NEWMARKET

COURT FILE NO.: CV-12-109309

DATE: 20130910

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Unimac Group Ltd.

Plaintiff

– and –

Trustees of the Mount Albert United Church Congregation of the United Church of Canada, Mount Albert United Church Senior Citizens’ Foundation, and The Congregation of the Mount Albert United Church of Canada

Defendants

Justin Baichoo, for the Plaintiff

Craig Losell, for the Defendant, Mount Albert United Church Senior Citizens’ Foundation

HEARD: June 25, 2013

REASONS FOR DECISION

EDWARDS J.:

Overview

[1] The defendant Mount Albert United Church Senior Citizens’ Foundation (the “Foundation”) seeks an order that would allow for the payment of $1,038,867.76 into court as security for the plaintiff’s construction lien, together with costs in the sum of $50,000.00 as security for costs. The plaintiff opposes the Foundation’s request and suggests that if the Foundation obtains an order vacating the construction lien that the Foundation should have to pay into court as security, not only the plaintiff’s outstanding lien claim but also the outstanding lien claims of the various subcontractors. The total of the subcontractors’ claims would bring the total payment into court to in excess of $1,800,000.00. The Foundation did not file any evidence with this court with respect to its financial wherewithal but did make clear, through the argument of its counsel, that while it could afford to pay into court approximately $1.1 million, it did not have the financial ability to pay into court $1,800,000.00.

The Facts

[2] On June 16, 2009, the plaintiff and the Foundation entered into an amended CCDC stipulated price contract, the terms of which required the plaintiff to act as the general contractor in connection with the construction of a three storey multiple rental unit retirement home (the “Home”). The total contract price was approximately $4 million, exclusive of GST/HST.

[3] The Foundation is a not-for-profit organization which has been operating a multiple rental unit retirement in Mount Albert since 1979. The Home is joined by a connecting hallway to an existing multiple unit retirement home. Work on the Home commenced on July 15, 2009. The contract was certified as substantially complete on February 6, 2012 by certificate signed by the Foundation and the plaintiff. A certificate of substantial performance was published on February 10, 2012. The Foundation suggests that the completion of the contract occurred twenty months after the agreed upon date for substantial performance. The Foundation also suggests that the plaintiff did not complete the work or various deficiencies and much of the work was seriously deficient. These suggestions are denied by the plaintiff. The resolution of these issues is not for this court to decide. Ultimately, there may well have to be a trial that will deal with the question of what amount is outstanding and what, if any, deficiencies still have to be done.

[4] There are four claims for lien, one of which is the lien of the plaintiff. The other three lien claimants are Yong Tai Construction Limited (“Yong Tai”), with a lien claim in the amount of $330,964.02; Vaughan Paving Ltd. (“Vaughan Paving”), with a lien claim in the amount of $132,531.20; and Dalcor Inc. (“Dalcor”), with a lien claim in the amount of $186,442.96. The claims of Yong Tai, Vaughan Paving, and Dalcor are all claims made by subcontractors. The total of these lien claims is approximately $650,000.00. Notice of the various subcontractor claims was given to the Foundation between December 2011 and March 2012.

[5] The contract has been invoiced by the plaintiff as 100 per cent complete. The plaintiff invoiced the Foundation for extras in the amount of approximately $177,000.00, which amount was included in the plaintiff’s claim for lien, totalling $1,038,867.76.

[6] There is no dispute between the plaintiff and the Foundation that Vaughan Paving, Yong Tai, and Dalcor were subcontractors of the plaintiff in connection with the construction of the Home. There is also no dispute that each of the aforementioned subcontractors contracted with the plaintiff and not with the Foundation. The subcontractors supplied services and materials to the plaintiff for the construction of the Home. There is no suggestion that any of the subcontractors claim privity of contract with the Foundation. Simply put, the services and materials provided for by the subcontractors were supplied for the Home to the plaintiff.

[7] As to the claims by the subcontractors, the plaintiff disputes all of the subcontractors’ claims and has taken the position on the motion before this court that no such amounts are due and owing to the subcontractors. It is for this reason that the plaintiff did not include in its claim for lien as against the Foundation, what the plaintiff describes as “the malicious non-existent and/or exaggerated claims for lien of Dalcor, Yong Tai, and Vaughan Paving”.

Position of the Plaintiff

[8] The position of the plaintiff is that the amount which the Foundation wishes to post with the court is only sufficient to satisfy the claim for lien registered by the plaintiff against title. It is argued that the amount which the Owner wishes to post will not be sufficient to satisfy any of the other claims for lien registered against title by the subcontractors.

