CITATION: Dominus Construction Corporation v. H&W Development Corp., 2022 ONSC 1240
DIVISIONAL COURT FILE NO.: DC-21-218
DATE: 20220228
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Kristjanson, Favreau and Nishikawa JJ.
BETWEEN:
Dominus Construction Corporation
Plaintiff/Respondent on Appeal
– and –
H&W Development Corp.
Defendant/Appellant
Riccardo Del Vecchio and Paul Guaragna, for the Respondent
Michael L. Shell and Glenn Brandys, for the Appellant
HEARD at Oshawa (by videoconference): September 22, 2021
Favreau J.
Introduction
[1] The appellant, H&W Development Corp. (“H&W”), appeals an order made by Casullo J. on December 30, 2020, granting summary judgment to the respondent, Dominus Construction Corporation (“Dominus”). The motion judge found that Dominus was entitled to payment for its share of cost savings under a construction management contract.
[2] For the reasons that follow, the appeal is dismissed. The motion judge made no errors in granting summary judgment to Dominus.
Background
The project and the contract between the parties
[3] The litigation relates to the construction of a residential condominium complex, in the City of Markham, consisting of 692 residential units within four towers. There were two phases for the project. Phase 1 consisted of Buildings A and B, as well as the underground garage for all four buildings. Phase 2 consisted of Buildings C and D. The construction started in June 2012.
[4] H&W was the owner and developer of the project.
[5] H&W retained the Dominis to provide construction management services.
[6] The contract between the parties provided that Dominus was to be paid $3,028,400.00, a share of any cost savings on a 50/50 basis with H&W, and any extras.
[7] Article A-5 of the agreement between the parties stated that cost savings were to be determined as follows:
The Owner and the Construction Manager will share in any net savings on a 50% / 50% basis. Net savings shall be determined as the difference between the Projected Workable Budget and the actual total costs (Divisions 1 through to 16, inclusive of the construction contingency).
[8] The agreement defined Projected Workable Budget as follows:
The Projected Workable Budget shall be determined based upon the Gross Liveable Area (“GLA”) of Phase 1 and 2 times a unit rate of $175.00 per square foot. The GLA shall include the above grade parking garage. The GLA is currently estimated at 775,797 sqft. The Projected Workable Budget is currently estimated to be $135,764,475.00 based upon a GLA of 775,795 sqft and a unit rate of $175.00 psf.
[9] The agreement provided that the costs savings were to be paid out as follows:
a. 50% of the net savings were to be paid within 60 days after the initial occupancy of Buildings A and B; and
b. The balance was to be paid six months after the initial occupancy of Buildings C and D.
[10] The construction was completed in late November or early December 2016. By March 2017, Dominus’s construction management services were complete.
[11] Dominus submitted its first invoice for costs savings on March 9, 2016. This invoice was for $1,243,000. This was based on its initial calculation of costs savings in the amount of $4,400,000 (50% of $4,400,000 = $2,200,000 + HST of $143,00).
[12] Dominus submitted its second invoice for costs savings in February 2017. This invoice was for $6,273,473.55. It was based on a revised calculation of costs savings of $13,303,493 (50% of $13,303,493 = $6,651,746.50 - $1,100,000 from previous invoice + HST of $721,727.05).
[13] H&W refused to pay either invoice, taking the position that, based on its interpretation of the agreement, there were no cost savings.
[14] Dominus registered a lien against the project.
Motion to discharge the lien
[15] The court scheduled a motion by H&W to discharge the lien and a motion by Dominus for summary judgment. Both motions were scheduled to be heard by the motion judge. She heard and decided them sequentially.
[16] The motion judge first heard H&W’s motion to discharge the lien. The argument H&W made on the motion was that the costs savings were not lienable because they were not part of the “price” of the contract but, instead, were in the nature of a bonus or profit-sharing arrangement.
[17] In a decision dated December 17, 2019, the motion judge dismissed H&W’s motion to discharge the lien. In doing so, she reasoned cost savings are part of the service Dominus provided to H&W.
