REASONS FOR DECISION

DOUGLAS, J.

[1] The Appellant N.K.P. Painting Inc. (hereinafter “NKP”) appeals from the decision at trial of Deputy Judge Goldstein of the Richmond Hill Small Claims Court by which the NKP’s claim against York Condominium Corporation No. 97 (hereinafter “YCC 97”) for unjust enrichment was dismissed with costs of $2,500.00 to YCC 97.

Standard of Review

[2] The parties are agreed that on a question of law the test is one of correctness in which the appellate court is free to replace the opinion of the trial judge with its own, while on issues involving findings of fact, the trial judge is not to be reversed unless it can be established that the trial judge made a palpable and overriding error.

Background

[3] The facts at trial were not significantly in dispute. The parties relied in part upon an Agreed Statement of Facts. I will not repeat those facts in their entirety here beyond the following broad summary.

[4] NKP carries on business as a painting contractor.

[5] YCC 97 administers the operation of a high rise condominium building comprised of 159 residential units in Thornhill, Ontario.

[6] YCC 97 is the “owner” for the purposes of the Construction Lien Act (hereinafter “the Act”).

[7] R.B.G. Inc. (hereinafter “RBG”) carried on business as a general contractor and is currently bankrupt.

[8] The defendant Ronald William Boyko was a Director and Officer of RBG. Mr. Boyko made an assignment of bankruptcy in 2012.

[9] YCC 97 contracted with RBG for RBG to act as General Contractor to supply the necessary materials and labour for a common area refurbishment of the building corridors. The total price for this work was $285,760.00 plus taxes.

[10] NKP was a subcontractor retained by RBG to supply painting and wallpapering material as part of the project.

[11] NKP did not have any contract with YCC 97.

[12] As the work progressed YCC 97 issued progress payments to RBG, less the applicable statutory holdback pursuant to the Act.

[13] NKP completed its work at the property and rendered invoices to RBG. Invoices totalling $28,928.00 were not paid by RBG.

[14] Neither RBG nor NKP registered liens under the Act.

[15] YCC 97 held back a total of $23,893.74.

[16] After reviewing the law regarding unjust enrichment as enunciated in Kerr v. Baranow, 2011 SCC 10, 2011 1 SCR 269, and relying upon Barrie Trim v. Heath et al., 2010 ONSC 2107, the learned Deputy Judge concluded that as there was a contract between RBG and YCC 97 which required RBG to provide materials to the YCC 97 property there was no reason to proceed to the “juristic reason” analysis pursuant to Kerr v. Baranow. For this reason the court below dismissed NPK’s claim against YCC 97 for unjust enrichment.

Analysis

[17] Kerr v. Baranow, sets out the elements of an unjust enrichment claim as follows:

The first and second steps in the unjust enrichment analysis concern first, whether the defendant has been enriched by the plaintiff and second, whether the plaintiff has suffered a corresponding deprivation.
The Court has taken a straightforward economic approach to the first two elements — enrichment and corresponding deprivation. Accordingly, other considerations, such as moral and policy questions, are appropriately dealt with at the juristic reason stage of the analysis…
For the first requirement — enrichment — the plaintiff must show that he or she gave something to the defendant which the defendant received and retained. The benefit need not be retained permanently, but there must be a benefit which has enriched the defendant and which can be restored to the plaintiff in specie or by money. Moreover, the benefit must be tangible. It may be positive or negative, the latter in the sense that the benefit conferred on the defendant spares him or her an expense he or she would have had to undertake…
Turning to the second element — a corresponding deprivation — the plaintiff’s loss is material only if the defendant has gained a benefit or been enriched…That is why the second requirement obligates the plaintiff to establish not simply that the defendant has been enriched, but also that the enrichment corresponds to a deprivation which the plaintiff has suffered…
The third element of an unjust enrichment claim is that the benefit and corresponding detriment must have occurred without a juristic reason. To put it simply, this means that there is no reason in law or justice for the defendant’s retention of the benefit conferred by the plaintiff, making its retention “unjust” in the circumstances of the case…
Juristic reasons to deny recovery may be the intention to make a gift (referred to as a “donative intent”), a contract, or a disposition of law… The latter category generally includes circumstances where the enrichment of the defendant at the plaintiff’s expense is required by law, such as where a valid statute denies recovery…However, just as the Court has resisted a purely categorical approach to unjust enrichment claims, it has also refused to limit juristic reasons to a closed list. This third stage of the unjust enrichment analysis provides for due consideration of the autonomy of the parties, including factors such as “the legitimate expectation of the parties, the right of parties to order their affairs by contract” …

[18] In Stuart Olson Dominion Construction Ltd. v. Structal Heavy Steel, 2015 SCC 43, the Supreme Court of Canada said:

“Ensuring payment of contractors and subcontractors and encouraging liquidity in the flow of funds to them are both significant preoccupations in the construction industry. In addition to common law remedies, two statutory remedies have been developed in provincial legislation to protect those who provide services or materials to a project: construction liens (also known as mechanics or builders liens) and statutory trusts.”

