



COURT OF APPEAL FOR ONTARIO

CITATION: 2099082 Ontario Limited v. Varcon 
     Construction Corporation, 2020 ONCA 202

DATE: 20200312

DOCKET: C67026

Feldman, Huscroft and Harvison Young JJ.A.

BETWEEN

2099082 Ontario Limited

Plaintiff (Respondent)

and

Varcon
    Construction Corporation
and Trisura Guarantee Insurance Company

Defendant (Appellant)

Todd D. Storms and Zach Flemming-Giannotti, for
    the appellant

Kenneth J. M. Coull, for the respondent

Heard: March 3, 2020

On appeal from the judgment
    of Justice Helen MacLeod-Beliveau of the Superior Court of Justice, dated April
    30, 2019, with reasons reported at 2019 ONSC 2497.

REASONS FOR
    DECISION

[1]

Varcon Construction Corporation (Varcon) appeals from a decision granting
    partial summary judgment to 2099082 Ontario Limited, carrying on business as AWD
    Contractors (AWD).

[2]

The relevant facts are as follows. Varcon was the general contractor for
    a project to construct additional buildings in a correctional facility near
    Joyceville, Ontario. Varcon engaged AWD, a subcontractor, to supply labour and materials
    related to excavation, installation of granular base, construction of pipe
    bedding, and installation of exterior sanitary pipe, backfilling, and
    compaction of the backfill. AWDs work was completed in the summer of 2013.

[3]

A dispute arose between Varcon and AWD when Varcon refused to release
    the balance of AWDs contract price to it. AWD commenced an action in August
    2015, and Varcon filed a statement of defence in November 2015. In late
    September 2016, the sewage system for the building failed. Varcon notified AWD
    that it required a remediation proposal. AWD refused do so unless Varcon
    established that its work had been deficient.

[4]

AWD brought a motion for summary judgment, arguing that Varcon owed it
    the outstanding monies under the construction subcontract. In May 2017, AWDs
    motion was granted, and Varcon was ordered to pay $39,064.87 into court. Varcon
    did so. Payment into the court allowed Varcon to obtain leave to re-open its pleadings
    and issue a fresh counterclaim, which it did in June 2017.

[5]

Varcon counter-claimed for damages, alleging (amongst other things) that
    AWDs work was deficient and that AWD failed to rectify the deficiencies. Varcon
    also claimed that AWD breached the warranty contained in the subcontract and
    was liable for the remediation work on that basis. AWD brought another motion
    for summary judgment to dismiss Varcons counterclaim in its entirety.

[6]

The motion judge granted partial summary judgment in favour of AWD. She determined
    that no trial was required to determine that AWDs work was not deficient, AWD
    did not fail to warn Varcon regarding the unsuitability of certain excavated
    material, and AWD did not fail to rectify the deficiencies. Varcon appeals from
    this decision.

[7]

The motion judge also determined that there was a genuine issue
    requiring a trial with respect to AWDs liability to Varcon under the subcontracts
    warranty provisions. AWD cross-appeals from this decision on the basis that the
    motion judge erred in finding that this was a genuine issue requiring a trial.
    It further submits that the motion judge erred in failing to determine that the
    warranty was inapplicable in the circumstances.

[8]

The appeal is dismissed and the cross-appeal allowed for the reasons
    that follow.

(1)

The main appeal: Did the motion judge err in granting partial summary
    judgment to AWD?

[9]

Varcon argues that the motion judge made palpable and overriding errors of
    fact, which led her to grant AWDs motion. We disagree.

[10]

At the outset, we note that the question of whether summary judgment was
    appropriate was fully argued before the motion judge.

[11]

We accept that the motion judge made some findings of fact that went
    beyond those necessary to determine the central question, which was: did AWD
    complete its work in compliance with the contract and in a non-defective way?

[12]

To the extent that the motion judge made findings as to the actual cause
    of the sewage failure, such findings do not undermine her conclusions, which
    are amply supported by the record.

[13]

In particular, it was open to the motion judge to reject Varcons expert
    evidence, which was given by Mr. Wong. She reasoned that his opinion  that the
    soil compaction had been inadequately performed  was not supportable without reviewing
    the compaction reports under the area of the sewer pipes done at the time of
    construction, which he had not seen. Whose onus it was to produce or obtain
    those records for the litigation was in issue before the motion judge. However,
    for the purpose of obtaining an expert opinion, there is no issue that it was
    Varcons obligation to obtain those records from the compaction overseer or
    from the owner of the project, if Varcon no longer had its copies.

