CITATION: Employment Professionals Canada Inc., v. SDF, 2016 ONSC 4230

DIVISIONAL COURT FILE NO.: 144/16

DATE: 20161007

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Employment Professionals Canada Inc., formally known as Erie Personnel Corporation, Plaintiff

AND:

Steel Design and Fabricators (SDF) Ltd., Triwest Construction (GP) Inc., Concreate USL LP., Triwest Construction LP, Cody T. Church, Derek Martin Norman Rokosh, Gordon Tozer, Ron Adams, Lorne H. Jacobson and John Doe, Defendants

BEFORE: Stewart J.

COUNSEL: Neil Kotnala, for the Plaintiff

Shadi Katirai and Brittany Déziel for the Defendants, Cody T. Church, Derek Martin, Norman Rokosh, Gordon Tozer, Ron Adams and Lorne H. Jacobson

HEARD: In Writing

ENDORSEMENT

Nature of the Motion

[1] The Moving Parties, the individual Defendants Cody T. Church, Derek Martin, Norman Rokosh, Gordon Tozei, Ron Adams and Lorne H. Jacobson seek leave to appeal to the Divisional Court the Order of Faieta J. dated March 10, 2016 which dismissed their motion for partial summary judgment.

[2] The Respondent Employment Professionals Canada (“EPC”) submits that leave to appeal should not be granted.

Decision of the Motion Judge

[3] This action arises out of the construction of the Strandherd-Armstrong Bridge in Ottawa, Ontario.

[4] EPC alleges that it entered into a contract with Steel Design and Fabricators (SDF) Ltd. (“SDF”) to supply labour for the project.

[5] The contract contained a term which required all payments, except for the first payment, to be paid within 30 days of the date upon which each invoice was rendered.

[6] SDF paid the first nine invoices it received. The next 17 invoices, totaling $205,501.33, were not paid.

[7] SDF and the other corporate Defendants are now bankrupt.

[8] EPC commenced its claim on March 26, 2014.

[9] EPC claims that the Moving Parties breached their trust obligations under the Construction Lien Act R.S.O. 1990, c-30, as amended (the “Act”), and should be liable for all amounts owing to EPC.

[10] On November 16, 2015, the Moving Parties brought a motion for summary judgment to dismiss the majority of Plaintiff’s claim for damages on the basis that the action had been commenced after the applicable limitation period had expired.

[11] In support of their position, the Moving Parties argued before the motion judge that the limitation period for a breach of trust claim runs concurrently with any breach of contract claim for unpaid invoices. Thus, the limitation period had expired with respect to the first 12 of the remaining invoices (totaling $190,096.58) before the action was commenced. Only 5 invoices (totaling $15,413.75) remained viable and within the limitation period.

[12] In response, EPC adduced evidence that in January 2012 EPC and SDF had amended the payment terms under the contract. SDF had proposed that the parties agree to change the contractual terms for payment from due 30 days from the date of the invoice to payment once it had been received from the project owner. EPC agreed to this arrangement.

[13] In his reasons for decision, the motion judge found that the contract did not obligate SDF to use EPC’s services. SDF was at liberty at any time to cease using labour from EPC and was free to source labour in the market place.

[14] The motion judge reviewed the issue of consideration for this alleged contractual amendment and found as a fact that SDF had requested forbearance from EPC. Such forbearance was granted by EPC. As a result, SDF enjoyed the benefit of EPC’s forbearance as well as the continued provision of services by EPC. In paragraph 16 of his reasons, the motion judge stated:

As noted earlier, SDF requested forbearance of its obligation to pay invoices and promised to pay the invoices after it was paid by the owner. Such forbearance was granted and SDF enjoyed the benefit of that forbearance as well as the continued provision of services by EPC. Accordingly, consideration was exchanged and the Amendment is enforceable. To come to any other conclusion would allow the doctrine of consideration to work an injustice.

[15] The motion judge then considered the limitation defence issue advanced by the Moving Parties, including the legislative history and wording of the Act in that regard.

[16] The Moving Parties rely on the decision in Carmen Drywall Ltd. v. BCC Interiors Inc., [2013] O.J. No. 3245, for the proposition that the claim arises when the payment is due. In that particular case, the Plaintiff had completed its work in December 2007 and had initially requested payment on January 8, 2008. The court determined as follows:

Thus, the limitation period commences to run not following any misappropriation of the trust funds by the contractor or knowledge of when the contractor received the trust funds, but on the day a reasonable person ought to have known that the damage or loss had occurred. Indeed, s. 39 of the Construction Lien Act entitled the plaintiff as a trust beneficiary of the hold back funds to request from TTC or BCC at any time, the state of accounts between the owner and the contractor and the material payment bond, posted by the contractor with the owner. Mr. Stornelli indicated in his affidavit that he only contacted the TTC in May 2010 seeking assistance to recover payments.

This raises the question regarding “discoverability” of a statutory construction trust by a beneficiary of the trust. In Cast-Con Group Inc. v. Alterra (Spencer Creek Ltd)…the court concluded that reasonable diligence when the contractor did not pay the sub-contractor could have revealed the trust claim and consequently, the limitation period ran concurrently with that of the breach of contract. A similar conclusion can be found in Aldine Construction Ltd. v. Brucegate Holdings Inc.

