Brighton Heating & Air Conditioning Ltd. v. Savoia et al. [Indexed as: Brighton Heating & Air Conditioning Ltd. v. Savoia]
79 O.R. (3d) 386
[2006] O.J. No. 250
Court File No. 46100/04
Ontario Superior Court of Justice
Divisional Court
J.W. Quinn J.
January 16, 2006
Civil procedure -- Pleadings -- Trial judge erring in finding that defendant breached his trust obligations under Construction Lien Act and in awarding judgment on that basis where trust claim was not pleaded by plaintiff -- New trial ordered.
Courts -- Jurisdiction -- Small claims court -- Small Claims Court having jurisdiction to hear trust claim under Construction Lien Act provided that amount of claim is within court's monetary jurisdiction -- Trust claim under Act not constituting claim for declaratory remedy -- Construction Lien Act, R.S.O. 1990, c. C.30, ss. 1(1), 50(2). [page387]
The plaintiff subcontractor claimed that it was not paid for work done on a construction project. The defendant contractor had registered liens against the property after the owner withheld payment, and then released the liens after reaching a settlement with the owner, but made no payment to the plaintiff. The plaintiff brought an action in Small Claims Court. The issue of a trust claim under the Construction Lien Act ("CLA") was not pleaded by the plaintiff, but was raised by the trial judge during closing arguments. The trial judge ultimately found that the moneys received by the defendant in settlement of the construction liens constituted a trust fund under the CLA, that the defendant was trustee of the fund, that he could not account for the moneys, and that he was liable to the plaintiff. The action was allowed. The defendant appealed.
Held, the appeal should be allowed.
The Small Claims Court has jurisdiction to hear a trust claim under the CLA, provided that the amount of the claim is within the monetary jurisdiction of the court. A trust claim under the CLA is not a claim for a declaratory remedy. Orders under ss. 8 and 13 of the CLA are not truly declaratory in nature. Any declaration is incidental to the substantive remedy of damages. The court makes findings that a trust exists and that moneys are owed. The judgment obtained is a money judgment.
In the Small Claims Court, a liberal, non-technical approach should be taken to pleadings. Unpled relief may be granted, and an unpled defence allowed, so long as supporting evidence is not needed beyond what was adduced at trial, or what reasonably should have been adduced in support of the relief or defence that was pled, provided that it is not unfair to grant such relief or allow such defence. In the circumstances of this case, it was unfair to the defendant for judgment to be awarded against him upon a trust claim that was not pleaded. As the unfairness rose to the level of a substantial wrong or miscarriage of justice, a new trial was ordered.
APPEAL from the judgment for the plaintiff in a Small Claims Court action.
Domtar Commercial Roofing and Insulation v. Exeter Roofing & Sheet Metal Co., [1993] O.J. No. 3113, 13 C.L.R. 63 (Gen. Div.), consd Other cases referred to 936464 Ontario Ltd. v. Mungo Bear Ltd. (2003), 2003 72356 (ON SCDC), 74 O.R. (3d) 45, [2003] O.J. No. 3795, 258 D.L.R. (4th) 754 (Div. Ct.); Bradbury v. Nu-Life Builders Ltd., [1986] O.J. No. 2675, 24 C.L.R. 296, 39 A.C.W.S. (2d) 333 (Prov. Ct.); Concord Trimming Inc. v. Valley Garden Homes Inc., [1998] O.J. No. 6350 (Div. Ct.); Keljanovic Estate v. Sanseverino, 2000 5711 (ON CA), [2000] O.J. No. 1364, 186 D.L.R. (4th) 481, 9 E.T.R. (2d) 32 (C.A.); Liuni (Litigation Guardian of) v. Peters, 2001 5153 (ON CA), [2001] O.J. No. 4724, 151 O.A.C. 389, 8 C.C.L.T. (3d) 207, 110 A.C.W.S. (3d) 381 (C.A.); Malcolm Group Contracting Inc. v. 842879 Ontario Inc., [2003] O.J. No. 46, 25 C.L.R. (3d) 241, 119 A.C.W.S. (3d) 