Summary judgment decision
[18] The motion judge subsequently heard the motion for summary judgment over three days between March 6 and July 2, 2020.
[19] In her decision dated December 30, 2020, the motion judge granted summary judgment to Dominus.
[20] As a preliminary issue, the motion judge addressed an argument made by H&W seeking to strike an affidavit sworn by Dominus’s affiant, Joseph Cordiano. H&W argued that it was not required to cross-examine on the affidavit and that the court should not rely on the evidence contained in the affidavit because it included improper unattributed hearsay evidence. The motion judge rejected this argument on the following basis:
However, unlike the affiant in Ledore, an articling student with no personal knowledge of the contents of the affidavit, Mr. Cordiano was the president of Dominus at the time the Contract was entered into. Who better to provide information? As president, Mr. Cordiano would reasonably be expected to have personal knowledge of the Project, and the information was not incorrectly contained in his affidavit. Any issues H&W had with portions of Mr. Cordiano’s affidavit should have been raised during cross-examination.
[21] The motion judge then went on to consider the two primary issues on the motion, namely how the Gross Liveable Area (“GLA”) and actual total cost of the project were to be calculated.
[22] With respect to the GLA, the motion judge agreed with Dominus’s position that the GLA was meant to be the actual GLA at the time of completion rather than the estimated GLA in the agreement. In reaching this conclusion, the motion judge reasoned as follows:
When the Contract was entered into in 2012, it was impossible to know the final GLA. The estimate of 775,977 square feet was taken from CB Ross’ 2011 Project Budget, and was based on 50 percent of the Project drawings.
The GLA can only mean the GLA of the completed Project. This was calculated to be 768,248 square feet by Mr. Pendlebury, a quantity surveyor retained by H&W, based on as-built drawings.
[23] With respect to the actual total costs, again the motion judge agreed with Dominus’s position. She found that the actual total costs referred to the costs of the part of the project Dominus managed and did not include the costs incurred after Dominus stopped working on the project:
The Project is defined in the Contract to mean the total construction and related services to be managed under this Contract of which the Work is part (emphasis added [in original]). Work is defined as that portion of the Project performed by a trade contractor or by the construction manager’s own forces. These meaning are easy to understand. The only construction and related services managed under the Project are the construction and related services managed and controlled by Dominus. I agree with Dominus’ submission that to include the construction services managed by H&W in the actual total costs would render the cost savings provision meaningless to Dominus.
[24] The motion judge then addressed two arguments made by H&W with respect to the validity of the lien.
[25] First, she considered H&W’s argument that Dominus was not the proper lien claimant given that the invoices were rendered by a company referred to as Dominus 2005. The motion judge rejected this argument on the basis that H&W should have raised this argument in the context of the motion to discharge the lien. The motion judge also found that, in any event, the evidence supported a finding that Dominus was the proper lien claimant because it supplied the work. The use of Dominus 2005 invoices was inadvertent.
[26] Second, the motion judge rejected Dominus’s argument that she should revisit her decision regarding whether the work was lienable. The motion judge rejected this argument as follows:
I am not prepared to reconsider my decision. Even if I were so inclined, I do not have the jurisdiction to do so. H&W may appeal my Order in the proper course, although pursuant to s. 71(3) of the Act, leave of the Divisional Court is required.
[27] Ultimately, the motion judge granted the motion for summary judgment. While the parties agreed that construction costs were at least $120,021,367.78, they disagreed over how some of the specific invoices are to be categorized. On that basis, the motion judge ordered a reference pursuant to Rule 54.04 of the Rules of Civil Procedure for determination of how the contested invoices are to be categorized.
Issues and analysis
[28] H&W argues that the motion judge made the following errors:
a. She failed to follow the proper framework for deciding a motion for summary judgment;
b. She erred in her assessment of Mr. Cordiano’s affidavit and thereby reversed the onus of proof;
c. She erred in finding that Dominus was the proper lien claimant;
d. She erred in refusing to revisit the issue of whether Dominus’s claim was lienable; and
e. She erred in her interpretation of the term “actual total costs” in the agreement.