[9] Fundamentally, the plaintiff takes the position that the Foundation’s request for payment into court of $1,038,867.76 violates the intent and the purpose of the Construction Lien Act (the “Act”), as such a reduced payment would not be sufficient to satisfy all of the claims for lien registered against title to the Home. The plaintiff suggests that if the Foundation is allowed to post the reduced amount as opposed to the full amount of all lien claimants, the Foundation will be circumventing the requirements of the Act and will be effectively disentitling and stripping the parties of their special remedies provided to them under the Act.

[10] The plaintiff also argues that the Foundation will face no prejudice in posting the full amount of approximately $1.8 million in order to vacate all of the claims for lien and certificates of action. On the other hand, if the Foundation is permitted to post the reduced amount, the various lien claimants could face significant prejudice if it is ultimately found that the Foundation is liable for an amount greater than the reduced sum posted, due to the fact that the construction lien rights would have been extinguished.

The Law

[11] The maximum entitlement of a subcontractor claiming directly through a contractor is restricted to the amount owed by the owner to the contractor - see section 17(1) and (2) of the Act. The only exception to this would be found in a situation where an owner has failed to comply with its holdback obligations. There is no suggestion in the evidence that the Foundation did not comply with its holdback obligations.

[12] The answer to the position taken by the plaintiff, which would see the Foundation paying into court the total amount of the plaintiff’s lien claim and the subcontractors’ lien claims, can be found in a decision of Herold J. in Boehmers v. B.E. Project Managers Inc. 1993 8 C.L.R. (2nd) 51 where he stated that the maximum entitlement of subcontractors to a lien against the land of the owner, in a case where they were claiming through the general contractors, is restricted to the amount owed by the owner to the general contractor. This is precisely the same situation that this court is faced with (i.e., the subcontractors’ claims rise out of claims that are made through the general contractor). There simply is no privity of contract between the subcontractors and the Foundation. As stated by Kozak J. in Tom Jones Corp. v. OSBBC Ltd. [1997] O.J. No. 2166:

The extent of the lien is limited firstly by section 17(1) to the amount owing to the claimant in respect of the improvement; and secondly to the least amount owed by a payor to a person whose work was, in part, performed by the claimant’s work. Therefore, a claimant may never enforce a claim for more than he is owed and his lien may never attach for more than is owed to the person with whom he had privity. Subsection 17(2) applies the same limitation, not just to each individual, contractor, or subcontractor, but to all lien claimants of the same class…

[13] In coming to the ultimate conclusion that I have reached in this matter, that the Foundation shall be entitled to vacate the four claims for lien and three certificates of action upon payment into court of $1,038,867.76, plus a further sum of $50,000.00 as security for costs, I am particularly mindful of the evidence of Leon Hui, who filed an affidavit with this court, as the president of the plaintiff corporation. In his affidavit and subsequent cross-examination, he acknowledged that the contract governed the relationship between the parties and that the contract had been completed. Mr. Hui also acknowledged in his evidence that the claims of Vaughan Paving and Yong Tai had been invoiced by the plaintiff to the Foundation. As such, those claims effectively were subsumed within the plaintiff’s lien claim. I have also taken note of the fact that the only serious opposition to the Foundation’s motion was that of the plaintiff and not the subcontractors.

[14] I am not satisfied that in the absence of any real evidence of prejudice filed by the plaintiff that it would be appropriate to require the Foundation, a non-profit corporation, to file additional security than that which is required under the Act. I am satisfied that in posting the security as set forth above, this court is exercising its discretion in coming to a determination that the aforementioned amount is reasonable under all of the circumstances of this case. As to the question of the legal costs to be posted as security, the plaintiff suggested in argument that the appropriate amount for costs should be an amount to reflect not just the plaintiff’s lien claim but also the three subcontractors’ lien claims. If there is a dispute between the plaintiff and its subcontractors, those disputes are the subject matter of the contractual relationship between the plaintiff and the subcontractors and not the Foundation. I see no reason to require the Foundation to post as security an amount to reflect the subcontractors’ lien claims. In the result then, I am ordering that the four claims for lien and three certificates of action registered against title to the Home shall be vacated upon payment into court by the Foundation of the sum of $1,038,867.76, plus costs of $50,000.00 for a total of $1,088,867.76.

[15] As to the question of the costs of this motion, if the parties cannot resolve the question of costs within fifteen days, written submissions limited to three pages in length shall be filed with the court, no later than September 30, 2013.

Justice M.L. Edwards

Released: September 10, 2013

[1] R.S.O. 1990, c.C.30.