Based on these decisions, the plaintiff could well have and should have taken the required steps to commence its action against the defendants within two years of December 2007. The failure to do this means that the plaintiff’s statement of claim filed in January 2012 is a statue barred.

[17] The motion judge did not accept the submission that Carmen Drywall or the other authorities referred to in that decision stand for the invariable principle that a claim for breach of trust under section 13 of the Act must run concurrently with a claim for breach of a construction contract. Those cases merely applied the discoverability principle to the facts of the particular case.

[18] In his reasons, the motion judge found as follows (at paras. 30 and 31):

As in Carmen Drywall, the Plaintiff as a beneficiary of the trust could have requested information on the state of the accounts between the SDF and the owner under section 39 of the Act. However, the assessment of when the Plaintiff should have discovered the claim in these circumstances, especially given the circumstances surrounding the Amendment, turns on the facts of this case and not the date on which payment was due under the Agreement. I accept the Plaintiff’s submission that a breach of trust does not exist if the trust does not exist. The trust does not exist until monies have been received by the contractor from the general contractor or are payable. Nor is there a breach of trust if the funds were paid by the contractor to proper beneficiaries.

Applying the discoverability principle in light of the available evidence, it is my view that the individual Defendants have not demonstrated that this action was commenced after the expiry of the limitation period for any of the invoices issued by the plaintiff.

[19] Accordingly, the motion for partial summary judgment was dismissed. As recommended in Hyrniak v. Mauldin, 2014 SCC 7 the motion judge seized himself of the action and gave directions to the parties with a view to implementing case management of the action toward an early trial.

[20] The Moving Parties seek leave to appeal two aspects of the decision of the motion judge:

(a) the finding of consideration in support of a contractual amendment;

(b) the determination of when the limitation period may commence for a breach of trust action under the Act.

Test for Leave to Appeal

[21] The test for granting leave to appeal under Rule 62.02(4) is well-settled. It is recognized that leave should not be easily granted and the test to be met is a very strict one. There are two possible branches upon which leave may be granted. Both branches involve a two-part test and, in each case, both aspects of the two-part test must be met before leave may be granted.

[22] Under Rule 62.02(4) (a), the moving party must establish that there is a conflicting decision of another judge or court in Ontario or elsewhere (but not a lower level court) and that it is, in the opinion of the judge hearing the motion, “desirable that leave to appeal be granted”. A “conflicting decision” must be with respect to a matter of principle, not merely a situation in which a different result was reached in respect of particular facts: Comtrade Petroleum Inc. v. 490300 Ontario Ltd. (1992), 7 O.R. (3d) 542 ( Div. CT.).

[23] Under Rule 62.02(4) (b), the moving party must establish that there is reason to doubt the correctness of the order in question and that the proposed appeal involves matters of such importance that leave to appeal should be granted. It is not necessary that the judge granting leave be satisfied that the decision in question was actually wrong – that aspect of the test is satisfied if the judge granting leave finds that the correctness of the order is open to “very serious debate”: Nazari v. OTIP/;RAEO Insurance Co., [2003] O.J. No. 3442 (S.C.J.); Ash v. Lloyds Corp, (1992), 8 O.R. (3d) 282 (Gen. Div). In addition, the moving party must demonstrate matters of importance that go beyond the interests of the immediate parties and involve questions of general or public importance relevant to the development of the law and administration of justice: Rankin v. McLeod, Young, Weir Ltd. (1986), 57 O.R. (2d) 569 (H.C.J.); Greslik v. Ontario Legal Aid Plan (1988), 65 O.R. (2d) 110 (Div. Ct.)

Analysis

[24] The decisions on the issue of sufficient consideration referred to cannot be said to conflict with the decision of the motion judge only because their analysis is not identical. A conflicting decision is one where a judge has applied legal principles or modes of analysis which conflict with those mandated by another judgment.

[25] An analysis of consideration is subject to several principles to ensure it leads to a fair outcome given the facts of the case. If there is any appearance of conflict between the motion judge’s decision in this case and a decision of another court, this is a function of the fact-specific analysis of consideration, as opposed to any strict legal conflict. As such, these are not conflicting decisions that would justify the granting of leave to appeal.

[26] Further, in my view, there is no reason to doubt the correctness of the motion judge’s decision. The same result could have been arrived at by analyzing the facts using a benefit or detrimental reliance approach.

[27] With respect to the limitation period issue, the motion judge did not conclude that a breach of trust claim does not run concurrently with the breach of contract because the trust could not be said to exist. Any such conclusion was, in any event, independent of his statement as to when the trust came into existence. The issue for consideration was the discoverability of a breach of trust, not the discoverability of a trust.

[28] The motion judge held that a determination of when EPC could have discovered the breach of trust claim turns on the facts of the case, and need not simply be the precise date payment was due under the contract. In his view, the evidence before him did not demonstrate conclusively that the limitation period had lapsed.

[29] The correctness of the decision is therefore not, in my opinion, open to serious debate.

[30] In any event, it has not been demonstrated that either of the issues sought to be appealed is such that makes it desirable that leave to appeal be granted, or that raises any question of general or public importance.

Conclusion

[31] For these reasons, the motion is dismissed.

Costs

[32] In view of the result, costs fixed at $9000.00, inclusive of disbursements and all applicable taxes, shall be payable by the Moving Parties to the Respondent within 60 days.

Stewart J.

Date: October 7, 2016