Campoli Electric Ltd. v. Georgian Clairlea Inc., 2017 ONSC 2784

COURT FILES NO.: 12-CV-456667; 12-CV-456478 & 13-CV-472420

MOTION HEARD: 20160908 &20160909

REASONS RELEASED: 20170608

SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

CAMPOLI ELECTRIC LTD.

Plaintiff

• and-

GEORGIAN CLAIRLEA INC., RESIDENCES OF CLAIRLEA GARDENS INC., ANTHONY MAIDA, FRANK MAIDA, and GENE MAIDA

Defendants

COURT FILE NO.: 12-CV-456478

AND BETWEEN:

E-M Air systems inc.

Plaintiff

• and-

GEORGIAN CLAIRLEA INC., RESIDENCES OF CLAIRLEA GARDENS INC., ANTHONY MAIDA, FRANK MAIDA, GENE MAIDA, and LORETTO CIRCOSTA

Defendants

COURT FILE NO.: 13-CV-472420

AND BETWEEN:

tRIUMPH aLUMINUM AND sHEET mETAL iNC.

Plaintiff

• and-

GARY DIMITROU, GEORGIAN CLAIRLEA INC., GENE MAIDA, ANTHONY MAIDA, and FRANK MAIDA

Defendants

BEFORE: MASTER D. E. SHORT

COUNSEL: Emilio Bisceglia Fax: (905) 695-5201

-for the Plaintiff Campoli

William Ribeiro Fax: (416) 533-3114

-for the Plaintiff Triumph Aluminum

Milton A. Davis Fax: (416) 941-8852

-for the Defendants Anthony, Frank him

and Gene Maida

Howard Manis Fax: (416) 364-1453

-for the Trustee

REASONS RELEASED: June 8, 2017

Reasons for Decision

“Two years after the onset of a global financial crisis and after three quarters of severe recession in Canada, the economic outlook for this country, and much of the world, has improved.... Although the recovery is likely to be muted, and effective and resolute policy implementation will be required, we are likely to experience positive growth this quarter, and a gradual closing of the output gap by the middle of 2011.”

Deputy Governor Bank of Canada

25 August 2009

I. Prologue

[1] Building a condominium project is far from an easy process. Even without the context of an economic crisis, any number of things can go wrong, and numerous parties can suffer adverse consequences as a result. In many ways, the saga of Toronto Standard Condominium Corp. No. 2051, is a textbook case on the complexities involved in trying to untangle the rights and obligations of various individuals and corporate entities flowing from a large construction project that comes off the rails, particularly in troubled economic times.

[2] The principal defendants Eugene, Anthony, and Frank Maida are brothers (hereinafter, when collectively referred to, the "Maidas. They all have made Proposals arising from their insolvencies.

[3] The Maida brothers were at the material time, officers and directors and persons with effective control of the defendant company known as the Residences of Clairlea Gardens Inc., also known as Georgian Clairlea Inc. (“Georgian” or “Clairlea”). That defendant is bankrupt.

[4] A variety of actions have been stayed by virtue of the provisions of the applicable insolvencylegislation. Unless I determine to allow the moving parties’ applications to lift those stays, the litigation will effectively be at an end.

[5] Because of the unusual nature of these disputes it has been necessary on occasion to restate some of the factual elements when addressing different issues. I apologize for that repetition but future readers seeking to apply some of the portions of this opus may appreciate what will be, for a reader of the entirety of this decision, a reiteration of some of the elements of the story.

II. Project Background

[6] Georgian owned and developed a construction project in Toronto ("the Project"). The Project comprised 112 stacked townhomes and 30 freehold townhomes. It was begun in 2006.

[7] By 2009, the Project was in financial difficulty. Unpaid contractors registered construction liens. Others threatened to register liens. By June 2009, Georgian owedand was unable to pay the Plaintiffs and other contractors (''the Trades") over $2.3 million.

[8] A number of categories of relief were sought before me. The Creditors, E-M Air Systems Inc. ("EM Air") and Campoli Electric Ltd. ("Campoli"), brought motions for Orders under section 69.4 of the Bankruptcy and Insolvency Act, R.S.O. 1985, c.B-3 ("BIA") lifting the stay of proceedings originally imposed under section 69(1) of the Act by virtue of the filing of a Notice of Intention to file a Proposal by Eugene Maida ("Gene" or "Eugene") and a Proposal by Anthony Maida ("Anthony"). Lifting the stays would allow the claimants to proceed with their actions against Eugene and Anthony under Court File No. CV-12-456478 (the "EM Air Trust Action") and under Court File No. CV-12-456667 (the"Campoli Trust Action").Triumph Aluminum and Sheet Metal Inc. ("Triumph") brings a similar motion to lift the stay to permit Triumph to proceed with its breach of trust action as well, bearing Court File No. CV-13-472420.

[9] At this stage I also note that an Order was already made by my colleague Master Jean, lifting on consent the stay imposed in relation to the Notice of Intention to File a Proposal by Frank Maida,. He now seeks to have that stay reinstated.

[10] When in private practice, I focused on construction and insolvency related matters in addition to having an ADR oriented practice. The matters before me on this occasion have elements of all three areas and highlight what can “go wrong” when a project comes off the rails, leading to complex disputes and difficult decisions involving the interaction of the various relevant statutory provisions.

III. Approach to Decision

[11] The reasons that follow are complex and extensive. In the circumstances of these cases, if I refuse to grant the relief sought by the moving parties, some of the legal actions involved, will effectively be at an end.

[12] Conversely, if I grant the leave there will be extensive examinations, arguments and ultimately trials which will likely turn on documentation generated eight years ago.

[13] Ultimately I turn to the guidance of Rule 1 with respect to the interpretation of of the Rules generally:

General Principle

(1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.

Proportionality

(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.

Matters Not Provided For

(2) Where matters are not provided for in these rules, the practice shall be determined by analogy to them.

In my view the intent of the addition of these and other changes made to the Rules was “to improve access to justice by reducing the inequities, cost, delay, and complexity of civil litigation.” In Abrams v. Abrams, 2010 ONSC 2703, Justice D.M. Brown, as he then was, observed:

“Proportionality signals that the old ways of litigating must give way to new ways which better achieve the general principle of securing the 'just, most expeditious and least expensive determination of every proceeding on its merits.’ ”

[14] In Hryniak v. Mauldin, 2014 SCC 7, Justice Karakatsanis was discussing the test for summary judgment, but what she had to say is thematically applicable to lifting these stays. At paragraphs 27 and 28 of her judgment atthe Supreme Court of Canada, she stated:

There is growing support for alternative adjudication of disputes and a developing consensus that the traditional balance struck by extensive pre-trial processes and the conventional trial no longer reflects the modern reality and needs to be re-adjusted. A proper balance requires simplified and proportionate procedures for adjudication, and impacts the role of counsel and judges. This balance must recognize that a process can be fair and just, without the expense and delay of a trial, and that alternative models of adjudication are no less legitimate than the conventional trial.

This requires a shift in culture. The principal goal remains the same: a fair process that results in a just adjudication of disputes. A fair and just process must permit a judge to find the facts necessary to resolve the dispute and to apply the relevant legal principles to the facts as found. However, that process is illusory unless it is also accessible - proportionate, timely and affordable. The proportionality principle means that the best forum for resolving a dispute is not always that with the most painstaking procedure. [my emphasis]

[15] While I have found drafting these reasons somewhat of a painstaking exercise it pales in comparison to the extent of court resources, litigant involvement and counsel costs that will be entailed if all the related litigation proceeds through “normal” trials and appeals.

[16] Rule 1.04, requires that the court should strive to have matters resolved on the merits. Hryniak encourages an approach that avoids lengthy trials. In my view there is no doubt that, as well, in construing the rules it is necessary to apply appropriate equitable principles.

[17] Endeavoring to utilize those lenses, I turn to the facts of these cases.

IV. The Plaintiffs’ Actions and the Present Motions

[18] In total the moving parties claim damages well in excess of one million dollars. Campoli supplied electrical services and materials to the Project pursuant to a contract with Georgian Clairlea, Campoli rendered unpaid invoices for the sum of $515,869.

