Clarksburg Contractors Limited v. Saks
CITATION: Clarksburg Contractors Limited v. Saks, 2012 ONSC 4903 DIVISIONAL COURT FILE NO.: 11-0971 DATE: 2012-08-31
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
BETWEEN:
CLARKSBURG CONTRACTORS LIMITED Plaintiff (Respondent)
– and –
URI SAKS and 3780 14th AVENUE HOLDINGS INC. Defendants (Appellants)
- and –
GARY GRANT, 466 HUME STREET, and SHIREWOOD CENTRE INC. Defendants (Respondents)
COUNSEL: H. McLeish, for the Plaintiff (Respondent) V. Arman, for the Defendants (Appellants) No one appearing
HEARD: July 4, 2012 at Barrie
REASONS FOR DECISION
QUINLAN J.:
OVERVIEW
[1] This is an appeal of the decision of Deputy Judge E. Symons, a deputy judge of the Small Claims Court.
[2] The plaintiff Clarksburg Contractors Limited (Clarksburg), the respondent in this appeal, sued a number of parties. The basis for its claim was the non-payment of invoices rendered for mechanical and electrical work performed at premises located at 466 Hume Street, Collingwood, Ontario (the property).
[3] Judgment was granted in favour of Clarksburg against two of the individual defendants, Gary Grant and Yuri Saks and against the corporate defendant 3780 14th Avenue Holdings Inc. (3780).
[4] Two of the defendants, Saks and 3780, hereinafter called the appellants, appeal the decision and ask that judgment be set aside and the action be dismissed as against them.
[5] The grounds of appeal are that the deputy judge erred:
a) by making certain findings of fact to establish the nature of the business relationship between Saks and Grant as a partnership and making conflicting findings as to whether there was a joint venture or a partnership between the parties; and
b) in failing to appreciate that Grant was the general contractor on the project and was solely responsible to pay Clarksburg for its unpaid invoices.
[6] For the reasons that follow, I find that the deputy judge did not err and this appeal should be dismissed.
EVIDENCE
[7] Grant and Saks agreed to purchase and develop the property. The vendor, for tax reasons, did not want the sale of the property to close until 2009. As a result, Grant and Saks took possession of the property on a lease basis in December 2007.
[8] Grant was to acquire ownership of the property (by entering into an agreement of purchase and sale with the vendor), lease the premises, and ensure completion of all other matters such as site plan approval, preparation of the construction and renovation contracts and supervision of the actual construction and renovation. Grant was not required to invest any money in the "venture".
[9] Saks agreed that he would fund the construction and renovation of the property and make the payments required to be made to the vendor pursuant to the agreement of purchase and sale.
[10] Because there was no entity in place at the time the property was being renovated, Grant agreed to contract in his own name with the sub-trades on behalf of the “venture”.
[11] Grant entered into an agreement with Clarksburg for mechanical and electrical work at the property. The quotation was addressed to Grant Development Corporation and was signed and accepted by Grant on March 26, 2008. Grant testified that "Grant Development Corporation" was a business name; it did not exist as a corporate entity.
[12] Clarksburg did work pursuant to the agreement and submitted its invoices to Grant Development Corporation. In turn, Grant submitted the invoices to 3780, a corporation controlled in part by Saks. 3780 paid a number of invoices submitted to it by Grant from Clarksburg from April 18, 2008 until August 6, 2008. After the last payment on August 6, 2008, $29,844.05 remained outstanding to Clarksburg.
[13] The sale of the property closed on February 2, 2009 with title taken in the name of 466 Hume Street Inc. (466). 466 was a corporation controlled by Grant and Saks, incorporated on January 28, 2009 to hold title to the property and carry out the business. 3780 provided the mortgage for the property to 466.
[14] Clarksburg sought damages for its unpaid invoices in the amount of $25,000 jointly and severally from Grant, Saks, 3780, 466 and Shirewood Centre Inc. (a corporation controlled in part by Grant).