[29] For the reasons below, I find that the motion judge made no reversible errors.
The standard of review
[30] The standard of review that applies to this appeal is the appellate standard of review. Questions of law are reviewed on a standard of correctness. Questions of fact or mixed fact and law are to be reviewed on a palpable and overriding standard, except for extricable questions of law, which are to be reviewed on a correctness standard.
Issue 1: The motion judge did not err in applying the framework for deciding a motion for summary judgment
[31] H&W argues that the motion judge failed to follow the proper framework for deciding a motion for summary judgment, which had the effect of reversing the onus of proof. Specifically, H&W argues that there was contested evidence between the parties on the issue of whether Dominus or Dominus 2005 performed the work, and that the motion judge improperly ignored its evidence and instead found that H&W failed to put its best foot forward by choosing not to cross-examine Mr. Cordiano.
[32] I disagree. In my view, Mr. Cordiano’s evidence on the issue was uncontested. She did not reverse the onus and there was no need for her to resort to the powers in Rule 20.04(2.1) of the Rules of Civil Procedure for the purpose of weighing the evidence or making findings of credibility.
[33] In his affidavit on the motion for summary judgment, Mr. Cordiano stated that he is a principal of Dominus, which is the basis for his knowledge of the matters set out in his affidavit. Mr. Cordiano states that Dominus supplied the work on the project and that invoices were inadvertently submitted on behalf of Dominus 2005:
Dominus, is a corporation incorporated under the laws of the Province of Ontario and carries on business as a construction manager. At all material times, Dominus was the construction manager of the residential development in the City of Markham, Ontario known as the Fontana Residential Condominiums.
At all times, invoices for Dominus’ construction management services performed were rendered on a monthly basis by Dominus Construction (2005) Corp. (hereinafter “Dominus (2005)”). Further, the names Dominus Management Group (hereinafter “DMG”) and Dominus Construction Group (“hereinafter “DCG”) appear in, among other documents, the Proposal for Construction Management Services and the Letters of Intent entered into between H&W and the various trades…
The names Dominus, Dominus (2005), DMG and DCG are used interchangeably and for all intents and purposes Dominus and Dominus (2005) are one and the same. It is clear that Dominus is the construction manager under the Contract and invoices were inadvertently issued by Dominus (2005).
There was never a doubt expressed by H&W to Dominus that Dominus was and continued to be the contracting party to the Contract. In any event, H&W has not expressed to Dominus that it suffered any hardship or damages as a result of any invoices being rendered by Dominus (2005), nor is any such hardship or damages alleged by H&W in these proceedings.
[34] H&W argues that the motion judge improperly ignored evidence from its affiant that Mr. Cordiano had no firsthand involvement with the project. In his affidavit, Mr. Wang reports on refusals given by Mr. Cordiano when he was cross-examined in the context of the motion to discharge the lien. Mr. Wang has no firsthand knowledge about the issues and his evidence is no different than what could be gleaned from a review of the cross-examination transcripts.
[35] In my view, this is not conflicting evidence that the motion judge was required to reconcile using her powers under Rule 20.04(2.1) of the Rules of Civil Procedure. Mr. Cordiano described himself as a principal of the company with firsthand knowledge. Mr. Wang was an outside observer who expressed scepticism about Mr. Cordiano’s level of knowledge based on his review of Mr. Cordiano’s prior cross-examination. He did not directly challenge Mr. Cordiano’s evidence that Dominus supplied the work and that the Dominus 2005 invoices were submitted in error. As such, there was no conflict in the evidence. I agree with the motion judge that, if H&W wanted to challenge Mr. Cordiano’s evidence on this issue, it should have done so through cross-examinations. This was not an improper reversal of the onus of proof and the motion judge was entitled to rely on Mr. Cordiano’s uncontested evidence that Dominus supplied the work and that the invoices were inadvertently sent out under Dominus 2005’s name.