428 (S.C.J.); Persad Estate v. Dissanayake, [2000] O.J. No. 5787 (S.C.J.); Popular Shoe Store Ltd. v. Simoni, 1998 18099 (NL CA), [1998] N.J. No. 57, 163 Nfld. & P.E.I.R. 100, 24 C.P.C. (4th) 10, 78 A.C.W.S. (3d) 833 (C.A.); Stein v. Kathy K (The), 1975 146 (SCC), [1976] 2 S.C.R. 802, 62 D.L.R. (3d) 1, 6 N.R. 359 Statutes referred to Construction Lien Act, R.S.O. 1990, c. C.30, ss. 1(1) [as am.], 7, 8, 13, 50(2) Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 18(3) [as am.], 20(1) [as am.], 21 [as am.], 22(1) [as am.], 23(1), 31, 97 [as am.], 107(1), 134(1) [page388]
D.G.E. Toppari, for plaintiff/respondent. Brandon M. Boone, for Bob Savoia (also known as Rosario Savoia), defendant/appellant.
J.W. QUINN J.:--
Introduction
[1] The plaintiff alleges that the defendants were involved in a joint venture relating to the installation of several residential plumbing and heating systems for a builder and that the defendants subcontracted the heating work to the plaintiff.
[2] The builder was not satisfied with the completed installations and withheld payment. The defendant, Bob Savoia ("Savoia"), registered construction liens against the subject properties ("Project") and subsequently released the liens after reaching a settlement with the builder and receiving payment.
[3] The plaintiff was not paid for its work on the Project by any of the defendants and brought action in the Small Claims Court.
[4] Savoia and his one-man company, the defendant, Bob Savoia Plumbing Inc. (the "Corporation"), delivered a defence, denying that they contracted with the plaintiff. They pleaded that the plaintiff was hired by the defendant, Stewart Clarkson ("Clarkson"), and alleged that Clarkson was responsible for payment of any moneys owed to the plaintiff.
[5] Clarkson died at, or about, the time the action was commenced. No steps were taken to regularize the title of proceedings and his estate did not deliver a defence. At the opening of trial, after prodding by the trial judge, the claim against Clarkson was withdrawn.
[6] The trial judge found: (1) that the moneys received in settlement of the construction liens constituted a trust fund under the Construction Lien Act, R.S.O. 1990, c. C.30 ("CLA"); (2) that Savoia was trustee of the fund; (3) that he could not account for the money; (4) that he thereby breached his trust obligations; and, accordingly, (5) that he was liable to the plaintiff.
[7] Judgment was given to the plaintiff in the amount sought. The action was dismissed as against the Corporation and Clarkson. Savoia now appeals the judgment against him. [page389]
[8] As this is an appeal from a final order of a Small Claims Court, it was heard by me sitting as a judge of the Divisional Court [^1].
Issues
[9] The appeal raises three principal issues, two of which relate to the trust fund provisions of the CLA. Firstly, it is argued by Savoia that the Small Claims Court does not have jurisdiction to deal with those provisions, as they fall within the purview of the Superior Court of Justice. Secondly, the trust fund issue was not pleaded but was raised for the first time in argument and it is contended that this was unfair to Savoia.
[10] The third issue is whether there was evidence to support the findings and judgment of the trial judge.
[11] The pertinent trust fund provisions are s. 8(1) and (2) and s. 13(1) of the CLA. Section 8(1) deems certain moneys to be a trust fund:
8(1) All amounts,
(a) owing to a contractor or subcontractor, whether or not due or payable; or
(b) received by a contractor or subcontractor,
on account of the contract or subcontract price of an improvement constitute a trust fund for the benefit of the subcontractors and other persons who have supplied services or materials to the improvement who are owed amounts by the contractor or subcontractor.
