ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-12-449856
DATE: August 24, 2015

BETWEEN:

Beta Construction Inc.

G. Wiseman, for the Plaintiff (defendant by counterclaim) and third party
Fax: 905-475-7590

Plaintiff (defendant by counterclaim)

• and -

He-Xing Chiu and Kin-Hung Chiu

F. Wong, for the Defendants (plaintiffs by counterclaim and third party claim)
Fax: 905-305-1739

Defendants (plaintiffs by counterclaim and third party claim)

• and -

Farid Bakhty Soroosh

Third party defendant

HEARD: August 11, 13, 14 and 18, 2015

Master C. Albert

[1] Beta Construction Inc. (“Beta C”) claims the balance owing for the supply of services and materials to renovate and build an addition on the home of He-Xing Chiu (“Mrs. Chiu”) and Kin-Hung Chiu (“Mr. Chiu”) at 7 Castlemere Crescent, Toronto. Beta C registered a construction lien for $73,442.50 on February 27, 2012 as instrument AT2953949 and issued its claim on March 27, 2012. Beta C reduced its claim to $69,547.99 at trial.

[2] Mr. and Mrs. Chiu counterclaim for $100,000.00 for deficiencies and incomplete work plus $43,713.13 (reduced from the claim of $74,764.30 pleaded) for damages for delay plus an unspecified amount for damages pursuant to section 35 of the Construction Lien Act, R.S.O. 1990, c.C.30 (the “Act”) alleging that Beta C registered a grossly excessive lien. Mr. and Mrs. Chiu also claim the same damages from Farid Soroosh (“Mr. Soroosh”), who is the principal of Beta C, in their third party claim against him.

[3] The issues are:

a) Did Mr. and Mrs. Chiu contract with Beta C? Alternatively did they contract with Mr. Soroosh personally, or with Beta Homes Inc., an unincorporated entity?

b) Did Beta C preserve and perfect its lien claim in time?

c) Which party breached the contract?

d) What amount, if any, do Mr. and Mrs. Chiu owe Beta C for services and materials supplied to improve their property?

e) Are Mr. and Mrs. Chiu entitled to damages for delay?

f) Are Mr. and Mrs. Chiu entitled to damages for deficiencies?

g) What amount, if any, are Mr. and Mrs. Chiu entitled to recover from Mr. Soroosh in their third party claim?

[2] For the reasons that follow I find that Beta C is entitled to $69,548.34 for services and materials supplied but not paid for, against which the Chiu's are entitled to set-off $28,443.48 for delay, leaving a balance owing by the Chiu's to Beta C of $41,104.86.

I. Background

[3] Mr. and Mrs. Chiu entered into two contracts with Beta H. The first contract, dated September 8, 2010, required Beta Homes Inc. (“Beta H”) to renovate parts of the Chiu’s existing older home and build a two storey addition for $264,960.00 plus HST for a total of $299,404.80.

[4] The first contract required Mr. and Mrs. Chiu to pay the contractor fixed amounts upon the completion of various stages of work, as follows:

a) $60,000.00 upon signing the contract;

b) $60,000.00 upon completing 30% of the work (foundation and framing);

c) $60,000.00 upon completing 60% of the work (rough-ins, windows, shingles);

d) $60,000.00 upon completing 90% of the work (drywall, trim, paint, doors, hardware);

e) the balance upon 100% completion following inspection.

[5] The second contract, dated July 11, 2011, is for $22,595.00 plus HST for a total of $25,532.35. It is also between Mr. and Mrs. Chiu as owners and identifies Beta H as the contractor. The second contract followed a negotiation over what was and was not included in the first contract. The second contract fixed an amount for specified extras.

[6] The grand total of the two contracts is $324,937.15. Mr. and Mrs. Chiu claim that they paid a total of $243,900.00 on both contracts. Beta C claims the Chiu’s paid $251,489.56, a difference of $7,589.56. The evidence of payments made by the Chiu's, filed in the form of cancelled cheques and receipts, proves that the Chiu’s paid Beta a total of $255,388.81.

II. Analysis

a. Is the lien claimant the contracting party?

