COURT FILE NO.: CV-07-009805
DATE: 20120323
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
J. Lepera Contracting Inc. Plaintiff – and – Royal Timbers Inc., Sonoma Windsor, a U.S. Trust, Sonoma Windsor Fl Ltd., and Sonoma Windsor LP Defendants
Myron W. Shulgan and Celina S. DeVuono, for the Plaintiff
Peter R. Green and Michael I. Binetti, for the Defendants
HEARD: October 18, 19, and 20, 2011 and November 9, 2011
Reasons for judgment
gates J. :
Overview:
[ 1 ] Royal Timbers Inc. (“Royal Timbers”) is a development corporation, wholly owned by Banwell Holdings Limited, which owned an extensive parcel of land on the west side of Banwell Road in the City of Windsor which intersects with the EC Row Expressway. One Murray Troup (“Troup”) was the principal owner and operator of the two corporations. However, Royal Timbers is the only active corporation involved in these proceedings.
[ 2 ] From the agreed productions of both parties, a detailed sketch of the land in question was produced and marked as Exhibit 3. For ease of reference in these Reasons, that portion coloured green (“the Green parcel”) represents the residual parcel to be retained by Royal Timbers after its planned sale of a portion of the land (“the Yellow parcel”) to the defendant Sonoma companies (“Sonoma”) for their intended construction of a Fairfield Inn hotel.
[ 3 ] Prior to the anticipated construction of the hotel, the plaintiff J. Lepera Contracting Inc. (“Lepera”) was engaged by way of contract with Sonoma, to construct and install the necessary underground services, which would be required before construction of the hotel could begin on the Yellow parcel.
[ 4 ] In a similar but entirely separate transaction, Royal Timbers contracted with the plaintiff to undertake the construction and installation of services for the balance of the Green parcel and when Lepera completed this contract it was paid by Royal Timbers.
[ 5 ] By way of an agreement of purchase and sale executed on February 17, 2007, Royal Timbers agreed to sell the Yellow parcel to Sonoma on which it intended to construct its hotel. Ultimately, despite several extensions granted to it, Sonoma aborted its purchase.
[ 6 ] Previously, on August 4, 2006, a contract for the provision of the necessary architectural and engineering services for its project was executed between Sonoma Hospitality Group LLC of Sonoma California and Architectural Design Associates Inc. (“ADA”), under the direction of its employee John Gillis (“Gillis”).
[ 7 ] With that, Lepera commenced work under both contracts at the same time. In accordance with the contract arrangements, as the work progressed on the Yellow parcel (“Sonoma”), ADA through Gillis issued a project certificate in the net sum of $385,449.68 due Lepera which then issued its invoice to Sonoma on June 25, 2007, due and payable within 30 days. It was not paid. Lepera then registered a lien pursuant to the Construction Lien Act , R.S.O. 1990, c. C.30 , on July 25, 2007 (“ CLA ”) and a Certificate of Action on September 12.
[ 8 ] Lepera also commenced an action against the Sonoma companies and recovered judgment by default in the sum of $402,509.79 plus $11,079.78 costs and an additional judgment to recover the statutory hold back, in the sum of $44,723.31 plus $11,079.78 for costs, on April 3, 2008.
[ 9 ] These monies remain unpaid.
Issues
i. Is Royal Timbers a statutory owner within s. 1.1 of the CLA ?
ii. Is Royal Timbers an owner within s. 18 of the CLA ?
iii. Do the concepts of unjust enrichment and/or quantum meriut have any application here in favour of Lepera?
iv. Has Lepera proved its damages?
The Plaintiff’s Evidence:
- Joe Lepera
[ 10 ] Joe Lepera is president of J. Lepera Contracting and is responsible for its operation (Lepera personally and the corporate plaintiff are referred to interchangeably as “Lepera”). His involvement with the project in question began with a tender invitation received from Gillis of ADA Inc. to bid for the provision of site services to the Green and the Yellow parcels, separately, which were part of the tract of vacant land being developed by Royal Timbers. The Yellow parcel also referred to as Phase I, which is surrounded by the Green parcel referred to as Phase II, is the site on which the planned hotel was to be constructed.
[ 11 ] While Lepera’s Tender for the project was directed to the Sonoma Hospitality Group on October 31, 2006, it was not until an e-mail of April 30, 2007, from his solicitor Mr. Martini (“Martini”), that the issue of who actually owned the lands was raised because the site services contract had been signed by Lepera and Gary Nelson on behalf of Sonoma Windsor as well as ADA the project consultant on April 9. However Lepera admitted that from at least May 1, 2007, Martini knew because he was exchanging emails with Gary Nelson of Sonoma to determine which of the Sonoma companies would be acquiring title to the Yellow parcel and which one would be in a position to guarantee payment of any obligations to Lepera. Lepera admitted that he never asked who Nelson was, nor did Martini ever tell him. Nevertheless he signed the Phase I contract document which was likewise signed by Nelson. Lepera was unable to address this discrepancy.
[ 12 ] Similarly on April 9, 2007, Royal Timbers and Lepera executed its separate site services contract for Phase II (Green parcel) and ADA was likewise retained as the architect and project consultant.
