COURT FILE AND PARTIES

COURT FILE NO.: CV-12-0081-SR

DATE: July 16, 2013

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Carmen Drywall Limited, Plaintiff

AND:

BCC Interiors Inc., Edward Burns and Terry Klingenberg, Defendants

BEFORE: André J.

COUNSEL:
Patrick G. Muise, for the Plaintiff

Howard M. Wise and Bradley Halfin, for the Defendants

HEARD: July 16, 2013

ENDORSEMENT

[1] The defendants bring a motion for summary judgment and a dismissal of the plaintiff’s collection claim on the ground that it is barred by the Limitations Act S.O. 2002 (the Act). The plaintiff concedes that the defendants failed to pay its invoice for work done on about December 2007 yet it only initiated its action in January 2012; well past the two year limitation period set out in the Act. The plaintiff maintains however, that the defendants, by their words and conduct, caused the delay and should therefore be prevented from relying on the Act in their defence. Secondly, that in addition to a breach of contract, its action is also based on a breach of trust which the plaintiff only discovered in 2011. To that extent, the plaintiff submits, its action is not statute barred and consequently, the defendants’ motion should be dismissed.

[2] In determining whether or not to grant the defendants’ motion for summary judgment, I must decide the following issues:

i. When does the limitation period commence with respect to the plaintiff’s breach of contract and breach of trust claims against the defendants?

ii. If the plaintiff’s action falls outside the limitation period, can it rely on the doctrine of promissory estoppel, to pursue its claim against the defendants?

Summary of the Facts

[3] In January 2006, the plaintiff contracted with the defendants to supply and install panels in a Toronto Transit Commission (TTC) renovations program, called the Inglis Project. The plaintiff’s principal, initially requested payment for work it performed on the project on January 8, 2008. It sent another request for payment in August 2008, this time threatening legal action if it did not receive payment of the outstanding amounts. The plaintiff however, did not commence its legal action to collect the outstanding balance, which amount to approximately $62,000, until January 2012.

[4] The plaintiff’s August 7, 2008 letter to the defendant refers to a conversation that Mr. Stornelli, the plaintiff’s Vice-Principal, had with Mr. Ed Burns, chairman of the defendant’s company, to the effect that payment of the outstanding amount was “being held up by the insurance company”. The defendants further advised the plaintiff in May 2011 that a legal settlement with the insurance company was “in the works.” The defendants further advised the plaintiff in June 2011, “that discussions between the lawyers continue.” Mr. Stornelli states that he made repeated inquiries to the defendants and also to the Toronto Transit Commission (TCC) between 2008 and September 2011 about the matter until being advised in September 2011 that the defendants and TTC had settled the matter. A representative of BBC advised the plaintiff in an e-mail dated October 12, 2011 that the parties had reached a “negotiated settlement,” although BCC was not entirely satisfied with the settlement. BCC disputes that Mr. Stornelli made any inquiry between 2008 and 2011 about the outstanding amounts owed to it. The defendants have refused to disclose any information about the settlement with TTC or how it disposed of the funds received which it was ostensibly hoping to use to settle its accounts with the plaintiff. Mr. Stornelli deposes that on December 2, 2011, the principal of the defendant company advised him for the first time that the company would not pay the outstanding debt.

A. The Law

[5] Rule 20.04 (2) provides that the court shall grant summary judgment where there is no general issue requiring a trial and where the parties agree to have the claim determined by summary judgment and the court is satisfied that it is appropriate to do so.

[6] In determining whether there is a genuine issue requiring a trial, the court must consider the evidence submitted by the parties by:

i. weighing the evidence;

ii. evaluating the credibility of the deponent; and

iii. drawing any reasonable inference from the evidence.

[7] In deciding whether to resort to Rule 20.04 (2.1) a motions judge must decide if the full appreciation of the evidence and issues that is required to make dispositive findings, can be achieved by way of summary judgment or can only be achieved by trial. Combined Air Mechanical Services Inc. v. Tilesch, 2011 ONCA 764 (OCA), para. 50.