Issue 2: The motion judge did not err in refusing to strike Mr. Cordiano’s affidavit
[36] H&W argues that the motion judge erred in failing to strike Mr. Cordiano’s affidavit and, instead, in stating that H&W should have cross-examined him on the affidavit.
[37] In principle, I agree with H&W. However, this is not what the motion judge did in this case.
[38] If Mr. Cordiano’s affidavit was improper hearsay evidence, the motion judge should have struck it or portions of it. If an affidavit is improper, it should be struck or the evidence contained in the affidavit should be disregarded. There is no obligation on a party challenging an affidavit on the basis that it contains inadmissible evidence to cross-examine on the affidavit before challenging its propriety. However, the risk in choosing not to cross-examine on the affidavit is that the court will find that the evidence is admissible as happened here.
[39] In this case, as reviewed above, the motion judge accepted that, as Dominus’s president, Mr. Cordiano had knowledge of the matters he addressed in his affidavit. She was entitled to reach this conclusion. Mr. Cordiano was not reporting on other people’s conversations or matters over which he clearly had no firsthand knowledge. In the circumstances, it was appropriate for the motion judge to accept his evidence and to find that, if H&W wanted to challenge Mr. Cordinao’s affidavit, it ought to have cross-examined him. I see no error in the motion judge’s approach to Mr. Cordiano’s affidavit.
Issue 3: The motion judge did not err in finding that Dominus was the proper lien claimant
[40] H&W argues that the motion judge erred in deciding that Dominus was the proper lien claimant. In making this argument, H&W argues that Dominus failed to provide evidence that it supplied the work rather than Dominus 2005.
[41] There is no question that, under section 14 of the Construction Lien Act, R.S.O. 1990, c. C.30[^1], only the person who supplied the service is entitled to a lien.
[42] However, in this case, the motion judge made a finding of fact that Dominus, rather than Dominus 2005, supplied the construction management services. She did so based on the fact that Dominus entered the contract with H&W, based on Mr. Cordiano’s evidence that Dominus supplied the work and that the Dominus 2005 invoices were submitted in error and based on Mr. Wang’s concession on cross-examination that his understanding was that Dominus performed the work. The motion judge was entitled to accept this evidence and her findings of fact are entitled to deference.
[43] H&W argues that the motion judge erred by not requiring more specific evidence that Dominus, rather than Dominus 2005, supplied the work and more specific evidence as to why Dominus 2005 submitted invoices, rather than Dominus. Faced with an unchallenged affidavit by the principal of Dominus, in my view, the motion judge made no palpable and overriding error in accepting Mr. Cordiano’s evidence. This situation is unlike Furlan v. Structform International Limited, where, at para. 29, the court held that a claim for a lien does not arise just from entering into a contract to supply services. In that case, the court found that the person claiming the lien did not provide evidence that he supplied the services at issue and was thereby not entitled to a lien. Here, there was evidence that Dominus supplied the services and the motion judge was entitled to accept it.
Issue 4: The motion judge did not err in refusing to discharge the lien
[44] H&W argues that the motion judge erred in refusing to revisit her decision not to discharge the lien in the context of the motion for summary judgment. H&W further argues that the motion judge should have discharged the lien.
[45] I agree with H&W that the motion judge should have reconsidered her decision on the validity of the lien. However, in my view, this does not affect the outcome of this appeal because she made no error in refusing to discharge the lien on the lien motion.
[46] H&W correctly submits that a decision to not discharge a lien under the Construction Lien Act is an interlocutory decision. Contrary to the motion judge’s statement at paragraph 90 of her decision that H&W could have appealed the lien decision to the Divisional Court with leave, at the relevant time, section 71(3) of the Construction Lien Act did not allow for any appeals of an interlocutory decision. In the circumstances, the validity of the lien is an issue that could be revisited at trial. In this case, in principle, the opportunity to do so was on the motion for summary judgment. However, given that the same judge heard both motions sequentially and that there is no suggestion of a change in circumstances between the motions, there would have been no utility in having the motion judge revisit her own decision on the issue of the validity of the lien.