[14]

Although the motion judge gave other reasons which were unnecessary,
    these reasons did not undermine the central basis upon which she found Mr.
    Wongs evidence to be unreliable and not credible.

(2)

The Cross-Appeal:  Did the motion judge err in ordering
    a trial on the warranty issue?

[15]

At the outset of oral argument before this
    court, Varcon submitted that: (i) the motion judge decided that a trial was
    required to determine the applicability of the warranty and any damages issues
    arising from it; (ii) as such, her order in this respect was interlocutory and
    leave to appeal is required; and (iii) AWD had not sought the required leave to
    appeal. Varcon argued that, while it was content for this court to entertain
    the leave application, AWD could not meet the applicable test for leave under
    rule 62.02(4).

[16]

We do not agree.

[17]

This is a case in which the appeals from the
    final and interlocutory aspects of the motion judges order are so
    interrelated, we [are] able to proceed to hear the two appeals together in
    accordance with s. 6(2) of the
Courts of Justice Act
, R.S.O. 1990, c. C.43, on the basis that once the first issue was
    before this court, leave would inevitably have been granted on the second:
Lax
    v. Lax
(2004)
,
70 O.R.
    (3d) 520 (C.A.), at para. 9; see also
Azzeh v. Legendre
, 2017 ONCA 385, 135 O.R. (3d) 721, at para. 26. Accordingly, this
    is a case where both appeals should be heard together by this court.

[18]

In its cross-appeal, AWD argues (i) that the motion
    judge erred in finding that a trial was required on whether AWD was liable to
    Varcon pursuant to the subcontracts warranties, and (ii) that she further
    erred in failing to find that the warranty was inapplicable in these
    circumstances.

[19]

On its merits, we would allow AWDs cross-appeal.
    There was no genuine issue requiring a trial on the warranty issue.

[20]

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).

[21]

Both parties relied on the contractual
    documents, and the warranty in particular, to support their position. The
    warranty provision reads as follows:

The Subcontractor hereby guarantees the work
    in accordance with the Prime Contract documents. No payment to the
    Subcontractor and no partial or entire use or occupancy of the Subcontract Work
    by the Owner shall be construed as an acceptance of any work or material not in
    accordance with this Subcontract Agreement.

The Subcontractor
    hereby agrees to repair and make good any damages or fault in the Subcontract
    Work []
as the result of imperfect or defective work done or material
    furnished by the Subcontractor
[]. The Subcontractor guarantees the
    Contractor, the Consultant and the Owner, against loss or damage
arising
    from any defects in material or workmanship furnished by the Subcontractor
    under this Subcontract Agreement
for such period as the Contractor is
    liable under the Common Law or Statue or under the specific terms of the Prime
    Contract. [Emphasis added]

[22]

GC3.11(1) of the Prime Contract states:

The Contractor shall promptly remove from the
    site of the Work and replace or re-execute defective Work whether or not the
    defect is the result of poor workmanship, use of defective Material, or damage
    through carelessness or other act or omission of the Contractor.

[23]

Varcon submits that, when reading the warranty
    and Prime Contract together, AWD remains liable to Varcon even if AWDs work
    was not deficient and even if the native soil used was problematic (which
    Varcon denies).

[24]

We do not agree. Varcons interpretation of the
    warranty would effectively make AWD  one of the many subcontractors on the
    project  a guarantor of any or all defects in the project, whether its own
    work has been defective or not. A plain reading of the warranty provisions does
    not support this position and does not accord with sound commercial principles
    and good business sense:
All-Terrain Track Sales and Services Ltd.
    v. 798839
, 2020 ONCA 129, at para. 27
.
Varcon
    also suggested that the warranty applies here because AWD furnished defective
    material, the native soil. However, the contract specified AWD was to use the
    native soil for backfilling. AWD cannot be faulted for adhering to these
    contractual terms.

[25]

The appeal is dismissed. The cross-appeal is
    allowed. Costs of the appeal and cross-appeal in the agreed amount of $6,000,
    all-inclusive, are payable by Varcon to AWD.

K.
    Feldman J.A.

Grant
    Huscroft J.A.

A. Harvison Young J.A.


