NEWMARKET COURT FILE NO.: CV-15-122538-00

DATE: 20151204

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

A. C. CONCRETE FORMING LTD.

Plaintiff, Defendant by counterclaim

– and –

TIME DEVELOPMENT CONSTRUCTION INC.

Defendant, Plaintiff by counterclaim

Craig Losell, for the Plaintiff

Kevin Power, for the Defendant

HEARD: December 1, 2015

EBERHARD J.

[1] The Plaintiff moves for the following relief:

(a) For summary judgment on and payment of the Plaintiff’s contract and extra claim in the amount of $131,919.97 as against the Defendant;

(b) prejudgment and post-judgment interest from May 1, 2015 at the rate of 4%per annum above the prime rate of interest charged by the Royal Bank of Canada, compounded monthly;

(c) alternatively, prejudgment and post-judgment interest in accordance with the provisions of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended;

(d) an Order that the Plaintiffs claim for lien proceed to trial, pursuant to the provisions of the Construction Lien Act, R.S.O. 1990, c. C.30, as amended;

(e) leave to bring this motion for summary judgment;

(f) in the alternative, if summary judgement is refused or is granted only in part, an Order specifying the material facts not in dispute and defining the issues to be tried and, an Order that the action proceed to trial;

(g) for the costs of the within motion on a substantial indemnity basis; and,

(h) such further and other relief as this Honourable Court may deem just.

[2] Issues remain as to the validity of the lien so that aspect of the case must proceed to trial.

[3] Leave is granted to bring this motion as there was no objection. The Defendant sought adjournment but the request was declined. No outstanding fact issues relating to the issues in question on the Summary Judgment motion were identified that required adjournment.

[4] The Defendant brought a counterclaim in this action. Some $15,000 in deficiencies are in dispute and the Defendant today acknowledges that of that claim, the first item was rectified without expense to the Defendant so the list of deficiencies claimed at tab (f) of the Motion Record of the Defendant: “Pack void between wall plate and top of foundation wall” $1235 and $1368 (for a total of $2603), the active counterclaim is thus reduced to $12,397.

[5] The remainder of the deficiencies list is created by the Defendant’s project manager Brian Snider. It is unsupported by invoices from anyone who may have done the work. It is said that the invoices have not yet been provided, many months later when further steps on the project have been taken that could only be done after such claimed deficiencies were made right. An adverse inference is fully available but I decline to dismiss the Defendant’s counterclaim as a sham at this stage.

[6] As to the Plaintiff’s claim for $131,919.97, it is fully proven, supported by invoices which the Defendant’s project manager does not dispute. At most the claim is vulnerable only to proof of the deficiencies.

[7] No other complaint is supported by a shred of evidence.

[8] The best foot forward is nothing at all relevant to the completion of the project. The tests for Summary Judgment procedure are fully met.

[9] The tension in the motion is whether a counterclaim in a separate action should be set off against the Plaintiff’s claim in this action.

[10] The separate claim brought by the Plaintiff in Toronto involves a different project. The only party common to both actions is the Plaintiff, Mr. Catarino signing as president. In the present action concerning two Elm St properties, the owner is Mr. Wang personally, the contractor is Time Development Construction Inc., Mr Wang signing as president and the project manager is Brian Snider.

[11] In the separate Toronto action concerning Birchmount properties, the owner is 2358825 Ontario Limited with Mr Wang signing, the contractor is 2358825 Ontario Limited and the project manager is YYZed Project Management.

[12] There is no nexus by way of privity of contract.

[13] Set-off is not pleaded in the present action, or the Toronto action, except the standard pleading which I find cannot be stretched to suggest that the counterclaim of the parties in one action are pleaded to set off against the claims of parties in another action.

[14] The Toronto action is not as far along as the present case.

[15] The individuals Wang, Snider and Catarino are common to both projects but the Defendant is a different legal “person”. The connection is that Mr. Wang has a holding company, out of the fray and insulated from liability, that owns both Defendants.

[16] I reject the argument that section 17(3) of the Construction Lien Act is so broad as to capture these circumstances. It states:

(3) Subject to Part IV, in determining the amount of a lien under subsection (1) or (2), there may be taken into account the amount that is, as between a payer and the person the payer is liable to pay, equal to the balance in the payer’s favour of all outstanding debts, claims or damages, whether or not related to the improvement. R.S.0.1990, c. C.30, s. 17 (3).

[17] I have read the definition of “payer” in the Act:

Payer” means the owner, contractor or subcontractor who is liable to pay for the materials or services supplied to an improvement under a contract or subcontract; (“responsible du paiement”)

[18] Neither the owner nor contractor in the Elm St. project is liable to pay for materials or services on Birchmount. Nor is the Birchmount owner or contractor liable to pay for materials or services on Elm St.

