Corbar Contracting Inc., et al, 2012 ONSC 1742

COURT FILE NO.: DC-10-254

DATE: 20120316

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

BETWEEN:

1000728 Ontario Limited O/A Baron Finance Plaintiff (Appellant)

– and –

Corbar Contracting Inc., Corrado Bartolo, Concetta Bartolo and 1678550 Ontario Limited c.o.b as Corbar Construction Defendant (Respondents)

COUNSEL:

Peter Baron, for Self-Represented Plaintiff (Appellant)

Richard J. Mazar, for the Defendant (Respondents)

HEARD: March 13, 2012

On Appeal from the Judgment of Deputy Judge, R.G. Sparks, Small Claims Court, dated October 28, 2010

REASONS FOR DECISION

DiTOMASO J.

THE APPEAL

[1] At trial, the Appellant 1000728 Ontario Limited o/a Baron Finance (“Baron”) claimed the sum of $25,000.00 for unpaid trucking services. Baron alleged a breach of contract and/or a breach of trust against all defendants. The Trial Judge granted Judgment against the defendant Corbar Contracting Inc. (“Corbar “) in the amount of $25,000.00 plus interest but dismissed Baron’s claim against the personal defendants Corrado Bartolo (“Corrado”) and Concetta Bartolo (“Concetta”) and the corporate defendant 1678550 Ontario Limited, carrying on business as Corbar Construction (“167”).

[2] On this appeal, Baron seeks an order that all defendants are liable to Baron for breach of trust in the amount of $25,000.00 plus interest and costs.

OVERVIEW

[3] This case concerns dump truck services provided by Litt Trucking Limited (“Litt”) in respect of a construction project called Baycliffe. Baron alleged that the services were provided to all of the defendants but it was never paid for those services.

[4] Litt subsequently assigned its invoices to Baron and Baron commenced the proceedings herein to recover payment.

[5] Corrado was the sole officer and director for both Corbar and 167. Concetta was the bookkeeper for both Corbar and 167.

[6] In September 2008, 167 entered into a contract with Baiashore Investments Inc. (“Baiashore”) for the removal of soil, the trucking of such soil to a specified location and other services for the sum of $550,400.00.

[7] In April 2009, 167 and Baiashore agreed to end their contract. It was the position of 167 that to continue was uneconomical. 167 was paid the total of $341,250.00 for services rendered to Baiashore under the contract. Baiashore gave 167 a release.

[8] In December 2008, Corbar entered into an oral contract with Litt wherein Litt supplied trucking services at the rate of $80.00 per load.

[9] The total services provided by Litt totalled the sum of $26,544.00. Litt invoiced Corbar. At the same time, Litt assigned the debt to Baron.

[10] Corbar did not pay Litt or its assignee Baron the amount of $26,544.00 for the outstanding invoices.

[11] On March 3, 2010, Baron commenced an action against Corbar, Corrado, and Concetta in Small Claims Court claiming a breach of trust under the Construction Lien Act, and waived the amount over the jurisdictional limit of $25,000.00.

[12] On April 1, 2010, Corbar, Corrado and Concetta filed a defence denying the breach of trust claim. At a settlement conference, Baron amended its claim to add 167 as a defendant and the respondents filed an amended defence to include 167. The respondents produced an accounting of the funds received on the Baiashore job.

[13] The matter proceeded to trial where Baron claimed a breach of contract and breach of trust under the trust provisions of the Construction Lien Act, R.S.O. 1990, c.C. 30 and, in particular, sections 8 and 13 of the Act.

[14] At trial, the Trial Judge held that Corbar was liable for the amount claimed and that there was no breach of trust by the defendants.

TRIAL PROCEEDINGS

[15] At trial, the appellant was represented by counsel. Mr. Baron and Mr. Chehal, a principal of Litt gave evidence. Concetta also testified.

[16] Mr. Chehal testified in-chief that he was hired by Corbar to provide trucking services for the haulage of dirt from Port Union/401 to Whitby. In cross-examination, Mr. Chehal testified that Litt supplied trucking services to Corbar. He further agreed on cross-examination that he did not deal with 167. In re-examination, he again confirmed that he was dealing with Corbar “owned by Charlie”.

