Court File and Parties

Court File No.: 11-51396 Date: 20160613 Ontario Superior Court of Justice

Between: Sylvain Lacroix, carrying on business as S & L Mechanical Plumbing and Heating, Plaintiff And: Robert Dompierre on behalf of Lexus Mechanical Inc., Defendant

Counsel: Cheryl Gerhardt McLuckie, for the Plaintiff Margot Pomerleau, for the Defendant, Robert Dompierre only

And In The Matter Of: Court File No.: 15-65289 Between: Sylvain Lacroix, carrying on business as S & L Mechanical Plumbing and Heating, Plaintiff And: Robert Dompierre, Defendant

Heard: February 16, 17, 18, and 19, 2016

Before: Beaudoin J.

Reasons for Decision

The Claims

[1] There are two actions being tried together. The first is a lien claim brought by Sylvain Lacroix (Lacroix) operating as S & L Mechanical (S & L) for unpaid invoices in relation to labour and materials supplied for heating and mechanical work for the housing project (the “Project”) at 466 Metcalfe St. in Ottawa known as the “Beaver Barracks.” There is a claim for set-off by the Defendant, Lexus Mechanical (Lexus). S & L’s registered lien was then bonded off. Robert Dompierre (Dompierre) indemnified the bond company and he was added as a party to the action commenced by S & L. Lexus then became bankrupt and S & L obtained an order to continue.

[2] The second action was commenced against Robert Dompierre alleging a breach of trust. On October 27, 2015, Master MacLeod ordered that the breach of trust claim be tried together with the lien claim.

Background

[3] The plumbing and mechanical work for the Project required a 3-in-one system; heating, cooling and hot water. Corix Utilities Inc. (“Corix”) was the general mechanical contractor to the Project and Corix also supplied the equipment. Corix then entered into a sub-contract with Lexus to supply certain construction work. Lexus then sub-contracted with S & L to connect equipment in the mechanical room. Hemmera Engineering (“Hemmera”) were the mechanical engineers.

The Issues for Trial

1. Was S & L’s lien registered in time?
2. Is the Claim for Breach of Trust against Robert Dompierre out of time?
3. What are the amounts owing to S & L and to what extent does Lexus have a right of set-off?

The Evidence Presented at Trial

Sylvain Lacroix

[4] He testified that S & L had been approached by Lexus for a bid on the Project since the two companies had worked together in the past. A purchase order was issued from Lexus to S & L on April 26, 2010 in the amount of $289,000. The purchase order contemplated that the work would be completed by June 15, 2015, but more time was required. Lexus had also issued a separate purchase order to S & L on March 29, 2010 in the amount of $3,000 to unload the equipment at the site. Work did not commence until May 2010 through no fault of S & L who was not responsible for construction management.

[5] There were changes to the original plan. Originally, the heating pumps were to be located on the floor of the mechanical room, but this room was not large enough. As a result, the pumps had to be attached to the ceiling. According to Lacroix, this impacted the seismic specifications which increased the price as the pumps now required steel braces. The seismic bracing had to be approved and certified by an engineer.

[6] Lacroix said there were other changes. Hemmera requested balancing valves which were not in the original specifications. There was extra piping required for an extra boiler. Lacroix said he performed all of the work he was requested to do and that nothing was removed from his contract after the purchase order was issued. He said that nothing was done without approval. While he submitted quotations for changes and invoices which were introduced in evidence, only one change order was produced and there was only one extra purchase order from Lexus dated November 24, 2010 in the amount of $7,520 for pipe welding.

[7] At one point, the gas piping was changed. Lacroix claimed he was ready to proceed with the work, but he needed additional information before he could proceed further. Since Corix was insisting that work proceed immediately, Lexus hired another contractor at a higher price. Lacroix acknowledged that some credit should be given to Lexus.

[8] Lacroix produced copies of emails wherein he sought approval for change orders or purchase orders, but he acknowledged an absence of approval or response. Another quote for a change order resulted from a request by Lexus to change the steel pipe to PVC plastic pipe. No purchase order was issued. He said that he and Lexus came to an agreement on the cost of that item. There was one request on September 10, 2010 for a 3-way valve and there was a change order from Hemmera, but no purchase order from Lexus.

[9] There was an emergency meeting in October 2010 so that an occupancy permit could be obtained for one of the buildings for November 1, 2010. Lacroix said temporary heating had to be provided since the heating contractor had not made decisions on equipment. There were a number of meetings and Corix paid S & L directly to provide the emergency services. This was separate from S & L’s contract with Lexus.

[10] Lacroix reviewed the minutes of a site meeting of October 12, 2010. While all equipment was installed, not everything was connected. There was an issue with respect to the PVC pipes that needed to be glued and welded to withstand the pressure. At this point, he claimed that there was still work to be performed under the contract with Lexus.

[11] A second emergency occurred in mid-November after there was a fire on site. There was damage to the mechanical room. There was an emergency meeting on December 22, 2010 and S & L entered into an arrangement directly with Corix for services under that plan. Lexus was no longer on-site after the fire.

[12] By late December, 2010, Lacroix said he still needed to complete a bit of seismic work, piping for a holding tank, and he was still waiting for word on expansion valves. The last thing to be done was the piping with respect to the holding tank as this tank was located in front of the door to the mechanical room and it could not be done until all of the rest of the equipment had been moved into the room.