[19] Further, I have considered the case cited by the Defendant. C & A Steel (1983) Ltd. V. TESC Contracting Co. 1998 14682 (ON SC), [1998] O.J. No. 6477. As in the present case there were two projects:

It is conceded by the plaintiff that the defendant presents a triable issue with respect to a claim in relation to the Blower Building project for an amount in excess of the lien claim with respect to the Sault Ste. Marie Mill Upgrade project. In my view, the defendant is entitled to have this claim treated as a defence pursuant to the Construction Lien Act, R.S.O. 1990, c. C.30, s. 17(3), which provides that "there may be taken into account the amount that is, as between a payer and the person the payer is liable to pay, equal to the balance in the payer's favour of all outstanding debts, claims or damages whether or not related to the improvement" (emphasis added). This broad language creates a statutory right of set-off broader than equitable set-off: see McGuinness, Construction Lien Remedies in Ontario, 2nd ed., at pp. 218-19.

While s. 17(3) is subject to Part IV of the Act, dealing with the holdback, I accept the argument put by the defendant that the saving for the holdback provisions "is intended to furnish the provision with sufficient scope to enable it to deal with the multi-level contractual nature of many construction projects" (McGuinness, supra, at p. 219) and does not preclude a set-off defence as between immediate parties. In any event, if I am in error in so concluding with respect to the holdback portion, I would exercise my discretion to stay execution on any judgment granted pursuant to rule 20.08 of the Rules of Civil Procedure with respect to the holdback pending determination of the defendants' claim.

I reject the submission of the plaintiff that there should be judgment in the construction lien action and that the defendant should be left to advance the counterclaim in the collection action. In my view, that would be patently unfair to the defendant as the plaintiff has claimed the benefit of the construction lien statute and has obtained security for its claim. Having availed itself of the benefits of the Act, I fail to see how the plaintiff can claim to deprive the defendant of the benefits of the statute including the broad set-off provision of s. 17(3).

Collection Action

The amounts claimed by the plaintiff with respect to the contracts for interior concrete and blockwork, primary sludge dewatering, and aeration basin are not in themselves disputed. The total amounts of such claims is $97,493.57. The plaintiff concedes the validity of the defendant's contract claim on the Blower Building contract in the amount of $48,382.59 and submits that it is entitled to judgment for the difference between those two amounts namely, $48,382.59. However, the plaintiff has also conceded that the defendant presents a triable issue on the counterclaim for approximately $223,000. The result is that when one totals the amount of the plaintiff's claim advanced in the construction lien action with the net claim advanced in the collection action, the total value of the counterclaims advanced by the defendant conceded to raise triable issue comes to within $7,000 of the plaintiff's claim.

I have no hesitation in finding that the counterclaim raises a triable issue for an amount in excess of the plaintiff's claims. In particular, I find that there is a triable issue as to the overtime claim well in excess of the amount conceded to be a triable issue by the plaintiff.

The plaintiff submits, however, that in the collection action, where s. 17(3) of the Construction Lien Act does not apply, the defendant does not satisfy the test for an equitable set-off to avoid judgment. If it does not, the issue then becomes whether any judgment should be stayed pending resolution of the defendant's counterclaim. The plaintiff also takes the position that the claims advanced by the defendant by way of counterclaim with respect to the Falconbridge, Neelon Castings, and SMP Screen-Room Upgrade contracts are presented in such bald terms that they do not raise a triable issue and that those claims should be dismissed at this point.

In my view, in the circumstances of the dealings between these parties, the defendant is entitled to assert its claims by way of equitable set-off. In Telford v. Holt, 1987 18 (SCC), [1987] 2 S.C.R. 193 at p. 212, 41 D.L.R. (4th) 385 at pp. 398-99, the Supreme Court of Canada set out the criteria for equitable set-off.

▪ (1) The party relying on a set-off must show some equitable ground for being protected against his adversary's demands . . .

▪ (2) The equitable ground must go to the very root of the plaintiff's claim before a set-off will be allowed . . .

▪ (3) A cross-claim must be so clearly connected with the demand of the plaintiff that it would be manifestly unjust to allow the plaintiff to enforce payment without taking into consideration the cross-claim . . .

▪ (4) The plaintiff's claim and the cross-claim need not arise out of the same contract . . .

▪ (5) Unliquidated claims are on the same footing as liquidated claims . . .

It is my view that each of these criteria is satisfied in the circumstances before me. Given the relationship and dealings between the parties, it would be inequitable if one were called upon to satisfy the claims of the other before the claims of the other were satisfied. The close interrelation of these claims is reflected by the plaintiff's concession that the amount owing to the defendant by the plaintiff under the Blower Building contract would have to be deducted from any judgment recovered in the collection action by the plaintiff. The fact that the plaintiff made such concession, in my view, demonstrates the close relationship between these claims and the need in equity to have them resolved at one time and to avoid a situation where one party is called upon to pay the claim of the other before all claims have been resolved. Telford v. Holt makes it clear that the modern approach to equitable set-off is a broad one and that rigid categories of the past no longer govern: see especially at pp. 213-14 S.C.R., p. 400 D.L.R. where the court quotes from the judgment of Denning M.R. in Federal Commerce & Navigation Ltd. v. Molena Alpha Inc., [1978] 3 All E.R. 1066 (C.A.) at p. 1078. On the evidence before me, it appears that both parties have in effect treated their respective obligations and claims as a running account and withheld payments acknowledged to be owing because of unresolved competing claims. As noted in McGuinness, supra, at p. 222, there is "an established practice" in the construction trade to treat claims in this manner. In my view, that constitutes grounds for finding that the defendant is entitled to avoid judgment at this stage on the basis of equitable set-off. (my emphasis added)

