Case: 2099082 Ontario Limited v. Varcon, 2020 ONCA 202 (CanLII)

Keywords: Subcontract Warranty; Work Deficiency; Summary Judgment; Hryniak v. Mauldin, 2014 SCC 7, [2014]; Rule 20.04(2), Rules of Civil Procedure, R.R.O. 1990, Reg. 194

Synopsis:

The Appellant (“Varcon Construction Corporation”) is general contractor for a project to construct an addition to the correctional facility near Joyceville.

Varcon engages the Respondent subcontractor to supply labour and materials related to the installation of an exterior sanitary pipe. After work is completed, Varcon refuses to release the balance of the Respondent’s contract price. An action in commenced by the Respondent to recover the balance.

Shortly after the parties’ exchange of pleadings, the sewage system fails. Varcon provides notice it requires a remediation proposal. The Respondent says Varcon must first establish its work is deficient.

The Respondent brings a motion for summary judgment with respect to the balance owing. Varcon counter-claims for damages, alleging the Respondent’s work is deficient, and that the Respondent breached its subcontract warranty. The Respondent applies for summary dismissal of the counterclaim. The Motion Judge determines:

  • trial not required on the work deficiency issue (i.e. the Respondent’s work is not deficient, the Respondent did not fail to warn Varcon, and the Respondent did not fail to rectify deficiencies);
  • trial is required with respect to the Respondent’s liability under the subcontract warranty.

Varcon appeals the Motion Judge’s determination on the deficiency issue, and the Respondent cross-appeals as against the Motion Judge’s determination on the subcontract warranty. The Court of Appeal dismisses Varcon’s appeal, but allows the Respondent’s cross-appeal.

Importance:

This case provides an opportunity for the Court of Appeal to clarify what kinds of legal issues can be determined by way of summary judgment. Citing Hryniak v. Mauldin, 2014 SCC 7, the Court of Appeal found that neither of the two issues before the Motion Judge required a trial.

With respect to Varcon’s appeal on the need for a trial of the deficiency issue, the Court of Appeal found that, although the Motion Judge made findings beyond what was “necessary” to determine whether the Respondent completed its work in a non-defective way, such findings were “amply supported by the record” and would not undermine her conclusion. (See paras. 11-12). The Motion Judge determined (and the Court of Appeal agreed) that Varcon’s expert evidence was neither reliable nor credible in the absence of “compaction reports under the area of the sewer pipes done at the time of construction”, and that it was Varcon’s obligation to obtain those records. (See paras. 13-14).

With respect to the Respondent’s cross-appeal on the need for a trial of the subcontract issue, the Court of Appeal disagreed with the Motion Judge. For the Court of Appeal, there is no genuine issue requiring a trial on that issue:

The record before the motion judge included all the evidence necessary to interpret the warranty and consider whether it applied to the circumstances. Specifically, the contractual documents contain a sufficient basis to resolve the dispute about the warranty. There is no indication there would be better evidence or legal arguments on the issues at trial. Summary judgment “must be granted if there is no genuine issue requiring a trial” (emphasis in original): Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 68; see also Rule 20.04(2), Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 20.04(2). (See para. 20).

The Court of Appeal allowed the Respondent’s cross-appeal “[o]n its merits”, (see para. 19) finding that “[a] plain reading of the warranty provisions” would not support Varcon’s position (i.e. that the Respondent remains liable even if its work was not deficient). For the Court of Appeal, Varcon’s interpretation of the warranty provisions “…does not accord with sound commercial principles and good business sense”. (See para. 24).

Counsel for the Appellant: Todd Storms and Zach Flemming-Giannotti (Templeman, Toronto & Kingston)

Counsel for the Respondent: Kenneth Coull, Kingston

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