[13] At the time of the fire, Lacroix claimed that the system was operational, but on a temporary basis only. They were getting ready to operate the system when the fire happened. The commissioning was done. The boilers were operational and the system was functional, but there was still outstanding work to be done.

[14] At this time, he claimed to be doing remedial work with Corix and completing his work on the Lexus contract. He said that there were still items to be repaired as a result of the fire before he could complete his work on the contract with Lexus.

[15] Corix then gave the remedial work to a different company. His contract with Corix was terminated on February 22, 2011. By this time, Lacroix claimed he still had some work to finish with respect to the seismic fittings on the holding tanks; some work on the heat pumps, work in the garage, and the balancing valves on the heat exchangers. He said that this was all original contract work or extra work required either by Lexus or by Corix.

[16] He claimed that there were no deficiencies. After Lexus left the site, he was communicating with Corix to make sure that he had approval to do the work. He wanted to finish the contract. Between February 1 and February 4, 2011, he was sending emails to Corix and to Lexus.

[17] In an email to Dompierre dated February 1, 2011, he says:

“… I am notifying you that I will be on site to finish my part of the contract Feb 7 th & 8 th ”

[18] He goes on to say that he will shut down the boiler to modify the piping and said he would then have the letter for seismic. Corix advised him not to do that work because of their insurance claim to which Lacroix responded on February 2, 2011:

I will not wait until the settlement of the insurance claim. Lexus will not pay me anything until my work is fully completed. For a $2000.00 job, I will have to wait month before I get paid 69,000 of money owed. This is not acceptable. I just want to finish, get out and get paid. Also Corix has an unpaid balance …when will I be able to collect the money.

Corix replied in an email dated February 4, 2011:

The insurance settlement is not related to the original contract work, the work you were proposing to complete is not required as due to the fire the boilers will be replaced and the work you are proposing will be completed at that time.

We have work out payment to Lexus for the work performed to date and will be issuing payment. I will check on the unpaid balance for S&L.

Lacroix then replied:

Please send me all the information regarding payments that you and Lexus agreed on ASAP. I will go and finnish (sic) the small issues other then (sic) Boiler 1 and 2. Could you please explain then to Lexus that work has been done 100% and the piping for the boilers are insurance issues so they would pay me in full.

Please provide with these information no later than Monday morning.

On Wednesday, February 9, 2011 Corix advised:

Sorry for not replying earlier. I have a number of other projects starting up and my days have been packed full. I was waiting for all the final clarification invoicing from Lexus which was final (sic) sent end of last week, and I am working on issuing them payment now. It will take a day or two on my end as it is out of the normal payment cycle.

[19] Lacroix had heard that Lexus’ contract with Corix had been terminated, but did not know for sure. He was never advised by Corix.

[20] He claims that the last day he supplied labour was February 21, 2011. All material had been on site from the outset. At that point, there was only a small portion of the seismic fittings to be done and a small portion of the boiler work which he was told not to do. He did not complete the seismic work.

[21] He went through the various invoices that he sent to Lexus. Although the first invoice, no. 21 dated September 17, 2010, is with respect to the final progress billing, he claimed that he could issue that because 90% of the work was done and it was expected to be finished within a month.

[22] Invoice no. 23 was the billing for extras, and on December 13, 2010, he billed for the holdback. He claimed he was still on site and that the holdback billing was proper. There was no payment certifier. This amount was not paid.

[23] There were two invoices identified as no. 30 dated January 6, 2011 in the amount of $3,940.77. One invoice was sent to Lexus, and the other was sent to Corix. These were for the installation of five balancing valves recommended once the commissioning of the equipment had started. These were extras. Lacroix said that there were arguments on the site as to who was going to pay. Lexus was not there. Lacroix was looking to be paid.

[24] Invoice no. 30B dated January 10, 2011, referred to an additional 3-way valve. This was an extra requested by Corix/Lexus for which he quoted a price on September 10, 2010.

[25] Invoice no. 35 referenced welding he was instructed to complete, and this could be cross-referenced to a purchase order from Lexus dated November 24, 2011.

[26] At times, he indicated that the work had been done at the request of either Corix or Lexus. He then sent emails looking for payment on March 3, 2011 where he only claimed an outstanding balance of $60,083.75. He renewed his demand for payment on March 8, 2011.

[27] He then got a response from Lexus on March 9, 2011. At this point, Lexus was looking to set off the full amount of the balance claimed. According to Lexus, the outstanding amount owed to S & L was $57,206.20. Lexus was claiming that S & L’s work was either deficient or not completed. Lexus also sought to set off claims with respect to another contract it had with S & L on a project known as the Florida Lab.

[28] Lacroix disputed Lexus’ starting figure. It was missing one purchase order and the extras. He disputed the claims for set-off that were itemized.

[29] Item 1 referenced the gas piping that was performed by somebody else. He did not do the work, but claimed that he did not have sufficient information to claim that part of the job. He said that the amount of $7,562.41 claimed by Lexus exceeded the value of what he was to do under his contract with Lexus.

[30] Item 2 was a claim by Lexus for lost or damaged boiler panels. Lacroix said that Lexus removed these, and since there was no place to put them in the mechanical room, they were placed in the garage next to the mechanical room. The asphalt contractor who was doing work on the garage later threw them out. He claimed it was not S & L’s responsibility to look after the panels. The March 9th letter was the first time he learned that Lexus was holding S & L responsible for these.

