Court File and Parties

CITATION: X-L-Air v. Hyde Park, 2015 ONSC 2019 Divisional Court File No: 427/14 DATE: 2015-04-30

SUPERIOR COURT OF JUSTICE – ONTARIO DIVISIONAL COURT

IN THE MATTER OF the Construction Lien Act, R.S.O. 1990, c. C.30, as amended

RE: X-L-AIR ENERGY SYSTEMS LIMITED, Plaintiff AND: HYDE PARK RESIDENCES INC., COURTYARD DEVELOPMENTS INC. and STEPHEN HYDE, Defendants

BEFORE: M.A. Sanderson, J.

COUNSEL: Jonathan F. Lancaster, for Landform Canada Construction Ltd. (Appellant) Catherine E. Wilson, for Aluma Systems Inc. (Respondent)

HEARD: March 26, 2015

ENDORSEMENT

Introduction

[1] The Appellant Landform Canada Construction Ltd. (“Landform”) appeals the decision of Master MacLeod dated September 3, 2014, holding that even after Landform pays Aluma 10[.7]% of the funds Landform receives/received under the October 2012 Settlement Agreement in satisfaction of its 2012 lien, the balance of the funds that Landform receives/received pursuant to that Settlement Agreement shall be impressed with a trust in favour of Aluma and any other lien claimant of the same class.

[2] When Landform recently received an additional $91,621.35 pursuant to that October 2012 Settlement Agreement, Aluma claimed the $91,621.35 on the basis that it was both a beneficiary of the trust fund under Part II of the Construction Lien Act, (“the Act”) and a lien claimant of a lower class [i.e. Landform is the payer of the class to which Aluma belongs].

Landform’s Position on the Appeal

[3] Counsel for the appellant Landform submitted on this appeal that Master MacLeod erred in law or in mixed law and fact in concluding that any funds payable to Landform under the October 2012 Settlement Agreement, admittedly paid in satisfaction of Landform’s 2012 lien, should (subject to Aluma proving its lien claims) be made available to satisfy Aluma’s liens registered on November 18, 2013 for $331,260 and on March 28, 2014 for $62,621.00) and those of other lien claimants of the same class.

[4] On this appeal, counsel for Landform did not dispute the correctness of the Master’s statement of law at paragraph 34 of his Endorsement. He conceded that funds received by Landform on account of a contract or subcontract price are potentially trust funds under section 8 of the Act, and that Landform must account for all such funds it receives. Landform is not entitled to appropriate any of those funds for its own use until all its sub-trades have been paid.

[5] Counsel for Landform did not dispute the Master’s legal conclusion at paragraph 36 of his Endorsement to the effect that the priority provisions of the Act require Landform to pay Aluma’s valid lien claims in priority to Landform’s own lien.

[6] Nor did he did not contest the Master’s observation that s. 79 of the Act creates classes of lien claimants and that subsection 80(1)(c) provides that the lien of every member of a class has priority over the lien of the payer of the class (i.e., that Aluma is entitled under the Act to be paid on its lien, before Landform is entitled to be paid on its lien [because Landform is the payer of the class to which Aluma belongs].

[7] However, counsel for Landform submitted on appeal that the Master did err in law, or in mixed law and fact, because he failed to hold that Aluma could and did contract out of its lien rights under the Act. The Master erred in law in failing to consider and hold that Aluma agreed to accept and not to claim any more than 10.[7]% of any amounts received by Landform in respect of the October 2012 Settlement Agreement agreed to contract out of its statutory rights and to limit its claim to 10.[7]% of the funds that Landform recovered in respect of its 2012 lien.

[8] He submitted that although Aluma was not a party to the October 2012 Settlement Agreement, Aluma’s lawyers reviewed its terms.

[9] Counsel for Landform pointed to emails between Aluma and Landform dated August 29, 2013 at 3:57 PM, specifically the following from Keri Gammon (for Landform) to Catherine Wilson (for Aluma):

(c) Aluma agrees that beyond those provisions in the Settlement Agreement which apply for the benefit of the lien claimants (e.g. the rights to share in the proceeds of the sale of units, the mortgage, etc.), and beyond terms (a) [$46,000 to be applied towards the 2012 Amounts] and (b) [Landform to pay Aluma 10.7% of any monies Landform received on account of its lien, pursuant to the Settlement Agreement], Aluma shall have no other rights or claims with respect to the 2012 Amounts. In particular, but without limitation, Aluma agrees that it will not file a lien with respect to any parts of the 2012 Amounts, nor will it assert any claims or other rights as against Landform in respect of those amounts. [Emphasis added.]

[10] He also pointed to the fact that on October 4, 2012, Mr. Steer of Aluma wrote, “We understand what is being negotiated by the lien claimants”. Counsel for Landform submitted that the amounts now being claimed by Aluma were paid to Landform in connection with Landform’s 2012 lien. In other words, Aluma agreed it would not seek to recover any more than 10.[7]% of all amounts that Landform recovered in connection with its 2012 lien. Put differently, he submitted that Aluma specifically agreed not to attempt to recover any additional money out of the amounts Landform recovered under the Settlement Agreement in respect of its 2012 lien.

[11] Counsel for Landform submitted that the Master found that Aluma agreed not to file a lien and that although Aluma was not party to that October 2012 Settlement Agreement, Aluma agreed with Landform that Aluma would only be paid for its 2012 invoices under that Settlement Agreement and that would not exercise its lien rights in respect of any of the funds Landform received pursuant to that Agreement.