[ 13 ] At present, all the plaintiff’s work is completed on both phases, with the exception of the curbs and the application of a second coat of asphalt.
[ 14 ] He admitted that Troup never said that he was involved with the Sonoma organization. Furthermore he never believed or understood that Sonoma and Royal Timbers were one and the same entity, nor did he ever inquire from Gillis about Royal Timbers’s involvement in the entire project.
[ 15 ] Lepera also testified that Martini never told him why it was necessary to secure the contract’s execution by the other Sonoma entities. He just assumed that Martini was looking after his interests to secure payment for the plaintiff’s work. While he was not advised by Martini until early May 2007 that he was cleared to start the construction, the plaintiff had been at work since sometime in April.
[ 16 ] In the seven months between the tender of October 31, 2006, and the execution of the contract on April 9, 2007, he was unable to recall whether he was aware that the Sonoma group was located in California nor did he ever settle the question of who would be the real contracting party on behalf of the Sonoma group and, more importantly, which Sonoma company would have the necessary financial resources to guarantee payment of Lepera’s invoices as required by Part V of the construction contract.
[ 17 ] However, his evidence is contradicted by the December 20, 2006 letter from ADA to Sonoma Hospitality, concerning the site services for Phases I and II which had been in Lepera’s possession by March 28, 2007. From that point forward, he knew that the Sonoma Hospitality Group was located in California.
[ 18 ] Furthermore, he acknowledged that his e-mail to Martini on May 1, provided Sonoma’s address and later that same day Martini used this information to send an e-mail to Nelson confirming that Lepera was the successful bidder to provide the site services for Sonoma’s hotel.
[ 19 ] One is left with the impression that the plaintiff and its advisers were not, perhaps, as diligent as they might have been in pressing the financial security and payment issues from the Sonoma group to which as it was entitled to do by Part V s. 5.1 of the Stipulated Price Contract dated April 18, 2007, which provided that an owner must, at the request of a contractor and prior to the execution of the Agreement or promptly thereafter, furnish the contractor reasonable evidence that financial arrangements have been made to fulfill the owner’s obligations under the contract. Furthermore, the owner is required to notify the contractor in writing of any material change in its financial arrangements during the performance of the contract.
[ 20 ] This standard form contract, he confirmed, sets out the practice in the construction industry as to how payment is to be made to a contractor.
[ 21 ] Despite this obvious entitlement to Lepera he admitted that neither he, nor could he recall, Martini, ever pursued the Sonoma companies to satisfy this obligation.
[ 22 ] When the money owing by the Sonoma group was not paid, no action was taken to collect the debt before Lepera’s lien was registered against the Yellow parcel. Nor was any demand ever made to Royal Timbers or Troup for payment. Consistent with this the payment certificate of June 19, 2007 in the sum of $385,449.68, was directed to the Sonoma Hospitality Group as owner, (not to Royal Timbers) and was approved for payment by Gillis on June 25, 2007.
[ 23 ] When this was not paid by the end of July, Martini arranged for the registration of the Lien and the Certificate of Action.
[ 24 ] Lepera admitted that while he dropped his invoice off at Royal Timbers’s offices, neither Troup nor Royal Timbers ever acknowledged any obligation to pay it. They only arranged to have it sent to Sonoma in California for payment. He was unable to explain why, if he expected Royal Timbers or Troup to pay the invoice, he was pursuing Sonoma directly in California. His (somewhat weak) response was that he wanted to keep Sonoma in the loop. Martini’s letter of August 10 jointly addressed to Sonoma and Royal Timbers advising of the lien registration was the first time any claim was made to Royal Timbers.
[ 25 ] All of this takes place against the background that firstly, the plaintiff never asserted its rights under the construction contract to demand security from Sonoma for payment in advance of the commencement of the work and secondly, it never fully pursued assurances that the appropriate Sonoma company would be in place to guarantee payment of Lepera’s contract.
[ 26 ] With all this context, therefore, it was becoming increasingly clear from his evidence that Lepera recognized that the true owner/payor was not Troup or Royal Timbers, but Sonoma.
- John Gillis
[ 27 ] John Gillis, an associate with ADA, was the project manager for both Phase II (Royal Timbers) and for Phase I which involved the construction of the Fairfield hotel on the Yellow parcel. He testified that his firm operated under a separate contract with the Sonoma group to provide architectural, design and engineering services as well as project management. Virtually all of the invoices for ADA’s work on the hotel were submitted to the Sonoma group and were paid by it. Similarly, its billings rendered to Royal Timbers arising from ADA’s separate contract with it, were paid by Royal.
[ 28 ] Because he was involved from the outset with both projects, he was thoroughly familiar with them and he confirmed that there were two distinct and separate contracts with each of Sonoma and Royal Timbers dated April 9th, 2007. ADA was the designated project consultant in each. Furthermore he stated that Lepera knew that Phase I involved only Sonoma and Phase II only Royal Timbers, as did Martini.
