Court File and Parties

CITATION: Tonda Construction Ltd v. J.A. Porter Holdings (Lucknow) Ltd, 2015 ONSC 5993

COURT FILE NO.: 1996/13

DATE: 2015-06-11

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Tonda Construction Limited (Appellant) - and - J.A. Porter Holdings (Lucknow) Ltd. (Respondent)

BEFORE: Justice D. A. Grace

COUNSEL: J. Forrest, for Appellant A. Ferrier, for the Respondent

HEARD: June 10, 2015

ENDORSEMENT ON APPEAL

[1] This appeal arises in the following circumstances.

[2] On March 22, 2012, J.A. Porter Holdings (Lucknow) Ltd. (‘Porter’) obtained default judgment against Ronald Pyatt c.o.b. as RJ Excavating (‘RJ’) in the amount of $19,034.45 (the ‘judgment’) together with post judgment interest at the rate of 3 per cent per year.

[3] Porter sought to enforce the judgment, which was granted by the Small Claims Court, pursuant to the rules applicable to that court.

[4] A notice of garnishment was issued pursuant to rule 20.08 of the Rules of the Small Claims Court (‘Rules’) on May 3, 2012.

[5] It was directed to Tonda Construction Limited (‘Tonda’) as garnishee. The notice advised Tonda that it was required to pay to the clerk of the London Small Claims Court all debts payable by Tonda to RJ at the time the notice was served or within six years of its issuance up to a maximum of $19,250.75.

[6] Tonda was instructed to serve and file a Garnishee’s Statement within ten days of service of the notice if it did not pay “the total amount or such lesser amount as you are liable to pay”.

[7] A May 2, 2012 Affidavit for Enforcement Request had preceded the issuance of the notice of garnishment. The deponent, lawyer Peter Fallis, had deposed that Tonda had tendered RJ a $110,000 job in London, Ontario.

[8] The notice of garnishment did not trigger a payment or the filing of a garnishee’s statement. However, it was not ignored.

[9] In a May 11, 2012 email Tracey Poels of Tonda advised Porter that:

We will be definitely paying you, I am hoping to pay you by the end of next week. Apparently I only pay when or if I have monies to pay you with, at this point I do not owe him any monies, by the end of next week I should be able to release the monies if I receive it…

[10] Somewhat ominously she added:

I’m hoping to work out something with RJ but that being said we all know how easy he is to deal with, therefore I’m asking for a little patience while I try and work some magic to keep on site…

[11] Nothing was ever paid despite subsequent telephone conversations between representatives of Porter and Tonda.

[12] As permitted by rule 20.08 (15) Porter requested a garnishment hearing.

[13] The required notice was served on Tonda. It set forth Porter’s allegation that Tonda continued to owe RJ the amount of the unpaid judgment.

[14] Prior to the February 1, 2013 garnishment hearing each party filed material.

[15] Porter filed a motion record. It included the December 5, 2012 affidavit of its general manager Susan Cleland. The May 11, 2012 e-mail to which I referred was attached. It also included the previously mentioned notice of garnishment.

[16] In addition to the language I have already referenced, it included a caution. It advised Tonda that if it failed to pay the clerk and did not file a garnishee’s statement disputing garnishment judgment could be obtained by Porter for the amount of the unpaid judgment and costs.

[17] Tonda was also told that if it paid anyone other than the clerk it could be required to pay again in accordance with the notice (see rule 20.08 (17) and (18)).

[18] At last, on January 28, 2013, Tonda provided a garnishee’s statement. Tonda took the position that nothing was owing to RJ. It explained its position in Schedule ‘A’. In essence Tonda:

(a) acknowledged that it had entered into a $148,934.60 contract (including change orders) with RJ;

(b) acknowledged that it paid RJ $46,993.50 and other amounts to three of RJ’s suppliers and to several subcontractors who completed RJ’s work after RJ was terminated on August 23, 2012;

(c) maintained that as a result of the payments, aggregating $157,571.63, nothing was due to RJ.

[19] Tonda attached what it described as “copies of the various back charges made to RJ with supporting documentation and an account reconciliation prepared by Tonda.” I will return to the reconciliation later in this endorsement.

[20] Deputy Judge Valassis presided. The forty page transcript was filed on this appeal. At the conclusion of the hearing the following ruling was given orally.

All right. I agree with Mr. Fallis’ [the lawyer for Porter] arguments, for the most part. I do not see before me sufficient evidence to satisfy me that the garnishee did not owe the amount that was subject to garnishment and I find in favour of the creditor.

Judgment against the garnishee for $19,250.75 in favour of the creditor.

[21] She then turned to the issue of costs.

[22] Tonda appeals pursuant to s. 31(a) of the Courts of Justice Act.

[23] While it advanced a number of grounds in its notice of appeal the primary one relied on in oral argument was the sufficiency of the Deputy Judge’s reasons.

[24] Tonda relies on Smyth v. Waterfall (2000), 2000 CanLII 16880 (ON CA), 50 O.R. (3d) 481 (C.A.) at para. 13 where Borins J.A. wrote in part:

The parties are entitled to know why the court reached its decision.

[25] He explained that a failure to give meaningful reasons made justice look arbitrary and appellate review difficult or even impossible: to similar effect see Crudo Creative Inc. v. Marin (2007), 2007 CanLII 60834 (ON SCDC), 90 O.R. (3d) 213 (Div. Ct.) at paras 20-25.

