CITATION: J. Lepera Contracting Inc. v. Royal Timbers Inc., 2016 ONSC 2909
DIVISIONAL COURT FILE NO.: 1963/12
DATE: 20161006
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
H. E. SACHS, C. J. HORKINS AND L. A. PATTILLO JJ.
BETWEEN:
J. LEPERA CONTRACTING INC.
Appellant
– and –
ROYAL TIMBERS INC., SONOMA WINDSOR, a U.S. Trust, SONOMA WINDSOR FL LTD., and SONOMA WINDSOR LP
Respondents
M. Marusic, for the Appellant
M. Binetti, for the Respondent, Royal Timbers Inc.
HEARD at London: April 22, 2016
L. A. PATTILLO J.:
[1] J. Lepera Contracting Inc. (“Lepera”) appeals from the judgment of Gates J. (the “Trial Judge”) dated March 23, 2012 at Windsor, Ontario wherein he dismissed both Lepera’s construction lien claim for $385,449.68 and its quantum meruit claim for the same amount against the Respondent Royal Timbers Inc. (“Royal Timbers”).
[2] In dismissing Lepera’s claims, the Trial Judge found that Royal Timbers was not an “owner” under the provisions of the Construction Lien Act, R.S.O. 1990, c. C.30 (the “Act”) and therefore was not entitled to a lien under the Act. The Trial Judge further held that Lepera was not entitled to maintain a claim for unjust enrichment on the ground that Lepera had not suffered a deprivation caused by Royal Timbers.
[3] For the reasons that follow, I dismiss the appeal. In my view, the Trial Judge made no palpable and overriding error in concluding on the facts as he found them that Royal Timbers was not an “owner” under the Act. Further, and while I am of the view that the Trial Judge erred in law in dismissing the claim for unjust enrichment on the ground that Royal Timbers did not cause Lepera’s deprivation, on the facts as found by the Trial Judge, Lepera cannot succeed in a claim for unjust enrichment.
Background
[4] Lepera is a construction contractor operating in and around Windsor, Ontario. Its principal is Joe Lepera.
[5] Royal Timbers is a development corporation which is wholly owned by Banwell Development Corporation (“Banwell”). Royal Timbers owns a 14-acre tract of land in Windsor, Ontario (the “Land”) which was divided into 9 Blocks designated Blocks 100 to 900. Royal Timbers and Banwell intended to develop the Land commercially. Murray Troop (“Troop”) was the principal owner and operator of both companies.
[6] Beginning in 2005, in anticipation of development of the Land, Royal Timbers hired Architectural Design Associates Inc. (“ADA”) from Windsor to prepare a site plan for the Land for commercial development. Royal Timbers also hired HGS Limited (“HGS”), an engineering firm, to prepare site servicing plans for the Land which dealt with storm and sanitary sewers, water service, electrical service and interior roads for the Land. John Gillis (“Gillis”), an associate with ADA, was involved from the outset in the work on the Land. Rick Spencer (“Spencer”) did the work for HGS.
[7] In late 2005, early 2006, Royal Timbers entered into discussions with the California based Sonoma Hospitality Group (“Sonoma”) concerning Sonoma building a hotel on Block 300 of the Land, a two-acre parcel. In mid-2006, Royal Timbers and Sonoma reached an “agreement in principal” regarding Sonoma’s purchase of Block 300.
[8] Subsequently, Royal Timbers retained ADA to design the servicing for Blocks 100, 200 and 400 of the Land and to be the project manager. In a separate but similar agreement dated August 4, 2006, Sonoma retained ADA to design the servicing for Block 300.
[9] In late October 2006, ADA issued tender documents (the “Request for Tenders”) on behalf of both Royal Timbers and Sonoma for the servicing of Blocks 100 to 400 of the Land. Contractors were invited to submit separate tenders for the servicing of Block 300 (Phase 1) and for the remaining Blocks 100, 200, and 400 (Phase 2). An addendum to the Request for Tenders dated October 25, 2006, clarified that the overall project would only be awarded to one contractor but there would be separate contracts entered into for each of Phases 1 and 2.
