Overproduce at Your Peril: Document Production in Construction Disputes
Construction disputes are notoriously document-intensive. Recent guidance from the Ontario Superior Court of Justice serves as a warning to litigants: avoid producing voluminous irrelevant records or risk facing cost consequences.
In Gowing Contractors Ltd v Walsh Construction Company Canada, 2023 ONSC 4407[1] the court found that the defendant had produced over 270,000 irrelevant documents to the plaintiff – equalling approximately 25% of its total productions. Other relevant records were produced late in error, resulting in the postponement of examinations for discovery.
The court granted a motion for further and better production from the defendant. Among other things, the court ordered that the defendant remove irrelevant documents from its production set and disclose the search terms it used to gather relevant records. Costs were also awarded against the party who had produced voluminous irrelevant records and caused the postponement of discoveries by late-producing other records.
This decision explores issues around electronic discovery, document collection, settlement privilege and discovery procedure in the context of multiple actions with hundreds of thousands of potentially relevant records.
Key Takeaways
- Discovery plans pertaining to vast amounts of electronic information should include search terms and lists of custodians to ensure that relevant documents have been produced. Failing to disclose search terms and custodian lists makes it more difficult to support that discovery obligations have been complied with.
- Producing parties should be aware that they have an obligation to decipher and produce relevant documents from large document sets. Failing to do so may result in an adverse costs award for time spent by the opposite party searching through irrelevant records.
- Allowing relevance to be defined by the pleadings opens parties up to very broad production scope subject to later interpretation by the courts. By more precisely defining relevant issues, search terms, custodian lists and the breadth of documentary discovery in discovery plans, parties may prevent multiple rounds of discovery or later disputes to determine relevance.
- Pre-production quality control is paramount to avoid inadvertently withholding relevant records. Late production may put discovery dates in jeopardy and risk a costs award.
- Settlement documents may be at risk of documentary production if the subject matter of the settlement is put into issue in the pleadings, even indirectly, and the settlement documents have relevance apart from evidence of “liability or a weak cause of action”.
Background
The City of Toronto (the “Owner”) hired Walsh Construction Company Canada (the “Contractor”) as the general contractor for a project related to upgrades to a wastewater treatment plant. Walsh hired Gowing Contractors Ltd. (the “Subcontractor”) as its mechanical subcontractor and provided Walsh with a payment bond and a performance bond through their bonding company, Zurich Insurance Company Ltd. (the “Surety”).
In July 2019, the Subcontractor ceased working and registered a claim for lien the following month. In addition to the lien proceedings, three civil actions commenced (collectively, the
Actions”):
- One involved an action by the Contractor against the Subcontractor for breach of contract causing delay and completion costs on the project.[2]
- The other pertained to an action by the Contractor against the Surety for payment on the performance bond.[3]
- The final action was by the Contractor against the Owner for delaying the project due to excessive change orders and incorrectly identifying contaminated soil, but was settled prior to the close of pleadings.[4]
Procedural History
At the trial management conference on March 29, 2021, the court made an order for interlocutory steps (the “Procedural Order”). One such step was that the parties agree on a discovery plan that dealt with electronic collection and production of records. Specifically, the plan was required to identify the custodians the parties would collect documents from and the search terms used by either party to find relevant documents.
Despite having difficulty agreeing to a plan, the parties eventually finalized a discovery plan.[5] However, details around the discovery plan’s scope of relevance were vague. The plan provided that relevance would be determined by the pleadings. It also stated that the parties had regard to the Sedona Canada Principles and the principle of proportionality. Contrary to the Procedural Order, the parties did not agree on lists of custodians to collect documents from, nor any search terms that would be used to identify relevant documents within those collections.
Both parties produced records in multiple tranches. The Surety and Subcontractor criticized the Contractor’s production of hundreds of thousands of irrelevant documents. Despite the production of over one million records, they claimed the Contractor’s production had inappropriately withheld documents regarding the Contractor’s settlement with the Owner (among other issues). The Surety and Subcontractor’s counsel demanded that the Contractor disclose its search terms. The Contractor refused. In response to the allegation of over-production, the Contractor stated it had chosen an “error bias in favour of inclusion.”
Less than two weeks before scheduled discoveries were to take place in March 2023, the Contractor advised the Subcontractor and Surety that it would be producing additional documents. An error had occurred where the tagging of one document in a group of documents caused all documents in that group to be incorrectly marked as irrelevant.[6] The discoveries did not proceed. Despite the Contractor producing two further tranches of records, several were redacted to omit financial information about the project that the Contractor asserted were irrelevant. The discoveries were subsequently rescheduled to November and December of 2023.