[31] In Item 3, S & L was claiming $9,831 for a damaged pump that it said was installed backwards. Lacroix installed it. Once he started it up, there was a noise coming from one of the pumps and he notified Lexus and Corix that the pump was defective. Since Corix supplied the pump, it was going to get another one. Lacroix said it was impossible to install the pump the wrong way. If it was not installed properly, there would be no pressure in the system and the problem would have been obvious right away. He said the motor on the pump had a fan that was rubbing on the steel and making the noise. No one told him that there would be a chargeback and he was never asked to go back to repair the pump.

[32] Item 4 included a claim for $18,720.80 for seismic work that was not performed. He agreed that some of this was not completed. He claimed that he had done the work set out in Lexus’ letter, but that he never got a chance to have an engineer come on site to certify the work he had done because of the fire. He claimed that the amount charged back was almost the full amount he had quoted for all of the seismic work whereas he had done 90% of the work.

[33] The other chargebacks related to another project that he had with Lexus called the Florida Lab. Item 5 referred to back charges to Lexus from the general contractor, MCB Construction. Lexus claimed that it had paid S & L’s first progress billing on that project in advance. Lexus claimed that S & L had not done all of the work on time and MCB then hired someone else to finish the job at a higher cost which it then passed on to Lexus. Lacroix disputed that he had been paid in advance and claims that he did the work he was paid for (on April 10). He agreed that some of the work had not been done because he was unable to finish the work as MCB wanted it done right away. He claims he was removed from the job site without prior notice. He was aware that Lexus had issues with the plumbing side of the contract after he left the site.

[34] Item 6 was not pursued at trial. He took no issue with Item 7 which made a claim of set-off in the amount of $965.97 for a restocking fee.

[35] After he received the March 9, 2011 letter, Lacroix then put a lien on the Project. He claimed that the last piece of work he had done was to complete the connection over the door to the mechanical room. That was done in February 2011. At first, he could not give the date, but said it was before he left the site. He was then not sure what the last thing was he had done; it could have been work in relation to the valves. He said that the work was done between mid-January or the 21 st or 22 nd when he left. He was waiting for answers from Corix or Lexus. He admitted he was not on site every day.

[36] As for the claims for lien, the registration of the lien receipted as OC12220002 on April 4, 2001, was made an Exhibit. The statement indicates that the last date of work was February 11, 2011. In his affidavit in support of the lien, Lacroix claims the last date services or materials were supplied was February 21, 2011.

[37] The lien was bonded off and the action was set down for trial within 2 years of the issuance of the Statement of Claim. Lexus went bankrupt on November 26, 2014. Lacroix said he never knew what Corix paid to S & L, and that he never received an accounting from Lexus. He claims he had no knowledge as to whether Lexus was paid.

[38] In cross-examination, he acknowledged that the seismic work was not completed and that he did not complete the gas piping, but claimed he credited that amount against extra new work. With respect to the pipe welding, he agreed that there was a purchase order for that item because it was an extra. He acknowledged that his first four progress billings were paid.

[39] His final invoice was dated September 17, 2010 in the amount of $29,500 and represented the last payment owing on the original scope of work. He estimated that 75% of the work, other than the extras, was completed before the fire. He estimated 40% of the seismic and the piping over the door was not completed.

[40] After the fire, he agreed that the Insurer’s contractor took over. He also agreed that he had a contract with Corix to provide emergency services and that Lexus was not a part of that contract nor was it present at the emergency meeting.

[41] He was taken to his email of February 1, 2011 where he had indicated to Corix and Lexus he would finish his work on February 7 or 8, 2001. He acknowledged that he was told by Corix on February 2, 2001 that the work was not required. He also agreed that Corix repeated that in a subsequent email.

[42] He also acknowledged that only work on the boiler had to be done by S & L and that he was told not to do it. He agreed that as of February 4, he had completed almost 100% of the original scope of the work. As for his contract with Corix which was terminated on February 22, 2011, he agreed that Corix did not request additional work to be done. He understood that Corix was going to hire a new mechanical contractor to complete the restoration of the mechanical room.

[43] He was taken to his email to Lexus and to Corix dated March 2, 2011 wherein he indicated:

It is my understanding that Lexus received the payment yesterday to pay there (sic) subcontractors in full for the Beaver Barracks job. Could you let me know ASAP as when S &L Mechanical will receive there (sic) payment for invoice 21 –33,335.00 and invoice 26 – 26,748.75 for a total of 60,083.75

Lexus replied the same date:

We will contact you shortly can give you the date when the cheque will be ready for pickup.

[44] Lacroix responded on March 3 indicating that he expected payment no later than March 7, 2011 and that he had no intention to negotiate any numbers. He agreed that as of March 2, he believed that Lexus had received payment from Corix.

[45] He was then referred to his email dated March 8, 2001 to Corix and Lexus wherein he confirms his understanding that Corix has paid Lexus. He asked for a copy of the payment letter between Corix and Lexus. He then heard from Lexus on March 9, 2011 when it claimed to set off the amounts that were reviewed with him in his earlier evidence.

[46] He repeated that the accounting provided by Lexus was missing the additional purchase order for the welding. He claimed that extras were missing for the 3-way valve, the balancing valve and an additional 3-way valve. He agreed that he had no purchase orders for these extras. He acknowledged that he had been paid $255,973.80. He did not respond to Lexus’ letter. He disputed their right to claim deficiencies without an engineer’s or architect’s report.

