CITATION: Roni Excavating Limited v. Sedona Development Group, 2015 ONSC 6576

DIVISIONAL COURT FILE NO.: DC-0013-00

DATE: 20151023

SUPERIOR COURT OF JUSTICE – ONTARIO – DIVISIONAL COURT

RE: RONI EXCAVATING LIMITED, Plaintiff (Respondent)

AND:

SEDONA DEVELOPMENT GROUP (LORNE PARK) INC, Defendant

AND:

CASACO DEVELOPMENTS INC. and CASMIRO HOLDINGS INC, Defendants (Appellants)

BEFORE: MOLLOY, HAMBLY and HACKLAND JJ.

COUNSEL: C. Reed, for the Appellants

R. Kennaley, for the Respondent, Roni Excavating Limited

HEARD: October 22, 2015 in Brampton

ENDORSEMENT

[1] This is an appeal from a decision of Ricchetti J. dated January 26, 2015, granting partial judgment on a summary judgment motion in a construction lien proceeding. The motion judge held that the Appellants were “owners” as defined by the Construction Lien Act, R.S.O. 1990, c. C.30, and that they owed trust obligations to construction trades. The Appellants appeal both findings.

[2] The motion judge correctly identified the legal test to be applied in determining whether the definition of “owner” under the Act had been met. Further, he provided careful reasons reviewing the relevant facts and applied the law to the reasonable factual conclusions and inferences which he drew. His ultimate conclusion that the appellants met the statutory requirements to be an “owner” within the meaning of the Act is a question of mixed fact and law and is entitled to deference. We see no error and hence no basis for interfering with the motion judge’s conclusion in that regard, whether as a question of fact, or a question of law, or a question of mixed fact and law.

[3] In particular, we find that the motion judge identified and applied the correct legal principles in determining whether the appellants could be said to have directly or implicitly requested the improvements to the real property. The fact that the appellants did not want to be involved in the actual construction is not determinative. This is an issue that is fact-driven and which requires a contextual approach, taking into account all of the surrounding circumstances. We are satisfied that the motion judge conducted that analysis appropriately. His findings of fact are entitled to deference.

[4] On the second issue, the Appellants argued that even if they were statutory owners within the meaning of the Act, any proceeds of sale received by them are held in trust only for claimants who contracted directly with or were employed by them. Since they had no privity of contract with the Appellants, they submit that they do not have any trust obligations to them.

[5] Before the motion judge, the Appellants had argued that the other defendant, Sedona Development Group (Lorne Park) Inc. (“Sedona”) was the owner of the project. The motion judge agreed that Sedona had an equitable interest in the lands and also met the other requirements of “owner” under the Act. That finding is not challenged in this appeal. However, the motion judge rejected the argument that if the Appellants were owners, then Sedona must be the contractor, rather than an owner. Rather, the motion judge found that there can be more than one owner and that Sedona was an owner, along with the two Appellants. Because all of the trades had contracted directly with Sedona, the motion judge held that the funds paid into court from the sale of the property were impressed with a trust in favour of the lien claimants.

[6] The Appellant’s argument with respect to privity of contract may be relevant to the obligations under ss. 7 and 8 of the Act with respect to the flow of funds down the construction ladder or pyramid. However, we do not agree that the same principles apply to the trust provisions in s. 9 of the Act. Sections 7 and 8 do not relate to proceeds of sale.

[7] With respect to the trust claims, it would be inconsistent with the purpose of the legislation to accede to the privity of contract argument advanced by the Appellants. For the scheme of the legislation to work, there will always be a contractor, there will always be a payor who holds the trust funds, and there will always be a beneficiary to whom the trust funds are owed. The Court of Appeal has confirmed that privity of contract is not always required in order to impose a trust obligation: Andrea Schmidt Construction Ltd. v. Glatt (1980), 1980 2714 (ON CA), 112 D.L.R. (3d) 371; Arthur Anderson Inc. v. Toronto-Dominion Bank (1994), 1994 729 (ON CA), 17 O.R. (3d) 363.

[8] The interpretation urged by the Appellants would defeat the purpose of the legislation, which is to ensure that contractors and workers who supply services and materials to real property are paid in priority to the owners of the property for whom the work was done. It is not consistent with that purpose to have the owners recoup the increased value of the land through the sale to the detriment of those claimants who created that increased value through their work and materials.

[9] We agree with the conclusion of the motion judge that Sedona and both Appellants were all owners who had an interest in the property. Notwithstanding the lack of direct privity between the Appellants and the claimants, the motion judge imposed trust obligation on all three owners. In our view that is consistent with the purpose of the legislation, the approach taken in a similar situation by Granger J. in DiMario v. Schuster, (1994), 13 C.L.R. (2d) 140, and with the Court of Appeal decisions we have mentioned above.

[10] Accordingly, this appeal is dismissed.

[11] On consent, costs are fixed at $22,000.00 payable forthwith.

MOLLOY J.

HAMBLY J.

HACKLAND J.

Date: October 23, 2015