[10] On October 31, 2006, Lepera submitted two separate tenders, one to Royal Timbers – Banwell in respect of Phase 2 and the other to Sonoma in respect of Phase 1. Lepera was the successful tenderer.
[11] On February 17, 2007, Royal Timbers and Sonoma Purchaseco Inc., an affiliate of Sonoma incorporated in Ontario, entered into an agreement of purchase and sale for Phase 1 (the “Agreement”). The Agreement provided, among other things, for a purchase price of $1.1 million, a deposit of $25,000 and a closing date of February 28, 2007.
[12] The Agreement noted that the parties had agreed upon a preliminary site plan for Phase 1 (Article 3.4). Further, as part of its representations and warranties, Royal Timbers represented that sanitary and storm sewers and water shall be brought up to the lot lines of Phase 1 and that other services, including gas and electricity, shall enter and pass through Phase 1 in accordance with valid easements.
[13] The Agreement’s closing date was extended a number of times by mutual agreement. Ultimately the 2008 financial crisis intervened and Sonoma aborted the purchase and forfeited its deposit.
[14] On April 9, 2007, Lepera entered into separate site servicing contracts with Royal Timbers for Phase 2 and Sonoma for Phase 1. For both contracts, ADA was retained as the architect and project consultant.
[15] Lepera commenced the site servicing work for both Phase 1 and 2 in late April 2007. ADA oversaw the work as the consultant under both contracts.
[16] On June 19, 2007, ADA issued a Certificate for Payment to Sonoma for the payment to Lepera of $385,449.68 on account of its work on Phase 1. Lepera sent Sonoma an invoice for that amount. Sonoma failed to pay and eventually Lepera obtained default judgment against it and the other Sonoma entities involved. On July 25, 2007, Lepera also registered a construction lien against the interests of both Sonoma and Royal Timbers in Phase 1.
[17] Lepera was paid by Royal Timbers for the work it did on Phase 2.
The Trial Judge’s Decision
[18] In dismissing Lepera’s lien claim, the Trial Judge concluded, among other things, that based on the facts as he found them, Royal Timbers was not an “owner” as that term is defined in s. 1(1) of the Act.
[19] Section 1(1) of the Act defines “owner” as follows:
“owner” means any person, including the Crown, having an interest in a premises at whose request and,
(a) upon whose credit, or
(b) on whose behalf, or
(c) with whose privity or consent, or
(d) for whose direct benefit,
an improvement is made to the premises but does not include a home buyer.
[20] The Trial Judge found, as the registered owner of Phase 1, Royal Timbers clearly had an interest in Phase 1. Further, based on the facts that he found, the Trial Judge concluded that there was no express or implied request by or consent of Royal Timbers to do the work on Phase 1. The Trial Judge stated at para. 44 of his reasons:
- That Royal Timbers never requested the work relating to the Yellow parcel [Phase 1] was made clear from the evidence of Troop and Gillis and Spencer, without any contradiction from Lepera. The design and installation of services, the monitoring, and the project management for the Yellow parcel were carried out under separate agreements between the plaintiff, Sonoma, ADA and Spencer, without any express or implied request or consent of Royal Timbers.
[21] In dismissing Lepera’s unjust enrichment claim, the Trial Judge stated that there was no enrichment to Royal Timbers caused by its deprivation of Lepera. Rather, the deprivation was caused by Sonoma’s breach of its contract with Lepera. The Trial Judge did not address the issue of juristic reason other than to say, in light of his decision, it was not engaged.
Standard of Review
[22] The standard of review on appeals from a judge’s order was set out by the Supreme Court of Canada in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. On a question of law, the standard is correctness; and on questions of fact, it is palpable and overriding error. For issues involving questions of mixed fact and law, an error of law in respect of an extricable legal principle requires correctness while mixed fact and law requires palpable and overriding error.