[47] He agreed that he was paid by Corix after the fire to do emergency work; however, he could not recall the exact amounts paid. The total was estimated to be approximately $6,500. He could not recall because of the lapse of time, but knew that there had been eight or nine invoices which he did not produce at trial.

[48] It was suggested to him that when he was not paid by Corix, he would send the invoice to Lexus. He was referred to communications from Corix to Lexus which disclosed payments from Corix to S & L for welding and a 3-way valve. Lacroix said that there were two welding jobs, but only one had a purchase order. He denied that Corix paid for any extras.

[49] He said that when he left the site, there were some invoices owing to him from Corix as well as from Lexus. He agreed that he had no documents to differentiate what he was doing for Corix and what he may be doing for Lexus pursuant to the original scope of work after January 1, 2011. He agreed that Lexus was not on site after the fire in 2011 and that he was working under Corix’ supervision after that time.

[50] He agreed that he knew that Lexus was terminated as of the March 9, 2011 letter from Lexus. He was taken to the set-off items claimed by Lexus. He claimed that the set-off amount for the gas piping was too high. He denied any responsibility for the damage to the boiler panels. He repeated that he had properly installed the pump and stated that 90% of the seismic work had been completed by S & L. Everything had to be taken out because of the fire and the subsequent mechanical contractors had to redo the work.

[51] As for the claims for set-off on the Florida Lab project, he was taken to an exchange of emails between himself and Lexus in January 2015 where MBC is complaining that S & L did not show up on the job site and warned that there would be a charge back. He acknowledged that there was $17,000 worth of work to be done and that he had not completed his share of it. He also knew that Lexus was going to be charged with the cost of finishing the work. Once again, he claimed that the cost of the charge back was too high.

[52] He was taken to his examination for discovery where he claimed that he had done all of the original scope of work before the fire. The engineer had approved all of the work and the only thing that was left involved the extra valves. He had some difficulty explaining his different answers at trial. He agreed that the system was functional before the fire.

[53] As for the lien, he had nothing to show that he had been on the site on February 21 or 22, 2011. He agreed that he had not done 100% of the work, but he could not explain why he did not finish it except that he was told not to do the work.

Robert Dompierre

[54] Mr. Dompierre was the former President and owner of Lexus Mechanical Inc. He sold the business in 2012 to a former employee, Yann Beaudry. He discussed his contract with Corix, the Project, and his sub-contract with S & L. The purchase order in the amount of $289,000 plus GST was for 100 % of the work. He agreed that an additional purchase order was issued for the welding in the amount of $7,520. He received information from Corix that led him to believe that Corix paid S & L directly.

[55] Lexus did the ventilation work for the Project. He testified that S & L’s work was basically all done prior to the fire. The system was functional. He testified with regard to S & L’s final progress billing dated September 17, 2010 in the amount of $33,335. From his experience in the industry, a final progress billing is an indication that the work is expected to be completed by the end of the month.

[56] He agreed that there were some changes to the design that took place in the fall, but there was not much left to be done except for some of the seismic. He disputed S & L’s claim on invoice no. 23 for a 3-way valve and said that no purchase order was issued. This was not requested by Lexus. It appears from an email sent by Mr. Lacroix that this was requested by Corix.

[57] He then went to the holdback billing from S & L dated December 13, 2010 in the amount of $30,226.09. He testified that the holdback is generally billed between 60 and 90 days after all of the work under the contract is done. According to him, an invoice for the holdback is an indication that a project is totally finished.

[58] He disputed invoice no. 30 dated January 6, 2011. He said that Lexus was off the Project after the fire and did not request this work. The insurers stepped in and Corix took over the management of the Project. Lexus did not issue any further purchase orders or direct any work to any other sub-trades after the fire.

[59] Lexus was attempting to be paid by Corix. Corix sent a letter on February 25, 2011 proposing to pay him the amount of Lexus’ outstanding invoices less an amount of $9831.00 that Corix claimed was for the damaged pump caused by improper plumbing. Lexus was then paid in accordance with the amounts agreed upon in two payments. Lexus extended a warranty on its work.

[60] He then testified with respect to the chargeback items claimed by Lexus in its letter of March 9, 2011. He maintained that there were only two valid purchase orders and said that the purchase order for the welding should have been cancelled since it was being paid by Corix.

[61] He testified that the gas piping reflected the cost Lexus paid to have the gas piping done since S & L could not complete the work on time. Lexus had to pay the company that did the work and then passed on the cost to S & L by way of invoice dated January 25, 2011 in the amount of $7,562.41.

[62] He maintained that the lost boiler panels were properly charged back to S & L because S & L was paid to unload the materials. He claimed it was their responsibility.

[63] As for the damaged pump, Lexus agreed with Corix. As for the seismic restraint work (Item 4), Corix took the position that the seismic work had not been done or not done properly so Lexus gave them a credit for the full amount. There had been letters of complaint from Corix with respect to the seismic work in July 2011, and later in December 2012 which Lexus tried to resolve. Dompierre was trying to determine how much seismic work was done by S & L since Lexus had given a full credit ($16,500) to Corix for that portion of the contract. Corix refused to assign any value to the work done by S & L.

[64] With regard to David Florida Lab (Item 5), he testified that Lexus paid $7,976.12 to S & L, but S & L did not finish the work and someone had to be called in by MBC. As a result, MBC charged back the full amount of the contract ($17,651.05) to Lexus. Lexus was seeking only a refund of the $7,976.12 being that portion that was paid to S & L. After totalling the backcharges, Lexus concluded that nothing was owed to S & L.

