SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: CV-14-502105
DATE: October 8, 2015
RE: Timur Khalimov cob Ravineview Construction v John David Hogarth, Susan Hogarth, James D. Bojeczko cob JB Contracting and Bank of Nova Scotia
BEFORE: Master Albert
COUNSEL: B. Bowles for defendants Hogarth (moving parties)
Tel: 416-368-8280; fax: 416-368-3467
M. Drudi for plaintiff (responding parties)
Tel: 905-850-6116; fax: 906-850-9146
No one appearing for Bojeczko
MASTER C. ALBERT
ENDORSEMENT
The defendant owners, John David Hogarth and Susan Hogarth (the “Hogarth’s”) embarked on a renovation of their home at 28 Edgar Avenue. Timur Khalimov c.o.b. Ravineview Construction (“Ravineview”) supplied services and materials and registered two construction liens. In this motion the Hogarth’s ask for partial summary judgment in the form of (i) a declaration of their maximum holdback obligation under the Construction Lien Act, R.S.O. 1990, c.C.30 (the “Act”) and (ii) an order dismissing the action against them for any amount in excess of their holdback obligation.
The issues are:
a) Is the motion necessary or likely to resolve or reduce issues for trial?
b) What is the holdback obligation arising from Ravineview’s first claim for lien?
c) What is the holdback obligation arising from Ravineview’s second claim for lien?
Background
The Hogarth’s and contractor James D. Bojeczko c.o.b. JB Contracting (“JB”) contracted to renovate the Hogarth’s home. They executed a written contract on October 17, 2012 (the “General Contract”). The Hogarth’s paid JB’s invoices without retaining holdback. They admit that their failure to retain holdback does not relieve them of their holdback obligations under the Act.
JB contracted with Ravineview to supply services and materials required by the General Contract. On this motion neither party challenges that Ravineview is a subcontractor.
Ravineview issued ten requests for progress draws, the last one on September 7, 2010. A dispute over payments and scope of work ensued. Work on the project stopped on September 8, 2013. Ravineview and JB left the site and did not return until January 14, 2014 except for one attendance in December 2013 by Ravineview to retrieve tools and equipment.
JB wrote to the Hogarth’s on October 11, 2013 by email stating that the contract had been terminated “some time ago” and they (the Hogarth’s) could release holdback after 45 days. In fact the Hogarth’s had already released holdback by not retaining any.
On October 18, 2013 Ravineview registered a claim for lien for $226,000.00, declaring that the date of last supply was September 7, 2013.
Also on October 18, 2013, JB paid $75,000.00 into the trust account of Ravineview’s lawyers. The parties commenced negotiations in November 2013 and on January 14, 2014 all three of Ravineview, the Hogarth’s and JB executed a document that they titled “Amendment to Contract”. This contract provided, inter alia, a scope of work, a method of verifying that the work was performed and a contract price.
Ravineview discharged the first claim for lien on January 15, 2014.
From January 30, 2014 to March 14, 2014 Ravineview and JB supplied services and materials pursuant to the Amendment to Contract.
Work stopped on March 14, 2014. Ravineview claimed that it was owed $80,396.68. On April 4, 2014 Ravineview registered its second claim for lien for $80,396.68 as instrument AT3553048, claiming payment for services and materials supplied from January 30, 2014 to March 14, 2014. A small lien claim of $5,900.00, registered by Custom Design Flooring Ltd. on April 4, 2014, is subsumed in the Ravineview lien claim and counsel advise that it has been assigned to Ravineview.
The Hogarth’s terminated the contract on March 19, 2014 with a letter stating that they had hired a replacement contractor.
Leave to hear this motion
Section 67 of the Act requires leave for interlocutory proceedings such as this motion. The test is whether the motion is necessary or likely to expedite resolution of the issues in dispute. I am satisfied that both tests are met.
The Hogarth’s seek a declaration of the quantum of holdback. The resulting declaration will determine the extent to which it will be necessary for them to participate in the trial, if at all.
In a reference the referee must devise and adopt the simplest, least expensive and most expeditious manner of conducting the reference (rule 55.01). Allowing this motion to proceed is consistent with that mandate as it will clarify the Hogarth’s exposure to liability, reduce the issues for trial and likely reduce the time required for trial.
The Hogarth’s holdback obligation arising from the first Ravineview lien claim
An owner must retain a holdback of ten percent of the price of services and materials actually supplied until all lien claims have been resolved. An owner who fails to retain holdback remains personally liable for the amount that ought to have been retained[1]. As a subcontractor Ravineview was entitled to claim a lien as a charge against the holdback that the Hogarth’s were required to retain pursuant to Part IV of the Act[2].
Section 22 of the Act provides:
Each payer upon a contract or subcontract under which a lien may arise shall retain a holdback equal to 10 percent of the price of the services or materials as they are actually supplied under the contract or subcontract until all liens that may be claimed against the holdback have expired as provided in Part V, or have been satisfied, discharged or provided for under section 44 (payment into court).
