Durham issued a tender to clean an exfiltration lagoon. Wessuc, as subcontractor, provided Todd Brothers Contracting, as contractor, a written estimate for a portion of the tendered work. The estimate was dependent on the volume of sludge removed and disposed from the lagoon, with no agreed upon fixed or capped price. Wessuc relied on Todd Brothers’ representation that there was approximately 6,100 cubic meters of sludge to be removed.

After the contract was awarded to Todd Brothers, the parties agreed to alter Wessuc's method of sludge disposal. Wessuc completed the work, removing a total of 13,249.58 cubic meters of sludge: more than double the estimated/represented amount. Wessuc argued that it was entitled to payment for the full amount of sludge disposed of pursuant to its contractual unit price. Todd Brothers argued that because of the agreed change in sludge disposal method, the parties agreed that the price was capped at Wessuc's original estimate, regardless of the amount of sludge removed.

Wessuc sued for its unclaimed balance. At issue were a number of admissions made by Wessuc in its pleadings. Amongst other things, Wessuc admitted to:

• Failing to give the Surety the required notice under the Labour and Material Payment Bond, thus relieving the Surety of its obligations under that bond.
• Agreeing not to seek any additional remuneration if the volume of sludge exceeded 6,100 cubic meters.
• The terms of the agreement between the parties provided that Wessuc would be paid for removal of up to 6,100 cubic meters of sludge and not seek any additional remuneration if the volume of sludge exceeded that amount.
• The alternative method for sludge removal was proposed by Wessuc and approved by Durham with the understanding that Durham would only pay for the disposal of up to 6,100 cubic meters of sludge.

Law/Test to Withdraw Admissions in a Pleading

The test for leave to withdraw an admission in Ontario is:

1. Does the proposed amendment raise a triable issue in respect to the truth of the admission?
2. Is there a reasonable explanation for the withdrawal, such as inadvertence or wrong instructions?
3. Has the party wishing to withdraw the admission established that the withdrawal will not result in any prejudice that cannot be compensated for in costs?

Analysis

Regarding the first step of the test, the Court determined that were the admissions to stand, the trial would have taken less than a day or two. Without them, it would take five days. The Court noted that Wessuc's admissions were in complete contrast with the remainder of its pleadings. For example, it claimed it was owed funds based on the removal of more than 6,100 cubic meters of sludge, yet admitted to not seeking additional remuneration for any amounts beyond that.

Even though Todd Brothers pointed out these admissions to Wessuc, Wessuc's counsel did nothing about them. Todd Brothers prepared for trial by preparing a joint book of documents consistent only with the pleaded issues, and not the admissions. The Court determined that given the obvious differences between the admissions and the balance of the pleadings, there were triable issues.

As to whether Wessuc had a reasonable explanation for the withdrawal, the Court stated, "the inadvertence in pleading is breathtaking but explained by a simple failure to read the standard first three paragraphs of the various pleadings and amended pleadings". This error was understandable, the Court concluded, given the number of pleadings and their amendments. The paragraphs were "overlooked by busy counsel while focusing on the real issues to be tried". Furthermore, the Court found that there was no intention or tactical advantage to rely on the admissions; it was simply an error.

Finally, the Court determined that withdrawing the admissions would not result in prejudice to Todd Brothers that could not be compensated for in costs. Todd Brothers acknowledged there would be no prejudice to it if the admissions were withdrawn. Todd Brothers prepared for trial on the basis of the contested issues, and two examinations for discovery were held with respect to damages that could only be in issue if the admissions were inadvertent. Furthermore, Todd Brothers intended to call a witness from the Surety to testify to the bond issue, an issue that would not need to be tried if the admission relating to the bond were confirmed.

Wessuc's motion was allowed, and the admissions were withdrawn.

Withdrawing Admissions in Alberta

Rule 6.37(6) of the Alberta Rules of Court allows a party to amend or withdraw an admission or denial with the Court's permission, or by agreement of the parties. The Alberta Court of Appeal in Stringer v Empire Life Insurance Co. laid out the factors to consider when deciding whether to permit withdrawal of an admission:

• Was the admission intentionally made, or was it inadvertently made, or inadvertently permitted to arise by operation of the Rules?
• What is the explanation for permitting the admission to arise, or for having made an admission which is now said to be inaccurate?
• If there has been any delay in moving to withdraw the admission, what is the explanation for that delay?
• Has the applicant provided sufficient evidence to demonstrate that the admitted fact may not be true, and that there is a genuine issue about an important enough fact to warrant sending the disputed fact to trial?
• Would the withdrawal of the admission cause prejudice to the other party that cannot be remedied by costs or other terms?

For practical purposes, Courts in Alberta have adopted the approach taken in Ontario, and the legal test to be applied is the same.

Takeaways

This decision reinforces the importance of carefully drafting one's pleadings. In particular, with amendments to pleadings altering paragraph numbers, a careful analysis of which paragraphs are admitted is essential.

Here, the Court commented that the conduct of counsel for both parties was "embarrassing", and Todd Brothers was chastised for relying on Wessuc's admissions at the last moment. Accordingly, the Court found both parties to blame for the costs of the application, which took two days of court time.

Given the complexities of the pleadings in commercial and construction disputes, it is always advisable to consult a lawyer before deciding which parties to sue, and for assistance in drafting pleadings. Contact Anthony Burden in Calgary, Ryan Krushelnitzky in Edmonton, or any other member of Field Law's Construction Group for assistance.

Link to the Decision: Wessuc Inc. v Todd Brothers Contracting Limited et al, 2024 ONSC 2655