Court File and Parties

COURT FILE NO.: 8344/14 DATE: 2016/05/19

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

Muskoka Minerals & Mining Inc., Plaintiff Derek A. Schmuck, for the Plaintiff

- and -

Gorge Holdings Inc. Big Biz Inc. 2239517 Ontario Inc. carrying on business as Not So Pro Sports John Morrison, Defendants Brett D. Moldaver, for the defendant Gorge Holdings Inc.

HEARD at Welland, Ontario: April 19, 2016 The Honourable Justice P. R. Sweeny

JUDGMENT

Introduction

[1] The plaintiff Muskoka Minerals & Mining Inc. delivered about 550 tons of sand to 296 Collier Road South, Thorold, Ontario to create indoor volleyball courts. An indoor volleyball league was to be run out of the premises by 2239517 Ontario. Inc. carrying on business as Not So Pro Sports (“Not So Pro”) under the direction of John Morrison (“Morrison”). Morrison has had prior experience operating similar volleyball venues.

[2] When the plaintiff did not receive payment in full, it registered a lien against the property and issued this claim against the landlord/owner of the property, Gorge Holdings Inc. (“Gorge”), Not So Pro, Big Biz Inc. (another corporation owned by Morrison), and Morrison.

[3] Gorge says that it is not liable under contract and that the lien was improperly registered against its ownership interest. Not So Pro acknowledges the debt. The plaintiff has judgment against Not So Pro, Big Biz Inc. and Morrison. The judgment has not been paid. The claim is for $8,404.73 plus interest at 24% per annum under the contract.

Issues

[4] The issues are: (I) Is Gorge liable in contract to the plaintiff? (II) If Gorge is not liable in contract, is Gorge liable under the Construction Lien Act as an owner of the premises? (III) If Gorge is not liable under the contract or under the Construction Lien Act, is Gorge liable in quantum meruit to the plaintiff?

Background

[5] Todd Knapton (“Knapton”) gave evidence on behalf of the plaintiff. He is in charge of sales and business development and has worked for the plaintiff for 26 years. Knapton had prior dealings with Morrison, and he had failed to pay in full for sand that had been delivered. Knapton’s evidence was that he spoke on several occasions with Alan Parker (“Parker”), an employee of Gorge. As a result of those conversations, Knapton understood that Gorge was involved in the project with Morrison. The plaintiff required a deposit to be paid and a contract to be signed before the sand would be left at the premises.

[6] Knapton believed he spoke to Parker on several occasions and met with him on October 30th prior to the sand being dumped. Parker denied meeting Knapton. Knapton was cross-examined and confirmed that he believed he spoke to Parker about six times on the phone: four with Morrison on the line also, and twice with just Parker. Parker denied any conversation with Knapton. The fact of Parker’s denial of any contact was not put to Knapton in cross-examination and he had no opportunity to offer any explanation. Knapton was not available to be called to give evidence in reply as he left the courthouse for an appointment immediately after giving his evidence.

[7] Morrison gave evidence on behalf of Gorge. Initially, Morrison was working with a partner who was to provide $50,000.00 cash for the business. When the partner dropped out, Morrison needed money. He spoke with Parker and was able to persuade Parker, as the representative of Gorge, to assist. After his partner backed out and refused to go forward, it was his evidence that he told Knapton to contact the landlord to have a discussion.

[8] Jordyn DelBen Fletcher (“Fletcher”) is the president of Gorge. He says he had no involvement with this matter before October 31, 2013. Fletcher first testified that the $15,000.00 deposit was a tenant inducement. In fact, it was not simply a tenant inducement. There was a specific written agreement (Exhibit 12) where Not So Pro and Morrison agreed that Not So Pro would pay $5,000.00 on or before Dec 31, 2014 and transfer ownership of a 1961 Fargo truck to Gorge. The agreement dated October 29, 2013 provided that if on December 31, 2015 Not So Pro was not in default of its payments, the truck and ownership would be returned. According to Morrison, the truck was signed over to Gorge. The truck was a novelty item worth at least $15,000.00.

[9] On October 29th, Knapton sent an email to Parker attaching a copy of the Supply Agreement (“the Agreement”). The email reads as follows:

Hello Alan,

Here is a copy of the Supply Agreement that I will require to be initialed along with the required Certified check as a deposit. I will have John sign as the “owner” and Gorge as the “Deposit”. John is to provide me with a check as well, postdated as described in the Agreement.