[19] EM Air supplied heating and ventilating systems, including labour and materials, to the Project pursuant to a contract with Georgian Clairlea. EM Air rendered invoices for the sum of $416,788.37. Triumph Aluminum and Sheet Metal Inc. asserts that it is owed $175,753.

[20] In the present motions, the Plaintiffs are moving to lift the statutory stays of proceedings as against Anthony and Gene. By cross motion, the Maidas seek to reinstate the stay of actions as against Frank.

[21] If any of the stays are, or remain, lifted, then the Maidas ask for summary judgment, dismissing the subject actions against them.

[22] In broad strokes the arguments made before me in opposition to the plaintiffs’ motions include these assertions:

• These actions are over four years old. They concern issues that the Plaintiffs settled in 2009. They signed Minutes of Settlement. The Minutes were a ''full settlement" of their lien claims. They did not preserve the breach of trust claims they are making in these actions.

• The Plaintiffs also settled all claims against the corporate Defendant. Consequently, the Construction Lien Act prevents the Plaintiffs from making any claim for breach of trust against the Maidas. So does the fact that the Plaintiffs have not had the bankruptcy stays against the corporate Defendant lifted.

• In addition, the actions are statute barred under the Limitations Act, 2002. They are also an abuse of process, or barred by estoppel, because the Plaintiffs settled their claims seven years ago (one Plaintiff gave a final release five years ago).

• There is no genuine issue requiring a trial. The Plaintiffs cannot prove breach of trust under the Construction Lien Act. Even if they could, their claims could not survive the Maidas' bankruptcies.

V. Action by Condominium Corporation against Developer

[23] In June of last year, my now retired colleague Master Haberman, released her decision in Toronto Standard Condominium Corp. No. 2051 v. Georgian Clairlea Inc. which can be found at 2016 ONSC 2948.

[24] That 2011 action related to claims by the newly formed Condominium Corporation against the developer and and its related entities and individuals.

[25] On the motion before Master Haberman, the residential condominium corporation as plaintiff sought to amend its Statement of Claim.. The plaintiff sought a declaration that two mortgages and a promissory note were null and void as against the Condo Corp. and sought damages for construction deficiencies and the developer’s failure to pay common element expenses. The defendants counterclaimed for judgment on the amounts due under the mortgages and promissory note. They brought a motion for summary judgment. In response, the plaintiff moved to amend its claim. The defendants opposed the relief sought.

[26] On that motion, the defendants submitted that a mediation agreement between the parties barred further motions, and that the proposed pleading raised new causes of action barred by expiration of the applicable limitation period. The plaintiff submitted that the proposed amendments did not alter the essence of the action related to the validity of the debt instruments at issue.

[27] Master Haberman allowed the amendments sought, holding that the resolution of procedural matters did not settle any aspect of the claim or counterclaim and did not preclude the plaintiff's motion.

[28] Specifically, she held that the agreement that had been made amongst the parties bifurcated the construction deficiencies issues from the other claims and that the addition of the proposed amendments would not add a layer of multiplicity that did not already exist. With respect to the substance of the proposed amendments, the proposed new facts did not constitute a new cause of action or entirely new claim. The proposed amendments, although extensive, for the most part dealt with what had already been pled, albeit with further particularization, to support the claim that the mortgages were unenforceable. She found that the proposed amendments did not constitute an abuse of process, nor gave rise to non-compensable prejudice.

VI. The Next Stage

[29] The present motion deals with the claims of the trades that they are entitled to be paid for work done prior to June 2009 from monies that they assert are subject to a trust in their favour.

[30] Thus the parties further down the construction chain now seek to enforce claims for payment against the developers of the project and against individuals who are alleged to owe a duty to the lien claimants under the trust provisions of the Construction Lien Act.

[31] One portion of Master Haberman’s extensive reasons on the motion before her, dealt with an interim resolution of some portions of the action before her, which has some relevance, in my view, to the issues before me. Her synopsis of the factual background is also helpful:

“2 The action is a factually complex one. The plaintiff is a residential condominium corporation, comprised of 112 residential units. The defendants are the condominium developer and declarant of the corporation, Georgian Clairlea Inc. ("GCI"); GCI's successor, the Residences of Clairlea Gardens Inc.; a transferee of the two mortgages in issue, Georgian Corporation, ("GC"); and the officers of directors of the corporate defendants, Anthony, Frank and Gene Maida.

3 The claim was issued on September 20, 2011, at which time the plaintiff sought, among other things:

• A declaration that two mortgages, totalling approximately $3.25 million, and a promissory note in the amount of $90,034 made in favour of GCI are all null and void;

• Damages against GCI of approximately $138,000, for failing to pay common element expenses; failing to pay monies collected as interim occupancy fees into the reserve fund, and for the first year budget deficit; and

• Damages of $2 million for construction deficiencies.

4 In response, the defendants counterclaimed for judgment on the outstanding amounts due under the mortgages and promissory note, along with ancillary relief.”

VII. The First “Settlement” Agreement

[32] Apparently a three week trial of the condominium corporation’s action was scheduled to begin on October 26, 2015 but The Condo Corp and the Developer decided to mediate first, in an effort to resolve some of the many issues on the table. They did so and on July 15, 2015, they were somewhat successful in that regard, having arrived at terms for the approach they would take going forward. Master Haberman notes:

6 Although the parties have characterized this as a "settlement agreement", in my view, that nomenclature is not a good fit as only procedural issues were resolved. No aspect of either the claim or counterclaim was, in fact, settled.

7 In essence, the parties agreed to break the claim into two parts. All issues pertaining to alleged construction deficiencies were hived off, to be dealt with through the Tarion warranty process, and it was agreed that the remainder of the claim would be dealt with by way of summary judgment, to be heard on October 26, 2015, a date counsel were already holding for the trial.

8 The responding parties assert that the agreement reached at mediation is a bar to this motion. It is therefore critical to examine what the parties did and did not agree to at that time.

[33] The details of my former colleague’s reasoning can be found in the reported decision. Suffice it to say that she concluded with respect to the intention behind the agreement, in part as follows:

23. One of the opening recitals to this agreement indicates that it has been reached in order to secure the just, most expeditious and least expensive determination of the issues. The responding parties rely on part of this recital (most expeditious and least expensive) to suggest that the proposed amendments would complicate the action, adding to the time needed to complete it and the ensuing costs. This, they say, would mark a departure from the parties' stated objective of achieving an expeditious and the least expensive determination of these issues. On that basis, they assert the amendments must be prohibited.

24. I disagree. This recital must be read as a whole and must be viewed in the context of the other opening recitals. The responding parties rely on the words “most expeditious and least expensive determination”, ignoring the fact that the word “just” precedes the other two.

25. It is interesting that the parties chose wording similar to that used in the now defunct Rule 77, when case management was the regime that applied to all civil actions commenced, among other places, in Toronto. Though the purpose of case management was to reduce delay and costs, it was always clear this objective was never intended to supersede orders that were just. It seems to me that the parties to this agreement were of a similar mind, as they place “just” before their other objectives. I am therefore reluctant to interpret this recital in a manner that puts speed and cost ahead of justice. My focus is on achieving a just result on this motion.

26. Accordingly, I do not believe the intention of the parties in coming to this agreement, as evidenced by what they said in it, bars this motion.

[34] While the ultimate resolution of that action is somewhat extraneous to the present motions I see the foregoing as helping to frame my quest for a just resolution of these subsequent disputes.

[35] In the present matter, I have reviewed the very different terms of the separate and distinct agreements amongst the parties to these actions in coming to the opposite conclusion.

[36] I note particularly that if the stay is not lifted the actions of the plaintiffs will be essentially at an end. It is against that potentiality I have endeavored to be extremely thorough in my review of the parties’ submissions and evidence in reaching my decision.

[37] Against that background I now turn to the group of motions, which gave rise to several bankers’ boxes of materials and two full days of argument by the various skilled counsel involved.

[38] Thus, as the remedy sought can be determinative of the actions I have felt obliged to canvas a wide variety of issues in more depth than would be the routine on most motions brought before the Masters of this court.

