ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 83673/13 and 85293/13
DATE: 2014-12-10
BETWEEN:
2153801 Ontario Ltd.
Plaintiff
– and –
Christian Chukwuedozie Chijindu and Nkiruka Ochei
Defendants
A. Carnavale, for the Plaintiff
Self-represented Defendants
Court File No. 85293/13
BETWEEN:
Christian Chukwuedozie Chijindu and Nkiruka Ochie
Plaintiffs
-and-
Shawn Paul Walker and Kevin Tetley
Defendants
Self-represented Plaintiffs
A. Carnevale for the Defendants
HEARD: November 25, 26, 27, 28, and December 1, 2 / 2014
Justice B. Glass
[1] 2153801 Ontario Ltd. has a business registration name of The Loen Group. This corporation is the Plaintiff in a construction lien claim regarding work done at a residence owned by Mr. Chijindu and Ms. Ochei. There is a companion action brought by Mr. Chijindu and Ms. Ochei for damages.
[2] The contract retaining the Plaintiff was entered into on September 7, 2012.
[3] There was a construction contract for the framing of the new home of the Defendants with KJT Carpentry Inc., which was a company owned by Shawn Walker and Kevin Tetley.
[4] The registration of the name used by 2153801 Ontario Ltd. was completed on August 28, 2012. The name used by the limited corporation was The Loen Group.
[5] The lien claim is for $30,842.55 inclusive of HST and holdback for services rendered by the Plaintiff to the Defendants as well as loss of profit. Pre-judgment interest is claimed at the rate of 6% per year commencing April 12, 2013 to June 12, 2013 and then 8% from June 12, 2013 to November 12, 2014. The alternative claim for interest is that allowed in the Courts of Justice Act for pre-judgment and post-judgment interest.
[6] The contract provided for a party to terminate on notice to the other.
[7] The contract retained The Loen Group to serve as construction manager of the building of a new residence for Mr. Chijindu and Ms. Ochei.
[8] The Defendants, Mr. Chijindu and Ms. Ochei, claim they were unaware of the corporate status of the Plaintiff and thought they were dealing with two individuals, i.e. Shawn Walker and Kevin Tetley. Any invoice provided to the Defendants by the Plaintiff corporation did not state the corporate name but rather the business name The Loen Group. The Defendants claim they thought Walker and Tetley worked in a personal capacity.
[9] The Business Registration Act has a provision that the corporation show the formal name of the company and the business name. If the company fails to do so, then it has no status to commence an action unless it is permitted to do so by a court.
[10] In addition to the issue of knowing who was contracting with the Defendants, they dispute the amounts claimed because some items were not within the scope of warranting a management fee and some were over-charged.
[11] The contract allowed for percentage charges of 8% for management fees and also 8% reimbursement for amounts paid by the Plaintiff corporation.
[12] Mr. Chijindu and Ms. Ochei dispute the claims and make a counterclaim as well as commenced a second action for the same damages claimed in the counterclaim. The Damages claimed are general damages, punitive damages and the discharge of the construction lien. The companion action claims compensatory and special damages as well as general and punitive damages. In the companion action against Shawn Walker and Kevin Tetley, those parties counterclaimed for damages.
Issues
[13] Is there an enforceable contract by the corporate Plaintiff?
[14] Does the Plaintiff corporation have an opportunity to request permission to continue the action even though it had not complied fully with the Business Name Registration Act?
[15] If the contract is valid and enforceable by the Plaintiff corporation, are the line items within the categories for compensation as set out in the contract proper?
[16] Are the counterclaim as well as the companion action for damages valid claims?
Analysis
[17] There is no doubt that the parties knew who were the contracting parties for the construction management of the building of the new home. The Defendants wanted a house built. They were referred by a person in the house building industry to Shawn Walker. They were discussing a framing job for the house that the Defendants were intending to build. When they discussed the work, Mr. Chijindu said he would be his own project manager.
[18] Mr. Walker testified that he told Mr. Chijindu that he and Mr. Tetley had two companies. One did actual construction work. The other managed projects.
[19] The Defendants retained the construction business that did framing work. That is KJT Carpentry Inc. There is no complaint with the quality of the work of KJT Carpentry Inc.
[20] Mr. Chijindu decided to have someone other than himself act as the construction manager. The contract retaining the Plaintiff to be the construction manager was executed in September 7, 2012. The contract provided that the construction manager would be paid 8% fee for all money paid out for the construction of the house. Contractors and sub-trades provided their accounts. Mr. Chijindu would approve them and then the construction manager would advance the funds less a 10% construction lien holdback. The contract provided that the owner could terminate on 30 days notice and that reasonable costs related to the termination would be paid to the construction manager as well as outstanding accounts.