[8] The “full appreciation test” may be met in cases with limited contentions, factual issues, document driven cases with limited testimonial evidence and those where the record can be supplemented by the hearing of oral evidence on discrete issues. Combined, supra, para. 52.

[9] In a summary judgment motion each party must put its best foot forward regarding the material issues to be tried: Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996) 1996 7979 (ON SC), 28 O.R. (3d) 423 (ONT. CT. GEN. DIV.).

B. Limitation Period

[10] A proceeding shall not be initiated in respect to a claim after the second anniversary of the day in which the claim was discovered: s. 4 of the Limitations Act, 2002, S.O. 2002, c,24.

[11] Section 5 (1) of this Act provides that a claim is discovered on the earlier of the following:

i. the date when the claimant first knew that the inquiring, loss or damage had occurred;

ii. that the inqury, loss or damage was caused by or contributed to by an act or omission; or

iii. that the act or omission was that of the person against whom the claim was made; and

iv. that having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

v. the day on which a reasonable person with the abilities and in the circumstances of the reason with the abilities and in the circumstances of the reason with the claim first ought to have known of the matters referred to in clause (a)

[12] Limitation periods are not to be taken lightly. A plaintiff in an action is required to act with due diligence in acquiring information to be fully apprised of the material facts on which a claim can be based: Shukster v. Young [2013] O.J. No. 272 (SCJ) para.15.

C. Estoppel of Limitation Period Defence

[13] For an admission of liability to constitute a promise not to rely on a limitation period, a trier of fact must be able to infer that the maker of the admission intended it to be so. There must be words or conduct capable of supporting an inference that the admission applied whether or not the case was settled and that the only contentious issue was that of quantum of indebtedness. Whether this inference can be drawn is an issue of fact. If the admission induced the plaintiff to miss the limitation period, the elements of promissory estoppel have been made out: Maracle v. Travellers Indemnity Co. of Canada (1991) 25.C.R. SO (SCC), para. 16.

Application of the Law to the Facts

Issue No. 1

[14] The decision to grant summary judgment in this case is conditional on a finding that there is no genuine issue requiring a trial. The moving party submits that to the extent that this matter involves a simple collections claim that is barred by s. 4 and 5 of the Act, then the court should grant summary judgment in this case.

[15] The applicant is partly correct. The parties agree that the plaintiff performed the work for the defendants on the Inglis Project in 2006 and 2007. They also agree that upon completion of the work involved, the plaintiff made a request for payment in January 2008 and later in August 2008. Both parties agree that on August 7, 2008, the plaintiff threatened to take legal action against the defendants if the latter did not pay the money owing to the plaintiff.

[16] The plaintiff therefore knew by January 2008 or certainly by August 2008, that the defendants had failed to pay the monies owing to it. To that extent its claim for loss recovery was discovered under the contract for services with the defendants by August 2008 at the latest. Thus, compliance with s. 5 of the Act required the plaintiff to initiate a claim against the defendants before the second anniversary of the day on which it discovered the claim. Accordingly, to be in compliance with the Act, the plaintiff should have initiated its claim for breach of contract well before August 2010. Absent any extenuating circumstances, such as would constitute promissory estoppel, the plaintiff would be statute barred from pursuing its claim against the defendants.

[17] Do the utterances and conduct of the defendants preclude it from relying on the limitations defence to extricate itself from its obligations under the contract for services with the plaintiff?

[18] The defendant clearly conveyed the impression to the plaintiff that it will pay the outstanding balance, once the claims with its insurance company had been resolved. The defendants advised the plaintiff in June 2011 that discussions between the lawyers were continuing. Furthermore, the defendants advised the plaintiff in September 2011 that a settlement had been reached.

[19] These utterances and assurances may have led the plaintiff to believe that his outstanding account with the defendants would be paid once they had achieved a settlement with their insurance company. The defendants’ written correspondence implied that they intended to pay the plaintiff once they completed their negotiations with their insurance company.

[20] The defendants’ submit that any oral assurances regarding payment made to the plaintiffs are irrelevant under s. 13 of the Act. They also rely on the cases of SKUY v. Greenough Harbour Corp. 2012 ONSC 6998, [2012] O.J. No. 5841 (Ont. S.C.J.) para. 56 and Burns v. McMillan [2002] O.J. No. 5751 (Ont. S.C.J.) paras. 75 and 77, for that proposition.