[17] The evidence of Mr. Baron was that the only officer and director of Corbar was Corrado and that he did not know who were the officers and directors of 167. He testified that the only interest Baron had was by reason of the assignment of Litt’s invoices owed by Corbar. He further agreed that Baiashore paid to 167 the sum of $341,250.00.

[18] Mr. Baron testified that he had received and seen the accounting from 1678550 for the Baiashore job prior to trial (see Exhibit Two). He admitted that the revenue received was correct on that job, namely $341,250.00. He admitted that he had no evidence to contradict the accounting and did not contact any parties listed on Exhibit Two.

[19] At trial, the evidence of Corbar and 167 Ontario Limited was provided by Concetta. Her evidence was that her role in 167 and Corbar Contracting was only as bookkeeper. She prepared the accounting contained in Exhibit Two. 167 received $341,250.00 on the Baiashore job. 167 paid out as follows:

(a) $337,840.00 to sub trades on the Baiashore job;

(b) $23,829.95 to employees on the Baiashore job;

(c) $61,960.65 to rental equipment on the Baiashore job;

(d) $423,631.20 total paid out and lost $82,386.20 on the Baiashore job.

[20] She admitted that 167 paid out more than it received on the Baiashore job. She reviewed the breakdown of each category and prepared the summary from the accounting records of 167.

[21] The Trial Judge decided that Baron was entitled to Judgment against the defendant (“respondent”) Corbar only based upon the contract and the balance of the claims were dismissed against the defendants (“respondents”).

[22] In his Reasons for Judgment, the Trial Judge found on the basis of the evidence before him that:

(a) No money was ever paid to Corbar;

(b) Therefore there was no trust fund for the benefit of Litt;

(c) 167 was paid the sum of $341,250.00 on the Baiashore job and paid out $423,636.20 which resulted in a deficit of $82,386.20 paid out;

(d) No monies were available to pay out Litt/Baron. All funds were used for the purposes permitted by section 10 of the Construction Lien Act;

(e) The evidence submitted by Concetta was correct and she was a credible witness. In particular, the information contained in Exhibit Two, was correct and showed a true situation as far as the funds received under the Baiashore job and what happened to the funds that were so received;

(f) That none of the Defendants were liable under section 13 of the Construction Lien Act. There was no breach of trust or improper payments made.

(g) The Trial Judge reviewed the statutory provisions of Section 8, 10, and 13 of the Construction Lien Act.

[23] The Trial Judge specifically found in his Reasons at page 68:

However, I am satisfied, based on the evidence given by Concetta Bartolo, that the information contained in Exhibit Two is correct, and I found that she was a credible witness. Whether or not the supporting documentation was available, I’m satisfied that Exhibit Two shows the true situation as far as the funds were received under that particular project or contract, and what happened to the funds that were so received. I’m satisfied that any funds paid out, the trustee of the trust funds was entitled to do so pursuant to section 10 of the Act.

I was asked to draw an adverse inference from the fact that the defendant Corrado Bartolo was not in Court and did not give evidence. Now, in some instances, that would be the case. In this instance, I believe that the evidence that was important and germane to the issues in this proceeding was the evidence of the bookkeeper, Concetta Bartolo. Based on the nature of the claim and the allegations that there should have been a trust fund, I believe that the accounting was the important information, and as I’ve already indicated, I accept her evidence as being truthful.

THE ISSUE

[24] The issue raised on this appeal is whether the Trial Judge erred by not giving judgment against Corbar, Corrado, Concetta and 167 based upon a breach of the trust fund provisions of the Construction Lien Act.

[25] Baron contends that all of the defendants should be found liable for breach of trust because a trust fund was established. The defendants failed to discharge their onus that the payments made out of the trust fund were to beneficiaries of the trust or within the exceptions provided in the Construction Lien Act. Baron submits that the Trial Judge erred in law by failing to find that the defendants were liable for a breach of trust.

[26] The defendants (respondents) submit that the Trial Judge was correct and that there was no palpable and overriding error which affected the Trial Judge’s assessment of the facts. The Trial Judge was correct in finding that there was a contract between Litt and Corbar for the supply of trucking services based on the evidence. He found that there were no monies paid to Corbar and hence there was no trust fund for the benefit of Litt. Corbar did not breach section 8 of the Construction Lien Act because it received no funds which were impressed with a trust. Further, Corrado and Concetta could not be liable to Litt under section 13 of the Construction Lien Act.