[39] In particular, the provisions of a number of statutes were considered as part of my analysis. I start with the section of the Bankruptcy and Insolvency Act, which creates the stay of the actions which the moving parties seek to remove so that their litigation can proceed.

VIII. BIA Stays of Proceedings

[40] When a party goes into bankruptcy or files a proposal, fairness dictates that there be a freezing of the assets and liabilities involved until a Court appointed Trustee can investigate the debts and assets involved and then provide a report to the creditors and the Court.

[41] Section 69.1 (1) of the BIA deals with the imposition of a “Stay of Proceedings” for Division I proposals under the Act and, with my emphasis added, reads in part:

69.1 (1) Subject to subsections (2) to (6) and sections 69.4 and 69.5, on the filing of a proposal under subsection 62(1) in respect of an insolvent person,

(a) no creditor has any remedy against the insolvent person or the insolvent person's property, or shall commence or continue any action, ….

[42] The BIA Section dealing with the lifting of a stay imposed under this provision is Section 69.4 which,with my emphasis added, reads:

69.4 A creditor who is affected by the operation of sections 69 to 69.31 or any other person affected by the operation of section 69.31 may apply to the court for a declaration that those sections no longer operate in respect of that creditor or person, and the court may make such a declaration, subject to any qualifications that the court considers proper, if it is satisfied

(a) that the creditor or person is likely to be materially prejudiced by the continued operation of those sections; or

(b) that it is equitable on other grounds to make such a declaration.

[43] As I hold an appointment as a Registrar in Bankruptcy as well as a Case Management Master I am in a position to deal with this motion in one or both of my capacities.

[44] Two of my colleagues have already dealt with similar BIA related motions and have lifted the statutory stays concerning other elements related to the Project. In his factum, counsel for one of the trades asserted:

“There is no proper evidence by the Maidas to oppose this motion, Eugene Maida advised that he had not read either of Frank Prete's [supporting] affidavits (Campoli and E-M Air) filed in relation to the motions. Rather, he was looking at them for the first time in his examination. Therefore, he could not say whether the E-M Air and Campoli affidavits were right or wrong.”

[45] With respect, I am not satisfied that those allegations are determinative of the tests set out in Section 69.4. Rather I need to evaluate whether there are any continuing claims that are possible of success having given consideration to the entire factual, and statutory background. Moreover, subsection (b) imports a proper overall consideration of equitable elements in considering whether or not to lift the stay.

[46] While dealing with the impact of the BIA it is important as well to note the existence of Section 178 which addresses types of debts that are not extinguished by a bankrupt’s discharge from bankruptcy:

178 (1) An order of discharge does not release the bankrupt from:

(a) any fine, penalty, restitution order or other order similar in nature to a fine, penalty or restitution order, imposed by a court in respect of an offence, or any debt arising out of a recognizance or bail;

(d) any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity or, in the Province of Quebec, as a trustee or administrator of the property of others;

(e) any debt or liability resulting from obtaining property or services by false pretences or fraudulent misrepresentation, other than a debt or liability that arises from an equity claim;…

(h) any debt for interest owed in relation to an amount referred to in any of paragraphs (a) to (g.1). [my emphasis]

[47] What the moving parties seek is to establish that the Maidas breached their duties, as directing minds of the Georgian corporation and that their personal liability for a breach of trust under the CLA will then continue, notwithstanding their receiving a discharge, by virtue of subsection 178(1)(d).

[48] Weighing those issues and the nature of the treatment of any funds received, requires a careful review of the trust obligations under Part II of the Construction Lien Act and the contractual agreements entered into between the parties after the project ran into difficulties.

IX. The “Trust” Remedy

[49] The CLA in the first section of Part II provides:

7. (1) Owner's trust, amounts received for financing a trust

All amounts received by an owner, … 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.

(4) Obligations as trustee -The owner is the trustee of the trust fund created by subsection (1), (2) or (3), and the owner shall not appropriate or convert any part of a fund to the owner's use or to any use inconsistent with the trust until the contractor is paid all amounts related to the improvement owed to the contractor by the owner.

[50] In Part II the legislature has set out a complete code of “trust” provisions .That remedy is separate and apart from the right to a lien against the land upon which construction work has been performed. The trust remedy is powerful and well established. It is useful in tracing monies through many hands and has the effect of protecting construction claims against a bankrupt payer. These sections keep construction funds within the “construction pyramid” (which includes the project funders), but do not otherwise change the manner in which persons in the construction industry try to do business.

[51] In particular they do not address the respective priorities or requirements of multiple creditors seeking payment. In other words, unless there is a statutory provision directing a priority to a class of claimant (e.g. holdbacks). So long as a party has a legitimate claim for payment there is no breach of trust if one genuine creditor is paid in preference to another supplier.

[52] In the 2016 edition of his highly useful book, Conduct of a Lien Action, Duncan Glaholt further describes (with my emphasis added) the “statutory ‘trust’ remedy”:

“In addition to the statutory lien remedy, the Construction Lien Act creates a powerful statutory trust remedy. It has been claimed that the statutory construction trust is sufficient and without the trouble or complexities of preserving or perfecting a lien. [see Structural Contracting Ltd. v. Westcola Holdings Inc. (2000), 2000 5740 (ON CA), 48 O.R. (3d) 417 (C.A.); leave to appeal refused (2001), 2001 CarswellOnt 709 (S.C.C).]

In any event, the trust action under the Construction Lien Act is a powerful remedy for the construction creditor. If the client's work was originally lienable, then a trust action under Part II of the Construction Lien Act is worth considering whether or not those lien rights have expired. “

[53] The basic liability of a “Contractor” is established by Section 8 of the CLA which, again with my emphasis, reads:

Contractor's and subcontractor's trust, amounts received a trust

8(1) All amounts,

(a) owing to a contractor or subcontractor, whether or not due or payable; or

(b) received by a contractor or subcontractor, on account of the contract or subcontract price of an improvement constitute a trust fund for the benefit of the subcontractors and other persons who have supplied services or materials to the improvement who are owed amounts by the contractor or subcontractor.

(2) Obligations as trustee - The contractor or subcontractor is the trustee of the trust fund created by subsection (1) and the contractor or subcontractor shall not appropriate or convert any part of the fund to the contractor's or subcontractor's own use or to any use inconsistent with the trust until all subcontractors and other persons who supply services or materials to the improvement are paid all amounts related to the improvement owed to them by the contractor or subcontractor.

[54] What that section does not require is a pro rata distribution amongst all entitled creditors. So long as the funds go to a proper recipient, who is covered by the protections the sections, there is no breach of the statutory trust, and thus no potential personal exposure.

[55] In The 2016 Annotated Ontario Construction Lien Act, (“2016 Annotated CLA”) Duncan Glaholt and David Keeshan comment with regard to the enforceability of these provisions:

“Some basic principles have been established. No special mens rea, or intent, is required to establish personal liability under this section. The standard is one of reasonableness and whether the defendant knew or "ought reasonably to have known" of a breach of trust …. Although, s. 13 does not impose strict liability evidence of direct dealing by the officers and directors with the trust property is not required in order to establish liability. The test is subjective. The level of sophistication of the officers and directors is relevant; see Shield Sprinkler & Fire System Ltd. v. Fahuki Construction Inc. (1996), 31 C.L.R. (2d) 156 (Ont. Gen. Div.). Any knowing personal benefit derived from the breach of trust will be conclusive against a defendant.

[56] Ultimately the moving parties seek to rely on the provisions of section 13 of the CLA in order to establish a continuing liability of the Maidas. The operative portions of that section, with my emphasis added, read:

13. (1) Liability for breach of trust by corporation –

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.

(2) Effective control of corporation - The question of whether a person has effective control of a corporation or its relevant activities is one of fact and in determining this the court may disregard the form of any transaction and the separate corporate existence of any participant.

(3) Joint and several liability - Where more than one person is found liable or has admitted liability for a particular, breach of trust under this Part, those persons are jointly and severally liable.