[20] Grace J. explained the application of that case recently in Architectural Millwork & Door Installations Inc. v. Provincial Store Fixtures Ltd. [2015] O.J. No. 4083

60 However, the competing obligations must be sufficiently connected that it would be unjust to permit one party to enforce payment without taking into account the commitment flowing the other way: Government of Newfoundland v. Newfoundland Railway Co. (1888), 13 App. Cas. 199 (P.C.); Coba Industries Ltd. v. Millie's Holdings (Canada) Ltd. (1985), 1985 144 (BC CA), 20 D.L.R. (4th) 689 (B.C.C.A.) at 696-697; Telford v. Holt, supra at 398-399; Federal Commerce & Navigation Co. v. Molena Alpha Inc., [1978] 3 All E.R. 1066 (Q.B.) at 1078; Algoma Steel Inc. v. Union Gas Ltd., supra at paras. 26-32.

61 C & A Steel, supra provides a useful example. While the claim by the plaintiff arose under one construction contract and the alleged set-off under others, Sharpe J. concluded that equitable set-off applied. He wrote:

o On the evidence before me, it appears that both parties have in effect treated their respective obligations and claims as a running account and withheld payments acknowledged to be owing because of unresolved competing claims. As noted in McGuinness, supra, at p. 222, there is "an established practice" in the construction trade to treat claims in this manner. In my view, that constitutes grounds for finding that the defendant is entitled to avoid judgment at this stage on the basis of equitable set-off.

o 62 Hennessy J. distinguished that fact situation from the one before her in Total Electrical v. Collège Boréal, 2011 ONSC 4586 (S.C.J.) in part because:

o ...there is no evidence from the defendant on the relationship between the parties that might suggest that they had a practice or understanding that there was a "running account" between them with respect to different projects. From the plaintiff, the evidence was clearly and emphatically to the contrary.

o 63 In my view, equitable set-off does not arise on the facts of this case. Provincial and AMDI had a multi-year relationship. There is nothing in the evidence which suggests that payment on one project was tied to performance on another at any other time.

o 64 The OLG Casino Project was entirely separate from the Imara Project. They were undertaken at different times, in different cities and for different owners. Provincial's accounting system tracked each job separately and "kept the funds for each of the projects segregated."

[21] The Defendant argues that C & A Steel, supra covers the relationship here where there were two projects at similar time with some time sheets referencing Elm and Birchmount. However, there is no comparable concession by the Plaintiff that the amount owing to the defendant by the plaintiff under the Elm St. contract would have to be deducted from any judgment recovered in the collection action by the plaintiff. There is no comparable evidence to support a finding that the parties “have in effect treated the respective obligations and claims as a running account and withheld payments acknowledged to be owing because of unresolved competing claims”. To the contrary, the owner / contractor is insulated from liability by inserting a different corporate “person”. It was not suggested in the evidence that these two projects were part of a wider relationship. Application of section 17(3) in the present circumstances would result in the Plaintiff never being able to claim payment for finished projects. There is no flavour here of “Having availed itself of the benefits of the Act, … the plaintiff … claiming to deprive the defendant of the benefits of the statute including the broad set-off provision of s. 17(3).”

[22] Accordingly I find A. C. Concrete Forming Ltd is entitled to:

(a) Summary judgment on and payment of the Plaintiff’s contract and extra claim in the amount of $131,919.97 as against the Defendant;

(b) The Plaintiff’s Claim for lien and the counterclaim now for $12,397., shall continue to trial (or other final resolution);

(c) Enforcement of $12,397, of the Plaintiff’s judgment is stayed pending finalization on the lien and counterclaim. The $119,522.97 remaining may be enforced.

(d) Prejudgment and post-judgment interest on $119,522.97 from May 1, 2015 at the contract rate of 4%per annum above the prime rate of interest charged by the Royal Bank of Canada, compounded monthly;

[23] Costs of the within motion may be addressed, as discussed, by written submission sent to the judicial secretary in Barrie, of no more than two pages together with offers and Bill of Costs by December 15, 2015 from the Plaintiff, January 11, 2016 for response, and January 15, 2016 for reply.

[24] It is axiomatic that the amount paid into court on the lien may be reduced, on motion, to the extent of payment out of the Plaintiff’s judgment on the contract herein. No double protection or payment is claimed or contemplated.

EBERHARD J.

Released: December 4, 2015