Section 8(2) identifies the trustee of the fund:
8(2) The contractor or subcontractor is the trustee of the trust fund created by subsection (1) and the contractor or subcontractor shall not appropriate or convert any part of the fund to the contractor's or subcontractor's own use or to any use inconsistent with the trust until all subcontractors and other persons who supply services or materials to the improvement are paid all amounts related to the improvement owed to them by the contractor or subcontractor.
Section 13(1) provides for liability attaching to officers, directors and those who have effective control of a corporate contractor or subcontractor: [page390]
13(1) In addition to the persons who are otherwise liable in an action for breach of trust under this Part,
(a) every director or officer of a corporation; and
(b) any person, including an employee or agent of the corporation, who has effective control of a corporation or its relevant activities,
who assents to, or acquiesces 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.
[12] Before discussing the three issues raised by this appeal, I will examine the decision of the trial judge.
Trial Decision
Contractual findings
[13] The trial judge made the following findings regarding the contractual relationships (or lack thereof) at bar:
(a) In June 2002, Savoia submitted tenders to install plumbing and heating in respect of three homes being constructed by a builder (which I earlier indicated will be referred to as the "Project").
(b) Savoia intended to have the heating work done by his friend, Clarkson. There was no written agreement between Savoia and Clarkson.
(c) Clarkson was "too busy" and the plaintiff, Brighton Heating & Air Conditioning Ltd. ("Brighton")"was brought on board to do the work". There was no written agreement between Brighton and Clarkson or between Brighton and Savoia.
(d) In July and September, 2002, Savoia invoiced the builder and the invoices included the heating installations carried out by Brighton.
(e) In September, Brighton, having completed the heating work covered by the tenders, invoiced the Corporation, not knowing that the tenders to the builder had been by Savoia rather than the Corporation. There were three invoices, amounting to $8,281.
(f) During the period that Brighton did the heating installations, it was unaware of the nature of the relationship between Clarkson and Savoia.
(g) Savoia testified that he paid Clarkson for the heating work, with six cheques totaling $9,114.69. This total exceeds the [page391] claim of the plaintiff by $833.69 and the tenders by $864.69. All of the cheques showed the Corporation as the payor. "The inconsistencies raised by the cheques throw doubt upon the actual reasons for the payments."
(h) Clarkson never invoiced Savoia and, despite the absence of a written contract or other "paper trail", Savoia contends that he "still paid out monies" to Clarkson.
[14] There are two matters about which the trial judge did not make an express finding but which, I think, permit an inference that they were accepted as facts. Firstly, it may be inferred, in the circumstances (particularly in the light of the construction liens addressed later in these reasons), that the trial judge found Savoia, not the Corporation, to be the contractor for the Project. Secondly, it may be inferred, from the following evidence accepted by the trial judge, that Brighton contracted with Savoia, not Clarkson (in other words, that Brighton was a subcontractor to Savoia and not a subcontractor to Clarkson):
(a) The testimony of the owner of Brighton was that Brighton reported to Savoia and the owner understood he would be invoicing Savoia for the heating work.
(b) According to the owner of Brighton, at no time did Clarkson give any direction to Brighton.
(c) Savoia telephoned the owner of Brighton and told him that he (Savoia) would be filing construction liens as "time was running out" and that "the liens were going to be placed on the [Project] for insurance of receiving our funds".
(d) At the meeting to settle the lien claims, the builder was present, along with Savoia and the owner of Brighton. Clarkson was not present.