[21] In December 2012, Mr. Chijindu decided that he would not pay the 8% management fee for work done by KJT Carpentry Inc. which was the framing company owned by Shawn Walker and Kevin Tetley because he did not think there should be compensation to the construction manager for overseeing their own work even though KJT Carpentry Inc. is a separate corporation. In addition, Mr. Chijindu and Ms. Ochei advised in December 2012 that they would pay out the accounts to subcontractors.
[22] The contract shows the manager of the project as The Loen Group with the name Shawn Walker in brackets. Although there has been a dispute throughout this trial about who was the construction manager, I have no doubt that Mr. Chijindu and Ms. Ochei knew that The Loen Group was 2153801 Ontario Ltd.
[23] On February 25, 2013, the Defendants terminated the contract for a construction manager.
[24] It is apparent that the Defendants were searching for ways to reduce their costs of the building of their house when they notified the construction manager in December 2012 that they would disperse the funds rather than the construction manager, i.e. The Loen Group. At the same time, the Defendants said that they would not pay a construction manager’s fee for the framing work done by KJT Carpentry Inc.
[25] Then, the Defendants disputed the amounts of some trade accounts claiming that they were entitled to receipts as proof of the work done. In fact, the contract provides that the manager would provide receipts or invoices. Invoices were provided.
[26] Claims for liens were registered against the title of the property and the Plaintiff then perfected the claims with a statement of claim.
[27] I find that the Defendants and Plaintiff knew who were the contracting parties. The only way out of the deal by the Defendants was to claim that the corporate Plaintiff failed to show on its documents its formal name along with the business name it had registered prior to the execution of the contract. Had the Plaintiff moved for permission to continue the action, it would have been granted. Furthermore, I note that registration of a business name pursuant to the Business Names Act is required so that the public knows the businesses with whom they are dealing should they wish to commence proceedings in court. In this case, there is no doubt that Mr. Chijindu and Ms. Ochei knew that The Loen Group was a corporation owned by Shawn Walker and Kevin Tetley.
[28] The amounts claimed have been explained in a way that leaves no doubt that they relate for the aspects of the contract involved. Basically, the Defendant-owners do not have a leg upon which to stand in disputing the construction lien claims. Items that the Plaintiff paid for labour and materials on behalf of the Defendant-owners are reimbursable items for which the Plaintiff is entitled to reimbursement. Mr. Chijindu and Ms. Ochei submit that some items are not within the schedules for reimbursable items so that even if the Plaintiff paid them, they do not have to reimburse the Plaintiff. These Defendants are not entitled to a windfall whereby they get something for nothing. They are playing a cute game of cat and mouse with this contract. There were several invoices with 10% holdback sums that Mr. Chijindu had not advanced after he commenced paying the accounts directly himself in December 2012. As a construction manager with those holdback funds on hand, the Plaintiff corporation properly advanced those holdback sums upon the expiration of the 45 day holdback periods.
[29] The bottom line is that the Defendants cut back on the contract by giving notice that they were refusing to pay The Loen Group a management fee for the framing contract work of KJT Carpentry Inc. which was owned by Mr. Walker and Mr. Tetley. Accounts were passed on to the Defendant-owners after December for them to pay directly. Previously, the Plaintiff provided copies to Mr. Chijindu and Ms. Ochei to review and then they gave payments to the Plaintiff.
[30] The reimbursable fees claimed are within the scope of the contract and the Defendants are obligated to reimburse the Plaintiff for them with a fee of 8%.
[31] At the root of the shortfall is that Mr. Chijindu and Ms. Ochei attempted to reduce their costs by simply not paying and finding ways to avoid paying by disputing such topics as registration of the business name of 2153801 Ontario Ltd. and whether or not they knew that the framing contractor was owned by Mr. Walker and Mr. Tetley. These Defendants had claimed that the framing company was TJT Carpentry Inc. and they were not paying an 8% fee for a management fee for that work. Mr. Chijindu suggests that Walker and Tetley had a conflict of interest to suggest that they would manage the project for work done by their own business.
[32] On top of the named businesses in the Schedules, the Plaintiff paid other accounts. Now, Mr. Chijindu and Ms. Ochei dispute that such payments should have been made. If there is validity to the Defence position, it makes sense that they should still reimburse the Plaintiff because they got the benefit of the work done by these businesses. I conclude that the possibly disputed amounts are owing because they have been paid by the Plaintiff on behalf of these Defendants.
[33] With respect to the efficacy of a management fee for KJT Carpentry Inc. invoices, I am satisfied that this was the very initial company to do the framing work when the parties talked of a contract in June 2012. There can be no confusion on the part of these Defendants that KJT Carpentry Inc. was to do the framing work and would be part of the calculation of a management fee. Only as time passed did they decide to refuse to pay the management fee for the KJT Carpentry Inc. work. In other words, they scrambled after the fact to cut down their expenses.