[47] In any event, I see no basis for overturning the motion judge’s finding that Dominus’s claim for its share of the cost savings was lienable. The motion judge reviewed the relevant case law and properly distinguished cost savings from profit sharing, finding that:
I find that cost savings provisions are not analogous to profit sharing provisions. Cost savings provisions are integrally linked to the ‘service’ provided for in s. 14 of the Construction Act. This ‘service’ is reflected in the contractor’s proficiency in bringing a project to completion under budget, which is no different than the ‘service’ Dominus provided in managing the Project.
On the other hand, profit-sharing is a system in which the interested party receives a direct share of the profits realized. Dominus was not entitled to a share of any of the profits realized by H&W on the sale of its units once the Project was complete.
[48] I agree with the distinction the motion judge drew between cost savings and profit sharing. In this case, one of the construction management services Dominus provided to H&W was finding ways to save costs. H&W got 50% of the benefit of the cost savings. The motion judge made no error in finding that the cost savings were a service provided by Dominus and therefore properly the subject of a lien.
Issue 5: The motion judge did not err in her interpretation of “actual total costs”
[49] Turning to the motion judge’s interpretation of the cost savings provision of the agreement between the parties, H&W does not challenge the interpretation of the GLA but only challenges the interpretation of “actual total costs”.
[50] The motion judge found that this provision was not part of a standard form contract, which is a finding that H&W does not contest. Accordingly, pursuant to the Supreme Court’s decisions in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, and Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, the motion judge’s interpretation of the agreement is entitled to deference and will only be overturned if she committed a palpable and overriding error.
[51] I am satisfied that she committed no such errors.
[52] The motion judge concluded that “actual total costs” refers to only those cost savings that fell within the scope of Dominus’s contract. In doing so, she had regard to the wording of the agreement and specifically the definitions of “Project” and “Work”. She also had regard to Mr. Wang’s cross-examination in which he acknowledged that he understood that actual total costs were to be interpreted as advocated by Dominus.
[53] H&W argues that the motion judge erred in failing to consider the plain meaning of the provision, and specifically that “actual total costs” is followed by “(Divisions 1 through to 16, inclusive of the construction contingency)”, thereby suggesting that “actual total costs” is meant to refer to the total costs for the whole project. Alternatively, H&W argues that, if there is an ambiguity in the provision, it should be interpreted in H&W’s favour because Dominus drafted the contract.
[54] I see no palpable and overriding error in the motion judge’s interpretation of “actual total costs” as only relating to the costs that fell within the Dominus’s scope of work. The motion judge considered H&W’s argument that the principle of contra proferentum should apply, but she found no ambiguity in the contract. Her conclusion on this issue is well supported by the wording of the agreement and the factual matrix. H&W seeks to impose an interpretation that would lead to Dominus losing the benefit of any cost savings it achieved due to work or circumstances over which it has no control. Based on the wording of the provision and the agreement as a whole, the motion judge was entitled to prefer Dominus’s interpretation.
Conclusion
[55] For the reasons above, the appeal is dismissed.
[56] As agreed between the parties, Dominus is entitled to costs of the appeal in the amount of $49,500.00, all inclusive.
Favreau J.
I agree _______________________________
Kristjanson J.
I agree _______________________________
Nishikawa J.
Released: February 28, 2022
CITATION: Dominus Construction Corporation v. H&W Development Corp., 2022 ONSC 1240
DIVISIONAL COURT FILE NO.: DC-21-218
DATE: 20220228
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Kristjanson, Favreau and Nishikawa JJ.
BETWEEN:
Dominus Construction Corporation
Plaintiff/Respondent on Appeal
– and –
H&W Development Corp.
Defendant/Appellant
REASONS FOR JUDGMENT
Favreau J.
Released: February 28, 2022
[^1]: Given the date of the project, the Construction Lien Act rather than the Construction Act, R.S.O. 1990, c. C.30, applies. Notably, section 14 of the Construction Act is identical to section 14 of the Construction Lien Act.