COURT FILE NO.: CV-13-480790
COURT FILE NO.: CV-13-478761
DATE: July 10, 2015
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
MGL CONSTRUCTION INC.
Plaintiff
John Sesito for MGL Construction Inc.
Tel.: 905-738-1078,
Fax: 905-738-0528.
-and-
Malcolm Martin for Distinctive By Design Fine Cabinetry Inc.,
Tel.: 416-449-4411,
Fax: 416-449-7879.
NATALIE BOUTET, DAVID JOHN FOLK, CASTLETON HOMES LTD. and THE BANK OF NOVA SCOTIA
Evan Tingley for the defendants, Natalie Boutet and David John Folk,
Tel.: 416-601-1852;
Defendants
Fax: 416-601-0655.
Evan Cappe for the Bank of Nova Scotia,
Tel.: 416-218-5641;
Fax: 416-225-7214.
HEARD: June 1, 2015.
Master C. Wiebe
REASONS FOR JUDGMENT
I. INTRODUCTION
[1] Castleton Homes Ltd. (“Castleton”) was retained by the owners of a residential property, Natalie Boutet and David John Folk, to work as a general contractor to demolish their existing home and construct a new one on the same property. The property is located at 17 Bessborough Drive, Toronto (“the Property”). The project will be called “the Project.”
[2] MGL Construction Inc. (“MGL”) supplied insulation, drywall, taping and other related services to Castleton in relation to the Project. On April 8, 2013 it registered a claim for lien in the amount of $41,685.70. Distinctive By Design Fine Cabinetry Inc. (“DBD”) supplied and installed the cabinetry for the Project. On July 25, 2013 it registered a claim for lien in the amount of $38,633.57. MGL commenced lien actions. DBD sheltered under the MGL actions.
[3] Castleton appears to be insolvent. It filed no defence. The declared holdback covers almost the entirety of these two claims for lien. The Bank of Nova Scotia was included as a defendant due to a priority claim. It did not defend as sufficient funds have been set aside from credit facilities to cover the lien claims. Its counsel was present throughout.
[4] The trial boiled down to whether these two claims for lien were registered within 45 days from the last days of supply of services and materials by the two lien claimants in accordance with Construction Lien Act (“CLA”) section 31(3)(b)(i), and, if not, whether the lien claimants have claims of restitutionary quantum meruit as against the owners.
[5] For the reasons that follow, I have determined that the lien claimants fail on both grounds.
II. BACKGROUND AND EVIDENCE
[6] Because of a misnomer issue, MGL started two lien actions and obtained two judgments of reference. The claims came before me for a first trial management conference on November 10, 2014. I conducted another trial management conference on December 9, 2014 and another one on January 14, 2015.
[7] Because of the amounts in dispute and the limited issues to be resolved, I ordered a trial in the format of a motion with affidavits for evidence in chief and cross-examinations on these affidavits all done in advance of the scheduled hearing date. The hearing itself was devoted to closing argument. It took place in the afternoon of June 1, 2015.
[8] Concerning the MGL claim, the following is the key evidence:
a) It is undisputed that MGL rendered invoices to Castleton totaling $41,685.70 (tax inclusive), that none were paid, and that this is what is owed to MGL by Castleton.
b) It is undisputed that MGL rendered an invoice to Castleton for $36,725 on November 5, 2012, and that, on November 9, 2012, Castleton emailed Mr. Folk stating that the drywall work was done.
c) It is undisputed that MGL rendered three invoices for extra work dated December 7, 2012, February 4, 2013 and February 27, 2013. The invoice dated February 4, 2013 concerned an MGL extra work order dated January 31, 2013. The invoice dated February 27, 2013 concerned an MGL extra work order dated February 15, 2013.
d) February 20, 2013 is the date beyond which MGL must be found to have supplied materials and services to the Project in order to be found to have preserved its lien in time, as the MGL claim for lien was registered on April 8, 2013.
e) MGL filed an affidavit from Victor Valles, an employee, sworn on February 23, 2015. Attached to the affidavit were 7 timesheets. They showed that Mr. Valles last performed work on the Project on February 14, 2013.