Aluma’s Position on the Appeal

[12] Counsel for Aluma denied that Aluma had contracted out of its Statutory rights with respect to any amounts claimed other than the 2012 Amounts.

[13] Counsel for Aluma referred to an email that she sent to counsel for Landform on the same day as the 3:57 AM email to which counsel for Landform referred in argument [set out in paragraph 9 above’. Later the same afternoon, on August 29, 2013 at 4:38 pm, before finalizing the Agreement, counsel for Aluma wrote:

#2 With respect to Aluma’s outstanding receivable that is not included in the 2012 Amounts, defined below. Aluma reserves its right to pursue these monies by claim for lien, contract, claim, or any other legal remedies available to it and Aluma is not bound by the Settlement Agreement in any way with respect to these Amounts, which continue to accrue and are not included in the 2012 amounts. (Emphasis Added)

With this clear, our client looks forward to receipt of its cheque tomorrow.

[14] The 2012 Amounts were defined as follows: “Amounts owed to Aluma for Aluma’s invoices rendered in 2012, on April 23, 2012, May 2, 2012, May 8, 2012, May 28, 2012, June 1, 2012 and July 3, 2012, totaling $153,415.63.

[15] Counsel for Aluma submitted that the 2012 amounts were NOT the amounts recovered or received by Landform under the Settlement Agreement pursuant to Landform’s lien. Aluma only agreed not to file a lien against Landform or otherwise to pursue its rights in connection with the 2012 Amounts. Aluma never agreed that Aluma would be precluded from claiming against the funds received by Landform under the Settlement Agreement or in connection with other matters. In fact, before the October 2012 Settlement Agreement was finalized, Aluma made that intention clear in its 4:38 PM August 29, 2012 email to Landform quoted above.

Events After Execution of the October 2012 Settlement Agreement

[16] After July 2012, Aluma continued to supply scaffolding to Landform on an ongoing basis. To this day, Aluma’s scaffolding continues to support the construction of Immanuel House. In Aluma’s submission, Aluma’s scaffolding could not be removed without damaging the building under construction. On November 18, 2013, Aluma filed a lien for $331,259.86 for work/supply of scaffolding that had not been covered by its 2012 invoices [i.e. were not included in the 2012 Amounts]. On March 28 2014, it filed a lien for $62,621.33 for further work/supply of scaffolding. [i.e. also for work not included in the 2012 Amounts].

[17] I find the Master did not overlook the submission of counsel for Landform that Aluma had contracted out of its statutory rights.

[18] At paragraph 16 he wrote “… it was part of Aluma’s agreement with Landform that Aluma would be paid for its 2012 invoices [the 2012 Amounts] only through that mechanism and not by the exercise of lien rights …” [Emphasis added]

[19] The Master noted that Aluma had not given up its rights to pursue other remedies not included in the 2012 Amounts. In paragraph 17 of his Endorsement, the Master wrote:

Aluma recognizes that this agreement with Landform is binding upon it. Landform has paid 10% of the funds received to date and intends to do likewise when the trust funds are distributed. Aluma understands that it has abandoned the right to pursue other remedies for its 2012 invoices and does not seek to do so. It does however seek to attach funds payable to Landform in satisfaction of its 2013 & 2014 lien claims. [Emphasis added.]

[20] The Master did consider whether Aluma had contracted out of its lien rights and concluded that Aluma had only contracted out in connection with the 2012 Amounts.

[21] The Master wrote at paragraph 31:

Although Aluma made its own side agreement with Landform with respect to the 2012 obligations, Aluma made it very clear it was not surrendering any lien rights for payments due subsequent to 2012 should those not paid. Landform does not dispute this and does not dispute the right of Aluma to register and enforce a lien in regard of its 2013 invoice. I am not sure what position it takes with respect to the lien registration in 2014.” [Emphasis added]

[22] The learned Master made a finding of fact that Aluma did not contract out of its lien rights for work done/scaffolding supplied after 2012.

[23] There was an evidentiary basis for the Masters finding of fact, that Aluma had not surrendered any lien rights for payments due not included in the 2012 Amounts. That evidence included the August 29, 4:38 p.m. e-mail quoted at paragraph 13 above in which counsel for Aluma made it clear on behalf of Aluma that Aluma was not contracting out of its rights/was reserving its right to pursue its lien rights in connection with work done/scaffolding supplied but not included in the 2012 Amounts.

[24] In my view, the Master considered and correctly rejected the submission that Aluma had contracted out of its after acquired rights. The “2012 Amounts” did not refer to all amounts owed to Landform under the lien. Aluma did not agree to limit its claims to the 10.[7]% of all amounts Landform received under its 2012 lien, only to limit its claims in connection with the “2012 Amounts”, a defined term.

[25] The Master held, correctly in my view, that Aluma had only contracted out of its lien rights in connection with the 2012 amounts, a defined term “Amounts owed to Aluma for Aluma’s invoices totalling $153,415.63 rendered in 2012 on April 23, 2012, May 2, 2012, May 8, 2012, May 28, 2012, June 1, 2012 and July 3, 2012.”

Disposition

[26] The appeal is therefore dismissed.

[27] Counsel may make written submissions on costs not exceeding 3 pages each on or before May 15, 2015.

M.A. SANDERSON J.

Released: April 30, 2015