[15] The trial judge made adverse findings of credibility against Savoia, but not against the owner of Brighton. Therefore, I think it may be inferred that the trial judge accepted the evidence I have just outlined and rejected the testimony of Savoia to the contrary. In addition, the trial judge held: "The alleged payments to Clarkson do not relieve Savoia of his duties. The onus was on him to see that Brighton was paid and he did not do so." I take this to mean that even if the six cheques to Clarkson were shown to be in relation to the Project, this fact would not relieve Savoia of his trust responsibility as he was the contractor and Brighton, not Clarkson, was his subcontractor. [page392]
The construction liens
[16] The trial judge made these findings in connection with the construction liens that were filed:
(a) The builder did not pay Savoia in full, alleging deficiencies in the plumbing and heating work. As a result, Savoia filed construction liens totalling $15,688.25, with the claims for lien referring to "supply and installation of plumbing and heating fixtures and equipment".
(b) The liens were in the name of Savoia, not the Corporation. He was described in the affidavits of verification as "the lien claimant".
(c) Savoia subsequently met with the builder and settled the liens for $9,114.44, acknowledging that there were deficiencies in the amount of the discount.
(d) Savoia contended that the deficiencies related solely to heating work and he "kept all of the money received as a result of the settlement with [the builder]" [^2].
[17] The trial judge observed that "the whole of the evidence is fraught with unanswered questions especially as to the lack of paperwork between and among the parties" and added: "The Savoia-Clarkson relationship throws much doubt on the evidence of [Savoia]." It is evident that the trial judge did not find Savoia to be a credible witness [^3]. [page393]
Trust claim under the [CLA](https://www.canlii.org/en/on/laws/stat/rso-1990-c-c30/latest/rso-1990-c-c30.html)
[18] In the course of closing argument by the legal agent for Brighton at trial, the issue of the trust claim under the CLA was raised for the first time, and by the trial judge:
THE COURT: Well, I will raise a point. Are you going to put forward any argument of the trust provisions under the Construction Lien Act?
[19] The legal agent for Savoia and the Corporation at trial, interjected:
AGENT: I was actually going to bring that up because that has not been pleaded and as such it's very much out of time.
[20] The issue was ignored until closing arguments were concluded and the trial judge indicated that he was reserving. The agent for Savoia and the Corporation then had this exchange with the trial judge regarding the trust issue and the fact that it had not been pled:
AGENT: Did you wish to speak briefly on the trust provisions ...
THE COURT: No, I will look it up.
AGENT: ... of the Construction Lien Act. I have the Construction Lien Act with me. It is section 7 [^4] and I would say we are ...
THE COURT: I am familiar more or less with the provisions and although it was not raised [in the] pleadings, I think it is something I should be considering.
AGENT: I don't even believe it [is] something that has been raised in the evidence, and, as such, I don't believe it is something that Your Honour can consider and we are -- we are definitely statute barred on it at this point ... I believe that we're now in a two year statute of limitations [^5] ... It is not something that has been brought properly before this court today ... I do not feel that the court can consider it because it has not been raised. It has not been raised in evidence. It has not been raised in argument. You have not heard that any money was retained by my client that was not used to pay sub-trades or suppliers and, as such, I don't feel that you can make a finding on that point of law.
THE COURT: I will consider your arguments on it. [page394]
[21] After a brief back-and-forth between the trial judge and the agent for Brighton on another point, the matter concluded as follows:
THE COURT: . . . I have raised the Construction Lien Act and [counsel for Savoia and the Corporation] has raised some arguments against that and I shall look into it. I shall also be considering all the evidence that has been given and arguments on both sides. With that, I thank you.
[22] The trial judge ultimately held:
I find that section 8 of the Construction Lien Act places a statutory obligation on contractors to hold proceeds received on account of a contract to which the Act applies as a trustee until all subcontractors are paid. This obligation imposes a strict trust on contractors. Regardless of whether or not it is pleaded, the trust obligations exist. [Savoia] was the Trustee and was responsible for payments out to subcontractors (DiMario v. Shuster (1994), 13 C.L.R. (3rd) 140).