[19] Thus it is clear that remedies under the Act do not exist to the exclusion of remedies available to an aggrieved party at common law.

[20] In proceedings before the learned Deputy Judge, counsel for the Respondents relied upon the decision of the Divisional Court of Ontario in Barrie Trim (supra). The issue before the Divisional Court was this:

“When a valid claim for lien has been made under the Construction Lien Act, R.S.O. 1990, Chapter C30, can a supplier of goods or materials who chooses not to shelter under that lien seek remedy against the homeowner directly on the basis of unjust enrichment?”

[21] The Divisional Court referred to two decisions of the British Columbia Supreme Court, both of which were appeals from decisions of the British Columbia Provincial Court. In each case owners were sued by material suppliers for improvements done to land. In each case the Plaintiffs had no contracts with the owners. In each case general contractors had agreements with the owners and separate contracts with the Plaintiff suppliers. In each case the Plaintiffs sought relief through the equitable remedy of unjust enrichment.

[22] In the first of those cases, Elbee Development Corp. v. A.N.D. Masonry Ltd., 1999 49 CLR 2d214 BCSC, the court concluded that the sub trades claim was against the general contractor or against the property under the Builder’s Lien Act, RSBC 1997 Chapter 45. In so concluding the court stated:

“To extend the remedy of unjust enrichment in circumstances such that are found involving [the owner and the sub trade] would be an unwarranted intrusion into the construction field.”

[23] In the second of the two cases relied upon in Barrie Trim (supra), being Pacific National Exhibition v. Alpine Stone Ltd., 2003 29 SLR 3d 161 BCSC, again the sub trade had no direct dealings or communication with the owner. The British Columbia Supreme Court followed the decision in Elbee, in concluding that juristic reason for the enrichment, if it occurred, came from the contract between the owner and the general contractor. The subcontractor’s contract was with the general contractor and therefor the subcontractor’s remedy was against the general contractor or as against the property under the Builder’s Lien Act RSBC 1997 Chapter 45.

[24] In Barrie Trim, the court concluded that there was no reason to proceed to the juristic reason analysis beyond the established category of contact. There was a contract between the general contractor and owner requiring the general contractor to provide materials to the owner’s property. Per Healey, J.: “That in and of itself is sufficient justification for the enrichment, if any enrichment truly occurred.” In accordance with the Supreme Court of Canada in Garland v. Consumer’s Gas Co., 2004 SCC 25, 2004 1 SCR 629, the Court considered the reasonable expectations of the parties as well as policy considerations and concluded that both of those factors favoured the owner as there could be “no expectation by [the general contractor] that it would be paid by the [owner] and the evidence at trial established that it knew that payment was to come from [the general contractor]”. The court in Barrie Trim, also found that there was a remedy available to the subcontractor which it chose not to take, presumably referring to registration of a lien.

[25] It appears that the Court in Barrie Trim may have been mistaken in its statement with respect to the absence of “expectation by [the general contractor] that it would be paid by the [owner]”. As the general contractor had a contract with the owner one might readily conclude that it would have every reason to expect payment to come from the owner. It appears that the Court likely intended to refer to the subcontractor rather than the general contractor in this passage in the court’s reasons.

[26] In any event in my view Barrie Trim can be distinguished from the instant case. In Barrie Trim the general contractor liened the owner’s property while the subcontractor did not and specifically extricated itself from the general contractor’s main action. As stated above the issues in Barrie Trim presupposed a valid claim for lien having been made under the Act. In the case before me the general contractor did not lien and was in fact bankrupt.

[27] Further, from Stuart it is clear that common law remedies are available to the appellant in addition to remedies under the Act. There is no reason to deny the appellant access to the common law remedy of unjust enrichment because it did not avail itself of potential statutory remedies, so long as the test set out in Kerr is met.

[28] Although the learned Deputy Judge does not appear to have had concerns regarding the first and second elements of unjust enrichment (i.e. enrichment and a corresponding deprivation) I consider it prudent to address these components.

[29] YCC 97 contracted with RBG for renovation work.

[30] There was no evidence before the trial judge of any deficiencies regarding the work performed by RBG for YCC 97.

[31] It is not disputed that YCC 97 paid 90% of the contract price, having held back 10% in accordance with the terms of the Act, s. 22(1).

[32] There was no evidence before the trial judge that the holdback of 10% had been disposed of in any manner or that it was being held in respect of alleged deficiencies.

[33] In this respect I do note that there was evidence before the trial judge of a claim being advanced by another of RBG’s subcontractors; however, that claim was not under the Act, and there was no evidence before the trial judge as to the status or disposition of that claim. Thus there was no evidence at trial to suggest that anything other than the full amount of the holdback remained available and under the control of YCC 97.