The Surety and Subcontractor brought a motion seeking, among other relief, further and better documentary production from the Contractor.[7]
Decision
Remove Irrelevant Records from the Production Set
The court granted the Surety and Subcontractor’s motion for a further and better production from the Contractor. The Contractor was required to remove the irrelevant records from its production and disclose the custodian list and search terms it had used to fulfill its discovery obligations.
The court accepted the undisputed evidence of an e-discovery specialist lawyer that 25% of over 1 million documents produced by the Contractor were irrelevant.[8] Despite acknowledging there can be a small amount of irrelevant documents expected in such a large production set, the court held that “such a large amount of irrelevant document production is egregious.”[9]
Notwithstanding the broad definition of relevance agreed upon in the parties’ discovery plan, the court held that the “primary obligation” was on each party to “decipher and produce only relevant documents” to the other side. Without having the benefit of the Contractor’s search terms or custodian list, the court found that the Contractor had failed to apply proper search protocols and breached is obligation to produce relevant documents.
Records Relating to Settlement were Producible
The court also ordered the Contractor to produce records to the Surety and Subcontractor relating to the Contractor’s settled delay claim against the Owner, given that:
- A significant portion of the Subcontractor’s claim for lien concerned delay and extension related costs. The Contractor settled its extension of time claim against the Owner, which included a claim for the Subcontractor’s delay costs.[10] As part of the Contractor’s defence against the Subcontractor, it claimed that the Subcontractor was only limited to what the Contractor could recover from the Owner under the prime contract.
- The Contractor was deemed to have conceded relevance of its settlement with the Owner by producing its claim for extension of time (without all schedules) in its litigation with the Subcontractor and Surety. The document included a claim for recovery of the Subcontractor’s general condition costs.
- The Contractor also expressly claimed recovery from the Subcontractor for liquidated damages the Owner charged as against the Contractor for delay concerning the Subcontractor’s work. Both parties’ pleadings mentioned the delay.
- An exception to the general rule against the disclosure of settlement documents exists where a third party to the settlement wants disclosure of those documents because they relate to the third party’s case and will not be used to establish weakness of the case of the party to the settlement concerning the settled issues.[11] The court found that the settlement documents were put in issue in this litigation, even if only indirectly in the pleadings. As the City was not put on notice of the production motion, disclosure was ordered with the right to the City to move to have it set aside.[12]
Costs Consequence
Costs “thrown away” in the amount of $52,886.26 were awarded against the Contractor. Costs were awarded for the Surety and Subcontractor’s review of deficient productions, the time spent during trial management conferences, and the wasted time preparing for scheduled discoveries that were adjourned on consent due to the Contractor’s late productions.[13] The court’s cost award included 25% of the hours that the Surety and Subcontractor’s legal counsel spent searching through irrelevant documents produced by the Contractor.
The order of costs thrown away did not include the actual costs of the motion. The Parties were invited to agree on costs, or make submissions for a costs decision by the court. Both parties claimed to have spent over $120,000 in lawyers’ fees and disbursements on the motion.
Concluding Thoughts
Despite being a part of civil litigation for over a decade in Ontario, some litigants still resist engaging in a discovery planning process with opposing parties. The court has once against shown that discovery plans are a necessary and mandatory part of civil proceedings. The failure to adopt and execute on a comprehensive discovery plan can lead to future delays in the litigation, costly interlocutory motions and adverse costs awards against non-compliant parties.
Given the number of construction disputes that feature millions of productions collected and produced, this case stands out as a warning for parties to abide by their obligation to avoid producing irrelevant documents or late-producing relevant records on the eve of discoveries.
[1] Gowing Contractors Ltd v Walsh Construction Company Canada, 2023 ONSC 4407 (“Gowing v Walsh”).
[5] Gowing v Walsh at para 10.
[6] Gowing v Walsh at para 19.
[7] The Surety and Subcontractor included as part of their motion a request for leave to amend their pleadings. Leave was granted, in part. For brevity, the leave to amend pleadings decision and its reasons are not reviewed here.
[8] Around 270,000 were considered to be irrelevant documents.
[9] Gowing v Walsh at para 29.
[10] Gowing v Walsh at para 40.
[11] Gowing v Walsh at para 46; Mueller Canada Inc. v. State Contractors Inc. (H.C.J.), 1989 CanLII 4117 (ONSC).