[23] The trial judge went on to find that Savoia "was personally liable to fulfill his trust obligation and failed to do so". He further concluded:
The alleged payments to Clarkson do not relieve Savoia of his duties. The onus was on him to see that [Brighton] was paid and he did not do so. I put no credence on the cheques submitted [in payment to Clarkson]. They establish no reference to the work carried out by [Brighton] and have no value in this case considering the payor is a limited company, the payee (with one exception, which is an anomaly) is Stewart [Clarkson] Plumbing. There is no evidence that the cheques relate to the matter at hand.
[24] In the result, the trial judge awarded judgment against Savoia for $8,041 plus prejudgment interest and costs. As I have already indicated, the action was dismissed as against the Corporation and Clarkson and Savoia now appeals.
[25] Perhaps I should add that there were three witnesses who testified at trial: Savoia, the builder and the owner of Brighton.
Grounds for the Appeal
Jurisdiction to hear a [CLA](https://www.canlii.org/en/on/laws/stat/rso-1990-c-c30/latest/rso-1990-c-c30.html) trust claim
[26] Does the Small Claims Court have jurisdiction to hear a trust claim under the CLA?
Position of Savoia
[27] On behalf of Savoia, Mr. Boone argues that, in order to grant a monetary judgment under the trust provisions of the CLA, a court must make declarations: [page395]
(a) that the moneys constituted a trust fund for the benefit of Brighton; and,
(b) that Savoia appropriated or converted the moneys to his own use or a use otherwise inconsistent with the trust while not paying to Brighton all amounts owed.
[28] Reliance is placed on Domtar Commercial Roofing and Insulation v. Exeter Roofing & Sheet Metal Co., [1993] O.J. No. 3113, 13 C.L.R. (2nd) 63 (Gen. Div.) [^6], at paras. 11, 15, 16 and 22, as support for the arguments, firstly, that trust fund claims under the CLA involve declarations and, secondly, that such declarations must be made by the Superior Court of Justice (formerly the Ontario Court (General Division)):
Traditionally, in Canada under the Constitution of the country, the federally appointed judges have the power to award declaratory judgments, and provincially appointed officials have not had the power.
Construction Lien trust claims and Declarations would appear prima facie in Ontario to have been dealt with by the federally appointed judiciary ...
It is my view, once again, that in the circumstances the province cannot award the powers of a superior court judge to its own appointee, especially under the Construction Lien Act because those powers have always been exercised in Ontario by federally appointed judges . . .
It appears that a declaratory claim [under the CLA] dealing with trust funds would ordinarily be decided by federally appointed judges who are members of the General Division of the province.
[29] It is submitted by Mr. Boone that the trust fund "is a unique remedy created by [the CLA]" and that a court is not permitted to "grant a remedy created by statute unless the statute creates jurisdiction in [the] court to do so. The statute does not do so": see Bradbury v. Nu-Life Builders Ltd., [1986] O.J. No. 2675, 24 C.L.R. 296 (Prov. Ct.), at para. 5. [page396]
[30] Finally, Mr. Boone points out that, pursuant to s. 97 of the Courts of Justice Act, the Small Claims Court is without jurisdiction to grant declaratory orders:
- The Court of Appeal and the Superior Court of Justice, exclusive of the Small Claims Court, may make binding declarations of right, whether or not any consequential relief is or could be claimed.
Position of Brighton
[31] Mr. Toppari, counsel for Brighton, argues that the Small Claims Court does have jurisdiction to consider a trust claim under the CLA. He relies upon three decisions:
(a) In Concord Trimming Inc. v. Valley Garden Homes Inc., [1998] O.J. No. 6350 (Div. Ct.), the court (composed of a single judge) heard an appeal from a decision of a Small Claims Court regarding a trust fund claim by the plaintiff under the CLA. At para. 1 of a tidy five-paragraph endorsement, it was held that the "Small Claims court had jurisdiction to consider a breach of trust claim under the [CLA]."
(b) The plaintiff in Malcolm Group Contracting Inc. v. 842879 Ontario Inc., [2003] O.J. No. 46 25, C.L.R. (3d) 241 (S.C.J. - Small Claims Court) sued for damages for breach of the trust fund provisions of the CLA. The action was allowed [^7].
