Sernoskie Bros. Ltd. v. Colautti Construction Ltd.
Sernoskie Bros. Limited, plaintiff, and
Colautti Construction Limited, defendant, and
Ashcroft Development Inc., Ashcroft Homes Inc., Ashcroft Homes
- Central Park Inc., Ashcroft Homes - Crown Pointe Inc., Crown
Pointe Development Inc., 1070280 Ontario Inc., 1230174 Ontario
Inc., David Choo and Shanti Choo, proposed third parties
 O.J. No. 252
120 A.C.W.S. (3d) 15
Court File No. 00-CV-014807
Ontario Superior Court of Justice
January 30, 2003.
Practice -- Joinder of causes and consolidations -- Consolidation of actions -- When available.
Application by the defendant Colautti Construction to consolidate this action with a separate action in which it sued Ashcroft Homes. Alternatively, Colautti sought to add Ashcroft as a third party to this action. In this action, Sernoskie claimed funds owed to it by Colautti. Colautti was responsible for the development of water mains, sanitary and storm sewers and excavating, drilling and blasting. Sernoskie was its drilling and blasting subcontractor. Ashcroft was the developer of this project. Sernoskie negotiated directly with Ashcroft with respect to the contract price and the scope of the work. It was engaged directly by Ashcroft to do additional drilling and blasting. The contract between Colautti and Sernoskie provided that Colautti would pay Sernoskie when it was paid by Ashcroft. Colautti claimed that it was not paid by Ashcroft for Sernoskie's work. It commenced the other action for nonpayment of its services. Ashcroft counterclaimed against Colautti for damages for deficient work. Colautti submitted that a substantial amount of Ashcroft's damage claim pertained to work performed by Sernoskie. Sernoskie opposed the application on the basis that it would be prejudiced by the delay. It did not state what the prejudice would consist of. Ashcroft did not want to be involved in this action. Many of the other third parties proposed by Colautti had no involvement in the project. If it was involved in this action, Ashcroft argued that there would be unnecessary duplication and increased expenses for all of the parties.
HELD: Application allowed in part. The two actions were not consolidated. They were to be heard at the same time or one after the other. The two proceedings had common questions of law or fact. There was the common issue of the alleged non-payment by Ashcroft. This was relevant to the 'pay when paid' clause contained in the contract between Colautti and Ashcroft. Another common issue was the deficiencies alleged by Ashcroft. Colautti claimed that much of this work was performed by Sernoskie. There were also issues about the scope of the work completed by Colautti since Sernoskie contracted directly with Ashcroft regarding certain items. The funds claimed by Colautti in the other action included funds claimed by Sernoskie in this action. The relief claimed in the two actions resulted from the same transaction or series of transactions.
Statutes, Regulations and Rules Cited:
Construction Lien Act, R.S.O. 1990, c. C-30. Ontario Rules of Civil Procedure, Rule 6.01.
Thomas P. Connolly, for the plaintiff.
Raymond Colautti and Paul A. Niebergall, for the defendant.
Paul Leamen, for proposed third parties.
1 There are a number of items of relief sought by the Defendant Colautti Construction Limited (Colautti) in this motion:
1. Colautti seeks to set aside a consent order dated July 18th, 2000.
2. It further seeks the consolidation of the present action along with action 01-CV-018487 involving Colautti and the proposed third parties ("the Ashcroft parties").
3. In the alternative, Colautti seeks to add the Ashcroft parties as third parties to these proceedings.
4. In the further alternative, Colautti seeks a stay of the present proceedings until a final adjudication of the claim by Colautti against Ashcroft in action number 01-CV-018487.
5. Finally, Colautti seeks leave to amend its statement of defence to bring a counterclaim against the Plaintiff.
Item 1 has been rendered moot by intervening. There is no issue with respect to last item of relief sought and the statement of defence will be amended accordingly.
2 In this action, Sernoskie Bros. Limited (Sernoskie) seeks funds owed to it by Colautti for services formed by Sernoskie as a subcontractor in respect of drilling and blasting for the installation of services on several projects in a residential development known as "Central Park". The developer is a group of companies collectively known as the "Ashcroft group" (Ashcroft). All of these claims involve Phase II and Phase III of the project.
Relationship between Sernoskie and Colautti
3 Colautti was responsible for the development of water mains, sanitary sewers, storm sewers, excavating, drilling and blasting. Sernoskie was retained as a subcontractor to do some of the drilling and blasting. In this relationship, the following facts are important:
1. Sernoskie negotiated directly with Ashcroft with respect to the contract price and scope of the work and was engaged directly by Ashcroft to do additional drilling and blasting.
2. The subcontract agreements between Colautti and Sernoskie contained a "pay if paid" clause.
3. By virtue of its agreements with Colautti, the Plaintiff agreed to:
"... be bound by the terms of this Subcontract Agreement and, to the extent that the provisions of the Contract Documents between the Owner and Contractor apply to the Work of the Subcontractor, Subcontractor shall assume all the obligations and responsibilities which the Contractor, by those Documents, assumes toward the Owner, and shall have the benefit of all rights, remedies, and redress against the Contractor which the Contractor, by those Documents, has against the Owner, insofar as applicable to the Subcontract, provided that where any provision of the Contract Documents between the Owner and the Contractor is inconsistent with any provision of the Agreement, this Subcontract Agreement shall govern."