f) MGL also filed an affidavit from John Martelli, president of MGL, sworn on February 23, 2015. He attached two timesheets that contained the name of Rob Brunetta. The first one was dated January 10, 2013 and concerned work in January, 2013. The second one was dated March 28, 2013 and concerned work in March, 2013. This second timesheet is the only one that MGL produced concerning work allegedly done after February 20, 2013. The March 28, 2013 timesheet showed 8 hours of work done by Mr. Brunetta on “Castleton 17 Bessborough” on March 22, 2013 and 8 hours of work done on “Castleton + Unit 1 Bass Pro” on March 25, 2013.
g) Mr. Brunetta was listed as one of MGL’s witnesses in my directions of December 9, 2014. He did not, however, file an affidavit at the trial and did not give evidence. Mr. Sesito advised that Mr. Brunetta was no longer an employee of MGL, was not cooperating and was indeed now a “hostile witness.”
h) MGL also filed an affidavit of one Valentino Lucente, an employee of MGL, sworn February 26, 2015. Mr. Lucente stated that he “recalled” doing taping work on the Project “up to and including March 25, 2013.” He produced no corroboration for his recollection in this regard.
i) In his affidavit, Mr. Martelli stated that he attended at the Project on a daily basis, that MGL provided contract and extra work up to and including March 25, 2013, and that it was the mutually agreed upon practice of MGL and Castleton that MGL would render invoices for work in advance of the completion of the work. There was no corroboration for these assertions.
j) Mr. Folk filed an affidavit he swore on March 31, 2015. He stated that the drywall work was finished when MGL did remedial drywall work around the tub in the main second-floor bathroom in mid-February, 2013, and that this remedial work was done by February 15, 2013 when the tile work began in that area. He denied that MGL did any work on the Project thereafter.
[9] Concerning the DBD claim, the following is the key evidence:
a) It is undisputed that DBD provided and installed cabinetry for the Project under a contract with Castleton, and that it is owed the amount of its claim for lien, namely $38,633.57.
b) It is undisputed that the owners, Mr. Folk and Ms. Boutet, moved into the new home on April 12, 2013, and that the locks were changed at that time.
c) June 10, 2013 is the date beyond which DBD must be found to have supplied materials and services to the Project, as DBD registered its claim for lien on July 25, 2013.
d) DBD filed an affidavit of Jim Zoras, owner of DBD, sworn February 27, 2015. Attached to this affidavit is an email from Mr. Zoras to Mr. Folk dated Jun 11, 2013 (without a subject field) asking as to when Mr. Folk was available to coordinate the “remaining items” concerning the house. Attached is a second email from Mr. Zoras to Peter Kurfurst, site superintendent for Castleton, dated June 12, 2013 referring to a vanity on the Project and attaching a picture of a drawer in the master bedroom ensuite vanity. The email also states that, “we are there completing the laundry room cabinetry today.”
e) DBD filed an affidavit of Pablo Cruz, an employee, sworn February 27, 2015. In this affidavit Mr. Cruz stated that he attended at the home on June 12, 2013 to do two items of work: the installation of a drawer in the vanity of the master bedroom ensuite, a drawer that needed to be reconfigured to accommodate piping; the installation of a base cabinet in the laundry room to facilitate the installation of a sink. Mr. Cruz appended pay records which showed that he was paid for work done during the week of June 12, 2013, but they do not indicate where he worked during this period.
f) DBD filed an affidavit of Mr. Kurfurst sworn February 27, 2015. Mr. Kurfurst was the Castleton site superintendent for the Project. He stated that Mr. Cruz was in the house on June 12, 2013 installing the vanity in the laundry room, and that this work was needed for the occupancy permit. Mr. Kurfurst attached a copy of his daily diary for June 12, 2013 which contains the following statement: “Jimmy’s emails said that he is going to site to install laundry room missing doors and counter.”
g) In this affidavit, Mr. Folk denied that DBD did any work on June 12, 2013. He denied receiving the Zoras email of June 11, 2013. He stated that the work allegedly done on June 12, 2013 was actually done in April, 2013. He attached a video he took of the house on the date of the move-in, April 12, 2013, which contains a view of a tall, skinny cabinet in the laundry room. He also stated that in any event this cabinet was deficient and was replaced by their handyman, Ross Gordon, later that year in November, 2013. Mr. Folk also stated that the faulty drawer in the master ensuite vanity was replaced in the first week after the move-in in April, 2013.