(c) In Persad Estate v. Dissanayake, [2000] O.J. No. 5787 (S.C.J. - Small Claims Court), it was held, at para. 4: "Under the Courts of Justice Act the Small Claims Court now has jurisdiction in all matters within its monetary jurisdiction unless specifically excluded by that Act or another Act."
Discussion
[32] Section 50(2) of the CLA states that trust claims may be brought in any court of competent jurisdiction:
50(2) A trust claim shall not be joined with a lien claim but may be brought in any court of competent jurisdiction.
"Court" in s. 50(2) means the Superior Court of Justice: see s. 1(1) of the CLA, as amended. And, the Small Claims Court is a branch of the Superior Court of Justice: see s. 22(1) of the Courts of Justice Act. Therefore, as the Small Claims Court is a "court of [page397] competent jurisdiction", I think that Bradbury, supra, relied upon by Mr. Boone, was wrongly decided. The only limiting factor in a trust claim is the amount involved. Obviously, where a trust claim is heard in Small Claims Court, the court is constrained by its monetary jurisdiction.
[33] If Domtar, supra, also cited by Mr. Boone, stands for the proposition that a trust claim under the CLA is a declaratory remedy, I must respectfully disagree with that assertion. Orders under s. 8 and s. 13 of the CLA are not truly declaratory in nature. They do not involve a declaration of duty or of rights in the necessary sense. Any declaration is incidental to the substantive remedy of damages. The court makes findings that a trust exists and that moneys are owed. The judgment obtained is a money judgment. And, s. 23(1) of the Courts of Justice Act gives jurisdiction to the Small Claims Court in any action for the payment of money within its monetary jurisdiction:
23(1) The Small Claims Court,
(a) has jurisdiction in any action for the payment of money where the amount claimed does not exceed the prescribed amount exclusive of interest and costs;
[34] Accordingly, I think the Small Claims Court does have jurisdiction to consider a trust claim under the CLA provided that the amount involved is within the monetary jurisdiction of that court.
Should the court have granted a remedy that was not pleaded?
[35] It will be remembered that Brighton did not plead the trust provisions of the CLA. This was a matter raised by the trial judge, and he did so during closing argument of the agent for Brighton over the objection of the agent for Savoia and the Corporation. Should the court have granted a remedy that was not pleaded?
Position of Savoia
[36] Mr. Boone submits that because a contractor or subcontractor who received moneys on a project bears the burden of proving that the moneys were distributed for project purposes"it is imperative for Savoia to know, going into trial, that he will have an onus to bear" and so the trust issue must be specifically pleaded. Savoia, it is argued, did not have an opportunity to adduce evidence on this issue, as the matter was raised for the first time in argument. [page398]
Position of Brighton
[37] Mr. Toppari relies upon Popular Shoe Store Ltd. v. Simoni, 1998 18099 (NL CA), [1998] N.J. No. 57, 24 C.P.C. (4th) 10 (C.A.) and 936464 Ontario Ltd. v. Mungo Bear Ltd. (2003), 2003 72356 (ON SCDC), 74 O.R. (3d) 45, [2003] O.J. No. 3795 (Div. Ct.) for his argument that the trust claim did not have to be pleaded to be considered by the trial judge.
[38] In Popular Shoe, supra, the court held, in part, at para. 24:
Particularly in Small Claims Court, where claimants, as here, are often unrepresented, a liberal approach ought to be taken to the pleadings that are presented so as to ensure that access to proper adjudication of claims is not prevented on a technicality ... If a claimant by his or her pleading or evidence states facts which, if accepted by the trier of fact, constitute a cause of action known to the law, the claimant should prima facie be entitled to the remedy claimed if that is appropriate to vindicate that cause of action. The only limitation would be the obvious one that if the case takes a turn completely different from that disclosed or inferentially referenced in the Statement of Claim, thereby causing prejudice to the other side in being able properly to prepare for or respond thereto, the court may either decline to give relief or allow further time to the other side to make a proper response.