[ 29 ] The site plan clearly demonstrates that the Yellow parcel for the hotel area is in effect, an island surrounded by the balance of the development lands shaded in green such that access to the Phase I hotel services would have to be made from the Green parcel.
[ 30 ] The addendum to the Stipulated Price Contract of April 9, 2007, between Lepera and Sonoma Windsor, was an assignment with Lepera’s consent, of Sonoma Windsor’s interest to other Sonoma entities who undertook and acknowledged to be bound by the terms of the original contract between Sonoma Windsor and Lepera Contracting. This was put in place once it was confirmed which Sonoma Company would be the ultimate owner.
The Defence Evidence:
- Murray Troup
[ 31 ] Murray Troup is president of Royal Timbers Inc., a wholly owned subsidiary of Banwell Development Corporation which purchased the lands in question in August 2003 for a proposed commercial development. The Yellow parcel previously described was to be sold to Sonoma for construction of its planned Fairfield Inn while Royal Timbers retained ownership of the Green parcel to be used for other development projects.
[ 32 ] In late 2005, he was approached by the Sonoma group which expressed an interest in developing a site for a hotel.
[ 33 ] Following further discussions, an agreement of purchase and sale for the Yellow parcel comprising approximately two acres, was executed between Royal Timbers as vendor and Sonoma as purchaser on February 5th, 2007 for a sale price of $1.1 million, with the closing date set for February 28. For a number of reasons the closing was extended by mutual agreement, from time to time. However, by the fall of 2007, it had not yet closed, nor did it ever.
[ 34 ] The hotel would be the flagship business which, it was expected, would drive the development of the remainder of the Green parcel.
[ 35 ] Before proceeding, all of the land had to be serviced and for this purpose in the fall of 2006, two separate tenders were put out, one for the Green parcel and another one for the Yellow parcel being purchased by Sonoma.
[ 36 ] The ADA firm was retained to design the Royal Timbers part of the project and to be the project manager for the Green parcel for which it billed and was paid by Royal Timbers.
[ 37 ] In a separate and similar contract ADA was retained by the Sonoma group for the Yellow parcel. Similarly it was billed and it paid ADA directly.
[ 38 ] He testified that further identification of their two separate contract interests is reflected in the fact that the consulting and design services provided by Rick Spencer (“Spencer”), a qualified engineer with the HGS Company, were undertaken separately for each of the Green and the Yellow parcels. Royal Timbers paid his account while his fee for the Sonoma work was paid for by ADA which in turn it disbursed to, and was reimbursed by Sonoma, along with ADA’s fees for its architectural and consulting services.
[ 39 ] In summary he confirmed that Royal Timbers’ construction contract obligation only related to the Green parcel. Its only involvement with the Yellow parcel, was to sell it to Sonoma.
[ 40 ] While the business address provided by Sonoma was 4747 Pleasant Place Windsor, the offices of Royal Timbers and Banwell Development, it was provided with an office free of charge, within Royal Timbers/Banwell’s commercial office area. It had its own separate telephone and staff. Troup stated that this arrangement was only a business convenience and marketing tool for potential future development work for his companies with the Sonoma group.
[ 41 ] In development terms the construction and operation of the Fairfield hotel would benefit his future business plans for the Green parcel, which included the establishment of a stand-alone restaurant beside the hotel. Apart from this broad commercial interest which would benefit his company, neither he nor it had any direct or indirect, interest in the planned hotel or in the Sonoma group itself.
Discussion
[ 42 ] Section 1.1 of the Construction Lien Act , defines an owner as follows:
“owner” means any person, including the Crown, having an interest in a premise at whose request and ,
a) upon whose credit, or
b) upon whose behalf, or
c) with whose privity or consent, or
d) for whose direct benefit
an improvement is made to the premises but does not include a home buyer.
[ 43 ] There can be no doubt that when Lepera registered its lien against the Yellow parcel Royal Timbers had an interest in it as the registered owner. However, the second criteria to be satisfied, namely s. 1.1(c), is whether the work in question was done by the plaintiff with Royal Timbers’ consent.
[ 44 ] That Royal Timbers never requested the work relating to the Yellow parcel was made clear from the evidence of Troup and Gillis and Spencer, without any contradiction from Lepera. The design and installation of services, the monitoring, and the project management for the Yellow parcel were carried out under separate agreements between the plaintiff, Sonoma, ADA and Spencer, without any express or implied request or consent of Royal Timbers.
[ 45 ] At no time on the facts, did Royal Timbers intend to become or to remain an owner within the CLA concept in s. 1.1(c). Without question Sonoma contracted to purchase the land from Royal Timbers and executed a binding offer to do so in February 2007, for the price of at least $1.1 million in cash. By this, Royal Timbers would divest itself of any interest in the Yellow parcel which was critical to Sonoma’s plan to build its stand-alone hotel.
[ 46 ] Royal Timbers’ interest in that land was transitory or temporary only, to last only until the sale to Sonoma was completed.
[ 47 ] That Royal Timbers did not object to the plaintiff Lepera entering onto on the land to carry out the construction of services for Sonoma is consistent with its planned divestiture of the Yellow parcel to Sonoma.
