2283624 Ontario Limited v Performance Painting & Floor Coating Ltd. et al., 2017 ONSC 2553
COURT FILE NO.: CV-13-19056 DATE: 20170425
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
2283624 Ontario Limited Plaintiff – and – Performance Painting & Floor Coating Ltd. and The Corporation of the City of Windsor Defendants
COUNSEL: Maria Marusic, for the Plaintiff Robert J. Reynolds, for the Defendant, Performance Painting & Floor Coating Ltd.
HEARD: November 29 to December 2, 2016
REASONS FOR JUDGMENT
carey j.:
[1] 2283624 Ontario Limited (“228”) registered a construction lien against Performance Painting & Floor Coating Ltd. (“Performance”) in the amount of approximately $58,760 in relation to the alleged rental of sandblasting pots to Performance. The threshold issue in this case is whether there was any contract.
Position of the Parties
[2] The plaintiff claims for renting sandblasting pots to the defendant for the use on a painting job that the defendants were performing as subcontractors to the main contractor, Oscar Construction. That work was being performed at the Lou Romano Sanitation Facility in west Windsor. 228 says that the equipment was used for approximately four months (July – November 2012) and claims compensation equivalent to the fair market value of the rental of that equipment. They do not rely on a written agreement but state that there was an agreement that 228 would receive “fair value rental” rates. They say it makes no sense that the equipment would be used without compensation. They say the fair market value for the rental was $57,860.
[3] 228 says that there is no issue that the equipment was their’s and that the defendant used it. The only issue is the calculation for the fair market value of the pots’ rental.
[4] The defendants argue that the parties were never ad idem and denies any contract in writing or orally. They say that they were not aware of the existence of the corporate defendant prior to this litigation. Their position is their employee, George Smalios, picked up some old painting pots in very rundown condition from the plaintiff, his former employer, when the one the defendant was using broke down. They said there was no thought of payment and their understanding was that they could use them if they could get them refurbished and working. They were welcome to them. The principals of the two companies, who were friendly, were involved in a much larger project in Ottawa. The defendants say it was after a falling out over that project that the plaintiff registered a lien against the property of the City of Windsor where the Lou Romano reclamation plant is situated. Performance argues that the claim came “right out of the blue” and the first demand letter was not sent out until March 1, 2013, with a notice that payment was “overdue”.
[5] Performance says they returned the equipment to the plaintiff upon demand for same and no discussion took place over payment. 228 is limited, Performance says, under s. 55(1) of the Construction Lien Act, R.S.O. 1990, c. C.30, to a judgment for services rendered at the Lou Romano site if it can prove a contract. Equitable remedies are excluded under the Act which precludes the plaintiff’s claim for unjust enrichment. Thus, if a contract is not proven, the plaintiff is not entitled to any compensation. The only agreement that the plaintiff 228 can seek is pursuant to a rental agreement for the painting pots, not for a purchase agreement which would bring with it no lien rights under the Act. The plaintiff paid into court the amount of the lien, plus additional amounts for costs in order to have the lien lifted and the Corporation of the City of Windsor removed from the litigation. The demand letter indicated that $4,000 per week was accruing for the over holding of the equipment. They point out that they paid for all of the repairs and additional accessories needed to use the painting pots on the Romano project. As well, they point out that their entire subcontract for their work, including labour and painting, was $180,000 of which the plaintiff claims over $57,000.
[6] They state that they completely refurbished the pots at their expense and the pots are now back in the plaintiff’s possession. They owe nothing to 228.
Review of Evidence
Plaintiff’s Case
[7] Michael Papp grew up in the painting business run by his father in Windsor. Most of their work was on contract to government agencies. There were different sizes of sandblasting pots in their possession. The pots are the bare unit, and require compressors, hoses and other accessories to be used in the sandblasting. The equipment had not been used in many years as his company was no longer doing sandblasting and painting. The equipment was in storage he said because “it still had value” and he and his brother George had contemplated getting back into the painting business.
[8] He recounted how he and Jeff Batten had met in their neighbourhood through their wives and young children. They were in similar businesses. The key figure who arranged for the pots to be used by Performance is George Smalios.