[65] In October, 2012, Corix made a claim on the warranty that was extended by Lexus in their earlier settlement. Corix demanded payment of $28,356. Lexus settled those claims for $20,500 Lexus further paid $1,500 in legal fees to affect the settlement. According to Dompierre, he said that all of the deficiencies related to work that were done by S & L.

[66] In cross-examination, he admitted that he remained involved in settling Corix’ claims before he sold the company in December 2012. With respect to Lexus’ final billing of $358,009.02 to Corix on January 27, 2011, he agreed that it carried over 100% of S & L’s work.

[67] He was taken to Lexus’ settlement with Corix in February, 2011. One of the terms of that settlement was that Lexus was to certify that outstanding sub-contractors had been paid. It specifically provided that Lexus was to provide proof of payment to S & L before the second payment to Lexus was made. He could not recall if a statutory declaration to that effect was provided to Corix. Lexus took the position that it did not owe any money to S & L. In any event, he testified that Corix must have been satisfied on this issue since it made the second payment to Lexus.

[68] As for the set-offs, he admitted that he had no written contract for the third party (Carmichael) that did the piping, and that Lexus was only charged $6,692.40. He agreed that the lost panels had been originally moved by Lexus.

[69] With respect to the set-off claimed for the pump, he knew that it was noisy when Lexus left the site, but he could not confirm that it was working. He also confirmed that Corix later reduced the amount claimed to $3,236.31. As for the seismic work, he conceded that Lexus had no knowledge of the state of the seismic after the fire. He also agreed that the seismic work as well as some piping claims were part of the later warranty claim.

[70] As for the Florida Lab project, he conceded that he had paid S & L after having received the contract adjustment notice from MCB. He was only seeking to set off the amount he paid to S & L and not the full value of the services that Lexus had provided and that MCB then refused to pay ( item 6 in the March 9 letter).

[71] As for the warranty claim, he could not recall any conversations with S & L with regard to Corix’ claims that S & L’s work had been deficient. He said that he emailed the information to S & L, but no copy was produced. He conceded that his settlement with Corix included a condition that Corix would assist him in this litigation.

[72] He acknowledged that paragraph 13 of his contract with Corix allowed to take over and complete Lexus’ work in the event of a termination of the contract.

Lacroix in Reply

[73] In re-examination, Lacroix testified that he would have insisted on a purchase order before doing any work that was not in the specifications. He said he had two separate purchase orders for welding; one to Corix and one to Lexus. He said that he was not given any opportunity to respond to the warranty claims.

Analysis and Conclusion

[74] After hearing the arguments of counsel, I have come to the following conclusions on the three issues to be decided.

Was the lien registered in a timely way?

[75] Section 31 of the Construction Lien Act, R.S.O, c. C.30, provides:

Expiry of Liens

31. (1) Unless preserved under section 34, the liens arising from the supply of services or materials to an improvement expire as provided in this section. R.S.O. 1990, c. C.30, s. 31 (1) .

Liens of other persons

(3) Subject to subsection (4), the lien of a person,

(a) for services or materials supplied to an improvement on or before the date certified or declared to be the date of the substantial performance of the contract, expires at the conclusion of the forty-five-day period next following the occurrence of the earlier of,

(i) the date on which a copy of the certificate or declaration of the substantial performance of the contract is published as provided in section 32, and

(ii) the date on which the person last supplies services or materials to the improvement, and

(iii) the date a subcontract is certified to be completed under section 33, where the services or materials were supplied under or in respect of that subcontract; and

(b) for services or materials supplied to the improvement where there is no certification or declaration of the substantial performance of the contract, or for services or materials supplied to the improvement after the date certified or declared to be the date of substantial performance of the contract, expires at the conclusion of the forty-five-day period next following the occurrence of the earlier of,

(i) the date on which the person last supplied services or materials to the improvement, and

(ii) the date a subcontract is certified to be completed under section 33, where the services or materials were supplied under or in respect of that subcontract. R.S.O. 1990, c. C.30, s. 31 (3) .

[76] In this case, the date of registration of the lien is April 5, 2011 and S & L has the burden of proof to demonstrate on a balance of probabilities that its claim for lien was registered and preserved before it expired. In satisfying this test, S & L has to demonstrate that the last date on which it supplied services and materials was, at the latest, February 18, 2011.

[77] I am not satisfied that S & L has met that burden. The only evidence that S & L completed its work on February 21 or 22 is the evidence of Mr. Lacroix at trial and in his affidavit of verification. I find that this evidence is not reliable. At trial, Mr. Lacroix had difficulty remembering exactly what he had done on his last day of work and had to be prompted to some degree by his counsel before coming up with a date.

[78] The documentary evidence suggests that he finished any work that he had to do at the very beginning of February at the latest. S & L’s final invoice for the holdback of December 13, 2010 is a strong piece of evidence that the work under the contract was 100% complete. When the holdback is billed, this is evidence that the lien period has expired and the contractor or owner can release holdback funds because the work is complete and other sub-trades cannot lien.

[79] S & L sent invoices to Corix and to Lexus for welding and for 3-way valves. From the emails filed in evidence, it appears that S & L was looking to both Corix and Lexus for direction and change orders even before the fire. S & L had a contract with Corix for emergency services in October. After the fire, S & L had another separate contract with Corix which was formally terminated on February 22, 2011; which happens to be the very same date that Lacroix claimed that he performed service for Lexus.