[34] Thus it would appear clear that YCC 97 has been enriched in the sense that it has received 100% of the benefit of the invoiced renovation work performed but has only paid 90% of the invoiced amounts.

[35] With respect to the second element (a corresponding deprivation), NKP must establish not simply that YCC 97 has been enriched, but also that the enrichment corresponds to a deprivation which NKP has suffered. Again, it appears plain and obvious that YCC 97 has been enriched for the reasons outlined above and that the enrichment corresponds to the efforts of NKP through the renovation work performed for which it has received no compensation.

[36] The third element of an unjust enrichment claim requires a consideration of whether there is a “juristic reason” for the benefit and corresponding deprivation. As indicated in Kerr: “Juristic reasons to deny recovery may be… a contract…” It is however important to note that the court makes clear that “… just as the Court has resisted a purely categorical approach to unjust enrichment claims, it has also refused to limit juristic reasons to a closed list.”

[37] Further, “This third stage of the unjust enrichment analysis provides for due consideration of the autonomy of the parties, including factors such as “the legitimate expectation of the parties, the right of parties to order their affairs by contract.”

[38] In my view reference to a “contract” as a juristic reason to deny recovery should be restricted to cases where the party advancing the claim for unjust enrichment is a party to the contract, as is the party against whom the claim is advanced. On the facts of the case before me, that would require a contract between NKP and YCC 97. There is no such contract. In other words YCC 97’s enrichment and NKP’s deprivation did not arise in the context of a contract between these two parties.

[39] I therefore conclude that there is no established category of juristic reason to deny recovery to the Appellant.

[40] The next step in the analysis requires consideration of the “reasonable expectations of the parties and public policy considerations to assess whether recovery should be denied” (see Kerr (supra), p. 43).

[41] At this stage of the analysis the Appellant has made out a prima facie case under the juristic reason component of the analysis; however, the prima facie case is rebuttable where YCC 97 can show that there is another reason to deny recovery. In this regard the reasonable expectations of the parties and public policy considerations are to be considered. (Kerr (supra), p. 43)

[42] In my view it cannot have been within the reasonable expectation of the parties that YCC 97 would receive a 100% benefit of renovation work invoiced, including NKP’s efforts, while paying only 90% of the cost of those efforts. YCC 97’s statutory obligation to retain the holdback has expired and had expired at the time of trial. There was no legal requirement at trial for YCC 97 to retain the funds by way of holdback, nor did YCC 97 retain any legal entitlement to those funds on the evidence before the learned Deputy Judge.

[43] The purpose of the holdback funds is to represent a potential source of funds from which to compensate unpaid providers of service and materials to the improvement of a property. It is remedial in nature.

[44] Thus YCC 97 could not reasonably have expected to retain the funds and indeed were it to do so it would represent a windfall.

[45] YCC 97 did not argue that it would be consistent with public policy to deny recovery to NPK.

[46] For the foregoing reasons, I conclude that the learned Deputy Judge erred in failing to find that YCC 97 had been unjustly enriched by receiving the benefit of NPK’s work without NPK being compensated for that work.

[47] The next issue is the measure of damages.

[48] NKP cites the Ontario Court of Appeal in Consulate Ventures Inc. v. Amico Contracting and Engineering (92) Inc., 2007 ONCA 324, p. 99:

“Thus, where the claim for restitutionary relief is based on quantum meruit, as in this case, an explicit mutual agreement to compensate for services rendered is not a prerequisite to recovery. It suffices if the services in question were furnished at the request, or with the encouragement or acquiescence, of the opposing party in circumstances that render it unjust for the opposing party to retain the benefit conferred by the provision of the services.”

[49] The measure of YCC 97’s enrichment is in my view equal to the amount of the holdback, being $23,893.74, which on the evidence before the trial judge, had not been paid out by YCC 97.

[50] NKP’s claim before the learned Deputy Judge was for the maximum amount plus interest and costs.

Conclusion

[51] In the result, the judgment of below shall be set aside and judgment entered in favour of NKP in the amount of $23,893.74 plus prejudgment interest pursuant to the Courts of Justice Act.

[52] If the parties are unable to agree on costs they may provide written submissions to my assistant at Barrie, restricted to three pages in length excluding Offers to Settle and Bills of Costs and subject to the following schedule:

a. Appellant within 30 days

b. Respondent within 45 days

c. Reply if any by Appellant within 55 days.

Douglas, J.

Released: May 4, 2016

N.K.P. Painting Inc. v. Boyko, 2016 ONSCDC 3016

Case Summary

REASONS FOR DECISION

Standard of Review

Background

Analysis

Conclusion

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Statutory Provisions 1

Legal Tests 1

Legislation 1