[15] Grant issued a defendant’s claim against the appellants, alleging that the appellants were liable to Clarksburg for the amounts owing.
[16] The court heard evidence from a representative of Clarksburg and from Grant. Amongst other things, an affidavit of Saks was filed as an exhibit. Neither Saks nor any representative of 3780 gave evidence.
REASONS FOR JUDGMENT
[17] At issue in the trial was the relationship between Grant and the appellants. Also at issue was whether a relationship existed between Clarksburg and the appellants such that the appellants were liable for the outstanding invoices.
[18] The deputy judge issued judgment in favour of Clarksburg against Grant and the appellants. He found that there was a joint venture or partnership between Grant and the appellants for the development of the property. He found that, initially, Grant and the appellant Saks “were contracting in their personal capacity”, and that there was to be “a corporate entity created at some time in the future which presumably would have assumed the rights and obligations of the individuals”. He also found that the Partnerships Act[^1] applied.
[19] The deputy judge ruled that “it would be unfair and unconscionable for [the appellant] Saks to avoid liability on the contract with Clarksburg simply because Clarksburg may not have been aware of [the existence of the venture] in the very beginning”. He found there was a joint venture and that Grant contracted as agent for the venture. In so doing, Grant bound himself personally as a party to the oral partnership arrangement. Judgment was granted against Grant, Saks and 3780 in the amount of $25,000.
[20] The claim of Clarksburg against 466 and Shirewood Centre Inc. was dismissed as was the defendant's claim against the appellants.
ANALYSIS
Proceedings in Small Claims Court
[21] Before dealing with the standard of appellate review, it should be borne in mind that the trial at first instance was a Small Claims Court trial. The Courts of Justice Act[^2] provides the following overarching comments concerning proceedings in the Small Claims Court:
The Small Claims Court shall hear and determine in a summary way all questions of law and fact and may make such order as is considered just and agreeable to good conscience.
[22] Housen v. Nikolaisen[^3] provides guidance on the standard of review for findings of fact by judges. As the court stated:
The standard of review for findings of fact is that such findings are not to be reversed unless it can be established that the trial judge made a “palpable and overriding error”.
[23] The Supreme Court[^4] quoted the comments of Laskin J.A. in Gottardo Properties (Dome) Inc. v. Toronto (City)[^5]:
Deference is desirable for several reasons: to limit the number and length of appeals, to promote the autonomy and integrity of the trial... proceedings on which substantial resources have been expended, to preserve the confidence of litigants in those proceedings, to recognize the competence of the trial judge... and to reduce needless duplication of judicial effort with no corresponding improvement in the quality of justice.
Standard of Review
[24] It is well-established that the test to be applied on the review of a deputy judge’s decision is as follows:
a) the standard of review for findings of fact and inferences of fact is such that they cannot be reversed unless the trial judge has made a palpable and overriding error; and
b) the standard of review on pure questions of law is one of correctness.
PRINCIPLES APPLIED
1. Did the deputy judge err in finding that there was a partnership or joint venture between Grant and the appellants and/or in making conflicting findings?
[25] The appellants argued that the deputy judge erred in making certain findings of fact to establish the nature of the business relationship between Saks and Grant as a partnership. In addition, he erred in making conflicting findings as to whether there was a partnership or joint venture between the parties.
[26] The Partnerships Act defines a partnership as the relation that subsists between persons carrying on a business in common with a view to profit. The relation between members of an incorporated company is not a partnership within the meaning of that Act. The Partnerships Act does not prohibit the co-existence of both a partnership and a joint venture.
[27] An agreement creating a partnership is a contract. It need not be in writing. Whether or not a partnership exists depends on the substance of the relationship and not on the form. Nor does it necessarily depend on how the parties characterize their relationship.[^6]
[28] There is no precise legal definition for a joint venture. Various meanings have been attributed to the term including:
• a partnership;
• an association of two or more persons for a limited purpose without the participants becoming partners; or
• any combination of resources by two or more persons in order to conduct a commercial venture jointly under agreed-upon rules.