[27] Even if Litt was a beneficiary of the trust fund on the Baiashore job, 167 complied with the provisions of section 10 of the Construction Lien Act and there was no breach.

STANDARD OF REVIEW OF APPELLANT COURT

[28] Where the issues address questions of law, the standard of review by the appellant court is one of correctness. See MacDougall v. MacDougall, 262 D.L.R. (4th) 120. (Ont. C.A.).

[29] Where the issues address questions of fact, the standard of review by the appellant court is that the appellant court will only interfere with the findings of the Trial Judge if there is a palpable and overriding error which affected the Trial Judge’s assessment of the facts. See General Signal Ltd. v. Magnesium Express Ltd. (1995) 79. OAC. 287 (Div. Ct.).

ANALYSIS

[30] In his submissions, Mr. Baron raised two issues. Firstly, whether 167 was in breach of trust. Secondly, whether Baron was a beneficiary of the trust.

[31] Dealing with the first issue, Mr. Baron advanced four points. He submitted that the onus was on the defendants as trustees of the trust fund to establish that payments were made in compliance with section 11(1) of the Construction Lien Act. The summary (Exhibit Two) prepared by Concetta was not proper evidence or sufficient proof. He argued that the intermingling of monies paid was a breach of trust. Further he argued that monies were paid out for rent and other overhead expenses which was also a breach of trust. There was also a lack of evidence identifying on which project funds were paid which was a further breach of trust.

[32] I disagree.

[33] Section 8 of the Construction Lien Act requires the plaintiff(appellant) to show:

(a) There was a contract between the contractor and the subcontractor for the supply of services to the contractor;

(b) Amounts were paid or payable to the contractor;

(c) Such amounts constituted trust funds; and

(d) the contractor shall not appropriate or convert or use the funds of the trust inconsistent with the trust until all amounts are paid to the subcontractor.

[34] Section 10 of the Construction Lien Act provides that payment of the trust funds to any beneficiaries of the trust discharges the trustee’s obligation to the extent of the payment made.

[35] The Trial Judge found that there was a contract between Litt and Corbar for the supply of trucking services. This finding was supported by the oral evidence of Mr. Chehal and Mr. Baron. The Trial Judge found that no monies were paid to Corbar and hence there was no trust fund for the benefit of Litt. It was 167 that was paid $341,250.00 on the Baiashore job and 167 paid out $423,636.20 which resulted in a deficit of $82,386.20. Though monies were available to pay out Litt/Baron, all funds were used for the purposes permitted by section 10 of the Construction Lien Act. The Trial Judge found the evidence of Concetta correct and credible. He accepted the summary which she prepared and marked as Exhibit Two. He was entitled to do so pursuant to rule 1.03 (1) and rule 18.02 of the Small Claims Court Rules.

[36] The written evidence at trial supported the Trial Judge’s findings of fact, namely, Exhibit 1, the contract between Baiashore and 167, 167 invoices and payments by Baiashore, and Exhibit One invoice from Litt to Corbar dated December 31, 2008 reflecting all of the tickets and charges totalling the sum of $26,544.00.

[37] In respect of the alleged trust liability of Corrado and Concetta pursuant to section 13 of the Construction Lien Act for Corbar, section 13 of the Act provides that the directors and officers of a corporation, or a person who has effective control of the corporation which breaches the trust fund provisions of the Construction Lien Act and assents or acquiesces to such breaches is liable to the beneficiary of the trust.

[38] In order to have been successful at trial, Baron must first have proved that Corbar breached the provisions of section 8 of the Construction Lien Act. The Trial Judge found that Corbar did not breach the trust fund provisions of section 8 of the Act because it received no funds which were impressed with the trust. Therefore, Corrado and Concetta could not be liable to Litt under section 13 of the Construction Lien Act.

[39] This finding was supported by the oral evidence at trial together with the contract between Baiashore and 167, 167 invoices and payments to Baiashore, the invoice for trucking services dated December 31, 2008 from Litt to Corbar.