(4) Contribution -A person who is found liable, or who has admitted liability, for a particular breach of a trust under this Part is entitled to recover contribution from any other person also liable for the breach in such amount as will result in equal contribution by all parties liable for the breach unless the court considers such apportionment would not be fair and, in that case, the court may direct such contribution or indemnity as the court considers appropriate in the circumstances.

[57] The proper interpretation of Subsection (4) is complicated in this case where all three Maida brothers have made Proposals under the BIA to their creditors but only one previously consented to an Order lifting the BIA statutory stay which he now seeks to have reinstated.

[58] With regard to the interaction between section 178 of the BIA and the trust fund provisions of the CLA Glaholt and Keeshan observe in their 2016 Annotated CLA:

“…Pursuant to s. 178(1) (d) of the Bankruptcy and Insolvency Act, …, an order of discharge does not release the bankrupt from any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity. If a debt under s. 13 of the Construction Lien Act is to survive bankruptcy pursuant to s. 178(1)(d), there must be some element of dishonesty, wrongdoing, or misconduct on the part of the debtor sufficient to exclude the debtor from the relief granted by the Act; see Simone v. Daley (1999), 1999 3208 (ON CA), 1999 CarswellOnt 551 (Ont. C.A.) and Superior Crane (Canada) Inc. v. Justan Consulting Ltd. (2003), 2003 27731 (ON SC), 41 C.L.R. (3d) 21, 2003 CarswellOnt 4591 (Ont. S.C.J.); affirmed (2005), 40 C.L.R. (3d) 1, 2005 CarswellOnt 169 (Ont. C.A.). Here, the court found no misconduct, and therefore the debt did not survive the bankruptcy. ….

… see HC Matcon Inc. v. Aspden Developments Inc., 2007 CarswellOnt 9970, 96 C.L.R. (3d) 199 (Ont. S.C.J.); affirmed 2009 ONCA 695, 2009 CarswellOnt 5849, 96 C.L.R. (3d) 204 (Ont. C.A.), where the court held that trust debts not involving misconduct do not survive bankruptcy.”

[59] Thus, the conduct of both the corporate defendant and any of their “directing minds” will potentially be very relevant to the outcome of the plaintiffs’ claims and the various actions under consideration at this time.

[60] Against that considerably complicated background I turn to an analysis of the issues raised by the moving parties regarding the alleged or questioned conduct of the Maida brothers.

X. Shifting Onus in Trust Fund Claims

[61] While this matter was under reserve the Court of Appeal released its decision in Airex Inc. v. Ben Air System Inc., 2017 ONCA 390 which related to an appeal from a summary judgment declaring the defendants in breach of the trust provisions of the Construction Lien Act and ordering them to jointly and severally pay an amount in excess of $200,000 to Airex Inc.

[62] In that case on the appeal the entity that hired Airex and its principals argued that they had filed evidence on the motion,

“which, at a minimum, raises an issue that Ben Air paid out more money on account of equipment purchases, payments to sub-contractors and wages and salaries for the project than it received from Omico, including payments made to itself from trust funds to reimburse itself for payments made in relation to the project. Relying on ss. 10 and 11 of the Act, the appellants submit that the motion judge erred in failing to find a genuine issue requiring a trial concerning whether Ben Air breached s. 8 and whether the personal appellants are liable for that breach.

[63] The appeal panel did not accept this submission. Simply put, the court held that the appellants failed to file evidence on the motion that carried sufficient weight to support its position. With respect to the applicable onus the court observed:

“16 However, once Airex demonstrated the following matters (which were never really in dispute), Airex had established that it was the beneficiary of trust monies under s. 8(1) of the Act:

• it was a sub-contractor on the project;

• it supplied materials to Ben Air, a contractor on the project, for which it (Airex) had not been paid; and Ben Air had received payments on account of the project from Omico, another contractor on the project.

17 It was then for Ben Air to show that the trust monies had been properly applied: St. Mary's Cement Corp. v. Construc Ltd. (1997), 1997 12114 (ON SC), 32 O.R. (3d) 595 (Gen. Div.) at pp. 600-601; Sunview Doors Ltd. v. Academy Doors & Windows Ltd., 2010 ONCA 198, 101 O.R. 3d 285, at paras. 83-84. Moreover, the appellants were required to put their best foot forward on the summary judgment motion: Canada (Attorney General) v. Lameman, 2008 SCC 14, [2008] 1 S.C.R. 372, at para. 11, citing Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 1996 7979 (ON SC), 28 O.R. (3d) 423 (Gen. Div.), at p. 434, aff'd [1997] O.J. No. 3754 (C.A.); Goudie v. Ottawa (City), 2003 SCC 14, [2003] 1 S.C.R. 141, at para. 32; Chernet v. RBC General Insurance Company 2017 ONCA 337, at para. 12. Viewed as a whole, the evidence the appellants filed was contradictory and lacked documentary support. It certainly did not carry sufficient weight to support their assertions that they had paid out more money than they received in relation to the contract -- or even that payments they had made on the contract left them without sufficient trust funds to pay Airex. [my emphasis]

[64] I am satisfied that in this case before me the moving parties have failed to establish any misapplication of funds for which the Maidas are responsible, Viewed as a whole, the evidence the plaintiffs filed was contradictory and lacked documentary support. It certainly did not carry sufficient weight to support their assertions that money was received in relation to the project was received by anyone who was not within the protected entities that were entitled to be paid without a breach of trust liability arising. My rationale for reaching this conclusion is found throughout these reasons.

XI. Seeking Evidence of Operative “Breach Of Trust”

[65] In considering the claims to trust monies I noted that in his factum counsel for Campoli relies in part upon an affidavit of Natale Prete sworn March 24, 2016 and asserts:

38: Incomplete records have been produced by the Maidas in this matter. However, based on a limited review of the banking records that were obtained, it appears that there was a breach of trust in that the Maidas in failing to account for over $26,000,000 in Trust funds. Further, the Maidas made over $800,000 in payments to a related company, Georgian Properties Corporation. This is over and above the payments alleged to have been made to Georgian Clairlea staff members….

39. Furthermore, Anthony Maida, Eugene Maida, and Frank Maida, continue to operate their corporation, Georgian Properties Corporation, from the property…owned by Georgian Properties Corporation, a company of which Anthony, Frank, and Eugene are the officers and directors.

40. On January 30, 2013, First National Financial GP Corporation registered a mortgage on the Meyerside Property in the amount of $20,000,000 ("First National Mortgage"). Anthony, Eugene, and Frank provided personal guarantees on the First National Mortgage. On October 14, 2014, a second mortgage was registered on the Meyerside Property in favour of Firm Capital Mortgage Fund Inc. for $2,400,000 ("Firm Capital Mortgage"). Anthony, Eugene, and Frank provided personal guarantees for the Firm Capital Mortgage.

[66] The plaintiffs assert that this raises serious questions regarding the conduct of the Maidas given that they were able to obtain these mortgages and provide personal guarantees in relation to them as recently as October 2014.

[67] It would seem that these allegations misconstrue the requirements of the trust provisions of the CLA. Individuals do have liability for misuse of monies that ought to of been applied to pay down debts owing for the construction of the project. However, simply because the project lost money does not turn the principals or officers of directors of a corporation into guarantors of the liabilities of the Corporation.

[68] The allegations set out above, discuss the liability of Georgian Properties Corporation. (“GPC”) There is no evidence before me that GPC was ever involved in the construction pyramid of the subject project. To the extent that there was ever any ownership equity in the land, that is clearly long gone It is clear that there were a number of mortgages ranking ahead of the Trades Mortgage that were also not able to be paid when the project was finally wrapped up.

[69] The plaintiffs chose to take a Trades Mortgage in the hopes that they would be paid. Their mortgage was “underwater”. That is unfortunate, but I do not regard that situation as establishing a trust liability exposure, applying to any of the individuals who have made a proposal under the BIA.

[70] However those issues might need to be addressed at a later stage were there evidence already obtained of wrongful diversion of funds over the past eight years by the moving parties. Or if the moving parties had not already agreed contractually to abandon any potential trust fund claims.

[71] I address those considerations in the pages that follow.