h) Mr. Folk also stated that his last email to DBD was dated May 14, 2013 and that in this last email he indicated he would be letting DBD know when he was ready for further work by them, which notice he stated he never gave.
i) Mr. Folk also stated that he was out of town on business during the week of June 12, 2013 and that his electronic calendar for that week, which was appended, showed no appointment with DBD for June 12, 2013.
j) Ms. Boutet filed an affidavit she swore on March 31, 2015. In this affidavit, Ms. Boutet denied that anyone from DBD made an appointment with her to attend or did attend in the house on June 12, 2013. She appended a copy of her calendar which showed that she had an appointment with Mr. Gordon on June 10, 2013 concerning “plumbing.”
[10] The Castleton holdback is $78,600 (tax inclusive), which is 10% of what the owners concede to be the price of the work that Castleton performed. The total of the two claims for lien is $80,319.27. This means that there is only a $1,719.27 shortfall in the holdback for both of these claims.
[11] There is one final point. In a February 1, 2013 email he wrote to Castleton, which was attached to his affidavit, Mr. Folk stated that he had paid “Castleton and vendors directly $834,734 . . . .” He stated that this was in excess of what Castleton had earned. Therefore, according to Mr. Folk, he and Ms. Boutet have experienced a loss due to Castleton’s mismanagement.
III. ISSUES
[12] The following are the issues to be determined:
Do the lien claimants have the onus of proof concerning timeliness?
If so, has MGL met its onus of proof concerning timeliness?
If so, has DBD met its onus of proof concerning timeliness?
If they have not, do they still have a claim in quantum meruit against the owners?
[13] I note that during the trial management conferences, the owners had also raised some minor issues of deficiencies. However, these were not pursued at trial.
IV. ANALYSIS
1. Do the lien claimants have the onus of proof concerning timeliness?
[14] I agree with Mr. Tingley that the onus of proof concerning the timeliness of the two claims for lien in issue rests on the lien claimants. He quoted the following from the decision in Applewood Glass and Mirror Inc. v. Baun Construction Inc., 2009 63590 (ONSC) at page 5: “It is trite law that the evidentiary burden is on a lien claimant . . . to prove timeliness on a balance of probabilities.” This proposition was not challenged by the lien claimants. I accept it. I will apply that test to the evidence.
2. Has MGL met its onus of proof concerning timeliness?
[15] Having reviewed that above noted evidence, I have concluded that MGL has not met its onus of proof concerning the timeliness of its claim for lien, for the following reasons:
• The strongest evidence of any work done by MGL after February 20, 2013 was the March 28, 2013 timesheet containing Mr. Brunetta’s name. It shows 8 hours of work done by him on the Project on March 22, 2013 and an unspecified amount of work done by him on the Project on March 25, 2013. The alleged work itself was not described on the document. It is not clear whether Mr. Brunetta signed this timesheet, as it just contains a printed version of Mr. Brunetta’s name. Most importantly, there was no evidence from Mr. Brunetta himself to substantiate the timesheet. Prior to trial he was listed as a witness whom MGL intended to call, but then he became uncooperative to MGL, even “hostile.” There was no explanation as to why Mr. Brunetta had become a hostile witness. I agree with Mr. Tingley that a negative inference can be drawn against a party who fails to call a key witness on a point when that witness is in the control of the party and there is no explanation for the absence of the witness; see Sopinka et al., The Law of Evidence in Canada, paragraph 6.321. I also conclude that such a negative inference can be drawn where a party does not call a key witness that appears on its pre-trial witness list, states that the witness is now “hostile,” and does not explain the hostility. I, therefore, draw the adverse inference that Mr. Brunetta’s evidence as to what he allegedly did or did not do on March 22 and 25, 2013 on the Project would not have been favourable to MGL.
• Mr. Lucente’s evidence was, in my view, self-serving and without credibility. He stated that it was his “best recollection,” now over 2 years after the alleged event, that he did “contract work” on March 25, 2013. He did not provide details of what that work was. He provided no timesheets or other contemporaneous documents in support of that statement. Mr. Martelli made it clear in his evidence that MGL always kept timesheets in support of the work of its employees. Therefore, the absence of supporting timesheets is glaring. I also note that Mr. Lucente remains an employee of MGL, which could affect his view of the evidence.