[ 48 ] In my view the context which cannot be ignored here is that of an owner who signed a contract to sell a piece of land to a hotel developer which, in anticipation of acquiring title to that land, contracted with the plaintiff to construct and install all the necessary services for its hotel. The defendant’s only involvement in that project was to convey the land to Sonoma; it was waiting for the deal to close.
[ 49 ] If the plaintiff and Sonoma wanted Royal Timbers to become involved in their construction contract they could have pursued this but they did not. Furthermore there were no direct dealings between Royal Timbers and Lepera with respect to the Yellow parcel which lends credence to the conclusion that it was always a non-party. The evidence here in my view does not support the existence of a consent, express or implied, to establish Royal Timbers as an owner within s. 1.1(c) notwithstanding Lepera’s position to the contrary.
[ 50 ] This conclusion is bolstered by the fact that Sonoma contracted separately with Gillis of ADA and Spencer for the design of the building and its services and also for project management and project consultant. When one looks at the totality of the circumstances there is no relationship between Royal Timbers and the plaintiff relating to the Yellow parcel. It makes no sense to suggest that it would make itself liable as owner to the plaintiff contractor when it had already contracted to sell the parcel to Sonoma which had its own construction contract with the plaintiff and was merely waiting for the deal to close.
[ 51 ] Because I have concluded that Royal Timbers is not a statutory owner, s. 18 has no application. However, for completeness, I will revisit the evidence as it relates to this section under the heading of “Joint or Common Interests”, as it provides as follows:
- Where the interest of the owner in the premises is held jointly or in common with another person who knew or ought reasonably to have known of the making of the improvement, the joint or common interest in the premises of that person is also subject to the lien unless the contractor receives actual notice, before the supply of services or materials to the improvement is commenced, that the person having the joint or common interest assumes no responsibility for the improvement to be made.
[ 52 ] Section 19 provides as follows:
19(1) where the interest of the owner to which the lien attaches is leasehold, the interest of the landlord shall also be subject to the lien to the same extent as the interest of the owner if the contractor gives the landlord written notice of the improvements to be made, unless the landlord, within 15 days of receiving notice of the contractor, gives the contractor written notice that the landlord assumes no responsibility for the improvement to be made.
[ 53 ] Because the evidence does not support a tenancy or leasehold relationship, s. 19 has no application.
[ 54 ] The plaintiff interprets s. 18 to mean that because of its joint or common interest in the Yellow parcel, Royal Timbers is to be deemed an owner and as such subject to the lien rights previously exercised by Lepera since it never issued the disclaimer referred to by this section.
[ 55 ] Lepera says that on the execution of that agreement of purchase and sale, the equitable interest then acquired by Sonoma co-exists with the legal interest of Royal Timbers in a joint or common capacity such that it is liable as an owner to the plaintiff. With respect, I disagree.
[ 56 ] In my view the plaintiff has conflated interest with ownership. The purchase agreement only created an equitable interest in favour of Sonoma, not an ownership which would only follow with the completion of its purchase. Until then, Sonoma’s interest was just that; an equitable interest which was inferior to the legal interest of Royal Timbers such that the two could not be considered to co-exist as owners jointly or in common, of the Yellow parcel.
[ 57 ] While the purchaser under an existing agreement of purchase and sale acquires an equitable interest, this is distinct from the legal interest which remains vested in the owner of the land (see: Scott J., in Meilloul-Blamey , at para. 36, following Peel Condominium Corporation). However on the facts of Peel , that condominium corporation by reason of the appropriate registrations under the Condominium Act , became the registered owner of the condominium project and it was, therefore, clearly in possession. In the case at hand, however, Sonoma as purchaser under its agreement of purchase and sale was not in possession of the Yellow parcel in circumstances where it could exercise power and control over that land at its pleasure, to the exclusion of all others. It could only achieve that status when it acquired the legal title from Royal Timbers. In the interim, its equitable interest was inferior to and distinct from the legal interest still vested in Royal Timbers.
[ 58 ] In Peel Condominium the Court of Appeal concluded that the condominium corporation, as the purchaser under a long form of agreement of sale would only acquire the legal title when the balance of the purchase monies was paid. Factually, it appears that the two points of distinction in Peel are firstly, that that corporation was the purchaser under a different form of agreement of purchase and sale where its constituent owners were in possession of their individual units in the building and secondly, it was clearly in possession of the property in question. Here, Sonoma was not yet in possession having only an equitable interest as the purchaser; it was not yet the owner.
[ 59 ] I now consider the concepts of joint or common interest of a landowner with another, as referred to in s. 18.
[ 60 ] I turn first to the concise Oxford English Dictionary, 10th Edition, Revised, which defines these concepts as follows:
i) Common: - Shared by two or more people
-In joint use or possession
-shared with; in the same way as;
ii) Joint: - shared, held or made by two or more people
-applied or regarded together
iii) Joint and several: - undertaken by two or more people each having liability for the whole.