XII. Claiming in the Proposals and Elsewhere

[72] Campoli’s factum asserts another basis for seeking a lifting if the statutory stays:

42. Based on the above, the Creditors/Moving Parties now wish to preserve and pursue their interests and rights in the Campoli Trust Action and the EM Air Trust Action. Further, Campoli and EM Air wish to participate in the Proposals of Anthony Maida and Eugene Maida as the only other significant creditor in either Proposal appears to be Canada Revenue Agency ("CRA"). In order to participate, based on the Trustee's position as outlined above, Campoli and EM Air must value their claims. In order to do so, the Campoli Trust Action and the EM Air Trust Action must continue; otherwise, Campoli and EM Air will be prejudiced.

[73] Therefore, Campoli and EM Air seek an Order lifting the stay imposed under the BIA in relation to Eugene Maida and Anthony Maida in order to continue with the Campoli Trust Action and the EM Air Trust Action against Eugene Maida and Anthony Maida as commenced by Campoli and EM Air and to value their claims which will allow them to participate in the Proposals of Anthony Maida and Eugene Maida.

[74] They assert as well that the Campoli Trust Action and the EM Air Trust Action against Eugene Maida and Anthony Maida are for debts which survive bankruptcy under the BIA; and, that “to-date, Clairlea Gardens and the Maidas have failed to provide a full accounting with respect to the Project.”

[75] In addition it is argued that Eugene and Anthony are necessary parties for the complete adjudication of the matters at issue in the Campoli Trust Action, the EM Trust Action, and Negligence Actions involving all of the other parties in all of the related actions that are subject to the Haberman Order, as outlined above.

[76] The Factum asserts:

“It is clear that the evidence of Anthony Maida and Eugene Maida (including the answers to undertakings and refusals) in the Campoli Trust Action, the EM Air Trust Action, and the Negligence Actions will be crucial to establish the circumstances surrounding the various issues and allegations which are currently before the court in all of the related actions listed under the Haberman Order, as outlined above”.

[77] It is the position of Campoli and EM Air that there cannot be a proper and complete adjudication of all of the issues in all of the related actions as among the parties without the production of documents in the possession of and from the examination for discovery and cross-examinations of the Maidas, including answers to undertakings and refusals, which have not been fulfilled to-date.

[78] I disagree. The evidence of the various individuals can be obtained notwithstanding the existence of the stays. Whether the proposals are accepted or result in the bankruptcy are for another day. In the meantime, I am considering whether or not it is appropriate in the present circumstances to maintain the statutorily mandated stays in the breach of trust actions.

[79] Counsel for Campoli succinctly sets out the moving party’s position:

“49. Having progressed to this point, it would be unfair to prohibit Campoli and EM Air from continuing with their Breach of Trust Actions to Judgment. It would be especially prejudicial to Campoli and EM Air to do so in the face of an absence of a full accounting from the Maidas and the Trustee's assertion that Campoli and EM Air's claims are contingent because they are not proven and are subject to litigation.”

[80] I note that the appeal of that decision made by the trustee was already successful in that proposal:Campoli and EM Air brought motions to set aside the Notices of Disallowance. On May 28, 2015, Master Wiebe ordered that the Notices of Disallowance be set aside.

[81] In my view, stay would have no adverse impact on the ability of Campoli and EM Air, if they prove their claims to an entitlement,to participate in the proposal without the necessity of establishing a violation of Section 13 of the CLA. Particularly where establishing a breach would not necessarily enable a recovery post the discharges of the Maidas.

XIII. Alleged Failure to Provide Proper Accounting

[82] The moving parties assert that the Defendants, Clairlea Gardens and the Maidas, “have not yet provided the requested financial documents and necessary accounting with respect to the Project.”

“51. Such requests for this information have been made for years. On April 12, 2012, Emilio Bisceglia, as counsel for Campoli and EM Air, wrote to Michael Warner of Firm Capital Mortgage Fund Inc., the Mortgagee on the Project, requesting information pursuant to s.39 of the CLA.

[83] I note that in that case a response was received within a week of the request, on April 19, 2012 in which counsel for Firm Capital Mortgage Fund Inc. advised that the mortgage was taken for the purpose of financing and making of an improvement on the Project; and, further, enclosing a list of the advances totaling $26,442,308.94.

[84] It is to be noted however that the debts asserted as the basis for the present trust claims were all incurred by mid 2009; while the present actions were not commenced until 2012.

XIV. Statutory Rights to Information

[85] The lien act contemplates providing those working on a project with a number of summary methods for obtaining information. These enable the claimant to assess the likelihood of any recovery and to avoid wasting efforts and funds waste efforts and further money if it demonstrated that there are not likely to be funds available to be recovered.

[86] Part VI of the CLA addresses “Right to Information” and with my emphasis added, provides in part:

39.(1) Any person having a lien or who is the beneficiary of a trust under Part II or who is a mortgagee may, at any time, by written request, require information to be provided within a reasonable time, not to exceed twenty-one days, as follows:

1. From owner or contractor-

By the owner or contractor, with,

i. the names of the parties to the contract,

ii. the contract price,

iii. the state of accounts between the owner and the contractor,

2. From contractor or subcontractor –

By the contractor or a subcontractor, with,

i. the names of the parties to a subcontract,

ii. the state of accounts between the contractor and a subcontractor or between a subcontractor and another subcontractor,

iii. a statement of whether there is a provision in a subcontract providing for certification of the subcontract,

iv. a statement of whether a subcontract has been certified as complete, and

[87] Section 39(2) provides further rights to information from a lender:

Any person having a lien or any beneficiary of a trust under Part II may, at any time, by written request, require a mortgagee or unpaid vendor to provide the person within a reasonable time, not to exceed twenty-one days, with,

(a) sufficient details concerning any mortgage on the premises to enable the person who requests the information to determine whether the mortgage was taken by the mortgagee for the purposes of financing the making of the improvement;

(b) a statement showing the amount advanced under the mortgage, the dates of those advances, and any arrears in payment including any arrears in the payment of interest; …

[88] It seems to me that there were a large number of opportunities for the plaintiffs to obtain much of the information that they now claim was not been provided to them. Moreover two sub sections of Section 39 provide teeth to the obtaining of financial information:

(5) Liability for failure to provide information - Where a person, who is required under subsection (1), (2), (3) or (4) to provide information or access to information, does not provide the information or access to information as required or knowingly or negligently mis-states that information, the person is liable to the person who made the request for any damages sustained by reason thereof.

(6) Order by court to comply with request - Upon motion, the court may at any time, whether or not an action has been commenced, order a person to comply with a request that has been made to the person under this section and, when making the order, the court may make any order as to costs as it considers appropriate in the circumstances, including an order for the payment of costs on a substantial indemnity basis.

[89] It seems passing strange that no timely motions were brought under the CLA seeking production of the data claimed. Given the amounts in issue and the expertise of the lawyers working on the file, unless sufficient knowledge had in fact already been obtained, it seems surprising that no Orders were sought or obtained utilizing these rights.. In my view “due diligence” would require such efforts if there was to be a delay in the start of the two year period established under the Limitations Act, 2002.

XV. Mortgagee Protection and Priorities under CLA

[90] In light of that previous inactivity, I believe it is appropriate to consider in the factual matrix of this case, whether there was ever was any realistic prospect of funds being available for the present claimants.

[91] In evaluating the parties’ positions I must give regard to the statutory protection given to lenders under the CLA. Section 22 of the act requires a holdback of 10% of the amount otherwise owing under a construction contract until all liens that may be claimed against the holdback, have expired or been satisfied or discharged. Here there is no doubt the moving parties have no continuing holdback entitlement.

[92] By virtue of Section 78 payments to lenders are a proper application of available funds. Clearly there is no breach of trust in applying any monies available with respect to the project to the payment of secured creditors registered on title, save and except liability for statutory 10% hold back where a proper lien has been registered and maintained.