JB invoiced $860,407.08 for services and materials actually supplied up to September 7, 2013 and the Hogarth’s paid JB without retaining holdback. Holdback of ten percent would have been $86,040.70. Neither Ravineview nor JB supplied any services and materials between September 8, 2013 and October 18, 2013, the date Ravineview registered its first claim for lien. The Hogarth’s maximum holdback obligation on October 18, 2013 was $86,040.70.
The Hogarth’s holdback obligation continues until all lien claims that could be made expire and all lien claims that have been made in time are either satisfied or discharged[3]. To calculate the holdback obligation the court must determine the last date by which a lien claim could have been made[4] and whether all lien claims made on or before that date have been satisfied or discharged.
In making this determination the court must consider whether the contract for the purpose of calculating the holdback obligation is the General Contract of October 17, 2012 or whether it is both the General Contract and the Amendment to Contract of January 14, 2014 combined.
i) Holdback obligation if the contract is solely the General Contract
If the contract for purposes of section 22 of the Act is solely the General Contract then the time within which a lien claim could be made by a subcontractor expired on October 22, 2013, 45 days after September 7, 2013. The only claim for lien registered on or before October 22, 2013 was the first Ravineview lien claim, registered on October 18, 2013.
Ravineview discharged its first lien claim on January 15, 2014 and did not supply any services or materials between September 8, 2013 and January 15, 2014.
Section 48 of the Act provides that a discharge of lien is irrevocable and cannot be revived. The lien claimant may claim a lien for services and materials supplied subsequent to the preservation of the discharged lien, but cannot make a second claim for the services and materials supplied up to the date the claim for lien was preserved.
Applying section 48 of the Act to the facts of this case, once Ravineview discharged its first claim for lien it was irrevocably precluded from claiming a lien for services and materials supplied prior to October 18, 2013, the date Ravineview registered its first claim for lien.
As contractor JB had 45 days from the date the contract was completed or abandoned to preserve a claim for lien. If the contract in this case is solely the General Contract then the Hogarth’s holdback obligation for services and materials supplied pursuant to the General Contract expired 45 days after JB completed or abandoned the General Contract.
The evidence persuades me that JB abandoned the contract prior to October 11, 2013, the date of his email to the Hogarth’s stating that the contract had been terminated “some time ago” and informing them that they could pay out holdback after 45 days. Thereafter Ravineview retrieved its tools, an act that is consistent with the contract having been terminated or abandoned. Consequently, JB’s lien rights expired at the latest by November 25, 2013, 45 days after JB’s unequivocal acknowledgement that the contract was at an end. Any contract entered into subsequently, regardless of the title the parties attached to it, was a new contract for purposes of the Act and the determination of holdback and lien rights.
Ravineview relies on the decision of the Supreme Court of Canada in Dielman Planer Co. v Elizabeth Townhouses Ltd.[5] wherein the court opined that “the cessation of work and abandonment are not necessarily co-existent”. The court explained that cessation of work is abandonment only if it is permanent, with no intention to return and complete the project.
I am persuaded by the evidence, including an exchange of emails in September and October 2013, that JB accepted that the contract was at an end. While JB stated in his email of October 18, 2013 that he remained ready to complete the project, he acknowledged that the issues in dispute had to be resolved and that the Hogarth’s were not willing to deal with them. I conclude from that exchange of emails that JB acknowledged that as of October 18, 2013 the contract was terminated. The document that the parties titled “Amendment to Contract” was in reality a new contract.
ii) Holdback if the contract is the General Contract and the Amendment to Contract
However, if I am wrong in that regard and the Amendment to Contract was a continuation of the General Contract and not a new contract, I nevertheless reach the same conclusion on the motion.
Applying the facts recited in paragraphs 11 and 12 of these reasons, the date of last supply of services and materials pursuant to the Amendment to Contract was March 14, 2014 and the contract termination date was March 19, 2014. If the contract for purposes of section 22 of the Act includes the Amendment to Contract then the last day for Ravineview to preserve a claim for lien was April 28, 2014 and the last day for JB to preserve a claim for lien was May 5, 2014.
Ravineview registered a second claim for lien on April 4, 2014, claiming $80,396.68 for services and materials supplied from January 30, 2014 to March 14, 2014, and sub-subcontractor Custom Design Flooring Ltd. registered a lien claim for $5,900.00, that lien claim subsumed in the second Ravineview lien claim and assigned to Ravineview. Neither lien claim has been discharged.
The Hogarth’s holdback obligation remains ongoing because the lien claims that were preserved in time have not yet been satisfied or discharged. The issue is whether a lien claim registered after March 14, 2014 could reach back and include a claim for lien against a holdback arising in respect of services and materials supplied prior to January 15, 2014, the date Ravineview discharged its first lien claim.