[29] The test for a partnership and a joint venture is the same, save and except that a joint venture may, but does not have to, be limited to a single undertaking or ad hoc enterprise.[^7]
[30] The appellants were unable to point me to any binding authority to support their proposition that a partnership and a joint venture cannot co-exist. In fact, a number of cases seem to accept that they can co-exist.
[31] In Graham v. Central Mortgage and Housing Corporation and Bras D’Or Construction Ltd,.[^8] the Nova Scotia Supreme Court found that it was immaterial whether the combination was called a partnership or a joint adventure. It held that it was probably a partnership, but in any case, it was a combination.
[32] In WCI Waste Conversion Inc. v. ADI International Inc.,[^9] the Prince Edward Island Court of Appeal noted that some cases identify joint ventures as partnerships:
Delineation between partnership and joint venture does not resolve the issue. And that is not essential. Some caselaw delineates, while other decisions identify the joint venture itself as a “partnership”: Ellis: Fiduciary Duties in Canada, Chapter 13 at pp.13-2 to 13-4.
[33] In Ben 102 Enterprises Ltd. v. Ben 105 Enterprises Ltd.,[^10] the court held that all partnerships involve a joint venture. The opposite can also hold based on the circumstances surrounding the joint venture.
[34] Carlson v. Sopow[^11] suggests that joint ventures and partnerships can co-exist: "The original owners of the land and the appellants entered into a joint venture agreement and a Partnership Agreement for the project...”
[35] In this case, the deputy judge had before him evidence to meet the requisites for both a partnership and a joint venture, that is, evidence of:
a) the contribution by Saks of money to fund the completion of the construction and renovation of the property and to fund payments required to be made for the property;
b) the contribution by 3780 of money to Clarksburg to fund the renovation of the property;
c) the contribution by Grant by way of his efforts to acquire ownership of the property, leasing of the premises, site plan approval, preparation of the construction/renovation contracts and supervision of the construction/renovation;
d) the taking of possession by Grant and Saks on a lease basis of the property with the intention to purchase the property (the delay in the completion of the sale being as a result of a tax decision by the vendor), thus demonstrating a joint property interest in the subject-matter of the venture;
e) a mutual right of control or management of the enterprise, as evidenced by the acceptance of responsibility by 3780 to receive invoices and make payments to Clarksburg, the ability of Saks to refuse to make payments on the invoices and the organizing by Grant of sub-contractors and permits; and
f) the lease and purchase of the property was done with an expectation of profit. The fact that Grant kept some of the money for himself in the course of the venture does not alter the fact that there was an expectation of profit and a right to participate in profits.
[36] Contrary to the submissions of the appellants, no essential terms were missing from the agreement by Grant and the appellants to be partners. They had an effective commencement date for their partnership. They were clear on what each party would bring to the table.
[37] I find that the deputy judge did not err in finding the existence of a partnership or joint venture. The relationship between Grant and the appellants could fairly be characterized as one or the other.
[38] This ground of appeal fails.
2. Did the deputy judge err in failing to appreciate that Grant was the general contractor and was solely responsible to pay Clarksburg for its unpaid invoices?
[39] I find this ground of appeal has no merit. The agreement between Saks and Grant was that Grant would, amongst other things, ensure site plan approval and prepare the construction and renovation contracts. The fact that Grant entered into the contracts in his own name does not support that he was the general contractor and was solely responsible to pay Clarksburg for its unpaid invoices.
[40] The deputy judge did not misapprehend the effect of the reference by Grant in his letter to Saks dated April 23, 2008 that “all the debt obligations are in my name”. A review of the entire document supported Grant’s evidence and position that he, Saks and 3780 were all liable for the unpaid invoices submitted by Clarksburg and that he was not acting in the capacity of a general contractor. Grant’s evidence on this point was undisputed.