[9] George Smalios is a very experienced commercial sandblaster who, at various times, has worked with both Michael Papp and Jeff Batten’s companies. He is currently with one of 228’s companies. It was he who called Papp about July 21, 2012, to inquire if he could inspect any sandblasting equipment that was stored at Batten’s facility. Papp recalls Smalios, who was at that time working for Performance, as saying he was looking “for other pots for Romano.” Smalios was eventually given the key to the warehouse so he could look and see what was there. Papp recalled no conversation with Batten before Smalios’ call. There had, however, been e-mail exchanges regarding other matters and projects.
[10] After the call, Papp e-mailed Batten (July 23, 2012) – Exhibit 1, Tab 2. It says in full: “I’m trying to locate which of my employees r holding keys to my shop. Will advise where you can pick them up. I have two dual chamber clemco pots for use.”
[11] Batten’s response within minutes was: “Thx. We made AWESOME progress in Ottawa this weekend! The whole North side from the back of the building to the 1st corner has got base coat on it! Roger is helping out with Ken regarding organization of the ste. He had 4 guys up in the air spraying. Jeff.”
[12] Papp testified that later on he talked to Batten about the use of the equipment and that “I expected fair compensation” and that Batten said he “would take care of it”. Papp did not know how the “fair compensation” price would be arrived at. He testified that he expected him to be fair. He added that it had been an urgent request.
[13] The other e-mails around this time in Exhibit 1 spoke about other projects and tenders. There was an arena in Tillsonburg, bids in Ottawa. There was mention of four local projects and “the need to review how we r going to bid each if any together.” At the end of an e-mail sent July 30 at 11:04 p.m., Papp wrote, “Did you order the sandblast parts including mushrooms?” He explained in his evidence that a “mushroom” was a piece needed in the blasting pots. Batten’s reply the next day, August 1, 2012, dealt only with needing extra time on the WUC proposal to obtain a bond.
[14] Later in August, there were e-mail exchanges regarding other projects the two companies were discussing and friendly chat about air flights, meetings and the weather. Towards the end of the month, there is a three e-mail exchange regarding work primarily on a separate contract for a City of Windsor water tower, and a crew of indigenous workers from Brantford led by someone known as “Tubby”. In the middle e-mail in the exchange, Michael Papp is urging Jeff Batten to hire the crew and pay their rate and expenses for high altitude work on the water tower. Mr. Papp had made arrangements for them to come and work on the water tower and was exasperated with the perceived lack of attention to the situation by Batten. He says his “credibility is being tested” and that he paid $260 for gas to show he was serious and that they were on “hold”. He ends the e-mail with “You’ve got me in a predicament. Respect begets respect.”
[15] Batten’s reply covers his “crazy day” putting out fires and responds “it was not my intention to get you caught in the middle.” He then deals with his discussions with “Tubby” and his budget not able to absorb the housing costs for the crew and extra $2.00 an hour they want from what he is prepared to pay. The 9:03 p.m. e-mail ends with “Let’s discuss above tomorrow.”
[16] Mr. Papp says he saw George Smalios around September and asked about the blasting equipment. He said some additional work was required on a tank due to the use of some wrong epoxy on one of the tanks. There are no further e-mails that relate to the equipment until December 13, 2012, with an e-mail from Papp titled “Final Notice NRC, WUC, OCWA partnership deals”. The e-mail appears to have followed a face-to-face meeting in a local coffee shop. The lengthy e-mail (Exhibit 1, Tab 6) expresses concerns about a number of business deals and the expectations of Mr. Papp. He accuses Batten of not sharing profits and “creative accounting”.
[17] The last substantial paragraph of the e-mail deals with the WUC water tower and the equipment used on that project being also used on the West Windsor clarifier tanks (Lou Romano). He points out the assistance and coaching he supplied in the bidding process. No price for the equipment is mentioned other than quoting Batten as stating, “that I am not owed anything from the interior water tower project.” The letter ends with essentially a 24-hour deadline to deal with the outstanding issues.
[18] Batten responded the next day with a brief e-mail “disagreeing completely” with the contents of Papp’s letter and expressing his non-appreciation of the deadline. He threatens to seek all costs associated with “your frivolous accusations”. Papp replied saying he would sue Batten personally, along with “the various Government departments. Govern yourself accordingly!”