[ 61 ] I also refer to Black’s Law Dictionary, 7th Edition, 1999 which provides:
i) Tenancy in common: the interests of two or more people in equal or unequal shares, each having an equal right to possess the whole but without the right of survivorship
ii) Joint Tenancy: A tenancy of two or more owners who take identical interests simultaneously by the same instrument and with the same right of possession. There is a right of survivorship.
[ 62 ] The latter definition of joint tenancy has also been characterized by the existence of the four unities of interest, time, title and possession, all of which must exist to create the joint tenancy.
[ 63 ] In my view the contemplation flowing from an interest in common with another is that of a relationship of equals, not one of an inferior-superior as reflected in the equitable verses the legal interest of Sonoma and Royal Timbers. Their individual interests are not each legal in nature. Therefore they cannot be said here to hold their interests in the Yellow parcel in common.
[ 64 ] The only unity applicable to a tenancy in common is that of possession but because Sonoma only had an equitable interest as purchaser, in my view this, too, would negate any suggestion of a right of possession in Sonoma with the result that it cannot be said they hold their respective interests in common.
[ 65 ] Similarly I conclude that they cannot be considered to hold those interests jointly because they do not comport with the four unities.
[ 66 ] Therefore s. 18 has no application to the facts at hand; it cannot be used to elevate an equitable interest to the legal status of ownership as with Royal Timbers.
[ 67 ] This is not to suggest the plaintiff has no claim for its unpaid work because undoubtedly it has. However, as I have noted, Lepera neglected or failed to enforce the right it had under s. 5.1 of the Stipulated Price Contract pertaining to the Yellow parcel, against Sonoma which would require it to provide reasonable evidence that financial arrangements had been made to fulfill its obligations under the contract to Lepera. It now seeks redress against Royal Timbers as a default position using the CLA , but for the reasons expressed I conclude that it cannot.
[ 68 ] In all, therefore, there is clear evidence that a separate and distinct chain of ownership and business development of the Green and the Yellow parcels existed throughout. I can find no evidence that Royal Timbers and Sonoma were business partners or joint venturers for the hotel project. They may have had a common purpose in facilitating the hotel’s construction but this does not equate to a common or joint interest in the land itself as contemplated by s. 18.
[ 69 ] While Lepera argues that Royal Timbers failed to provide the necessary disclaimer for financial responsibility for the plaintiff’s lien as required in s. 18 of the CLA , I conclude that a disclaimer can be inferred, (if it need be), from the conduct of Royal Timbers by virtue of the fact that it contracted in February 2007, to sell the land to Sonoma from which one could reasonably infer to be an express intention to divest itself of any interest in the Yellow parcel in favour of Sonoma. Therefore it would make no sense for it to contemplate assumption of any ownership responsibility for the payment of Lepera’s lien which did not arise until months later. Furthermore no mention is made of this in the sale agreement to Sonoma.
[ 70 ] In summary of my conclusion that Royal Timbers is not an owner here is based on the following facts I find rebut any such assertion:
i. The tenders of October 31, 2006, demonstrated that there were two separate contracts for the installation of services, one with the Sonoma group relating to its proposed hotel site solely on the Yellow parcel and second with Royal Timbers which covered the balance of the Green parcel for its own future development.
ii. Sonoma independently retained its own consultant, ADA represented by Gillis for the design, consultation and project management of its project.
iii. The change order which was negotiated between Sonoma and Lepera resulted in a contract price increase concerning the replacement of gravel. This was negotiated by Gillis on behalf of Sonoma, as owner, in favour of the plaintiff. Throughout these discussions there was no reference in the contract documents, to Royal Timbers.
iv. The initial request for payment was made by Lepera to Sonoma in the form of its Payment Certificate directed to ADA dated June 19, 2007, in the sum of $385,449.68, net of holdback which was approved by ADA the project manager. It issued a Certificate for Payment which then authorized Lepera to send its formal invoice to Sonoma, which it did, for that sum on June 25, 2007. Again, there is no reference or mention made of Royal Timbers as a payor.
v. There were never any demands for payment made to Royal Timbers before the plaintiff registered its lien on August 8, 2007.
vi. It is undisputed that Royal Timbers contracted separately with Lepera to service the remaining development lands in the Green parcel. It paid the plaintiff’s account in full of approximately $350,000 on completion of its work.
vii. The addendum executed May 15 and 21, 2007, to the Stipulated Price Contract of April 9th between the Sonoma companies and Lepera, came about as a result of the plaintiff seeking to add the correct Sonoma company as a party in order to ensure there would be a Sonoma company with assets, available to satisfy the ultimate account of Lepera. Once again there is no reference to Royal Timbers.
viii. Additionally, there are a number of significant e-mails passing between Lepera, the Sonoma organization and Lepera’s lawyers, the most pertinent of which are as follows:
• Lepera to Martini on April 30, 2007 at 5:28 p.m., advising that he is about to start work shortly and inquiring as to whether any contract had been signed.
