Court File and Parties
COURT FILE NO.: CV-15-528416 DATE: 20160805 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Monro Ltd., Plaintiff AND: Faga Group Construction Ltd., Giuliana Caprara and Marco Caprara, Defendants
BEFORE: Carole J. Brown, J.
COUNSEL: John Lo Faso, for the Plaintiff
HEARD: July 29, 2016
Endorsement
[1] The moving party plaintiff seeks judgment against the defendants in the amount of $116,894.77, a declaration that the defendants are in breach of the trust provisions of the Construction Lien Act, RSO 1990, c. C-30 ("the Act" or the “CLA”) and that in the event that the defendants or any of them are or become bankrupt, any judgment obtained against them by the plaintiff shall not be released by the discharge of the bankruptcy.
[2] The plaintiffs supplied materials to the corporate defendant, Faga, for a number of construction projects. The plaintiff brought this action against the defendants for breaching the trust provisions of the Act. The defendants’ statement of defence was struck, the defendants have been noted in default and the plaintiff brings this motion for judgment.
[3] Pursuant to an agreement, the plaintiff had supplied material to the corporate defendant in respect of a construction project. The outstanding balance owing to the plaintiff was $70,886.19. Further, the plaintiff supplied material to the corporate defendant regarding a second construction project, with an outstanding balance owing to the plaintiff of $19,414.04. Further, the plaintiff supplied the corporate defendant with material in respect of other projects, with outstanding balances owing in the total amount of $26,594.54. As regards all of the various construction projects for which the plaintiff supplied materials, it is owed a total of $116,894.77.
[4] The corporate defendant received monies in respect of its contracts for the various projects. However, the defendants have not provided an accounting of how the monies paid to the corporate defendant were paid or distributed.
[5] Giuliana Caprara is a director and officer and Marco Caprara is an officer of the corporate defendant. They were the controlling minds of the company at the material times. They failed to properly account for the funds received as regards the construction projects and failed to preserve the trust funds contrary to their fiduciary duty to the plaintiff.
[6] Rule 19.02 of the Rules of Civil Procedure provides that a defendant whose statement of defence is struck is deemed to admit the truth of the allegations made in the statement of claim. As the statement of defence in this matter has been struck and the defendants noted in default, they are deemed to admit the truth of the allegations made in the statement of claim. On a motion for judgment upon the default of the defendants, the facts alleged must entitle the plaintiff to judgment pursuant to rule 19.06.
[7] In order to prove a breach of trust pursuant to section 8 of the Act, it must be established that the defendant is the contractor or subcontractor; that the plaintiff supplied materials to the projects on which the defendant is the contractor or subcontractor; that the defendant has received or is owed monies on account of the contract price for the project and that the defendant owes the plaintiff money for the materials supplied: Sunview Doors Ltd v Academy Doors and Windows Limited, 2010 ONCA 198. Once this is established, the onus shifts to the defendant to prove all payments of trust funds were made to proper beneficiaries of the trust. The Court of Appeal further held that for a trust to arise under section 8 of the Act, a supplier "need not intend that the material be incorporated into a known and specific improvement at the time of supply". Provided that a supplier is able to prove a link between the improvement for which the contractor or subcontractor is owed money, or for which it was paid, the supplier gains the protection of the trust imposed by section 8.
[8] Pursuant to section 13 of the Act, any director, officer or person who has effective control of the corporation "who assents to, or acquiescences in, conduct that he or she knows or reasonably ought to know amounts to breach of trust by the corporation is liable for the breach of trust." Based on the jurisprudence, liability for misappropriation of trust funds pursuant to sections 8 and 13 of the CLA constitutes a sufficient wrongdoing to fall within the meaning of section 187(1)(d) of the Bankruptcy and Insolvency Act (BIA) and thus survives the discharge order.
[9] In the present case, the corporate defendant received monies in respect of various construction projects for which Monro had supplied materials. Those monies are impressed with the trust for the benefit of subcontractors and suppliers. Monro is owed money by the corporate defendant as regards the materials supplied. The corporate defendant was noted in default and has failed to prove that it properly distributed the monies received in respect of the various construction projects. It is, therefore, liable for breach of trust pursuant to section 8 of the CLA. Pursuant to section 13 of the CLA, the individual defendants are jointly and severally liable along with the corporate defendant for breach of trust. As directors, officers and controlling minds of the corporate defendant, they acquiesced in or assented to the corporate defendant’s breach of trust.
[10] Pursuant to the foregoing, and based on all of the material delivered by the plaintiff and submissions of counsel, this Court grants judgment as follows:
- This Court orders judgment against the defendants on a joint and several basis in the total amount of $116,894.77 plus prejudgment interest in the amount of $2,266.76, for a total amount of $119,161.53;
- This Court declares that the defendants are in breach of the trust provisions of the CLA, and that in the event that any of the defendants are or become bankrupt, this judgment shall not be released by the discharge of the bankrupt from bankruptcy;
- This Court orders costs of this action on partial indemnity basis in the amount of $7,713.43.
Carole J. Brown, J. Date: August 5, 2016