[19] Papp subsequently used the services of an Ottawa law firm to register the lien. He calculated the fair market value of the rental from the time that the equipment was picked up on July 25, 2012 to November 29, 2012, the date the entire contract was certified as substantially performed in the certificate issued under the Construction Lien Act. He estimated the monthly amount for each piece of equipment by looking at the rental rates of a local equipment rental company and adjusting those to reflect the types of equipment he had supplied to Performance. His calculations relating to seven blasting pots and seven air hoses are set at Exhibit 1, Tab 11 and total $57,860. He noted that some of the equipment was difficult to rent in Canada.
[20] In cross-examination, Mr. Papp indicated that in over 25 years in the painting and related businesses that he had been involved in lots of contracts. He knows that in a contract both parties must agree to the terms of the contract. He agreed that his company 228 was not in the rental business. He was not the one to send out invoices generally. He agreed that the invoice sent to Performance Painting of 228 was the first time he had invoiced from 228.
[21] In further cross-examination, Papp indicated no one advised him that George Smalios had authority to bind Performance Painting contractually. He said that the equipment George Smalios took had not been used in eight to ten years and he was not sure if where it was stored was heated. He had no inventory of what was in the warehouse or what was taken by George. He acknowledged that the equipment needed repair. He said the equipment was rented “as is”. He said that Jeff Batten said he’d “take care of me” and acknowledged there was no written or e-mail verification of their agreement. He said there was no length of term or rental rate to the agreement. He agreed that the e-mail of December 13, 2012 made no claim in relation to the use of the equipment at the Lou Romano site. He said that the rental was not a priority or “top of mind” at that time.
[22] Papp acknowledged that there was no discussion or communication with anyone at Performance prior to the issuance of the invoice for $58,760.
[23] George Smalios came to Canada from Australia in 1986 and has spent most of the past 30 years involved in industrial and commercial painting and sandblasting. He worked with Windsor Painting, a company run by Mr. Papp’s family between 1986 and 1991, before setting up his own business with his late wife which he operated until around the time of her death in 2010. In 2011, he approached Jeff Batten and worked with Performance until 2012, not long after finishing work on the Lou Romano project. He testified his relationship was good with Batten when he left and that there were other people that he could not get along with. He said here was no falling out with Jeff Batten. He was hired by Hastings, a 228 owned company, in late 2012 or early 2013. He was subpoenaed to testify.
[24] He testified as to a long experience with blasting pots which he said last a very long time. They are metal, typically about half an inch thick. He can strip down and put them back together. The maintenance required is on the pipes and valves. The pots come in sizes that range from 100-1200 plus pounds. The poundage relates to the amount of sand in the pot. There are single and dual chamber pots. The dual chamber pot allows for reloading by a second labourer while the pot is in use, allowing for greater labour efficiency.
[25] Mr. Smalios indicated that when some of the equipment he was using broke down, he contacted Mr. Batten and said that his equipment was not working well and another pot was needed. He said he told Jeff Batten that Papp might have some equipment. He subsequently attended the Tecumseh warehouse that Papp’s company used and, after getting a key, went to look at the equipment. He said he told Mr. Papp that they would take the equipment and fix it at the expense of Performance Painting. He said he told Papp that “Jeff will fix you up at the end”. He indicated that four pots were taken and repaired, that the pots were picked up in early August and work started on the tanks a few days later. He said he told Mike Papp that the pots were going to be used at the Lou Romano site. He said there were no conversations about the pots being purchased. He said some pots were transferred to the water tower project and three stayed there after work at the Romano site was completed.
[26] In cross-examination, he indicated that he had his own business before and had never rented equipment, he always used his own. When he closed his business after his wife’s death, he sold all of this equipment to Performance for $10,000.
[27] He agreed that he told Jeff Batten that he needed some more equipment but did not say how much. He said the entire discussion about the piece of equipment was “we’ll fix them up and we’ll pay you what’s fair”.