• Mr. Martelli’s evidence was also, in my view, self-serving and without credibility. He gave no corroboration for his assertion that he attended the Project site on a daily basis and that MGL worked on the Project right up to March 25, 2013. One would have thought that he would have kept some form of record showing this routine. Such a document was not produced. Furthermore, he admitted in a section 40 cross-examination conducted on October 30, 2013 that he could not remember when he last had employees working on the site, which contradicts his evidence at trial 19 months later.
• Mr. Martelli also gave no corroboration for his assertion that MGL and Castleton developed a practice whereby MGL rendered its invoices before its work was done. This practice would have been inconsistent with the wording of MGL’s contract with Castleton. Also, no one from Castleton was produced to substantiate this practice. I do not accept this assertion.
• MGL produced no invoice for the work it alleged did in March, 2013. As stated earlier, Mr. Martelli’s assertion that any such invoice predated the alleged March, 2013 work is not credible.
• MGL did produce one invoice dated after February 20, 2013, namely the invoice dated February 27, 2013 for the amount of $689.30. The work described in the invoice was “drywall and taping in washroom and in laundry room.” This invoice corresponds with the MGL extra work order 1302 dated February 15, 2013. On this work order, 8 hours of work are indicated along with certain materials. There is no indication as to whether this work or the supply of this material happened before or after February 20, 2013. I note that Mr Valles’ timesheets showed that his last day of work on the Project was February 14, 2013, which predates February 20, 2013. This is no sufficient evidence that MGL performed any work after February 20, 2013.
[16] I, therefore, find that MGL’s claim for lien has expired for not having been preserved in a timely way in accordance with section 31(3)(b)(i) of the CLA. MGL’s date of last supply occurred prior to February 20, 2013.
3. Has DBD met its onus of proof concerning timeliness?
[17] Having reviewed the above noted evidence, I have concluded that DBD has also not met its onus of proof concerning the timeliness of its lien, for the following reasons:
• There is no credible evidence that the owners gave access to the site to DBD after June 10, 2013. Ms. Boutet and Mr. Folk moved into the house on April 12, 2013 and changed the locks and activated the alarm. Thereafter, access to the house would have been controlled by the owners, and access without their permission would have been a trespass. The Zoras email to Mr. Folk dated June 11, 2013, if valid, was at most just a request to gain access to do work. He said in his affidavit that he “made arrangements” to have Mr. Cruz attend at the site on June 12, 2013. There are no particulars of what these “arrangements” were. Mr. Zoras sent an email to Mr. Kufurst on June 12, 2013 stating that “we are there completing the laundry room cabinetry.” Again, there are no particulars as to how Mr. Zoras gained access. Mr. Zoras is the owner of DBD and clearly has an interest in the outcome of this case, which undermines his credibility.
• The other evidence does not add to DBD’s credibility on this point. In his affidavit, Mr. Cruz states simply that he “attended” at the site on June 12, 2013. Again, there are no particulars as to how Mr Cruz gained access to the house. In his affidavit, Mr. Kurfurst appended his diary entry for June 12, 2013 which simply confirmed that he received Mr. Zoras’ email that day. Mr. Kurfurst then states that he was “on site” on June 12, 2013 when Mr. Cruz did his work. I was shown no entry in Mr. Kurfurst’s diary confirming such a site attendance. Mr. Folk denies that he received the Zoras email of June 11, 2013 or that he gave access to DBD. Ms. Boutet reiterated that point in her affidavit. Their calendar entries show no appointment with DBD for June 12, 2013.
• It is unlikely that the owners would have granted access to Castleton at this time to do any work. By June 12, 2013 the MGL claim for lien had been registered and the MGL lien action had been commenced. The owners were preparing their pleadings in that action at this time, as that pleading was served two days later on June 14, 2013. There was undoubtedly a tense relationship between Castleton and the owners at this time.