• Martini’s reply at 7:58 p.m. confirms that a title search disclosed that the land in question is not owned by Sonoma but by Royal Timbers. He refers to the potential of a s. 19 notice, before the plaintiff commences its work. However, this notice was not actually given until May 22 at a point in time when Martini knew that his client had been working on the job for approximately three weeks. The inference to be drawn from this scenario is that bearing in mind that Royal Timbers owned the property, because of the lengthy delay before a s. 19 notice was ultimately sent to it, this is consistent with the inference that it was not to be held responsible for anything with respect to the contract between Lepera and Sonoma. This is bolstered by the fact that Lepera required a Sonoma entity with assets and not Royal Timbers to stand behind the servicing agreement, to protect the ultimate payment of the Lepera account.
• On May 1, 2007 at 6:20 a.m., Martini sent an e-mail to Nelson confirming that Lepera was the successful bidder to the Sonoma group for the site work and suggested that the Sonoma contracting party should be the one which will be owning the property. Again, there is no reference to Royal Timbers. While Lepera testified that he had never met Nelson, nevertheless Martini had to request his address at Sonoma, in California, from Lepera.
o Lepera also admitted that no one ever demanded Sonoma produce the financial information it was required to by virtue of Article V of their contract. This was an absolute obligation by Sonoma under the agreement but the plaintiff chose not to enforce this significant contractual obligation.
• On May 1, 2007 at 8:28 p.m., Lepera provided the Sonoma California address to Martini and confirmed that he had retained all of the contract documents which he signed but he would not return them until the issue of which Sonoma company would be signing the contract, was resolved.
• On May 1, 2007 at 9:25 p.m., Martini e-mailed Nelson in California indicating that he then understood that because Sonoma would be acquiring the property therefore the contract must be executed with the proper Sonoma entity. There is no mention in any of these communications to Royal Timbers, further evidence that there was no intent to bind it because Sonoma was to become the owner.
• On May 3, 2007, Lepera who was now at work on the site, e-mailed to Martini inquiring as to whether he had heard anything and whether the guarantees and/or the contracts had yet been signed. No mention is made of Royal Timbers.
• On May 3, 2007 at 9:39 a.m., Martini e-mailed Nelson at Sonoma in California stating that the contractual issues must be resolved to avoid further delays in the work. Again, there is no reference or suggestion about any involvement by Royal Timbers.
• On May 3, 2007 at 11:22, Nelson confirmed that the beneficial owner of the property would be Sonoma Windsor and that the property would be held in trust by Sonoma Windsor GP Trust.
• On May 3 at 11:23, Lepera e-mailed Troup a copy of the e-mail of Martini concerning the necessity for the execution of the contract documents.
• At 1:33 that day Martini advised Nelson that unless the outstanding contract issues between Lepera and Sonoma is resolved within 24 hours, Lepera would cease all work on the site.
• On May 3, Martini e-mailed Nelson at 4:54, having just reviewed the proposed documents and suggested additional Sonoma companies execute the documents in order to guarantee Lepera’s contract. Again there was no mention of Royal Timbers. Sonoma signed the contract on May 15 and Lepera on May 21st.
• On August 3 at 10:06, Lepera e-mailed to Pillait and Nelson at Sonoma, but not to Royal Timbers, requesting payment of its June 25 invoice which was due for payment on July 25.
[ 71 ] It is also significant that the sole target of the plaintiff’s attempts to collect its account prior to registering its lien were the Sonoma companies which further serves to negate any inference that Royal Timbers requested the work be done by Lepera. In the totality of the circumstances, it was never stated or intended that Royal Timbers was to be responsible for Lepera’s unpaid invoice.
[ 72 ] The plaintiff also asserts a claim based on Unjust Enrichment, the three elements of which are:
➢ An enrichment or gain by one party (here, Royal Timbers)
➢ Corresponding deprivation to the other (here, Lepera Contracting)
➢ No juridical reason for the deprivation
[ 73 ] In my view Unjust Enrichment cannot apply here because any deprivation of the plaintiff was caused by the breach by Sonoma of its contract with Lepera, not by Royal Timbers. Nor is there a corresponding benefit accruing to Royal Timbers as a result of this work by the plaintiff because, as Gillis testified, the Yellow parcel is an island unto itself; it was always intended to be a “stand alone” part of the overall development. Consistent with this is the payment by Royal Timbers to Sonoma of $60,000 toward its construction expense following an agreed cost revision arranged by Gillis which is further evidence of Sonoma’s separate liability for the Yellow parcel, as distinct from Royal Timbers.
[ 74 ] In other words there is no enrichment to the defendant caused by its deprivation of the plaintiff. Therefore the juristic reason factor is not engaged. Because, as I have concluded there is no deprivation of Lepera by Royal Timbers then the unjust enrichment issue is at an end and the other two factors need not be considered (see: Garland v. Consumers Gas Co. 2004 SCC 25 , [2004] S.C.J. 21).
[ 75 ] Similarly because I have concluded Royal Timbers is not an owner, s. 14 which states that a person who supplies services for an owner has a lien upon the owner’s interest for those services has no application.
[ 76 ] It is also significant that the sole target of the plaintiff’s attempts to collect its account prior to registering its lien were the Sonoma companies which further serves to negate any inference that Royal Timbers requested the work be done by Lepera. In the totality of the circumstances, it was never stated or intended that Royal Timbers was to be responsible for Lepera’s unpaid invoice.