Defence Evidence
[28] Jeff Batten is the owner of Performance Painting. He testified that his background was similar to Mike Papp’s in that they both had worked with family commercial painting companies. He testified that he and Papp had met through mutual friends in their neighbourhood of Russell Woods in Windsor. He recalled that he and Mike Papp had a discussion about George and sandblasting pots. He recalled that Papp told him that if you ever need any pots, we have some in storage. At the time, he said “we have our own equipment”. The equipment that he was referring to was the pots he had purchased from George Smalios when he closed down his business. He said he purchased the equipment for $10,000 to help out George. He gave evidence about the tender that he had made for the Lou Romano site and that it was his intention to use two sanding pots and one compressor at the site. The specification for the job did not require a specific pot size or number of pots or more than one person doing the work per day. He said the contract was a “weather-permitting” contract and he was unaware of any penalty clause. He only intended to have George working on the sandblasting and no intention to have a second man and pot based on the timeframe of the project. He reviewed the photographs and the various e-mails between him and Mike Papp. He said that the agreement between him and Papp was that he could take the pots and fix them up if they were of any use to him as they were no use to Papp. He viewed it as a situation where one man’s trash could be another man’s treasure. He quoted Mike Papp as “see what you can do and we’ll figure it out”. He took that to mean that after repair, purchase price would be figured out. He said the pots were very weathered and he took the pictures at Performance that were entered as evidence. He said the pots needed the insides fixed as there could not be any damage over the welds. The pots were sent to Stevens for welding and he identified the bills connected with that. He said the cost was approximately $4,302.50. He also identified a bill from Marco for hoses and other equipment that was used for the pots which came to a total of $6,168 but these parts were used on the water tower project. A bill of September 4, 2012 for $1,630 U.S. funds were identified as being used on the pot from Mike Papp.
[29] He said that he and Mike Papp were discussing various projects including the one in Windsor at the water tower and a large project in Ottawa. He said that Mike Papp and he had disagreements over monetary issues. They had a meeting at Armando’s Restaurant and that was the first time that Mike ever mentioned the equipment or wanting it back. He said the first he knew about a lien being registered was when Oscar Construction called and he was told there was a lien regarding consulting services and tank inspection. He testified there was no agreement about tank inspection or a rental at the Lou Romano site and no contract for $58,760. It was important for him to have the lien removed. Oscar Construction was a business that he worked with on a regular basis and his company paid $73,450 into court to have the lien removed.
[30] By the spring of 2013, he was still of the view that he would be buying the pots but when he asked the price, the pots return was requested and he returned them. He says he was never made aware of any rental request or agreement.
Analysis
[31] The evidence presented by the plaintiff company did not approach establishing on the balance of probabilities that there was any contract between the parties for the rental of the old pots in storage in the possession of 228 or for any other services. The parties’ principles, Papp and Batten, were friends who were working towards a business relationship on a number of large projects, most notably in Ottawa. 228 was not in the business of renting any equipment including these sandblasting pots. There was no discussion about the price, the length of the rental, or even the number of pots involved. The e-mails between the parties provide no evidence that there was any agreement to rent the pots. I accept the evidence of Jeff Batten that, at most, he thought that after the extensive investment into the equipment that his company had made, there might be a purchase of the equipment. Both companies were experienced in the construction trades business and sophisticated in terms of contracts, bidding and pricing. It is highly improbable, in my view, that either party regarded this as anything more than an offer to assist a friend and future business partner. It seems most likely that the offer of the pots was a goodwill gesture designed by Batten to help with establishing a business relationship with an eye towards future projects together. The account that was issued and the filing of the lien are all highly suspicious as being motivated as a tactic in the larger dispute that transpired between these parties.
[32] I was not convinced that this was in any way a proper matter for a construction lien to have been filed. I did not find the evidence of either Mr. Papp or Mr. Smalios to be convincing that the two companies had any agreement for the rental of this equipment, let alone for a contract of almost $60,000. On the other hand, I found Mr. Batten to be straightforward and credible in his recollection of how the equipment came to be used by his company. I have no hesitation in finding that the parties were never ad idem on the issue of a contract to rent the equipment. The considerable investment in the rehabilitation of the pots made by Performance was consistent with them getting ownership of them. His offer to buy them was refused.
[33] I agree with the defendant that as this is a Construction Lien Act trial, this court has no recourse to equitable remedies. The construction lien claim is dismissed and there will be an order returning the funds paid in trust to Performance Painting.
[34] If the parties are unable to agree upon costs, I will receive submissions within fourteen (14) days from Performance, including costs outline, and responding material within seven (7) days after that from 228.
Original signed by Justice Thomas J. Carey
Thomas J. Carey Justice
Released: April 25, 2017