Analysis
Owner
[23] Based on the definition of “owner” in s. 1(1) of the Act, in order to establish Royal Timbers as an owner of Phase 1, it must be found that (a) Royal Timbers had an interest in Phase 1, (b) Royal Timbers requested the work to be performed on Phase 1 by Lepera, and (c) such work was done on the credit or on behalf, or with the privity or consent, or for the direct benefit of Royal Timbers: Parkland Plumbing & Heating Ltd. v. Minaki Lodge Resort 2002 Inc., 2009 ONCA 256, [2009] O.J. No. 1195 (C.A.) at para. 61.
[24] The determination of whether a person is an “owner” under the Act is a question of fact. Further, the issue of whether there has been a request or consent may be established either expressly or be inferred from all the circumstances, viewed in light of the substance of the relationship between the parties. Finally, the determination of whether a person is an “owner” does not require that there be a direct relationship or privity of contract between the lien claimant and the person whose interest is sought to be charged with the lien. A request to have the work performed can be inferred from the circumstances of the case. See: Orr v. Roberson (1915), 34 O.L.R. 147, 23 D.L.R. 17 (Ont. C.A.); Bird Construction Co. v. Ownix Developments Ltd., [1984] 2 S.C.R. 199 (S.C.C.); Parkland Plumbing at paras. 67-69.
[25] Lepera submits that the Trial Judge made a palpable and overriding factual error in his analysis of whether Royal Timbers requested the work to be performed on Phase 1 by Lepera. In particular, it is alleged on Lepera’s behalf that the Trial Judge erred in finding that in the fall of 2006, there were two separate tenders put out, one for each Phase, when the evidence establishes only one tender. Correctly viewed, it submits the tender documentation supports Lepera’s position that Royal Timbers requested the work on Phase 1. As a result of the error, therefore, the Trial Judge’s finding that there was no request by Royal Timbers for the work is flawed and cannot stand.
[26] The Request for Tenders put out by ADA on behalf of both Royal Timbers – Banwell and Sonoma jointly – was not a tender. Rather, it contained the tender documents for both Phase 1 and 2. It is more properly described in my view as a request for tenders. While there was only one joint Request for Tenders, the document clearly requires two separate tenders for each of Phase 1 and Phase 2. Lepera submitted two tenders, one to Sonoma for Phase 1 and one to Royal Timbers – Banwell for Phase 2. In view of this the Trial Judge did not commit a palpable and overriding error when he stated that Lepera put in two separate tenders.
[27] Lepera also submits that the Trial Judge failed to recognize that a statutory owner’s request and consent to performance of the work can be established from surrounding facts, particularly in circumstances where an owner permits a third party access to the site for the purpose of permitting the work.
[28] It is clear from his reasons that the Trial Judge was aware that a request or consent to do the work can be inferred from the facts. Further, in reaching the conclusion that Royal Timbers did not impliedly or expressly request or consent to the work on Phase 1, the Trial Judge specifically addressed the fact that Sonoma was not the owner of the Phase 1. In that regard, he stated at para. 90:
While a request for the work may be inferred from the totality of the facts, the cases are highly fact specific. The absence of any direct dealings between an alleged owner and a contractor is a factor to be considered but this is not determinative. In this case, however, as I have concluded, it cannot be said that the work was done for the direct benefit of Royal Timbers as owner because of its pending sale of the Yellow parcel [Phase 1] to Sonoma and the benefits and improvements to that land were directed at Sonoma under its contract with Lepera.
[29] In addition, in reaching his decision that there was no implied request or consent by Royal Timbers for the work which Lepera did on Phase 1, the Trial Judge relied on a number of other factors including that the tender documents were clear that there were two separate contracts for the services; one with Sonoma for Phase 1 and the other with Royal Timbers for Phase 2; that Lepera entered into separate contracts, one with Sonoma for the Phase 1 work and the other with Royal Timbers for the Phase 2 work; that Lepera had no direct dealings with Royal Timbers in respect of the work on Phase 1; and that Lepera’s invoice and all of its demands for payment for the work on Phase 1 prior to registering the lien were directed only to Sonoma.