[93] In this case liens were registered, but were discharged in exchange for the trades mortgage. That being the case, so long as necessary holdbacks are retained, any payment made on account with respect to any of the mortgages on the Property is an authorized use of those funds. The applicable section (with my emphasis added) reads:

78. (1) Priority over mortgages, etc. - Except as provided in this section, the liens arising from an improvement have priority over all conveyances, mortgages or other agreements affecting the owner's interest in the premises.

(2) Building mortgage- Where a mortgagee takes a mortgage with the intention to secure the financing of an improvement, the liens arising from the improvements have priority over that mortgage, and any mortgage taken out to repay that mortgage, to the extent of any deficiency in the holdbacks required to be retained by the owner under Part IV, irrespective of when that mortgage, or the mortgage taken out to repay it, is registered.

(4) Prior mortgages, subsequent advances - Subject to subsection (2), a conveyance, mortgage or other agreement affecting the owner's interest in the premises that was registered prior to the time when the first lien arose in respect of an improvement, has priority, in addition to the priority to which it is entitled under subsection (3), over the liens arising from the improvements, to the extent of any advance made in respect of that conveyance, mortgage or other agreement after the time when the first lien arose, unless,

(a) at the time when the advance was made, there was a preserved or perfected lien against the premises; or

(b) prior to the time when the advance was made, the person making the advance had received written notice of a lien.

(5) Special priority against subsequent mortgages - Where a mortgage affecting the owner's interest in the premises is registered after the time when the first lien arose in respect of an improvement, the liens arising from the improvement have priority over the mortgage to the extent of any deficiency in the holdbacks required to be retained by the owner under Part IV.

(6) General priority against subsequent mortgages - Subject to subsections (2) and (5), a conveyance, mortgage or other agreement affecting the owner's interest in the premises that is registered after the time when the first lien arose in respect to the improvement, has priority over the liens arising from the improvement to the extent of any advance made in respect of that conveyance, mortgage or other agreement, unless,

(a) at the time when the advance was made, there was a preserved or perfected lien against the premises; or

(b) prior to the time when the advance was made, the person making the advance had received written notice of a lien.

[94] Clearly if no holdback liability to any of the moving parties was outstanding at any relevant point in time, a payment then made to a bona fide mortgage holder would be an appropriate application of such funds and not a breach of the trust obligations set out in Part II. I therefore turn to a brief recapitulation and an examination of these observations to what happened in this case.

XVI. Severe Financial Problems Encountered

Project Financing

[95] The Project, owned and developed by Georgian, was at St. Clair Avenue East and Victoria Park in Toronto. It was financed principally by Firm Capital Mortgage Fund and The Equitable Trust Company (collectively "Firm Capital").

[96] In return for the financing, Georgian granted Firm Capital a first charge in 2005 over the Project lands. Jt secured $23,130,000. This was increased in 2006 to $26,250,000. Construction on the Project began in 2007. In 2007, Georgian also granted Firm Capital a second charge. It secured $2,650,000.

[97] Georgian granted three other mortgages over the Project lands:

• April 11, 2007- Lombard Insurance Company of Canada - $5,400,000.00

• April 15, 2009- KML Engineered Homes Ltd. - - $432,098.00

• April 15, 2009- 2075064 Ontario Limited - - $650,000.00

Financial Challenges and Construction Liens

[98] In the spring of 2009, the Project began to experience financial challenges. These included cash flow issues. The Trades were not paid in full. They began to register construction liens, including these:

(i) Millway Carpentry Ltd. - April 15, 2009 - $127,693.00;

(ii) All Weather Windows Ltd. - May 6, 2009 - $63,914.29;

(iii) Campoli Electric Ltd. - May 22, 2009 - $523,952.32;

(iv) Crown Security Services Inc. - June 3, 2009 - $85,922.24

[99] By mid-June 2009, Georgian was indebted to the Trades for over $2.3 million and apparently unable to pay the usual progress draws. Specifically, as noted earlier, at that point in time the three plaintiffs in the present actions were owed a total in excess of $1 million for work done on the Project.

Trust Actions

[100] Three years later on June 20, 2012, Campoli commenced the Campoli Trust Action against the Defendants, Georgian Clairlea, Anthony Maida, Frank Maida, Gene Maida, and Loretto Circosta ("Defendants"). The action against Loretto Circosta has since been discontinued. Whether these actions were commenced out of time will be addressed later in these reasons.

[101] Apparently although they originally held Construction Lien rights, rather than proceeding with their liens, EM Air and Campoli entered into Minutes of Settlement which contemplated a “Trade Mortgage” between them and other contractors and Clairlea Gardens. Importantly, the parties executed the Minutes of Settlement and a Trade Mortgage as of June, 2009.

XVII. “Trades Mortgage”

[102] Counsel for the Maidas asserts:

“The Project's primary construction financier threatened Georgian with receivership if constructions liens were or remained registered. Georgian negotiated a settlement with the Trades ("the Settlement"). The Trades agreed to take a mortgage on the Project (the “Trades Mortgage"). This satisfied all of Georgian' s debts to them. It would be paid from any surplus from the sales of the Project units (after prior mortgages were paid).[my emphasis]

[103] The term “Trade Mortgage” or “Trades Mortgage” is somewhat of a term of art in the Ontario Construction Industry which has in the past been utilized to keep a troubled project to be completed rather than having to be abandoned due to an inability to pay the building trades on a timely basis.

[104] The concept involves the developer not being in a position to pay the major trades as their work is performed. Those parties are faced with the dilemma of perhaps recovering nothing for the work they have already done or ultimately being paid when the project is completed and sold.

[105] The traditional mantra in the construction lien business is that the filing of a lien “Stays the hand of the Paymaster”. If the contractor is not in a position to “bond off” the construction lien then the filing of a lien may effectively end the project. Often, in that event, the likelihood of payment of the full amount owed to the trades is, at best, remote.

[106] If a power of sale under mortgage is exercised, applying section 78 the mortgagee would still have an exposure for the 10% hold back. Moreover it was conceivable that the trades wwould only have the statutory protection to the extent of 10% of the value of the work they had performed. Clearly that worst case scenario would not be very attractive to the trades.

[107] The Trade Mortgage at least offered a possibility of eventually, and optimistically, getting paid the full amount of the existing indebtedness at the end of the project by virtue of having a registered Mortgage. That mortgage at least ranked ahead of the Developer’s equity in the project while nevertheless ranking behind any construction finance mortgages that were already in place and necessary to complete the Project.

[108] Normally, the expectation is that following such a deal, the project will resume, and that further work will be paid on a current basis so as to complete the project and hopefully to permit everyone ultimately to be paid in full.

[109] Given the substantial risks and uncertainties involved, Trades Mortgages in Canada are relatively rare and little appears to have been written about the concept.

[110] My admittedly limited research reveals only two cases discussing the concept. In a 2005 judgment, Justice E.M. Macdonald described such an arrangement in Iori (Litigation Administrator of) v. Village Building Supplies (1977) Ltd.,2005 23122 (ON SC), 16 R.F.L. (6th) 244; 34 R.P.R. (4th) 76; 140 A.C.W.S. (3d) 750; 2005 CarswellOnt 2807. There the issue related to the lien having been released in exchange for what was found to be a fraudulent mortgage:

5 In February 2001, Village Building Supplies registered a claim for lien against 240 Novaview Crescent. It sought the payment of $100,527.00 then owed to Village Building Supplies by Blue Willow on account of drywall and related products supplied to the Baycrest Homes Project.

6 As a result of negotiations between Nicola and Domenic Valsi, a representative of Village Building Supplies, Village Building Supplies agreed to release its claim for lien upon receipt of a mortgage registered against 240 Novaview Crescent and securing the payment of $102,000.00. Upon receipt of the mortgage in registerable form signed by Nicola as consenting spouse and with the forged signature of Giuseppina, Village Building Supplies released its claim for lien.” [my emphasis]

[111] Similarly in British Columbia the court addressed priority issues in Granville Savings and Mortgage Corp. v. 332252 B.C. Ltd. [1992] B.C.J. No. 2386 where Spencer J described the background to a priority dispute before him:

“This is an application by a third mortgagee for payment out of the balance of the proceeds of sale of the mortgaged property. Those proceeds, after payment of the first and second mortgages, are now held in a solicitor's trust account. They amount to some $120,000.00 and are far less than is required to satisfy the third mortgage, let alone the fourth mortgage and the claims of remaining builders lien holders.