[ 77 ] My conclusions on the facts are bolstered by the following cases:
[ 78 ] To bind Royal Timbers as owner, any improvements would have to be made with its privity or consent, which would require a significant element of direct dealing between Lepera and Royal Timbers (see: Haas Holmes Ltd. v. March Road Gym & Health Club Inc ., [2003] O.J. No. 2487 , Sedgewick J.). As I have found, the only dealing by Royal Timber regarding the Yellow parcel is its agreement to sell it to Sonoma. Furthermore, a quantum meriut claim cannot be asserted here where a liquidated sum is owing under a contract.
[ 79 ] In Consulate Ventures Inc. v. Amoco Contracting and Engineering (1992) Inc ., 2007 ONCA 324 , 2007 CarswellOnt. 2627 (ONCA), Cronk J.A. concluded that a quantum meriut claim is not dependent on the existence of a valid contract but rather it is a discreet cause of action which is separate and apart from claims grounded in either contract or tort, both of which contemplate a remedy for unjust enrichment.
[ 80 ] An explicit mutual agreement to compensate is not a necessary prerequisite for recovery based on quantum meriut, it is sufficient if the service in question was furnished at the request or with the encouragement or acquiescence of the opposing party in circumstances that would render it unjust for that party to retain the benefit conferred by the provision of those services (see: Nicholson v. St. Denis (1975), 1975 393 (ON CA) , 57 D.L.R. (3d) 699 (Ont.C.A.).
[ 81 ] As I have concluded, there is neither a mutual agreement between Lepera and Royal Timbers for the work in question nor did Royal Timbers encourage or acquiesce in the provision of those services in the circumstances where it would be unjust for it to retain the benefit. That Sonoma had its own contract with Lepera was amply demonstrated by both Troup and Gillis. When Lepera was not paid it sued Sonoma to judgment.
[ 82 ] In his book Restitution , (2d) Carswell, G.H.L. Fridman discusses the concept of work and services performed without a contract and he makes the following points:
i. Historically, the basis of a quantum meriut claim lay in the notion of implied contract until Deglman v. Guarantee Trust of Canada , 1954 2 (SCC) , [1954] S.C. R. 725, where the court replaced it with restitution or unjust enrichment.
ii. Thereafter the generalized right to restitution where a defendant would be unjustly enriched at the expense of the plaintiff, began to replace the historical use of quasi-contractual forms of action. While the courts did not lay down any factual requirements in order to apply restitution (other than proof that the services were not rendered gratuitously), it has gradually evolved in later cases that no claim will be maintainable unless the defendant has been unjustly enriched. In other words the mere rendering of the services is not enough and an unjust enrichment by itself will not be sufficient to establish a valid claim for recovery.
iii. Unjust enrichment could be more accurately termed as the doctrine of restitution which has developed to provide a remedy where it would be unjust to allow a defendant to retain a benefit conferred on him by the plaintiff, at the plaintiff’s expense. However, this does not mean that restitution will follow every enrichment of one person and the loss by another. Of significance, he says that in almost all of the cases where it was awarded, the facts established that there was a special relationship between the parties, (frequently contractual in nature), at the outset which would have made it unjust for the defendant to retain the benefit conferred on him by the plaintiff (see: Nicholson v. St. Denis (1975), 1975 393 (ON CA) , 57 D.L.R. (3d) 699).
[ 83 ] Fridman concludes that in Canada the possibility of a quantum meriut action for services rendered or work performed without there being a contract between the parties, cannot be founded solely on the conferral of a benefit on the defendant, however incontrovertible that benefit might be.
[ 84 ] In my view, the facts here demonstrate that there was no such special relationship between the plaintiff and the defendant insofar as it related to the Yellow parcel. The only contractual relationship that did exist was between the plaintiff and Sonoma and there was no evidence before me to suggest that Royal Timbers was connected to that contract. Rather, it had its own separate one with the plaintiff for the servicing work performed on the Green parcel.
[ 85 ] Royal Timbers did not stand idly by and allow Lepera to undertake the servicing of the Yellow parcel that it was preparing to sell the parcel to Sonoma. From the evidence before me, there is no reasonable basis to suggest that the plaintiff did the work on the Yellow parcel under its contract with Sonoma with the expectation of being paid by Royal Timbers. As has been previously noted this is amply supported by the series of e-mails which passed between Lepera, its lawyer, and representatives of Sonoma in the spring of 2001. They clearly refute any notion that Royal Timbers was involved with that Yellow parcel (except to sell it to Sonoma) or that it was expected to pay the plaintiff for its Yellow parcel work. Consistent with the plaintiff’s view of its entitlement to payment by Sonoma only, it sued that company to judgment.
[ 86 ] In Parkland Plumbing & Heating Ltd. v. Minaki Lodge Resort 2002 Inc ., 2009 ONCA 256 , [2009] O.J. No. 1195 (C.A.), the plaintiff filed a lien against Minaki and Cellestine Mortgage Corporation which, it was found were virtually indistinguishable, one from the other. In her reasons in the Court of Appeal, Cronk J.A. concluded that Celestine was an owner within s. 1.1 of the CLA .