And, the court further stated, at para. 25:
A Small Claims Court judge has a duty, on being presented with facts that fall broadly within the umbrella of the circumstances described in the statement of claim, to determine whether those facts constitute a cause of action known to the law, regardless of whether it can be said that the claimant, as a matter of pleading, has asserted that or any other particular cause of action. Subject to considerations of fairness and surprise to the other side, if a cause of action has been established, the appropriate remedy, within the subject-matter jurisdiction of the court, ought to be granted.
[39] In Mungo Bear, supra, a plaintiff brought an action in the Small Claims Court on an unpaid invoice. The trial judge found that there was no contract between the parties but awarded the maximum allowable amount in that court on a quantum meruit basis. The defendant appealed, inter alia, on the ground that the judge erred in considering quantum meruit, as it had not been pleaded by the plaintiff. The court in Mungo Bear, supra, dismissed the appeal, and, in so doing, followed Popular Shoe, supra, holding, at para. 45:
The higher standards of pleading in the Superior Court are simply unworkable in the Small Claims Court, where litigants are routinely unrepresented, and where legal concepts such as the many varieties of causes of action are completely foreign to the parties. Essentially, the litigants present a set of facts to the deputy judge, and it is left to the deputy judge to determine the legal issues that emerge from those facts and bring his or her legal expertise to bear in resolving those issues. [page399]
Discussion
[40] I agree with the proposition that, in the Small Claims Court, a liberal, non-technical approach should be taken to pleadings [^8]. Therefore, unpled relief may be granted (and an unpled defence allowed) so long as supporting evidence is not needed beyond what was adduced at trial, or what reasonably should have been adduced, in support of the relief (or defence) that was pled; and, of course, provided that, in all of the circumstances, it is not unfair to grant such relief (or allow such a defence).
[41] Savoia went to trial alleging: (1) that the Corporation was the contractor for the Project; (2) that the Corporation had subcontracted to Clarkson the heating component of the work; (3) that Clarkson, in turn, had subcontracted to Brighton; (4) that the Corporation had paid Clarkson for the heating work; and, therefore, (5) that neither he (Savoia) nor the Corporation was liable to Brighton for that work. Savoia had no satisfactory documentary evidence to support (1), (2) and (3) and the trial judge rejected his oral testimony on those matters. Savoia tendered six cheques in evidence to prove (4), but the trial judge rejected them, holding that "there is no evidence that the cheques relate to the matter at hand".
[42] To establish his defence, it was unnecessary for Savoia to address the distribution of the construction lien settlement moneys (except to the extent of the sixth and last of the aforementioned cheques to Clarkson in the sum of $3,193.36 which Savoia said came from the settlement moneys). Accordingly, it would have come as a surprise to Savoia to be required to account for the balance of those moneys. The trust fund provisions of the CLA, as I have already mentioned, include a burden upon a defendant to prove compliance with the trust provisions once a plaintiff establishes the existence of a trust.
[43] Although I have some reservations about the likelihood that Savoia (with his aversion to paper and penchant for casual contractual relations) has the necessary records to discharge his burden of proof, I think that the ends of justice require that he be given the opportunity to do so. In short, it was unfair to Savoia for judgment to be awarded against him upon a trust claim that was not pleaded. [page400]
Evidence to support the trial judgment?
[44] With the second of the first two issues on this appeal having been resolved in favour of Savoia, there is no need for me to consider the third and final issue: whether there was evidence to support the trial judgment.
Conclusion
[45] Because I have concluded that it was unfair for judgment to have been awarded against Savoia based upon a claim not pleaded, the appeal is allowed. As I think that the unfairness rises to the level of a "substantial wrong or miscarriage of justice", I order a new trial pursuant to s. 134(1)(b) of the Courts of Justice Act.