…The third mortgagees are a firm of solicitors. They were owed substantial fees and disbursements …. They reached a settlement agreement with the group under which their fees were settled and payment was deferred...

The fourth mortgagees are a group of builders lien claimants who, instead of pursuing their liens, elected to release them and take instead a fourth mortgage position over the condominium project. Their liens were for amounts originally owing by 332252 B.C. Ltd., the mortgagor.”

[112] Clearly any such mortgage is intended to replace and be a substitute for existing lien rights with the intention that the project’s developers can ensure that future secured lenders were in a position to treat the property as being free of liens.

XVIII. Claims of the Moving Parties

[113] Against that background I note that Counsel for Campoli’s Factum asserts:

“10. Pursuant to Section 8 of the Construction Lien Act, R.S.O. 1990, C.c.30 (the "CLA"), the Creditors allege that the Defendants received funds on the Project which funds were to be held in trust. The Creditors further allege that they are beneficiaries of said trust and that the Defendants were fiduciaries with trust obligations under the CLA. The Creditors also allege that Anthony, Gene, and Frank were officers and/or directors and/or shareholders and/or persons with effective control of the affairs of Clairlea Gardens and that they consented to and/or acquiesced in conduct they knew or ought reasonably to have known amounted to a breach of trust by Clairlea Gardens pursuant to Section 13 of the CLA.”

[114] EM Air commenced the EM Air Trust Action , as well Triumph Aluminum and Sheet Metal Inc. ("Triumph") and All City Drywall & Acoustics ("All City") commenced breach of trust actions as against Georgian Clairlea, and the Maidas.

[115] In addition, Campoli, EM Air, and Triumph have all commenced separate negligence actions. Campoli and EM Air have commenced a solicitor negligence action against, their former lawyer and the trustee holding the Trade Mortgage. In Triumph's action, it has also made allegations of solicitors' negligence as against that trustee.

[116] In total, there are 6 actions related to the same Project and related issues relied upon before me. As a result of the number of related actions, the motion described at the outset of these reasons was brought to have all of the breach of trust actions and negligence actions proceed under one common discovery plan, one set of examinations, and a timetable.

[117] Accordingly, by Order dated August 14, 2014, Master Haberman (the "Haberman Order") required that the following actions proceed under a common discovery plan:

Court File No.CV-13-472420 ("Triumph's Action"),

Court File No.: CV-12-37367 (Hamilton) ("All City's Negligence Action"),

Court File No.: CV-12-464749 ("E-M Air's Negligence Action),

Court File No.: CV-12-456478 ("E-M Air's Breach of Trust Action"),

Court File No.: CV-12- 464747 ("Campoli's Negligence Action"),

Court File No.:CV-12-456667 ("Campoli' s Breach of Trust Action"),

[118] As well, the Haberman Order required that the actions proceed to one set of examinations for discovery. The Haberman Order also provided for certain deadline dates with respect to completing various steps in the actions but did not provide a set down deadline date.

[119] The Maidas assert that these actions and in particular the motions seeking to lift the stays, fail to respect the agreement reached between the parties in 2009 and subsequently. In response the Defendants’ Factum details a number of specific agreements to which I now turn.

XIX. “ When all else fails read the contract ”

[120] Based upon my review of the documentary evidence. I am convinced that the following portions from the factum of counsel for the Maidas set out an accurate description of the situation:

“11. With full knowledge of their breach of trust rights, and of Georgian's advances from the construction financing, the Plaintiffs signed Minutes of Settlement dated June 17, 2009 ("the Minutes"). Two paragraphs in the Minutes were amended on July 7, 2009 ("the Addendum").

12. Later, in February 2011, two of the Trades made additional, confirmatory settlement agreements:

• E.M. Air Systems Inc. ("EM Air") signed additional Minutes ("the EM Air 2011 Minutes") re-affirming that all claims against Georgian were settled;

• Triumph Aluminum and Sheet Metal Inc. ("Triumph") signed "Supplementary Minutes of Settlement" ("the Triumph 2011 Minutes"). They also contain a full and final release of all Project-related claims ("the Triumph Release") which is fatal to Triumph's claim.

13. The Settlement, Minutes, Addendum and 2011 EM Air and Triumph Minutes ended any lien actions and other litigation. They allowed the Project to be completed. That was their purpose. The Trades knew they were giving up their registered and unregistered liens. The Trades knew they were giving up all Project-related claims. They hoped to be paid from the Project's sale proceeds surplus.”

[121] I turn first to the keystone document and adopt the following factum extracts (with my emphasis added to each extract) as accurately describing the situation faced by the parties in 2009:

“The June 17, 2009 Settlement: The Trades Mortgage Settles All Debts

26. Firm Capital threatened to shut the Project down, in order to keep it moving forward, Georgian negotiated the Settlement with the Trades. It was embodied in the Minutes, dated June 17, 2009.

27. Everyone, including the Plaintiffs, intended the Settlement to satisfy all of the debt Georgian owed or would owe the Trades. The Minutes made this clear:

“AND WHEREAS Millway, All Weather, Campoli, Crown and any other trade who has registered a Claim for Lien have agreed to discharge their Lien and Discontinue their action to enforce their Lien (if applicable) on the following terms and conditions.

AND WHEREAS certain Trades have agreed to complete all work on the [Project] in accordance with their respective contract with [Georgian].

AND WHEREAS it is the intention of the parties to secure payment for the work of the Trades on the Stacked Townhouses by way of a mortgage against the [Project].”

[122] Specifically the trades agreed:

“7. MILLWAY, ALL WEATHER, CAMPOLI, CROWN and any other TRADES who have registered a Claim for Lien agree to accept these aforesaid amounts and to be subject to these terms and conditions in full settlement of their respective Claims for Lien and for claims against Georgian including interest and costs for all labour and materials supplied to the [Project} excepting the work and/or materials to complete the Freehold Townhouses. [ ... ]

11. IF MILLWAY, ALL WEATHER, CAMPOLI, CROWN or any of the Trades have instituted an action in the Ontario Superior Court of Justice to enforce their respective Claim for Lien, Millway and/or All Weather and/or the Trades shall deliver a Notice of Discontinuance of that action, or, if necessary, shall consent to an Order dismissing the action without cost.

[123] If Georgian is released of claims relating to the Project by this agreement, what continuing failure to pay can be said to give rise to a Breach of Trust by it or a liability under Section 13 of the CLA??

[124] I am satisfied that the Trades Mortgage was intended to replace the entire debt and made clear (as in these factum extracts) that it would rank behind the main project financing:

“(c) The [Trades] Mortgage shall be postponed in favour of the mortgages. against [the Project] in favour of Equitable Trust Company and Firm Capital Mortgage Fund Inc. (totaling [sic] approximately $24,818,748.00) and Lombard General Insurance Company of Canada (totaling approximately $618,693.00) (herein referred to as Lombard Security) including any refinancing thereof, that is, bringing in one or more lenders to provide required construction and development funding for [the Project]; so long as the refinancing is the same or lesser amount than the original mortgage; the [Trades} Mortgage shall also be postponed in favour of a mortgage registered against [the Project] in favour of KML Engineered Homes Ltd. (totaling $432.908.14) (herein referred to as the KML Mortgage) and 2075064 Ontario Limited (totaling $650,000.00)(herein referred to as the PSC Mortgage) including any refinancing thereof so long as the refinancing is for the same or lesser amount than the original mortgage(s);

(d) the Mortgage shall be paid out of the surplus of the proceeds of the closings of the Stacked Townhouse Units and Freehold Townhouses (herein referred to as the Surplus Proceeds);

(e) Millway, All Weather, Campoli, Crown and the Trades shall each have a proportionate interest in the .Mortgage as set out in paragraph 6 above and the Trustee shall pay to them their percentage share of the Surplus Proceeds subject to adjustment in accordance with their respective contract with [Georgian]; [Emphasis added.]