Colautti asserts that it has not been paid by Ashcroft for the work performed by Sernoskie in the Central Park project. Ashcroft maintains that it has been paid in full.
History of the Litigation
4 A previous lien action, 00-CV-13731, was commenced in May of 2000 between Colautti and Ashcroft which action was settled in May 2001. Sernoskie's statement of claim in this action was issued on August 22nd, 2000 and the statement of defence delivered roughly one month later. On September 27th, 2001 Colautti commenced a second action, 01-CV-018487, against Ashcroft for payment of services rendered. On November 2nd, 2001, Ashcroft counterclaimed against Colautti. According to Colautti, $900,000.00 of the damages claimed by Ashcroft involves the work preformed by Sernoskie.
5 In this action, examinations for discovery have been commenced but these are far from complete. A settlement conference in this action is scheduled for February 14th, 2003, although it is obvious the case will not be ready to proceed to a settlement conference by that date. Although Ashcroft's counterclaim in 01-CV-018487 involves work performed by Sernoskie and for reasons that are not clear, Colautti chose not to third party Sernoskie in those proceedings. That would have been the preferred way to proceed and would have facilitated the disposition of this motion.
6 The plaintiff has raised the issue of the defendants' delay in bringing this motion. Colautti claims that it had settled a number of Sernoskie claims save and except for the Phase II and Phase III claims relating to the Central Park development. Colautti alleges that it believed that Sernoskie was content to await the outcome of its dispute with Ashcroft and it was not pursuing this claim.
7 After reviewing the materials submitted by counsel and after hearing their arguments, the Court concludes that the facts and issues in this action are intermingled with those of 01-CV-018487.
1. There is the common issue of the alleged non-payment by Ashcroft which would trigger the "pay when paid" clause between Colautti and Sernoskie. If Colautti has been paid in full, as Ashcroft alleges, then it may be liable to Sernoskie pursuant to the trust provisions of the Construction Lien Act, R.S.O. 1990, Chap. C-30.
2. There is the common issue of backcharges and deficiencies alleged by Ashcroft, many of which involve work that Colautti says was performed by Sernoskie.
3. There are issues with respect to the scope of work to have been completed by Colautti since Sernoskie contracted directly with Ashcroft with respect to some items.
4. The monies claimed by Colautti in 01-CV-018487 include the monies claimed by Sernoskie in this action.
8 For these reasons, Sernoskie entitlement to compensation in this action is inextricably bound to the outcome of the related proceedings. That linkage has now been strengthened by the amendment to the statement of defence to include a counterclaim. The policy of our Courts is to discourage the multiplicity of proceedings. This is particularly so where these are case managed. Sernoskie acknowledges that any entitlement to payment that it may have against Colautti and, in deed any judgment that it might obtain, would be subject to any claims of a set-off by Colautti as a result of Ashcroft's counterclaim in the other action.
9 Sernoskie opposes the relief sought on the basis that it will be prejudiced by any delay. Sernoskie's counsel submits that there is an onus on the part of Colautti to demonstrate that the relief sought will not be prejudicial to the Plaintiff. Sernoskie itself offers no significant evidence of prejudice other than a bald statement that any delay will cause prejudice and the obvious one that payment of its claims for compensation will be postponed. It was conceded nevertheless that any claim by Sernoskie and any judgment would have to await the outcome of the dispute between Colautti and Ashcroft. This is a procedural motion, and the Court accepts Colautti's argument that the Court must look at the issues raised by the parties in their pleadings. If, after consideration of those issues, the Court considers that there should be a joinder of the claims or a consolidation of the actions, it will do so unless it is satisfied by the party resisting in any such joinder that there is a demonstrable prejudice to that party. Sernoskie has failed to meet that test for the reasons set out above.
10 Most of the authorities submitted by counsel focused on the addition of Ashcroft as a Third Party. Ashcroft has no desire to get involved in this litigation. Moreover, it alleges that many of the third parties proposed by Colautti had no involvement in the Central Park project and are not properly the subject of "a claim over". Ashcroft has already been extensively engaged in its current and preceding litigation with Colautti and has no desire to get involved in these proceedings. The Court accepts its argument that this would lead to a duplication and an increase in expense to all parties. Rule 6.01 allows the Court to direct that two proceedings to be heard at the same time or one after the other as an option to consolidation. The conditions to such an order, namely that:
a) the two proceedings have a question of law or fact in common;
b) the relief claimed in the two proceedings arises out of the same transaction or series of transactions or occurrences;
have been met. In the circumstances of this case, this is the appropriate course of action. Such an order will reduce costs and duplication and provide an effective balancing of the interests between all of the parties.