Thank you very much and see you tomorrow at 8:00 a.m.

[10] Parker did not recall receiving the email but acknowledged that he likely did receive it.

[11] The evidence of Parker and Knapton is contradictory. Knapton recalls speaking and meeting with Parker. Parker denies meeting and speaking with Knapton. I am satisfied that Knapton either spoke with Parker or spoke with Morrison’s partner that had dropped out and understood that person to be Parker. Morrison told Knapton to contact the landlord to have a discussion. Knapton seemed to be reliable and straightforward in his evidence. The email was sent to Parker. Ultimately, it is unnecessary to resolve this discrepancy because Parker received the Agreement and signed it.

[12] The Agreement is said to be between Morrison and Hutcheson Sand and Gravel (trade name of the plaintiff). Morrison is described as the owner and Hutcheson as the supplier/vendor. The scope of work includes the “supply of approximately 550 +/- TONS of Processed Washed Hutcheson V Sand”. The price was estimated to be approximately $25,300.00 plus HST. The Agreement includes the following:

Please note that the Landlord, known as “Gorge Holdings”, c/o Mr. Alan Parker have submitted a deposit of $15,000.00 by way of Certified check to Hutcheson Sand on the 30th of October, 2013 for the initial monies required for the sand sale.

The address for Gorge Holdings was handwritten in later.

[13] Under “TERMS AND CONDITIONS” the contract reads:

Payment is due upon invoice receipt. Other Standard Terms and Conditions apply (see below or on reverse side). The above listed, Mr. John Morrison agrees to “Gorge Holdings” pay Hutcheson with a deposit of $15,000.00, which will be applied to the last invoice for the project. Based on the take-off, the balance of $14,589.00 plus equipment time, will be due in 30 Days and paid by way of Postdated check for November 30, 2013.

[14] Parker signed the Agreement on the morning of October 30th before the sand was delivered. He understood that the sand would not be delivered unless he signed the Agreement. He read the Agreement in its entirety prior to signing. He signed it as purchaser. He also understood that the deposit had to be paid before the sand would be delivered. A certified cheque was provided to the plaintiff and the sand was delivered.

[15] The Agreement was also signed by Morrison. Morrison signed the Agreement on the far right of the signature page, handwriting in “purchaser” and the date. He also changed the date of the postdated cheque from November 30, 2013 to “Dec 03/13”.

[16] Although the agreement is said to be between Morrison as owner and Hutcheson as supplier/vendor, the first invoice was sent to Not So Pro at an address on Queen Street East in Toronto. It was dated October 31, 2013 and the total due for delivery of sand was $24,466.73. A further invoice was sent to Not So Pro at the address in Toronto on November 22, 2013 in the amount of $2,938.00 for the bobcat and operator used to distribute the sand as set out in the Agreement. No invoice was sent to Gorge. The $15,000.00 deposit was applied to the account. However, the balance was not paid. On December 13, 2013, a construction lien was registered against Gorge’s property interest in the amount of $12,404.73. A certificate of action was registered on January 14, 2014.

[17] The plaintiff received two payments of $2,000.00 each from Morrison in March and June 2014, leaving a net amount of $8,404.73 for principal plus accrued interest under the contract.

[18] Although Not So Pro occupied and carried on business on the premises from November 2013 until March 2016, very little rent was actually paid. Morrison stopped paying the full rent in March 2014. Gorge was owed in excess of $170,000.00 from Not So Pro. Morrison said there were issues of rental payments and Fletcher was “happy to work with us.”

(I) Is Gorge liable in contract?

[19] Gorge says it is not liable under the contract. It only agreed to pay the deposit. The plaintiff says Gorge is liable – it signed as purchaser. It was working with Not So Pro and Morrison.