[7] The written contracts identify and define the contractor on the first page and the signing page as Beta Homes Inc., referred to in these reasons as Beta H. Beta H is not an incorporated entity, nor is there any evidence that it is a registered style name. The individual who signed the contracts on behalf of Beta H is Mr. Soroosh. He is also the individual who coordinated and managed the project. Mr. Soroosh’s business card and some of the signage he used in this renovation project and one other project display the name “Beta H”.

[8] Beta C is an incorporated entity. Mr. Soroosh is the principal, director and operating mind of Beta C. Eight pages of contract documents are on the letterhead of Beta C., with the name in oversized large bolded letters. The parties communicated via email, beginning in August 2010 prior to signing the first contract. Mr. Soroosh sent his emails from the email account of Beta C, and identified as such in the email header, and he signed off at the end of each email in the name of Beta C. Mr. Chiu replied by email to the account of Beta C.

[9] Mr. and Mrs. Chiu testified that they did not pay attention to the name that Mr. Soroosh used for Beta, whether it was Beta H or Beta C. They claim that they did not know they were dealing with Beta C and were only prepared to contract with Beta H. I find their evidence on this issue not credible. It is obvious from the contract documents and emails that they were dealing with Beta C as well as Mr. Soroosh and that Mr. Soroosh used the names Beta H and Beta C interchangeably. They knew or ought to have known that they were dealing with Beta C when they executed the contract.

[10] When Mr. and Mrs. Chiu made payments Mr. Soroosh instructed them to make their cheques payable to Beta C and they did so. When the Chiu’s made payments by way of bank transfer they transferred money into the account of Beta C, not Beta H or Mr. Soroosh personally. All receipts for payments made by Mr. and Mrs. Chiu by cheque and by bank transfer were issued by Beta C.

[11] Mr. and Mrs. Chiu allege that they did not contract with Beta C, but rather they contracted with a company called Beta H or else with Mr. Soroosh personally. They claim they had no knowledge of Beta C, despite having made cheques payable to Beta C, receiving receipts for payments from Beta C, sending emails to Beta C and receiving emails from Beta C. They assert that Beta C’s lien claim is invalid because it was not the contracting party.

[12] Mr. Soroosh, on behalf of Beta C., of which he is a director, and on behalf of Beta H by which he carries on business, asserts that he did not appreciate the legal distinction between the two names, nor did he understand that he could not include “Inc.” in the name of a business that was not an incorporated entity. He claims ignorance even though he is a well-educated individual, having achieved the professional designation of engineer in both Iran and Canada.

[13] In 2013, under cross-examination on her affidavit filed on an earlier summary judgment motion brought by the defendants, Mrs. Chiu admitted that it did not matter which of Mr. Soroosh’s companies he used to carry out the construction project on her home. However at trial in 2015 she testified that it mattered a great deal that the company with which she and her husband contracted was Beta H and not Beta C.

[14] By changing such critical evidence regarding the contracting parties Mrs. Chiu undermines her credibility on that issue and on her evidence in general. It suggests to me that she learned of the legal significance of the two different names and on that basis changed her evidence to what she believed would be to her advantage. In doing so she succeeded merely in undermining her credibility.

[15] The Act is remedial legislation, intended to provide security for contractors who affix their services and materials to property owned by others. The Act takes away an owner’s right to clear title and bestows lien rights on contractors who have supplied services and materials to improve the property. To avail oneself of the benefit of the remedial legislation a lien claimant must comply strictly with the technical requirements of the Act. However, there is some relief available for minor irregularities as provided for in section 6 of the Act, which provides:

“No certificate, declaration or claim for lien is invalidated by reason only of a failure to comply strictly with subsection 32(2) or (5), subsection 33(1) or subsection 34(5), unless in the opinion of the court a person has been prejudiced thereby, and then only to the extent of the prejudice suffered.”

[16] Subsection 34(5) of the Act specifies the required contents of a claim for lien. It provides, in part, as follows:

“Every claim for lien shall set out,

the name and address for service of the person claiming the lien…”

[17] The issue is whether the lien claimant, Beta C, is the person[^1] that contracted with Mr. and Mrs. Chiu and supplied services and materials to improve their property. If so, then no amendment to the claim for lien is required. If not, the issue is whether the name of the proper person can be substituted for Beta C in the claim for lien and the statement of claim.