[30] In my view, there is no substance to this ground of appeal.
[31] Lepera further submits that the Trial Judge failed to recognize that Royal Timbers enjoyed a direct benefit from the work done by Lepera on Phase 1. In view of the Trial Judge’s finding that Royal Timbers never requested the work on Phase 1, which I would uphold, there is no need to consider this ground of appeal.
Unjust Enrichment
[32] The essential elements of a claim for unjust enrichment are well established. They are threefold: an enrichment of the defendant; a corresponding deprivation of the plaintiff; and an absence of juristic reason for the enrichment: Pettkus v. Becker, [1980] 2 S.C.R. 834; Peel (Regional Municipality) v. Canada, [1992] 3 S.C.R. 762; and Garland v. Consumers’ Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629.
[33] Lepera submits that the Trial Judge erred in dismissing its unjust enrichment claim on the basis that Lepera’s deprivation was not caused by Royal Timbers. It submits that it is not a requirement that there be a finding that the deprivation to the plaintiff was caused by the defendant.
[34] I agree with Lepera’s submission. In Peter v. Beblow, [1993] 1 S.C.R. 980 (S.C.C.) at paras. 79-80, the court noted that “As a general rule, if it is found that the defendant has been enriched by the efforts of the plaintiff there will, almost as a matter of course, be deprivation suffered by the plaintiff.”
[35] While the deprivation must be linked to the benefit received by the defendant, based on a straightforward economic approach, none of the cases require that the defendant must have caused it. Where causation becomes relevant is in respect of determining the appropriate remedy, i.e., to impose a constructive trust: Peter, at para. 98.
[36] Accordingly, the Trial Judge erred in concluding that Lepera’s claim for unjust enrichment did not apply because the deprivation to Lepera was not caused by Royal Timbers.
[37] Notwithstanding that conclusion, on the facts as found by the Trial Judge, Lepera’s claim for unjust enrichment must fail on the basis that there is no absence of a juristic reason.
[38] As set out in Garland, at paras. 44-46, the juristic reason inquiry is a two-step process. First, the claimant must show that no established juristic reason exists that would deny recovery. This includes a contract, disposition of law, donative intent or other valid or statutory, common law or equitable obligation. Second, and even where a claimant demonstrates no such reason applies, the defendant is still entitled to rebut the claim based on the reasonable expectations of the parties and public policy considerations.
[39] On the facts as found by the Trial Judge, Lepera’s claim for unjust enrichment cannot succeed on the basis that Lepera’s claim for the monies owing for work it did on Phase 1 arises from its contract with Sonoma. In my view, that contract constitutes a juristic reason sufficient to defeat Lepera’s claim against Royal Timbers in unjust enrichment.
[40] Further, on the facts as found by the Trial Judge, it is clear that the reasonable expectations of the parties at the time that the work began was that Lepera would be paid by Sonoma for the work done by it on Phase 1 in accordance with their contract and not by Royal Timbers, with whom it had a separate contract for the work on Phase 2.
Conclusion
[41] For the above reasons, therefore, the appeal is dismissed.
[42] At the conclusion of the hearing the parties advised that they had agreed on costs of $7,500 to the successful party. Accordingly, Royal Timbers is entitled to costs of the appeal, fixed at $7,500 in total.
L. A. PATTILLO J.
H. E. SACHS J.
C. J. HORKINS J.
Released: 20161006
CITATION: J. Lepera Contracting Inc. v. Royal Timbers Inc., 2016 ONSC 2909
DIVISIONAL COURT FILE NO.: 1963/12
DATE: 20161006
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
H. E. SACHS, C. J. HORKINS AND L. A. PATILLO JJ.
BETWEEN:
J. LEPERA CONTRACTING INC.
Appellant
– and –
ROYAL TIMBERS INC., SONOMA WINDSOR, a U.S. Trust, SONOMA WINDSOR FL LTD., and SONOMA WINDSOR LP
Respondents
REASONS FOR JUDGMENT
L. A. PATTILLO J.
Released: 20161006