[20] The parties agree that the correct approach to contract interpretation is as set out by Winkler C.J.O. in Salah v. Timothy’s Coffees of the World Inc., 2010 ONCA 673, as follows:

…When interpreting a contract, the court aims to determine the intentions of the parties in accordance with the language used in the written document and presumes that the parties have intended what they have said. The court construes the contract as a whole, in a manner that gives meaning to all of its terms, and avoids an interpretation that would render one or more of its terms ineffective. In interpreting the contract, the court must have regard to the objective evidence of the “factual matrix” or context underlying the negotiation of the contract, but not the subjective evidence of the intention of the parties. The court should interpret the contract so as to accord with sound commercial principles and good business sense, and avoid commercial absurdity. If the court finds that the contract is ambiguous, it may then resort to extrinsic evidence to clear up the ambiguity…. (para. 16)

[21] It is clear on the evidence of Parker that he was aware that his signature on the Agreement was required before the sand would be delivered. In addition, the deposit was required. It was paid by Fletcher prior to the sand being delivered. Although Morrison denied he was a partner with Parker or Gorge, he told Knapton to contact Gorge with respect to money issues. Based on all the evidence, I am satisfied that Gorge was actively supporting and encouraging the indoor volleyball venture. The fact of Gorge’s involvement was a determining factor in the delivery of the sand. The plaintiff requested some evidence of Gorge’s involvement more than simply the delivery of the deposit. On behalf of Gorge, Parker signed the Agreement, which confirmed the involvement of Gorge in the venture.

[22] In interpreting this Agreement, I place emphasis on the fact that Parker signed as purchaser, as did Morrison. In the email, Knapton required Gorge to sign as “Deposit”. There is no definition for deposit. The contract itself provides a payment of $15,000.00 as a deposit and a post-dated cheque for the balance. Given the plaintiff’s understanding that Gorge was involved in the business and that the plaintiff required that both sign, it is reasonable to interpret the contract to mean that each of Morrison and Gorge would be liable for the full amount if the other did not make the requisite payment. Accordingly, I find that Gorge is liable to the plaintiff for the amount outstanding, together with interest at 24% per annum in accordance with the contract.

(II) Is the landlord liable under the Construction Lien Act as an owner of the premises?

[23] Given that I have found Gorge is liable under the contract, in my view, it follows that Gorge is liable under the Construction Lien Act.

[24] Under s.14(1) of the Construction Lien Act, a person who supplies services or materials to an improvement for an owner has a lien upon the interest of the “owner” for the price of these services or materials. In Roni Excavating Ltd. v. Sedona Development Group (Lorne Park) Inc., 2015 ONSC 389, Ricchetti J. addresses what constitutes a statutory owner:

50 The Construction Lien Act defines “owner” as follows: “owner” means any person, including the Crown, having an interest in a premises at whose request and, (a) upon whose credit, or (b) on whose behalf, or (c) with whose privity or consent, or (d) for whose direct benefit, an improvement is made to the premises but does not include a home buyer;

51 This is referred to as a “statutory owner”. There may or may not be more than one statutory owner for Construction Lien Act purposes.

52 There is a three part test for a party to be a statutory owner under the Construction Lien Act: (a) The party must have an interest in the premises; (b) The party must have requested the improvement in the premises; and (c) The improvement on the premises must have been made upon that party’s credit or behalf or with that party’s privity or consent or for that party’s direct benefit.

[25] In this case, Gorge is the owner of the premises. Gorge signed the contract and requested the improvement to the premises by the delivery of the sand. By signing the Agreement, Gorge lent its credit and consented to the improvement. Therefore, under s.14(1) of the Construction Lien Act, the plaintiff has a lien upon the interest of Gorge for the contract price of $8,404.73.

[26] This is not the case of an absentee landlord simply making a payment for some tenant improvements. In this case, Gorge was an active participant in facilitating the delivery of the sand and supporting the venture.

[27] Given my determination of these two issues, there is no need to consider whether there is any liability of Gorge to the plaintiff based on quantum meruit.

Disposition

[28] The plaintiff shall have judgment against Gorge Holdings Inc. in the amount of $8,404.73 plus prejudgment interest at 24% per annum in accordance with the contract and the plaintiff has a lien for the amount of $8,404.73 on the premises.

Costs

[29] If the parties are unable to agree on costs, I will accept written submissions addressed to me at my chambers in Welland, limited to three pages, plus a bill of costs and any offers to settle. In addressing the issue of costs, I encourage the parties to be mindful of rule 1.04(1.1) of the Rules of Civil Procedure dealing with proportionality. The plaintiff shall deliver them within 10 days of the release of this decision, and Gorge has a further 10 days to respond.

Sweeny J. Released: May 19, 2016