation for the failure; and
(b) granting the leave would not,
(i) cause prejudice to the opposing party that could not be compensated for by costs or an adjournment, or
(ii) cause undue delay in the conduct of the trial.
(2) Subrule (1) applies with respect to the following provisions:
Subrule 30.08 (1) (failure to disclose document).
Rule 31.07 (failure to answer on discovery).
[21] Whether or not to grant leave is a discretionary decision. The onus is on the party seeking the indulgence to show a reasonable explanation for the failure to comply with the relevant discovery rules and that granting leave will not cause prejudice to the opposing party that cannot be compensated for by costs or an adjournment or cause any undue delay in the conduct of the trial: Agha v. Munroe, 2022 ONSC 2508 at para. 19.
[22] I agree with Premform that there is no non-compensable prejudice to Teskey or Heights Rental. The only prejudice raised by Teskey is, essentially, the impact of delayed disclosure on the conduct of litigation to date and its litigation strategy. I agree that impact does constitute some prejudice to Teskey (and Heights Rental), but it is compensable.
[23] Teskey argues that it would have conducted its examination of Premform differently had it known that the bid estimate was being relied upon to support a loss of productivity claim. I accept that different questions would likely have been asked and that a different approach to examinations for discovery may have been taken by Teskey (and Heights Rental). Both Teskey and Heights Rental had (and have) a procedural right to understand the case to be met. That right was obstructed by Premform’s decision not to produce the bid estimate. However, Premform is not suggesting that they be denied the opportunity to examine on the bid estimate. To the contrary, Premform is offering such an examination. In my view, a further examination ameliorates the prejudice. The costs of that examination are compensable.
[24] I also agree with Premform that granting leave will not cause undue delay in the conduct of the trial. I say this for several reasons.
[25] First, discoveries have fairly recently been completed and a mediation is pending. Although Teskey felt that these actions were ready for trial scheduling at the last hearing for trial directions, neither Premform nor Heights Rental agreed. My view was that the actions were not ready for trial scheduling, in part because of Teskey’s challenge to admissibility of the bid estimate, but also because of the pending mediation and its potential to assist the parties in narrowing issues if a settlement is not reached.
[26] Second, a trial hearing has not yet been scheduled. Although Teskey argues that trial is deemed to have commenced by virtue of the order referring the proceedings for trial, I need not address that argument. Whether or not that is accurate does not change the reality that no trial dates have been fixed.
[27] Third, there is no dispute that Premform will require expert evidence to support its damages claim and, if leave to rely on the bid estimate is denied, a new expert or revised expert report will be required. It is undisputed that Premform will be entitled to do that. Responding expert reports have not yet been served. Premform correctly points out that denying leave will actually have the effect of further delaying the trial while a fresh expert report is obtained.
[28] Reasonableness of Premform’s explanation for failing to produce the bid estimate is heavily disputed on this motion.
[29] As already discussed, Premform’s evidence is that the bid estimate was not produced because it was considered irrelevant to the issues in dispute. Specifically, at the time of preparing its affidavit of documents, Premform viewed the bid estimate as irrelevant because its calculation of damages was based on actual labour, material, and equipment costs incurred during the alleged period of delay and loss of productivity. It was not based on the information included in the bid estimate. Premform’s evidence is that the bid estimate also contained confidential and sensitive pricing information that Premform was concerned about producing. Premform argues that fact reinforced its view that the irrelevant bid estimate should not be produced.
[30] Premform submits that case law supports that, in loss of productivity claims, damages may be measured in various ways, including by expert evidence: TMS Lighting Ltd. v. KJS Transport Inc., 2014 ONCA 1 at para. 87. Premform argues that it was reasonable to view the bid estimate as irrelevant in the circumstances, submitting that it should thereby not be prevented from relying on it. The document was not considered relevant until Premform’s expert employed a specific formula for calculating damages that used the bid estimate.
[31] Teskey submits that Premform’s explanation is far from “reasonable”. It submits that a party’s concern about confidential or commercially sensitive pricing information is not a basis to withhold relevant documents. It argues that the deemed undertaking rule provided in rule 30.1 of the Rules is more than sufficient to address any concerns about confidential or sensitive pricing information. Subrule 30.1(3) provides that all parties and their lawyers are deemed to undertake not to use evidence or information obtained through discovery for any purposes other than those of the proceeding in which the evidence was obtained.
[32] Premform’s evidence on this motion confirms that it understood at the time of preparing its affidavit of documents that a loss of productivity claim was being advanced. Teskey argues that the bid estimate thereby cannot reasonably have been viewed as irrelevant. Cross-examination evidence does tend to support that protecting confidential and sensitive pricing information was Premform’s primary motivation for not producing the bid estimate.
[33] Teskey further argues that Premform has only produced the bid estimate because doing so now suites Premform’s case. I am asked to consider the multiple opportunities that Premform had to produce the relevant bid estimate prior to the expert report being served, and Premform’s repeated decision not to disclose it. Teskey points specifically to the following from the record before me:
(a) in December 2019, Premform excluded the bid estimate from its original affidavit of documents;
(b) in October 2021, despite having excluded it from production, Premform provided a copy of the bid estimate to its anticipated expert without expressing its view that the bid estimate was irrelevant;
(c) in December 2021, Premform delivered its answers to undertakings and refused to produce the bid estimate;
(d) in February 2022, Premform formally engaged its expert and failed to provide the opposing parties with all documents that had been provided to the expert, which included the bid estimate; and
(e) in June 2022, Premform received a draft of its expert’s report, yet still did not produce the bid estimate.