[ 87 ] In her reasons, Cronk J.A. discussed the three prerequisites to establish ownership in s. 1(1):
i. The person said to be an owner must have an “interest in the premises”;
ii. That person must have requested an improvement in the premises;
iii. The improvement must have been made on the credit of, on the behalf of, with the privy or consent of, or for the direct benefit of the person who is said to be an owner.
[ 88 ] The significant point of distinction of Minaki from the case at hand is the fact that it and Celestine were indistinguishable and that, therefore a consent or request by one was equally applicable to the other. As I have previously concluded there is no such relationship between Sonoma and Royal Timbers.
[ 89 ] An “interest in a premises” in s. 1.1 is broad enough to include an interest of any nature including that of Royal Timbers here.
[ 90 ] While a request for the work may be inferred from the totality of the facts, the cases are highly fact specific. The absence of any direct dealings between an alleged owner and a contractor is a factor to be considered but this is not determinative. In this case however, as I have concluded, it cannot be said that the work was done for the direct benefit of Royal Timbers as owner because of its pending sale of the Yellow parcel to Sonoma and the benefits and improvements to that land were directed at Sonoma under its contract with Lepera.
[ 91 ] The final prerequisite (iii), requires that the improvement must fit under at least one of the four subheadings in s. 1.1. In my view, only (c) which requires that the service supplied to the owner be with its “privity or consent”, could apply here. As I have noted, while the absence of direct dealings between Lepera and the defendant is one factor to be considered, it is not determinative. However when all of the circumstances earlier referred to are considered they are sufficient in my view to negate any suggestion of a request express or implied, by Royal Timbers to Lepera to do the work.
[ 92 ] In their text The 2010 Annotated Ontario Construction Lien Act , Carswell (Toronto: 2009), Duncan Glaholt and David Keeshan review the legislative history pertaining to s. 18 which replaced s. 7 in the old Mechanic Liens Act, 1980 which Glaholt states was directed to the situation where improvements were made to the land of a married woman. He traced its history to the original version of the Mechanics and Wage Earners Lien Act, 1896, S.O. 1896, which had remained virtually unchanged until passage of the Mechanics and Wage Earners Lien Act of 1923.
[ 93 ] Following the passage of the Mechanics Lien Act, 1980, it remained unchanged until it was replaced entirely by the new Construction Lien Act 1983.
[ 94 ] The Report of the Attorney General’s Advisory Committee on the Draft Construction Lien Act , April 1982 also confirmed that s. 18 replaced s. 7 of the old 1980 Mechanics Lien Act and its scope was broadened to include not only a husband-wife situation but any interest which is held jointly or in common with others.
[ 95 ] Those interests are now also subject to a lien so long as the other “owners” knew or ought to have known that the improvements were being made and were mutually beneficial to all owners in which this case they would all be responsible for the costs of the improvement, if the contracting party defaulted.
[ 96 ] However, the key here is the concept of ownership. The work undertaken by Lepera is not mutually beneficial to it and to Royal Timbers as joint or in common owners for the reasons I have already expressed, nor does it comport with the ownership status defined in s. 1.1(c).
[ 97 ] Harvey J. Kirsch, Carswell (Toronto: 1989), the author of the Construction Lien Act: Issues and Perspectives , states that s. 18 may have a more limited application than originally intended, given the fact that the interest of a landlord or an unpaid vendor would probably not be held either jointly or in common with a tenant or a purchaser, which is analogous to the case of an equitable and legal interest.
[ 98 ] Lastly, I turn to consider the status of $25,000 paid by Sonoma as a deposit toward its purchase. Because the sale did not proceed through no fault of Lepera, I conclude it is entitled to a lien on this deposit from Royal Timbers toward satisfaction of its judgment against Sonoma (see: Zender et al. v. Ball et al. (1975), 1974 730 (ON SC) , 5 O.R. (2d) 747).
Decision
[ 99 ] 1. The answers to the issues identified in page 4 are as follows:
i) Royal Timbers is not a statutory owner within s. 1.1 of the CLA ;
ii) It is not an owner within s. 18 of the Act ;
iii) Unjust enrichment and/or quantum meriut have no application here;
iv) The damages sustained by Lepera are those reflected in the judgments obtained against Sonoma.
v) Lepera is entitled to the $25,000 deposit paid by Sonoma to Royal Timbers.
The plaintiff’s action is therefore dismissed with costs.
If counsel are unable to agree, I may be spoken to but any written submission are not to exceed five (5) pages.
Original signed “Justice Gates”
Richard C. Gates
Released: March 23, 2012
COURT FILE NO.: CV-07-009805
ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: J. Lepera Contracting Inc. Plaintiff – and – Royal Timbers Inc., Sonoma Windsor, a U.S. Trust, Sonoma Windsor Fl Ltd., and Sonoma Windsor LP Defendants REASONS FOR JUDGMENT Gates J.
Released: March 23, 2012