• There is no credible evidence that Mr. Cruz performed the work he claimed he performed on site on June 12, 2013. He stated in his affidavit that he completed his work “in approximately four hours and then left the site.” He produced no timesheets or other contemporaneous record confirming this, which is a glaring absence since the DBD lien rights were in jeopardy and MGL had liened by this time. There was no DBD invoice for this work. Mr. Cruz produced records showing that he was paid for work done on this day, but those records do not establish that he was working on the Project. When cross-examined, Mr. Cruz confirmed that he remains an employee of DBD and that he understood that his evidence would assist DBD in making its claim. This undermines Mr. Cruz’s credibility. Mr. Folk asserted in his evidence that the two items of work that Mr. Cruz claimed he performed on June 12, 2013 were actually done by or at the time of the move-in on April 12, 2013. In his affidavit Mr. Folk produced the video he prepared on April 12, 2013 showing that a cabinet in the laundry room existed as of that date. He also stated that he recalled that the correction of the drawer in the master bedroom ensuite vanity was done in April, 2013. On a balance of probabilities, I do not find that the claimed DBD work was done on June 12, 2013.
• If the correction of the master bedroom ensuite vanity drawer was done after June 10, 2013, it would not be the type of work that would extend the time period for preserving liens in any event. It was deficiency correction work. Deficiency correction work does not extend the time period for preserving liens; see Nortown Electrical Contractors Associates v. 1619175 Ontario Inc., 2010 ONSC 3284, at paragraph 15.
• It is undisputed that DBD did not do work on the site after June 10, 2013 other than the alleged work on June 12, 2013.
[18] I, therefore, find that DBD’s claim for lien has expired for not having been preserved in a timely way in accordance with section 31(3)(b)(i) of the CLA. DBD’s date of last supply occurred prior to June 10, 2013
4. Do the lien claimants have a claim in quantum meruit against the owners?
[19] The lien claimants claim restitutionary quantum meruit as an alternative remedy in the event their lien claims are declared expired. Such a claim can be raised against a party with whom one has no contract if the following elements are proven by the plaintiff: there must be enrichment by the defendant, a corresponding deprivation by the plaintiff and the absence of a juristic reason for the enrichment; see Hussey Seating Co. (Canada) v. Ottawa (City), 1997 12116 (ONSC); affid 1998 17730 (ONCA), at page 5; also see Consulate Ventures Inc. v. Amico Contracting & Engineering (1992) Inc., 2007 ONCA at paragraph 19.
[20] I do not accept this claim for the following reasons. First, the decision of the Divisional Court in Yorkwest Plumbing Supply Inc. v. Nortown Plumbing (1998) Ltd. et al., 2014 ONSC 5655 (Div. Ct.), paragraphs 49 and 50, makes it clear that quantum meruit claims “unrelated to contracts” cannot be joined with lien actions by operation of section 55(1) of the CLA. This is the subsection which allows claims for breach of contract to be joined with claims for lien. The kind of restitutionary quantum meruit claim asserted by the lien claimants in this case fall clearly outside that ambit of what would be allowed under section 55(1). Mr. Sesito complained that Mr. Tingley had not raised this point prior to trial. I do not find that criticism to be valid as this is a legal point and the parties are presumed to know the relevant law.
[21] Second, and related to one above, there is consistent authority for the proposition that claims in restitutionary quantum meruit by subcontractors against owners should not be allowed because to do so would circumvent and undermine the scheme established by the construction lien legislation. The existence of the CLA is in effect the juristic reason for any unjust enrichment by the owner that a subcontractor may otherwise be able to establish. The CLA provides subcontractors with specific in personam remedies against owners which turn on the concepts of lien and holdback. To give subcontractors the added non-statutory remedy of restitutionary quantum meruit when the statutory remedies fail would undermine the statute. In Barrie Trim v. Heath et al., 2010 ONSC 2107 (Div. Ct.) at paragraph 8, Justice Healey quoted from the British Columbia Supreme Court in Elbee Development Corp. v. A&D Masonry Ltd. [1999] as follows: “To extend the remedy of unjust enrichment in circumstances such as are found involving A&D [subcontractor] and Elbee [owner] would be an unwarranted intrusion into the construction field.” In the above noted Hussey Seating case, the court held on page 7 that to allow such unjust enrichment claims would undermine the construction lien legislation, as “an owner [is] not the guarantor of every debt owed by its contractor.” I note that the claims for quantum meruit in the above noted Yorkwest case, which were rejected by the Divisional Court, were asserted by subcontractors against owners. I agree with these points.