[21] Section 13(1) of the Act states that when someone acknowledges liability for payment of a liquidated sum the act or omission on which the claim is based shall be deemed to have taken place on the day on which the acknowledgement was made. However, section 13(9) provides that section 13(1) does not apply unless the acknowledgment is in writing and signed by the person making it or the person’s agent.

[22] In this case, the defendants did not sign or acknowledge in writing their indebtedness to the plaintiff. Secondly, the emails sent by agents for the defendants to Mr. Stornelli do not contain any specific acknowledgment of the debt which the plaintiff claims is owed to it. Thirdly, while the August 7, 2008 letter from the plaintiff to the defendant threatened legal action if the dependants did not pay the outstanding amount, there is no evidence suggesting that the plaintiff changed its mind about pursuing legal action after relying on a representation from the defendants that they would pay the outstanding balance. Finally, the plaintiff maintains that he received oral assurances from the defendants between August 2008 and May 2010, that the outstanding amounts would be paid. That however, is not noted in Mr. Stornelli’s affidavit.

[23] For these reasons, the plaintiff cannot rely on the doctrine of promissory estoppel to justify initiating their action beyond the two year limitation in the Limitations Act.

Breach of Trust

[24] The plaintiff bases his breach of trust claim on sections 7 and 13 of the Contruction Lien Act. The former provides that money received by an owner equal to the amount owed to a contractor constitute trust funds and must not be used until the contractor is paid what he is owed. The latter provides that where a breach of section 7 occurs, the person having control of the owner may also be liable for the breach.

[25] The plaintiff asserts that the two year limitation period for breach of trust under s. 13 of the Act, does not begin to run until the plaintiff has knowledge of the fact that would establish a breach of trust. The plaintiff maintains that it only gained knowledge of the defendants’ breach of trust on December 2, 2011 when the defendant Mr. Klingenberg advised Carmen Stornelli that the Construction Lien Act hold back funds, would not be paid out to the plaintiff. The defendants on the other hand, assert that the breach of trust arose once the contract price was not paid and consequently, that the discoverability of the breach of contract and the breach of trust occurred concurrently.

[26] The plaintiff relies on the case of Anron Mechanical v. L’Abbe Construction (1991) 46 C.L.R. 49(Ont. Ct. Gen. Div.) for its proposition that the tort of breach of trust only arises when the following elements are present:

i. the contractor received trust funds from the owner;

ii. the contractor converted part of or all of the trust funds to the contractor’s use or a use inconsistent with the trust;

iii. monies were owing to the plaintiff; and

iv. with respect to the improvement in question.

[27] I disagree with the plaintiff’s position for the following reasons:

i. The Anron Mechanical case was decided prior to the Limitations Act which provides, pursuant to s. 5(1)(b), that a claim is discovered on the day on which a reasonable person with the abilities of the person with the claim first ought to have known of the injury, damage or loss suffered.

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

[28] This raises the question regarding the “discoverability” of a statutory construction trust by a beneficiary of that trust. In Cast-Con Group Inc. v. Alterra (Spencer Creek Ltd.) (2008) 71 C.L.R. (3d) 54 (S.C.J.). Affirmed (February 20, 2009), File #DC-08-00013-00 (Div.Ct.) the court concluded that reasonable diligence when the contractor did not pay the sub-contractor could have revealed the trust claim and consequently, the limitation period ran concurrently with that of the breach of contract. A similar conclusion can be found in Aldine Construction Ltd. V. Brucegate Holdings Inc. [2010] O.J. No.2214 (S.C.J.) para.18.

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

Conclusion

[30] I therefore find, based on the above, that a full appreciation of the evidence and issues required to make dispositive findings can be achieved by summary judgment in this matter.

[31] Accordingly, the motion for summary judgement is granted. Written submission regarding costs must be submitted by both parties within fifteen days of today’s date.

“Justice André”

Justice I. André

Date: July 26, 2013