[46] Brighton shall, by March 1, 2006, deliver an amended claim reflecting the trust issue and deleting Clarkson from the title of the proceedings. Leave is hereby given for those amendments. Savoia and the Corporation shall, by April 1, 2006, deliver an amended defence.
[47] The costs of this appeal shall be awarded to Brighton if, at the new trial, it proves the trust and Savoia fails to establish that he discharged his responsibilities as trustee. Otherwise, if either Brighton does not prove the trust or Savoia is found to have discharged his responsibilities as trustee, the costs of the appeal shall go to Savoia. In the event Brighton does not deliver an amended claim by March 1, 2006, Savoia shall have his costs of the appeal. If, under any of the foregoing scenarios, the amount of the costs is disputed, I will entertain oral submissions and fix the costs.
[48] As a final word, I commend counsel for their arguments. It is unfortunate that the trial judge did not have the benefit of their submissions.
Appeal allowed.
[^1]: An appeal lies to the Divisional Court from a final order of the Small Claims Court in an action for the payment of money in excess of $500 excluding costs: see s. 31(a) of the Courts of Justice Act, R.S.O. 1990, c. C.43; a proceeding in the Divisional Court may be heard and determined by one judge where the proceeding is an appeal under s. 31: see s. 21(2)(b); every judge of the Superior Court of Justice is also a judge of the Divisional Court: see s. 183(3); and, an appeal to the Divisional Court shall be heard in the region where the hearing that led to the decision appealed from took place, unless the parties agree otherwise or the Chief Justice of the Superior Court of Justice orders otherwise: see s. 20(1).
[^2]: No other moneys are owed by the builder in connection with the Project.
[^3]: Bearing in mind the standard of review to be exercised by an appellate court, I am unable to say that the trial judge was wrong on the issue of credibility. "It is well accepted that in civil cases, appellate courts will not interfere with the factual findings of the trier of fact 'unless it can be established that the learned trial judge made some palpable and overriding error which affected his assessment of the facts'": see Liuni (Litigation Guardian of) v. Peters, 2001 5153 (ON CA), [2001] O.J. No. 4724, 151 O.A.C. 389 (C.A.), at para. 9, where the court cited Stein v. Kathy K (The), 1975 146 (SCC), [1976] 2 S.C.R. 802, 62 D.L.R. (3d) 1, at p. 808 S.C.R. "It is well accepted that an appellate court will only interfere with a finding of fact where a trial judge has made a clear or manifest error. The requirement that errors be clear or manifest imposes a differential standard of reasonableness, not correctness. This means that an appellate court will not interfere, simply because it disagrees with the finding of fact, but only concludes that the finding is unreasonable": see Keljanovic Estate v. Sanseverino, 2000 5711 (ON CA), [2000] O.J. No. 1364, 186 D.L.R. (4th) 481 (C.A.), at para. 25.
[^4]: This reference is an error. Section 7 deals with the owner of property as a trustee, not a contractor or subcontractor as a trustee (the situation at bar).
[^5]: I do not know what limitation period the agent had in mind, but the argument was rejected by the trial judge and the matter was not raised by either side on the appeal.
[^6]: In Domtar a defendant moved, pursuant to s. 107(1) of the Courts of Justice Act, for an order transferring three Small Claims Court actions to the General Division or, alternatively, for an order staying the three actions. All four actions involved the same set of circumstances and sought the same relief. The Small Claims Courts actions were stayed and leave was granted for the plaintiffs in those actions to be added as plaintiffs in the General Division action.
[^7]: The issue of jurisdiction seems not to have been raised in the case.
[^8]: And I do not think that this approach should depend on whether the litigants are self-represented (or represented by non-lawyers). Otherwise, what happens where one party is self-represented and one has counsel? The informality of pleading is a function of the nature of the court and not of the quality of the representation.