[40] As for the trust liability of 167, the Trial Judge did not find that Baron or Litt had a contract with 167 but rather than with Corbar. This fact was supported by the oral evidence of Litt and Baron. This evidence was confirmed by the written documents tendered into evidence, namely, the contract between Baiashore and 167, 167 invoices and payments by Baiashore, and invoices for trucking services dated December 31, 2008 from Litt to Corbar.

[41] Absent such contract, a trust fund between Litt and 167 could not be created for the benefit of Litt and its assignee Baron.

[42] In addition, 167 provided evidence through its bookkeeper Concetta that all funds received from the Baiashore job were paid to sub trades, employees and rental expenses in compliance with Section 10 of the Construction Lien Act and the receipts and disbursal of funds on the Baiashore job was explained.

[43] In addition, and even if Litt was a beneficiary of the trust fund on the Baiashore job, the Trial Judge found that 167 complied with the provisions of section 10 of the Construction Lien Act and there was no breach.

[44] Similarly, as there was no breach by 167, there was no trust liability on the part of Corrado and Concetta pursuant to section 13 of the Construction Lien Act.

[45] Again, the conclusion was supported by the oral evidence of Concetta and the written documentation.

[46] Regarding the second issue raised by Baron, namely whether Baron is a beneficiary of the trust, he argued that a contract between Litt and 167 made the most commercial sense and the Trial Judge was wrong in finding that there was no contract between Litt and 167. He pointed to some of the truck tickets which read Corbar Const. He argued that Litt made an error when it invoiced Corbar Contracting Inc. In the alternative, he submitted that Corbar was an agent for 167. 167 was an undisclosed principal, Corbar and 167 are owned by the same people, Corbar could not be used as a shield by 167 and in the end all of the defendants (respondents) are liable to Baron for breach of contract and breach of trust.

[47] I disagree.

[48] Mr. Baron’s arguments are not supported by the evidence at trial. The Trial Judge was correct in finding that the contract was between Litt and Corbar, not between Litt and 167. Mr. Baron’s argument that there ought to have been a finding of a contract between Litt and 167 “because it makes the most commercial sense” is wishful thinking and not supported by the evidence at trial. The evidence does not support Litt being in error when it invoiced Corbar. Similarly there is no evidence to support Mr. Baron’s agent/undisclosed principal argument.

[49] The Appellant relied upon the following cases: St. Mary’s Cement Corp v. Construc Ltd., Maintemp Heating & Air Conditioning Inc. v. Momat Developments Inc.. I find those cases are distinguishable on their facts from the case at bar.

[50] For these reasons, all of Mr. Baron’s arguments fail.

CONCLUSION

[51] Based upon the foregoing reasons, I conclude that the findings of fact by the Trial Judge were supported by the evidence at trial. There was no palpable and overriding error which effected the Trial Judge’s assessment of the facts. The applicable statutory provisions (section 8, section 10 and section 13) of the Construction Lien Act were properly considered by the Trial Judge. The Trial Judge was correct in his analysis of the applicable law. He was correct in finding that the defendants (respondents) were not liable for breach of trust. He was correct in deciding that Corbar was liable to Baron in the amount of $25,000.00 plus pre judgment interest. He was correct in dismissing the action against all other defendants.

[52] Accordingly, this appeal is dismissed with costs.

[53] I heard submissions in respect of costs. The defendants (respondents) are the successful parties. Counsel for the defendants (respondents) seeks partial indemnity costs in the amount of $12,000.00 all inclusive. Mr. Baron submits that this amount together with counsel’s hourly rate at $550.00 an hour and time spent at 31.7 hours is excessive.

[54] The defendants (respondents) are entitled to costs on a partial indemnity scale. The question becomes what is fair, reasonable and proportional in all the circumstances. I find the sum of $12,000.000 all-inclusive represents a claim for costs almost one-half of the judgment awarded by the Trial Judge. In my view, such a claim for costs is disproportionate. While I acknowledge that there was considerable work devoted to this appeal given the issues and as evidenced by the materials, the amount claimed on a partial indemnity basis is also somewhat excessive when reviewed in the overall context of this appeal.

[55] In all the circumstances, I fix costs in the amount of $8,000.00 all inclusive, including the attendance to argue the appeal, payable by Baron to the defendants (respondents).

DiTOMASO J.

Date: March 16, 2012