[22] Third, I distinguish the decision of Master Albert in Cleanol Integrated Services Ltd. v. Johnstone, 2015 ONSC 768 from the case before me. In his written submissions, Mr. Sesito relied heavily on that case. In Cleanol Master Albert found that there was no contract at all as between a person who provided construction materials and services to an owner and the owner. She held that there was “no meeting of the minds” despite all of the discussions between the parties. She went on to find that there was nevertheless an alternative remedy of restitutionary quantum meruit as against the owner as the owner had obtained the benefit of the materials and services without paying for them. In the case before me, there is no dispute as to the existence of binding contracts between all of the parties, namely between MGL and Castleon, DBD and Castleton and Castleton and the owners. In such circumstances, the contracts and the overlying construction lien legislation should govern the issues between the parties.
[23] Fourth, if the lien claimants were to overcome all of these hurdles, there is not sufficient evidence, in my view, to establish such a claim. The onus of establishing the claim rests on the lien claimants. I accept that there is clear evidence of deprivation on the part of the lien claimants. However, there is not clear evidence of “enrichment” by the owners resulting from that deprivation. Mr. Folk stated in his affidavit that he overpaid Castleton for what they did. He attached an email he sent to Castleton on February 1, 2013 wherein he stated that he had paid Castleton “$834,734 vs. the total contract price of $786,000 . . .” I note that the owners pleaded a crossclaim against Castleton in the MGL lien action wherein their raised a claim of $250,000 in damages. While there may have been “enrichment” on the part of Castleton by virtue of the unpaid materials and services that were supplied by MGL and DBD, the evidence is not at all clear that there was such “enrichment” by the owners.
[24] Therefore, I deny the claims by MGL and DBD for restitutionary quantum meruit as against the owners.
V. CONCLUSION:
[25] I, therefore, declare the claims for lien of MGL and DBD expired and dismiss their actions as against the owners and the Bank of Nova Scotia in their entirety.
[26] I understand that MGL obtained default judgments against Castleton in each of its two actions, one dated June 20, 2013 in the amount of $42,453.17 plus $850 for costs and the other dated March 25, 2014 in the amount of $42,809.50 plus $1,050 for costs. As a result, I will not make any judgment for breach of contract damages in favour of MGL as against Castleton.
[27] I grant judgment for damages for breach of contract in favour of DBD as against Castleton in the amount of $38,633.57. As to interest, I will require submissions on this from Mr. Martin.
[28] Concerning the owners’ crossclaim against Castleton, Mr. Tingley advised me at the first trial management conference on November 10, 2014 that the owners had noted Castleton in default on that claim. No evidence was presented at trial by the owners concerning this crossclaim, and I, therefore, make no ruling in that regard.
[29] As to costs, Messrs. Tingley and Sesito filed costs outlines at the conclusion of the argument. With my leave, Mr. Martin delivered his costs outline on June 3, 2015. The MGL costs outline shows a partial indemnity cost total of $32,500.07 (tax inclusive) and a full indemnity cost total of $42,569.22 (tax invlusive). The DBD costs outline shows a partial indemnity cost total of $22,184.88 (tax inclusive). The owners’ costs outline shows a partial indemnity cost total of $32,247.52 (tax inclusive)
[30] Generally costs follow the event. If the parties are unable to agree on costs, counsel may file written submissions on costs. Submissions may not exceed two pages. The owners’ submissions must be served and filed by July 22, 2015. The submissions of MGL and DBD must be served and filed by August 4, 2015. Any reply submissions from the owners must be served and filed by August 7, 2015. The DBD submissions should also address any interest I should add to the breach of contract judgment I have made in favour of DBD as against Castleton, if any.
[31] If the parties are unable to agree on the form of the final report, an attendance may be required to settle the report.
Released: July 10, 2015 ___________________________
Master C. Wiebe
COURT FILE NO.: CV-13-480790
COURT FILE NO.: CV-13-478761
DATE: July 10, 2015
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
MGL CONSTRUCTION INC.
Plaintiff
- and -
NATALIE BOUTET, DAVID JOHN FOLK, CASTLETON HOMES LTD. AND THE BANK OF NOVA SCOTIA
Defendants
REASONS FOR JUDGMENT
Master C. Wiebe
Released: July 10, 2015