Rare Example of Partial Summary Judgment in a Construction Matter Upheld

Motions for partial summary judgments are typically frowned upon by the judiciary in Ontario. The Court of Appeal for Ontario has repeatedly held that such motions should be granted only rarely, and only where an issue “may be readily bifurcated from those in the main action and that may be dealt with expeditiously and in a cost-effective manner”.[1] Otherwise, there is a risk that findings made in the summary judgment motion will be inconsistent with findings made following the trial of the balance of the action.[2]

Moreover, where a key witness is facing credibility issues, partial summary judgment motions are almost never granted. Judges prefer to assess credibility in the flesh; it is understandably difficult to assess on a paper record.[3]

However, partial summary judgment, while rarely granted, is not always refused. In its recent decision in Learmont Roofing Ltd. v Learmont Construction Ltd., 2022 ONCA 894, the Court of Appeal upheld a rare example of a successful partial summary judgment emerging from a construction dispute which developed between a general contractor and subcontractor as part of a CCDC stipulated price contract in respect of a commercial roof replacement.

The Decisions

The case involved a dispute between a general contractor (Learmont Construction Ltd.) and a roofing subcontractor (Learmont Roofing Ltd.). Despite their names, the two parties were not related. The subcontractor had agreed to perform all the work for the project. In this arrangement, the contractor would receive the entirety of the payment from the owner (who was not a party to this dispute) and retain 5% of the gross amount of each invoice billed. The subcontractor would then receive 95% of the total amount billed for that work.

The owner paid each of the five invoices rendered by the contractor for the completion of the entire scope of work. The owner did not set off against any invoices and for the purposes of this case appeared to have no concerns with the work performed by the contractor/subcontractor. Despite having received full payment, the contractor only remitted the amount owing to the subcontractor for four of the five invoices (invoices 1, 2, 3 and 5 were paid to the subcontractor in full). The principal of the contractor – Mr. Boer – later explained that he had refused the payment for the fourth invoice because he believed that the contract price had been inflated as part of a corrupt scheme whereby the lead engineer on the project would have his cottage roof installed by the subcontractor at no charge. Mr. Boer deposed to having attended a meeting where this was admitted. Mr. Boer also claimed that the contractor did not have the funds to pay the subcontractor.

The subcontractor commenced an action to recover the amount owing, $138,134 for invoice #4.  The contractor commenced “a myriad of counterclaims”, including for fraud and conversion.

Notwithstanding the rarity of the relief, the subcontractor successfully obtained partial summary judgment on its claim. The motion judge granted the relief finding, among other things, that Mr. Boer’s “speculative allegation” regarding the corrupt scheme was not a genuine issue requiring a trial: there was no evidence that the price had been inflated for the benefit of the engineer, or that the engineer had failed to properly certify the value of the work done. Indeed, the subcontractor provided a cheque representing full payment by the engineer for his cottage roof as well as an email in which the engineer expressed appreciation for the work done and stated that the amount owing would be paid in full. The motion judge also found no “credibility issues” raised by the contractor.

Moreover, Mr. Boer’s suggestion that the contractor did not have the funds to pay the subcontractor the remaining amount was “obviously disingenuous”. The motion judge found that the funds received from the owner had been diverted to Mr. Boer for his personal benefit or the benefit of his holding company. Mr. Boer was therefore “liable for the breach of the [contractor’s] trust obligations under the Construction Act, R.S.O. 1990, c. C.30, as he failed to remit the amount owing to [the subcontractor].”[4] As a result, Mr. Boer and his holding company were jointly and severally liable for the full amount owing to the subcontractor.

Finally, the motion judge rejected the risk of inconsistent findings. Far from being intertwined with the subcontractor’s claim, the slurry of counterclaims made by the contractor were entirely separate.

The Court of Appeal upheld the motion judge’s decision, including her conclusions that there was no risk of inconsistent findings and that the evidentiary record did not give rise to any credibility problems: “We agree that the appellants raised no genuine issues requiring a trial. Further, after reviewing the evidentiary record, the motion judge concluded that it did not give rise to any credibility problems. We see no palpable and overriding error justifying appellate interference with the motion judge’s findings.”[5]

Takeaways

Partial summary judgments are difficult to obtain; it can even be challenging to convince the Court to schedule such a motion. Nevertheless, they remain an option to claimants or defendants in the right circumstances. This may be particularly so when considering clear and apparent breaches of the trust obligations imposed by the Construction Act in circumstances such as those in the present case.

Furthermore, making allegations which would seem to raise credibility issues may not prevent a partial summary judgment where those allegations lack any evidentiary foundation. Moreover, parties should consider carefully whether their claims (or counterclaims) are intertwined with other parts of the litigation. If not, partial summary judgment is an option that warrants further discussion with counsel.

[1] Butera v Chown, Cairns LLP, 2017 ONCA 783 at para 34.

[2] Butera v Chown, Cairns LLP, 2017 ONCA 783 at paras 26-29, 33.

[3] Trotter v Trotter, 2014 ONCA 841 at para 55.

[4] Learmont Roofing Ltd. v Learmont Construction Ltd., 2022 ONCA 894 at para 17.

[5] Ibid at para 21.

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