[41] In addition, 3780 paid the invoices rendered by the sub-contractors. If Grant was the general contractor, this would have been his responsibility.
[42] The deputy judge did not err in finding that Grant contracted as agent for the venture. As a result, the issue of privity of contract does not arise.
[43] I find that the deputy judge did not err in finding that the appellants were liable to Clarksburg for its unpaid invoices.
[44] If a partnership existed, Grant and the appellants would be jointly liable for all debts and obligations, including the unpaid debt to Clarksburg.[^12]
[45] Although the law is far from settled, there is case law to support the proposition and it was open to the deputy judge to find that if a joint venture existed, Grant and the appellants would be jointly and severally liable for all debts and obligations incurred after the creation of the joint venture, including the unpaid debt to Clarksburg.[^13]
[46] In addition, the appellants have not demonstrated that the deputy judge erred when he found that it would be both “unfair and unconscionable" or, in the words of section 25 of the Courts of Justice Act, would not be “just and agreeable to good conscience” “for Mr. Saks to avoid liability on the contract with Clarksburg simply because [Clarksburg] may not have been aware of [the existence of the venture] in the very beginning”.
[47] If Saks could avoid liability on the basis that he was a member of a joint venture only, then he, as a member of a joint venture, would benefit from work done on a contract entered into by another member of the joint venture, in circumstances where the agreement between the joint venturers was that Grant would enter into the contracts and Saks would provide the funds. This would not be just and agreeable to good conscience.
[48] This ground of appeal also fails.
CONCLUSION
[49] Accordingly, the appeal is dismissed.
COSTS
[50] Clarksburg seeks its costs of the appeal of a substantial indemnity scale in the amount of $5,442.76 inclusive of disbursements and HST. Total fees, exclusive of HST, are $4,370.00.
[51] I am not satisfied that Clarksburg has demonstrated that the costs should be awarded on a substantial indemnity basis. On a partial indemnity basis, I estimate that the fees sought would be approximately $3,000.
[52] I find that the quantum sought, on a partial indemnity basis, is reasonable.
[53] Accordingly, I order that the appellants pay to Clarksburg its costs of the appeal in the amount of $4,000, inclusive of disbursements and HST.
________________________ QUINLAN J.
Released: August 31, 2012
[^1]: Partnerships Act, R.S.O. 1990, c.P.5. [^2]: Courts of Justice Act, R.S.O. 1990 c.C.43 at paragraph 25. [^3]: Housen v. Nikolaisen, 2002 SCC 33, 2002 2 S.C.R. 235. [^4]: Housen, supra at para. 12. [^5]: Gottardo Properties (Dome) Inc. v. Toronto (City) (1998), 1998 6184 (ON CA), 162 D.L.R. (4th)574 at para. 48. [^6]: Applewood Place Inc. v. Peel Condominium Corp. No. 516, [2003] OJ No. 3318 at paras. 22-24 (SCJ). [^7]: Continental Bank Leasing Corp. v. Canada, 1998 794 (SCC), [1998] 2 SCR 298 at para. 24 (SCC); Applewood Place Inc. v. Peel Condominium Corp. No. 516, supra at para. 24; Canlan Investment Corp. v. Gettling, 1997 4126 (BC CA), [1997] BCJ No. 1647 at para. 31 (BCCA). [^8]: [1973] NSJ No. 180. [^9]: WCI Waste Conversion Inc. v. ADI International Inc., 2011 PECA 14 at para. 48. [^10]: Ben 102 Enterprises Ltd. v. Ben 105 Enterprises Ltd., [2007] BCJ No. 1825 (SC) at para. 104. [^11]: Carlson v. Sopow, 2004 BCCA 612. [^12]: Partnerships Act, R.S.O. 1990, c.P. 10. [^13]: S.G. Levy and Sons Ltd. v. Dover Financial Corp. (1996), 1996 NSCA 23, 147 N.S.R. (2d) 186 (NSCA).