[34] My primary concern is the just and fair disposition of this case on its merits. The Court of Appeal has commented that, when assessing late disclosure of a relevant document, a trial judge must consider whether there are any realistic or meaningful concerns about opposite parties being unfairly taken by surprise by the admission of such evidence at trial: Nemchin v. Green, 2019 ONCA 634 at paras. 50 and 69. Although those comments pre-date the amendment to rule 53.08, in my view, they remain instructive.
[35] Teskey has put forward a strong argument for why Premform’s explanation is not “reasonable” in the circumstances. I certainly question the reasonableness of Premform failing to produce the bid estimate based solely on its subjective view of relevance, particularly in circumstances where there was a clear dispute over relevance of the bid estimate. However, I nevertheless accept Premform’s submission that its explanation is not unreasonable. Coupled with the lack of non-compensable prejudice and the reality that permitting Premform to rely on it at this juncture will not unduly delay a trial hearing, it is sufficient.
[36] This is not a situation where late disclosure has given rise to realistic or meaningful concerns that Teskey (or Heights Rental) are being unfairly taken by surprise at trial. In the circumstances of this case, and in the context of an ongoing reference before me, there is sufficient time before a trial hearing to ameliorate any unfairness or prejudice from the delayed disclosure.
[37] Teskey cites my decisions in Osmi Homes v. Kumar, 2020 ONSC 2712 and Smith v. Hudson’s Bay Company, 2019 ONSC 2348 in support of its position that late production of the bid estimate should not be without sanction. The facts of those cases are distinguishable. Osmi Homes dealt with production of a relevant document for the first time in trial affidavit evidence, which is not what has happened here. Smith was a case dealing with sanction for non-compliance with my predecessor’s trial timetable order. It did not deal with late production of relevant documents or an expert report. It dealt with the failure to serve any affidavit trial evidence or the contemplated expert report at all, let alone in compliance with the ordered timetable.
[38] I nevertheless agree with Teskey that Premform’s non-compliance with its discovery obligations should not be without sanction. I am not convinced, though, that denying leave to rely on the bid estimate is the appropriate remedy.
[39] Subrule 30.08(2) provides broad discretion for the court to determine an appropriate remedy for the failure to comply with production obligations. The scope of the remedy is to be determined in the context of the particular case: Newlove v. Moderco Inc., 2002 CanLII 34748 (ON SC) at para. 21.
[40] I am granting leave to Premform to rely on the bid estimate, but on terms that will still serve the function of “sanctioning” non-compliance with the Rules, namely that the native format version of the bid estimate be promptly disclosed and that Premform be subject to further examination on its loss of productivity claim, including the bid estimate, at its own expense.
[41] Both Teskey and Heights Rental sought costs thrown away from the prior examinations in the event leave was granted for Premform to rely on the bid estimate. I do not agree that the prior examinations were wasted and the record before me does not support a basis to find that there were any genuine costs thrown away from them. In my view, the more appropriate remedy is for Premform to compensate the reasonable full indemnity costs of both Teskey and Heights Rental for the now-necessary further examination. Preparation for and attendance at that further examination are a more accurate reflection of costs thrown away from delayed disclosure of the bid estimate.
Costs
[42] Premform has been successful, but does not seek costs of the motion. Teskey conceded that there should be no costs of the motion if Premform succeeded. However, this is case in which I view Teskey’s opposition to the motion as wholly reasonable, particularly given my determination that Premform breached its production obligations. Costs are discretionary. This is a rare case in which, despite Teskey’s concession, I do not think it fair or just to foreclose Teskey from recovering its costs of the justified opposition in the cause.
[43] At the time of the hearing, I had not considered awarding Teskey costs in any event of the motion. Having reached that result, I do not think it fair to decide on a quantum of costs to award Teskey in the cause without further submissions that address the result as it relates to the costs factors outlined in subrule 57.01(1) of the Rules. Since a costs award depends on the result of the proceeding, and I am seized of all steps through to and including the ultimate trial, there is no need for the parties to go to the expense of further submissions at this time. I am accordingly ordering that Teskey’s costs of this motion be claimable in the cause.
Disposition
[44] For the above reasons, I order as follows:
(a) Leave is hereby granted for Premform to rely on the bid estimate.
(b) Premform shall forthwith:
(i) produce a native copy of the bid estimate to Teskey and Heights Rental; and
(ii) produce its representative for a further examination for discovery on Premform’s loss of productivity claim, including the bid estimate, at its own expense, on a date to be agreed by the parties acting reasonably.
(c) Premform shall reimburse Teskey and Heights Rental their reasonable costs of the further examination, on a full indemnity basis, in an amount to be agreed by Premform or fixed by the court. Such costs shall be payable in any event of the cause, subject to further court order at a future hearing for directions.
(d) Teskey’s costs of this motion shall be claimable in the cause.
(e) This order is effective without further formality.
ASSOCIATE JUSTICE TODD ROBINSON
DATE: February 7, 2023