Ravineview’s discharge of lien registered on January 15, 2014 extinguished its lien claim, including its charge against holdback. For the reasons given by Master Sandler in Southridge Construction Group Inc. v 667293 Ontario Limited[6] Ravineview’s lien claim cannot be revived.
Ravineview’s second lien claim does not claim a lien for services and materials supplied prior to September 7, 2013 but seeks to enforce a charge against holdback for the period ending September 7, 2013. Such a claim is similarly unenforceable. The same principles apply as were enunciated by the court in the Southridge case. Once a lien is discharged all lien claims expired, including a lien claim asserted as a charge against holdback.
Even if I were to find that the Hogarth’s holdback obligation for the entire project remains ongoing because the contract includes the Amendment to Contract, I would nevertheless conclude that their holdback obligation in respect of services and materials supplied by Ravineview up to October 18, 2013 expired and did not carry over to the second Ravineview lien claim.
As noted by Justice DiTomaso in Blockwall Masonry Ltd. v Arcaio Design[7] at paragraph 19:
“Unlike a contractor, a subcontractor cannot take a hiatus or holiday from work. A period of 45 days elapses when the subcontractor is not working on the job. Its lien rights expire. Section 31(3)(b)(i) provides a rigid calendar test for subcontractor liens that does not exist for contractors.”
Ravineview took a hiatus from work from September 7, 2013 to January 30, 2014. Even if the facts bear an interpretation that the contract is made up of both the General Contract and the Amendment to Contract as a single contract, Ravineview’s lien rights, including its right to claim holdback against the owners, expired 45 days after last work prior to the hiatus. Ravineview registered and subsequently discharged its claim for lien. Upon discharging the lien claim all lien rights arising from the services and materials supplied prior to the hiatus, including the right to claim holdback from the owners, were extinguished.
Had its lien claim not been extinguished I would have found that Ravineview waived its lien claim against the Hogarth’s. The second Ravineview lien claim is for services and materials supplied from January 30, 2014 to March 14, 2014. By confining its second lien claim to services and materials supplied after January 30, 2014, Ravineview has waived its lien claim for services and materials supplied prior to January 30, 2014. Consequently, pursuant to section 22 of the Act, the Hogarth’s holdback obligation arising from the first Ravineview lien claim in respect of services and materials supplied prior to January 30, 2014, if not extinguished, was waived.
I conclude that the Hogarth’s holdback obligation in respect of services and materials supplied by JB up to and including October 18, 2013, is nil.
The Hogarth’s holdback obligation arising from the second Ravineview lien claim
The Hogarth’s holdback obligation arising from the second Ravineview claim for lien is equal to ten percent of the price of services and materials actually supplied from January 30, 2014 to March 14, 2014.
Ravineview claims $80,396.68 inclusive of HST in its second claim for lien. The Hogarth’s position is that the value of services and materials supplied is $49,843.03, based on invoices produced by Ravineview and deducting amounts claimed for markup and profit.
Accepting for the purpose of calculating holdback that Ravineview will be able to prove that the value of services and materials actually supplied is the amount claimed in its claim for lien, the holdback calculation for the purpose of this motion is ten percent of $80,396.68.
I find and declare that the Hogarth’s maximum holdback obligation to Ravineview under the Act is $8,039.66. Ravineview’s claim against the Hogarth’s in excess of $8,096.68 is dismissed.
Costs
- The parties agreed at the outset that costs should follow the event, fixed at $10,000.00. On that basis I fix costs of the motion at $10,000.00 inclusive of HST and disbursements, payable by Ravineview to the Hogarth’s within 30 days.
Master C. Albert .
DATE: October 8, 2015
COURT FILE NO.: CV-14-502105
DATE: October 8, 2015
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Timur Khalimov cob Ravineview Construction v John David Hogarth, Susan Hogarth, James D. Bojeczko cob JB Contracting and Bank of Nova Scotia
BEFORE: Master C. Albert
COUNSEL:
B. Bowles for defendants Hogarth (moving parties)
M. Drudi for plaintiff (responding parties)
No one appearing for Bojeczko
ENDORSEMENT
Master C. Albert
1Section 23 of the Act
2section 21 of the Act
3Section 26 of the Act
4A lien claim preserved after that date would have expired.
51974 175 (SCC), 1974 CarswellBC 8, 20 C.B.R. (N.S. 81, [1975] 2 S.C.R. 449
6(1992), 2 C.L.R. (2d) 177 (Ont. Master), affirmed (1993), 1993 8454 (ON SC), 2 C.L.R. (2d) 184, 12 O.R. (3d) 223 (Div. Ct.)
72007 CarswellOnt 5451, 66 C.L.R. (3d) 155, affirmed by the Divisional Court: 2008 CarswellOnt 1434