[80] In his evidence, Lacroix had difficulty identifying the work he was doing for Corix and the work he was doing for S & L. Lexus was not on site after the fire nor was it providing services or materials or direction to anyone. At this point, the insurers had taken over and they had their own contractor.

[81] The email chain of February 1 – 2, 2011 referred to earlier is important. In an email to Dompierre, Corix, and the project manager dated February 1, 2011, Lacroix writes:

“After asking you several time on a schedule to finnish (sic) our contract so we could ALL be paid… I am notifying you that I will be on site to finish my part of the contract Feb 7 th & 8 th . “ I will shut the boiler off to drain part of the system for 5 to 6 hours to modify the piping of boiler 2 & 3. After this work done I will have your letter for seismic…..

Corix responds then responds the same day as follows:

We are currently working through our insurance claim, at this point we are not going to disrupt the system in any manner. We do not require that the work be performed .

Lacroix responded on February 2, 2011:

I will not wait until the settlement of the insurance claim. Lexus will not pay me anything until my work is fully completed. For a $2000.00 job I will have to wait month before I get paid 69,000 of money owed. This is not acceptable.

I just want to finish, get out and get paid. Also Corix has an unpaid balance …when will I be able to collect the money.

Corix replied in an email dated February 4, 2011:

The insurance settlement is not related to the original contract work, the work you were proposing to complete is not required is due to the fire the boilers will be replaced in the work you are proposing will be completed at that time.

We have work out payment to Lexus for the work performed to date and will be issuing payment.

I will check on the unpaid balance for S&L

Lacroix then replied:

Please send me all the information regarding payments that you and Lexus agreed on ASAP. I will go and finnish (sic) the small issues other then (sic) Boiler 1 and 2. Could you please explain then to Lexus that work has been done 100% and the piping for the boilers are insurance issues so they would pay me in full. Please provide with these information no later than Monday morning .

[82] There was nothing left for S & L to do at that point and Lacroix’ own email said he intended to be finished on February 7 or 8. He wanted to finish the small issues so he could be paid as soon as possible. By February 9, 2011, Lacroix was then looking for payment and a reasonable inference can be drawn that he had attended the site as he indicated he would on February 7 or 8, 2011 and finished those small issues. There was no doubt in his mind that he felt entitled to be paid.

[83] As for the registration of the lien, the certificate states the date of the last supply is February 11, 2001, even though Lacroix’ affidavit of verification says otherwise. I note that the affidavit misstated the start date and the contract price listed is different from the amount now being claimed.

[84] All in all, it is not clear what work was done, when it was done, and under which contract be it Lexus or Corix. S & L suggested that Corix had the right to assume Lexus’ obligations pursuant to paragraph 13 of its contract with Lexus. A letter dated February 25, 2001 from Corix to Lexus discloses that the Corix terminated its agreement with Lexus on February 7, 2011. There is no evidence that Corix took the position that Lexus had abandoned the contract or that Corix was taking possession on Lexus’ work on that date. The only evidence is to the contrary; Corix had already told S & L not to do any more work on February 2, 2011.

[85] The case law highlights the difficulty here. In Any-Wall Concrete Forming Inc. v. Bloomfield and Ken Temple Contracting Ltd., 2012 ONSC 2374, 15 C.L.R. (4 th ) 275 , Master Polika reviewed the case law and noted at para. 39:

The defendants Bloomfield tendered six authorities including Applewood, Blockwell, Wildberry and Canadian Rogers. The fifth authority tendered was that of Justice Corbett in Urbacon Building Groups Corp. v. Guelph (City), [1912] O.J. No. 56 where the justice reviewed some of the applicable authorities related to timeliness and at paragraph 4 set out the applicable principles as follows quoting from paragraph 22 of the Justice’s reasons in Urbacon v Guelph (September 1, 2010):

The cases are replete with examples of concocted attendances at a job site to extend the time for filing a claim for lien. 12 The court will not permit a claimant to bootstrap its claim by late attendance at a job site after its lien rights have expired. 13 On the other hand, where there is no certificate or declaration of substantial completion of the contract or the subcontract (as is the case here), a subcontractor lien claimant is entitled to register a claim for lien within forty-five days from “the date on which the [claimant] last supplies services or materials to the improvement”. 14 I do not agree that “unlike a contractor, a subcontractor cannot take a hiatus or holiday from work”. 15 Rather, the question is whether there is continued supply of services and materials under the contract, or whether a subsequent attendance is a sham or ‘bootstrapping” attendance to revive expired lien rights. The cases are fact-specific, and a sweeping conclusion that non-attendance at a construction site for 45 days will terminate lien rights is not correct. 16 Rather, I agree with Di Tomaso J. when he observes:

Sometimes a fine distinction must be made between services and materials supplied in order to complete a contract and the same services and materials supplied merely for the purpose of extending the time for filing a lien which otherwise would have expired. This distinction is a question of fact in every case and often a difficult one to make. 17

I conclude that S & L has attempted to bootstrap its claim against Lexus by relying on Corix’s right to take possession of Lexus’ work pursuant to its contract with Lexus and there was no evidence that Corix did so. I declare that that lien has expired and that the lien bond can be cancelled.

Has the limitation period with respect to the breach of trust claim expired?