[18] Mr. and Mrs. Chiu rely on my decision in Juddav Design Inc. v Cosgriffe[^2], affirmed by the Divisional Court on appeal[^3], as support for their position. The decision is distinguishable and supports the position of Beta C. In the Juddav case the contract was executed by Judy Davis carrying on business as JD Design. All interactions, including the initial contact, billings, payments and correspondence, were between the owners and Ms Davis in her personal capacity using that style name. There was no evidence whatsoever that Ms Davis conducted business through a corporation. However, the construction lien in that case was registered by the corporation Juddav Designs Inc. and the action was issued in the same corporate name. I concluded that the corporation was not a party to the contract and the lien claim failed.

[19] In awarding damages on an alternative basis, I wrote at paragraph 22 of the Juddav case:

“To allow the defendants to rely on a technicality to avoid paying Judy Davies or her company what they owe makes a mockery of the justice system. To exacerbate matters both defendants are lawyers. To permit them to use the justice system to take advantage of a genuine supplier of services and materials and rely on a technicality to line their own pockets would be unfair. It would condone their attempt to manipulate the legal system to their own advantage and thumb their respective noses at the supplier.”

[20] That statement applies to the case before me as well. The Chiu’s seek to rely on a technicality to avoid paying the contractor that supplied services and materials to improve their home, in the face of clear evidence that they were dealing with Beta C throughout the renovation. Unlike the Juddav case where the corporate entity took no part in the supply of services and materials, Beta C was identified in the contract, was the payee of the Chiu’s payments made by cheque, was the bank account holder of deposits made by direct transfer from the Chiu’s account to Beta C’s account and was the entity that wrote receipts out to the Chiu’s for payments they made on the contract. For the Chiu’s to testify under affirmation that they did not know that they were dealing with Beta C as the contractor is not credible. As already noted, by taking that position at trial the Chiu’s discredit themselves on this issue and on their evidence in general.

[21] There is no evidence to corroborate that Mr. and Mrs. Chiu contracted with Mr. Soroosh personally. They believed that they had contracted with an incorporated entity of which Mr. Soroosh was a principal. They testified that they contracted with Mr. Soroosh’s company after seeing an example of his work and they did not pay attention to the name of the company. They clearly understood that they had contracted with a company of which Mr. Soroosh is the principal. Beta H is not a corporation. Beta C is a corporation. Based on the evidence of the Chiu’s I conclude that they intended to contract with a corporation and not an individual. Beta C is that corporation. Mr. Saroosh executed the contracts in the name of Beta H, which has no legal capacity to enter into the contracts because it is not a legal entity. If the contract is with Beta H then the contracting party in law is Mr. Soroosh personally.

[22] Mr. Soroosh is the principal and a signing officer of Beta Construction Inc. I find that the intention of the parties was to enter into a contract with Mr. Soroosh’s company as contractor and Mr. and Mrs. Chiu as owners. “Homes” is a misnomer used in place of “Construction” in the title of the contract. The intention of the parties was that the contracting party be Beta C. I conclude that the written contracts as between Beta H and Mr. and Mrs Chiu are valid contracts between Beta C as contractor and Mr. and Mrs. Chiu as owners.

[23] Alternatively, if I am wrong in that regard, then I must consider whether there is an oral or implied contract between Beta C as contractor and Mr. and Mrs. Chiu as owners. Mr. Soroosh is a director of Beta C. He dealt directly with Mr. and Mrs. Chiu throughout the renovation project. He instructed the owners to make payments payable to Beta C and they did so without question. He issued receipts for payments in the name of Beta C and Mr. and Mrs. Chiu accepted the receipts without questioning the name of the entity issuing the receipts, even though they claim that their contract was with Beta H. All emails regarding the project were sent by Beta C to the Chiu’s who sent their emails about the project to Beta C and not to Beta H.

[24] I find an implied contract between Beta C as contractor and Mr. and Mrs. Chiu as owners, with the terms and conditions of the two written contracts forming the terms and conditions of the implied contracts. I find that the essential elements of a contract exist, namely offer, acceptance and consideration in the form of the $33,900.00 deposit paid by cheque by the Chiu’s to Beta C on September 8, 2010 contemporaneously the first contract. On that basis a valid contract was formed on September 8, 2010 between Beta C and Mr. and Mrs. Chiu.

(Decision continues verbatim exactly as in the source through paragraph [120], Appendix “I”: SCOTT SCHEDULE, and footnotes.)