[34] I have no doubt that Shawn Walker clearly identified The Loen Group as a company owned and operated by him and Kevin Tetley thereby removing any possible confusion that the contract with The Loen Group was a corporation. Mr. Chijindu and Ms. Ochei suffer no hardship or damages that the invoices from The Loen Group do not also include 2153801 Ontario Ltd. Although both 2153801 Ontario Ltd and The Loen Group should be on the invoices connecting the business name of The Loen Group to the numbered company as one and the same, these Defendants suffer no hardship from the invoices not including all that information because I find that the Defendants knew the two were one and the same. Had an application been made to permit the numbered company to continue the action, it would have been granted. There was no confusion whereby Mr. Chijindu and Ms. Ochei would not have known with whom they were dealing.
[35] This move to dispute the numbered company being involved and to include an action and counterclaim against the personal shareholders and officers of 2153801 Ontario Ltd. is only a stalling tactic so that Mr. Chijindu and Ms. Ochei might avoid paying for work done.
[36] The amount found to be owing to 2153801 Ontario Ltd. is $30,842.55 for the outstanding management fee invoices, the reimbursable expenses administration fees and loss of profit together with prejudgment interest at the rate of 6% per year from April 12, 2013 to June 12, 2013 in the sum of $308.43 and 8% per year from June 12, 2013 to November 12, 2013 in the sum of $1028.09 for a total of $32,179.07. The management contract provided for these interest rates for the first 60 days of default at 6% and thereafter at 8%. Included in the $30,842.55 is $2,911.37 for an 8% administrative fee related to reimbursable expenses of $36,392.16. Also, the $30,842.55 includes an 8% administrative fee of $4,974.70 on a loss of profit of $55,029.88.
[37] The personal action of Mr. Chijindu and Ms. Ochei carries no cause of action because the Defendant-owners are simply doing an end run to the construction lien. They knew they were dealing with a corporation. They terminated the contract. The lien was preserved and perfected as required by the Construction Lien Act. This appears to be nothing short of the Defendants attempting to whittle down what they owe for construction work. If the construction lien claims were not enforceable, the Defendant-owners would advance claims for expenses incurred because of improper actions of the Plaintiff; however, I have found that the construction lien claims are valid.
[38] Mr. Chijindu and Ms. Ochei by way of their counterclaim in the construction lien action were excessive for general damages and punitive damages. They advanced allegations that they had to find emergency shelter for their children and that this flowed from the illegal actions of the Plaintiff. I have found the lien action to be valid so that the only conclusion is that the counterclaim is without merit.
[39] The waters became muddied further because Mr. Chijindu and Ms. Ochei commenced a personal action against Shawn Walker and Kevin Tetley for compensatory and special damages of $85,000 and general damages of $100,000 and punitive damages of $50,000. This action is File No. 85293/13. It is founded on allegations that Walker and Tetley commenced a lien action on the property of Mr. Chijindu and Ms. Ochei when such an action ought not to have been commenced. The building contract was to be with Walker and Tetley personally. I have set out that the construction lien claims were valid with 2153801 Ontario Ltd. so that the conclusion can only be that this personal action against the shareholders and officers of the numbered company carries no merit. Piercing the corporate veil may be considered should the conduct of the shareholders act fraudulently or improperly. One might consider piercing the corporate veil if the shareholders of the company registered a construction lien claim when the corporation had no interest in the property of Mr. Chijindu and Ms. Ochei. That is not the case.
[40] Mr. Walker and Mr. Tetley defended the personal action and made a counterclaim against Mr. Chijindu and Ms. Ochei for specific and general damages of $100,000 and punitive and exemplary damages of $50,000. The most that might be considered in this counterclaim might be an award of costs. The two groups of actions were tried together. The real participants have been 2153801 Ontario Ltd., Mr. Chijindu and Ms. Ochei. The damages set out in the counterclaim are not established.
Conclusion
[41] In action 83673/13, there will be judgment in favour of 2153801 Ontario Ltd. for the amount in the construction lien proceeding. The counterclaim of Mr. Chijindu and Ms. Ochei in the construction lien action is dismissed.
[42] Judgment will be for the sum of $30,842.55 inclusive of HST and holdback for services rendered by the Plaintiff to the Defendants. Pre-judgment interest is claimed at the rate of 6% per year commencing April 12, 2013 to June 12, 2013 in the sum of $308.43 and then 8% from June 12, 2013 to November 12, 2014 in the sum of $1028.09. This totals $32,179.07. Post-judgment interest shall be calculated pursuant to The Courts of Justice Act.
[43] Action 85293/13, the personal action of Mr. Chijindu and Ms. Ochei, is dismissed as a natural result of the finding that the construction lien claims are valid and judgment is awarded in that proceeding. I am not persuaded that damages are established by Shawn Walker and Kevin Tetley in the personal action against them because the two actions are interconnected and the matter can be addressed with costs.
[44] Costs in both actions will be addressed separately after I hear submissions and have been advised whether there are offers of settlement that might influence the scope of costs.
Justice B. Glass
Released: December 10, 2014