[86] The Breach of Trust Claim against Robert Dompierre, was commenced on August 6, 2015. The claim is based on sections 7(1) and 13(1) of the Act which provide:

Owner’s trust

Amounts received for financing a trust

7. (1) All amounts received by an owner, other than the Crown or a municipality, that are to be used in the financing of the improvement, including any amount that is to be used in the payment of the purchase price of the land and the payment of prior encumbrances, constitute, subject to the payment of the purchase price of the land and prior encumbrances, a trust fund for the benefit of the contractor. R.S.O. 1990, c. C.30, s. 7 (1) .

Liability for breach of trust

By corporation

13. (1) In addition to the persons who are otherwise liable in an action for breach of trust under this Part,

(a) every director or officer of a corporation; and

(b) any person, including an employee or agent of the corporation, who has effective control of a corporation or its relevant activities,

who assents to, or acquiesces in, conduct that he or she knows or reasonably ought to know amounts to breach of trust by the corporation is liable for the breach of trust. R.S.O. 1990, c. C.30, s. 13(1) .

[87] Sections 5(1) (a) and (b) of the Limitations Act, 2002, S.O. 2002, c. 24, Schedule. B provide:

Discovery

5. (1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a). 2002, c. 24 , Sched. B, s. 5 (1).

[88] There is no issue that Lexus received the funds and that the statutory trust provisions are applicable in this case. In Datashpere Sales Ltd. v. Universal Light and Power Corp., [1991] O.J. No. 3482 (Ont. Gen. Div.) the court held that a trustee cannot use a right of set-off to defeat the statutory trust provisions of the Act . There is also no question that the two year limitation period is applicable, and that is the critical issue to be decided here. The Defendant maintains that the Plaintiff knew or ought to have known in early 2011 that Lexus had been paid in full. The Plaintiff maintains that he did not obtain a breakdown of the amounts paid by Corix to Lexus until September, 2014, and that the limitation period did not begin to run until that time.

[89] Once again, the documentary evidence is relevant. On March 2, 2011, Lacroix sent Dompierre an email. It read:

It is my understanding that Lexus received payment yesterday to pay there (sic) subcontractors in full for the Beaver Barracks job….

[90] Lexus did not deny this and replied that it would contact him as soon as the cheque would be ready. In turn, Lacroix responded on March 3 stating that he expected payment no later than Monday March 7. On March 8, Lacroix sought details from Corix and his email starts as follows:

In our meeting last week you mentioned that you have paid Lexus Mechanical …

[91] He sought a copy of the payment issuance letter. In its response, Corix does not deny the payment to Lexus, but claims it is not at liberty to share the document between Corix and Lexus. This correspondence confirmed that a payment issuance letter existed. S & L did not seek that information from Lexus nor did S & L invoke its statutory right under section 39 of the Act for the state of the accounts.

[92] In Carmen Drywall Limited v. BCC Interiors Inc., 2013 ONSC 4644, the trial judge concluded at paras. 27(ii) to 29:

[27] ….

ii. Thus, the limitation period commences to run not following any misappropriation of the trust funds by the contractor or knowledge of when the contractor received the trust funds, but on the day a reasonable person out to have known that the damage or loss had occurred. Indeed, s. 39 of the Construction Lien Act entitled the plaintiff as a trust beneficiary of the hold back funds, to request from TTC or BCC at any time, the state of accounts between the owner and the contractor and the material payment bond, posted by the contractor with the owner. Mr. Stornelli indicated in his affidavit that he only contacted the TTC in May 2010 seeking assistance to recover payments.

[28] This raises the question regarding the “discoverability” of a statutory construction trust by a beneficiary of that trust. In Cast-Con Group Inc. v. Alterra (Spencer Creek Ltd.) (2008) 71 C.L.R. (3d) 54 (S.C.J.) . Affirmed (February 20, 2009), File #DC-08-00013-00 (Div. Ct.) the court concluded that reasonable diligence when the contractor did not pay the sub-contractor could have revealed the trust claim and consequently, the limitation period ran concurrently with that of the breach of contract. A similar conclusion can be found in Aldine Construction Ltd. v. Brucegate Holdings Inc. [2010] O.J. No.2214 (S.C.J.) para.18.

[29] Based on these decisions, the plaintiff could well have and should have taken the required steps to commence its action against the defendants within two years of December 2007. The failure to do this means that the plaintiff’s statement of claim filed in January 2012 is statute barred.

[93] The evidence is clear that Lacroix knew he was not going to be paid once he got the March 9, 2011 letter from Lexus. He knew he had suffered damages at that time. He admitted in cross-examination that he knew that Lexus had been paid, yet he did not commence the Breach of Trust of Claim until four years later. I conclude that it was commenced out of time.

The amounts due to S & L and the claim for set-off

[94] Having determined that the lien had expired and that the Breach of Trust Claim was issued out of time, the claims against Mr. Dompierre are dismissed. Given the Order to Continue, the claims against Lexus must be determined. At trial, the Plaintiff claimed that it is owed $84,733.00. Lacroix arrived at the figure by adding the original contract amounts plus the invoices for extras. In February 2011, S & L was looking for $60,083.75. The registered lien refers to the amount of $73,485.35 which is the same amount in the Statement of Claim. The Breach of Trust Claim cites an amount of $87,611.42.