[26] Porter does not quarrel with the proposition but augmented it with the comments of McLachlin C.J. in R. v. R.E.M., 2008 SCC 51, [2008] 3 S.C.R. 3 at para. 37. The Chief Justice wrote:

As we have seen, the cases confirm that a trial judge’s reasons should not be viewed on a stand-alone, self contained basis. The sufficiency of reasons is judged not only by what the trial judge has stated, but what the trial judge has stated in the context of the record, the issues and the submissions of counsel at trial. The question is whether, viewing the reasons in their entire context, the foundations of the trial judge’s conclusions – the ‘why’ for the verdict – are discernable. If so, the functions of reasons for judgment are met.

[27] In my view, those comments are equally applicable to the garnishment hearing. The entire proceeding was transcribed.

[28] The difficulty is that I am unable to discern the “why” for the Deputy Judge’s decision from the ruling or the somewhat cryptic reference to Mr. Fallis’ submissions. They occupied approximately thirty pages of transcript. What does acceptance of his arguments “for the most part” mean? What about the submissions of counsel for Tonda?

[29] What was said causes concern. Surely the onus of proving that Tonda was liable to RJ and had paid someone other than the clerk of the Small Claims Court lay on Porter: see Turchiaro v. Liorti, 2006 CanLII 8872 (ON CA), [2006] O.J. No. 1113 (C.A.) at para. 2. The Deputy Judge appears to have reversed the onus.

[30] I have considered the issue of the sufficiency of reasons recognizing that the decision below was made in a very busy court – the Small Claims Court. Nonetheless, brief, understandable reasons could and should have been given which would have allowed the parties – and this court – to know rather than guess at what resonated and why.

[31] The ruling, even with the additional context the transcript provides, is simply inadequate. The failure to provide sufficient reasons is an error of law.

[32] The parties agreed that this court has the powers conferred by s. 134 of the Courts of Justice Act. I could, as Tonda requests, order a new garnishment hearing.

[33] I can also make any order or decision that ought to or could have been made by the Small Claims Court.

[34] Rule 20.08 (15.2) of the Rules allowed the Small Claims Court to determine the rights and liabilities of the garnishee (Tonda) and the debtor (RJ). Rule 20.08(18) sets out the consequences if Tonda paid someone other than the clerk an amount due to RJ.

[35] The garnishee and creditor agreed to proceed with the hearing based on a written record (see p.8 of the transcript, lines 11-28) although counsel for Tonda made one short-lived and half-hearted attempt to fill an evidentiary gap in its material with oral evidence from Mr. Pyatt who happened to be in court that day: see p. 31 of the transcript at lines 23-32 and p. 32, lines 1-9. In my view, the Deputy Judge properly exercised her discretion and declined to turn the process into a roving inquiry suddenly including oral evidence.

[36] I have read the documentary record that was before the Deputy Judge. I have read the transcript. I have had the ability to ask questions. Tonda’s counsel on appeal also appeared at the garnishment hearing.

[37] It is clear from the evidence that Tonda and RJ were in a subsisting, contractual relationship when the notice of garnishment was served. That continued for more than three months.

[38] The garnishee’s statement is significant both for what it says and what it does not.

[39] As noted, $46,993.50 was paid to Tonda. The “reconciliation” is at p. 76 of the Appeal Book and Compendium. At the bottom of that page these words appear:

Please note: first payment made to RJ Excavating was prior to receiving notice of Garnishee. However, to avoid lien on job by his suppliers, Tonda paid suppliers directly for materials purchased. Nethercott Excavating had to be hired to finish remainder of Contract – this expense is now over and above the remaining balance of Contract.

[40] Those words raise questions. They do not supply answers. Does the word “first” refer to the entire $46.993.50 that was paid to RJ or to an initial instalment with others following? Why didn’t Tonda provide the dates of any payment to RJ or provide a copy of a cheque, other payment instrument or ledger?

[41] How could Tonda choose to pay RJ’s suppliers rather than the Clerk of the Small Claims Court?

[42] Tonda controlled the information yet the documentation it produced created an incomplete picture.

[43] That picture has to be assessed with Ms. Poels’ May 11, 2012 e-mail in mind. Her words “we will be definitely paying you” was conditional only on Tonda being paid by the property owner. Clearly it was. The garnishee’s statement, prepared long after Ms. Cleland’s affidavit was sworn and served, did not address that e-mail at all.

[44] An inference adverse to Tonda could and should have been drawn based on the incomplete picture created by the Garnishee’s Statement. On the balance of probabilities, it appears to me that Tonda paid RJ some amount after the Notice of Garnishment was served. That amount may well have been more than the judgment.

[45] RJ’s suppliers included Ro-Buck (paid $44,088.16); Con Cast ($26,084.18) and Wolseley ($10,238.68). It is clear from the attachments to and contents of the garnishee’s statement that most, if not all, of those payments were made after the notice of garnishment was served. Rule 20.08 (18) specifically addressed that situation. Tonda circumvented and therefore ignored a process of the court. It did so, undoubtedly, to move a project forward but it did so at its peril.

[46] In my view, the Small Claims Court ought to have granted an order directing Tonda to pay to the Clerk of the Small Claims Court (pursuant to Rule 20.08(18) and therefore not to the creditor directly) the sum of $19, 250.75.

[47] However, I would have ordered Tonda to pay Porter’s costs in the amount of $700.

[48] In the circumstances, the appeal is allowed. However, Tonda shall pay to the Clerk of the Small Claims Court forthwith the sum of $19,250.75.

[49] Post-judgment interest shall accrue at the rate of 3 per cent per year from this date onward.

[50] As agreed by counsel, Tonda shall pay Porter its costs of this appeal in the all-inclusive amount of $5,900 within thirty days failing which post-judgment interest shall accrue at the rate set forth in paragraph 49. It shall also pay $700 on account of the costs below.

“Justice A. D. Grace”

Justice A. D. Grace

Released: June 11, 2015