[95] In this case, given some confusion in the evidence, I rely on the purchase orders that were issued in the following amounts:

• $3,000 + GST = $3,390
• $289,000 + GST = $326,570
• $7520 + 977.60 = $8,497.60

Total: $338,457.60

Lexus paid the sum of $255,973.80 which leaves an outstanding balance of $82,483.80.

[96] I cannot rely on the Plaintiff’s invoices. Lacroix testified that he would not do any work without a purchase order. At times, he was looking to both Corix and Lexus for payment and billing each of them for similar items. The evidence with respect to the welding purchase is unclear. The evidence that Corix paid for this is hearsay. Dompierre’s evidence that the invoice should have been cancelled is unreliable.

[97] This leaves Lexus’ claim for set-offs. Section 17(3) of the Act provides:

Set-off

(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.O. 1990, c. C.30, s. 17 (3) .

[98] In C & A Steel (1983) Ltd. v. Tesc Contracting Co., (1998), 39 O.R. (3d) 155, Justice Sharpe (as he then was) was faced with a construction lien claim against a defendant who had an overtopping claim against the plaintiff with respect to another project. The Court concluded that the defendant was entitled to have its claim treated as defence pursuant to section 17(3) of the Act which created a statutory right of set-off that was broader than equitable set-off. After citing the criteria for equitable set-off found in Telford v. Holt, [1987] 2 S.C.R. 193, the Court concluded that the modern approach to equitable set-off is a broad one. I conclude that Lexus is entitled to set-off the various claims it has made against S & L. There are issues with respect to quantum and evidence. The Plaintiff attempted to rely on the decision of Architectural Millwork & Door Installations Inc. v. Provincial Store Fixtures Ltd., 2015 ONSC 4913, but in that case, the Plaintiffs had not commenced their action under the Act and the trial judge concluded that the statutory set-off rights were not available.

[99] I conclude that Lexus is entitled to claim the set-off, but the evidence in support of Lexus’s claims is, for the most part, hearsay. Dompierre had no direct knowledge of the alleged deficiencies in S & L’s work. The complaints all came from third parties, none of whom offered any evidence at trial. For this reason, I will allow set-offs only for those items where Lacroix admitted that he did not complete the work.

[100] Item 1: The Natural Gas Piping. Lacroix admitted that he was unable to complete the job within the time constraints imposed by Corix and that Lexus had to hire someone else to do the job. His major complaint is that they paid too much. He acknowledged, however, that in situations like these, a contractor who is called in to do work on a priority basis can often command a premium. Dompierre testified that Lexus had no choice but to hire Carmichael Engineering and that it had to pay $6,874.92 (tax included) to have the work completed. I conclude that Lexus is entitled to set-off this amount.

[101] Item 2: Damaged Lost Boiler Panels. On the evidence, I am not persuaded that these were lost or damaged due to the negligence or improper storage by S & L. Lexus is not entitled to set off this amount.

[102] Item 3: The Damaged Pump. The only evidence that this was damaged due to improper installation by S & L is hearsay. Lacroix testified that the pump was defective and that it was operational but noisy after he installed. Dompierre agreed that the pump was noisy. Lacroix further testified that the system would have been unable to operate if the pump had been installed backwards as alleged. Lexus is not entitled to set off the amount claimed, which amount was later reduced by Corix.

[103] Item 4: Seismic Restraint Work. Lacroix testified that 90% of this was done by the time of the fire. Lexus itself relied on the billing of the holdback as evidence that S & L’s work was 100% complete by that date. Lacroix acknowledged that there was still a bit of the seismic that was not completed when he left the site. The only admissible evidence on the extent of the work and the quality of the work completed by S & L comes from Mr. Lacroix. Dompierre had no idea of how much work had been done by S & L and was trying to get that information from Corix. I accept Lacroix’ evidence on this issue, and while I conclude that Lexus is entitled to a set off, I limit this to 10% of the contract price; $1,871.28 (tax included). S & L also agreed that there should be $788.15 credit for some balancing work that was not done.

[104] Item 5: Plumbing for the Florida Lab. I conclude that Lexus is entitled to set off the amount it was charged by MBC to have another contractor attend and complete the work that S & L agreed that it did not complete on time. I limit this sum to the amount actually paid to S & L since the chargebacks to Lexus from MBC were the full value of its contract including the value of the work that was done by S & L. This results in a further set-off of $7,976.12 (tax included).

[105] Item 7: S & L conceded that Lexus was entitled to set off the restocking fee of $965.97.

[106] As for Corix’ warranty claim of October 2012, this included the cost of the pump already claimed in the set-off and for Corix’ cost of providing construction management oversight that should have been performed by Lexus. Corix calculated this cost at $16,990.68 or roughly 60 % of the warranty claim that was ultimately settled for $20,500. Dompierre said that he emailed a copy of Corix’s letter to S & L, but no such email was produced and Lacroix denied receiving any such communication. This settlement was made without any input from S & L and the evidence that the warranty claims arose solely from defects in S & L‘s work is hearsay and pure speculation. I conclude that Lexus is not entitled to set off any part of this amount.

[107] S & L will have judgment against Lexus in the amount of $82,483.80 less the set-off amounts allowed ($6,874.92 + $1,871.28 + $965.97 + $7,976.12 = $ 17,688.29) or a net amount of $64,795.51.

[108] The parties are to provide me with their brief written submission as to costs as follows: the Plaintiff within 20 days of the release of this decision and the Defendant, Dompierre, 20 days thereafter.

Mr. Justice Robert N. Beaudoin Released: June 13, 2016