[125] What I find highly significant is that the amounts set out in the Trades Mortgage correspond very closely to the amounts claimed in the present actions (I will address the EM Air claim reduction at a later point):

2009

Present

Minutes

Actions

All City Drywall & Acoustics

$184,917

$184,917

Campoli Electric Ltd.

$513,952

$515,869

E.M. Air Systems Inc.

$441,704

$416,788

Triumph Aluminum Sheet Metal Inc.

$175,793

$175,793

XX. The July Addendum: Confirming the Settlement

[126] It is clear there were extra documents entered into subsequently which reflected the intent that the previous documents were to be a complete resolution of the entitlement to future claims arising out of the project with regard to the 2009 amounts which could have been the subject of construction liens. All the parties to the Minutes agreed to an Addendum, dated July 7, 2009. In this respect the factum continues:

“The Addendum fulfilled three objectives:

First, it confirmed the Settlement:

“WHEREAS Minutes of Settlement were executed by the parties hereto dated June 17, 2009 (hereinafter referred to as the Minutes of Settlement).

AND WHEREAS the parties enter into this Agreement by way of Addendum to the Minutes of Settlement.”

Second, the Addendum amended the Minutes to postpone the Trades Mortgage to mortgages registered against the Project property with a value of about $27 million:

6(e) The Mortgage (hereinafter referred to as the Trades' Mortgage) shall be postponed in favour of the mortgages against [the Project] in favour of Equitable Trust Company and Firm Capital Mortgage Fund Inc. reglsterd [sic] for $26,250,000.00 (collectively referred to herein as the Firm Mortgage) for the full principal amount secured thereunder of $25,416,070.00 only together with interest and any other costs and charges which may he owing thereunder from time to time, and Lombard General Insurance Company of Canada (totaling approximately $618, 693. 00) (herein referred to as Lombard Security) including any refinancing thereof, that is, bringing in one or more lenders to provide required construction and development funding for the [the Project], so long as the financing is the same or lesser amount than the original mortgages. The parties agree that it is not necessary for Equitable Trust Company and Firm Capital Mortgage Fund Inc. to obtain a Postponement of the Trades' Mortgage for each advance to be made by the aforesaid mortgagee from time to time pursuant to the Firm Mortgage as the Trades Mortgage shall be postponed and subordinated in favour of the Firm Mortgage for the full amount secured thereunder as if the Firm. Mortgage were fully advanced as of the date hereof. The Trades' Trustee shall sign a Postponement in the terms set out in the Minutes of Settlement, as amended with Capital Mortgage Fund Inc. and Equitable Trust Company. The Trades' Mortgage shall also be postponed in favour of mortgages registered against [the Project] in favour of KML Engineered Homes Ltd. (totaling $432,908.14) (herein referred to as the KML Mortgage) and 2075064 Ontario Limited (totaling $650,000.00) (herein referred to as the PSC Mortgage) including any refinancing thereof so long as the refinancing is for the same or lesser amount than the original mortgage(s). [Emphasis added.]

Third, the Trades agreed that "all the net sale proceeds from the sale of units on the Project" would go to Firm Capital until it was repaid in full, in priority to the Trades.”

XXI. Specific Further Confirmatory Agreements

[127] Subsequently additional documentation was entered, with respect to the claims of EM Air. The factum sets out the following:

“Reconfirming The Settlement: The 2011 EM Air Minutes

32. The parties implemented the Settlement right away in 2009. The Trades discontinued their lawsuits. They discharged their liens. Georgian and the Trades kept the Project going."

33. Two years later, EM Air and Georgian concluded the EM Air 2011 Minutes. Georgian had sold a condominium unit in the Project …at a discount price to … the principal of EM Air. In return, EM Air had discounted its contract price for work on the Project. A dispute arose. EM Air began legal proceedings. The EM Air 2011 Minutes set out terms that allowed the completion of the discounted [unit] purchase …. They confirmed that EM Air was giving up (again) all its Project-related claims…”

[128] That agreement reduced the net owing to EM Air to $416,788.37 as set out in the arlieer chart. The EM Air 2011 Minutes acknowledged:

“ E.M. Air agrees to accept the aforesaid transfer of the Condo Unit and to be subject to these terms and conditions in full settlement of its Claim for Lien and for any other claims against [Georgian], including interest and costs, for all labour and materials supplied to the [Project].”

[129] Georgian transferred (in trust) the Condo Unit to Mr. Colosimo in March, 2011. EM Air discontinued its lien action against Georgian.

[130] Similarly, it would appear that Triumph executed documentation at a later date, which is consistent with the interpretation put forward by the Maidas. The factum asserts:

The Triumph Release: Full and Final

36. Georgian also reached another settlement in February 2011 with Triumph. In the Triumph 2011 Minutes, Georgian agreed that Triumph was entitled to $42,031.85, in addition to its $175,793 share in the Trades Mortgage. Triumph was to be paid [the later sum] from the Firm Capital mortgage funds.

37. In turn, Triumph discharged a further lien it had registered against the Project. It discontinued an action against Georgian.

[131] Commenting upon the complaint in Triumph’s Reply Affidavit that “it was not advised to obtain independent legal advice" in respect of the 2009 Minutes. The Maida’s materials present evidence that on cross-examination, its principal Mario Ribeiro admitted that

“(a) he understood what Triumph was getting under the 2009 Minutes, and

(b) he was represented by counsel when he entered into the Triumph 2011 Minutes, and

(c) those Minutes incorporate and affirm the 2009 Minutes. This belies Triumph's complaint about independent legal advice.”

[132] Most importantly, Triumph gave Georgian a full and final release, i.e. the Triumph Release:

“THE PARTIES agree on behalf of themselves, their officers, directors, employees, successors and assigns (as the case may be), for good and valuable consideration, hereby release and forever discharge each other and their respective officers, directors, employees, successors and assigns (as the case may be) from any and all manner of actions, causes of actions, suits, debts, proceedings, duties, covenants (whether implied or expressed), contracts, agreements, claims, demands, damages, sums of money, grievances, executions, rights, obligations and liability of every kind and nature whatsoever, whether in law or inequity [sic], which the parties ever had, now have, or may in the future have for any reason against each other arising from, incidental to, or in connection with, all matters raised or which could have been raised in relation to the [Project], save and except that the amount of $175,793.00 remains outstanding to Triumph according to the Minutes of Settlement, executed on June 17, 2009 and the registration of the Trade Mortgage.” [Emphasis added.]

[133] In questions 202 through 207 0f that on cross-examination Mr. Ribeiro also admitted that, when he signed the Triumph Release, he knew that Triumph was releasing not only Georgian, but the Maidas as well.”

[134] I find the totality of this evidence supportive of the Maidas’ position. In particular I adopt this extract form the Maidas’ Factum which relies in part upon the affidavit of Anthony Maida, sworn May 6, 2016:

“The Settlement: What Everyone Knew and Intended

41. Georgian and the Plaintiffs all intended the Settlement, the Addendum, and the various Minutes to achieve the following:

(a) For Georgian and the Trades to settle finally all the debts;

(b) To complete the Project free of all debt to the Trades;

(c) To give the Trades the security of the Trades Mortgage in full and final place of any Project-related debt to the Trades, present and future;

(d) To postpone the Trades Mortgage to the Firm Capital, Lombard Insurance, KML Engineered Homes Ltd. and 2075064 Ontario Limited mortgages;

(e) To pay the Trades Mortgage from the surplus proceeds from the sale of the Project, after the prior mortgagees were paid;

(f) To discharge any of the Trades' liens registered against the Project, and give up any unregistered liens;

(g) To put an end to any lien actions and other litigation in respect of the Project.”

42. The Plaintiffs are all experienced in the construction industry. They had legal advice (Triumph in 2011). The 2009 and 2011 Minutes are clear. They settle not only lien claims, but also "other claims" against Georgian.

43. The Plaintiffs knew they would only be paid after the Project was sold. They knew the prior mortgagees would be paid first. They knew they were surrendering any right to sue for Project-related debts.”

XXII. The Limitations Act, 2002

[135] The Limitations Act, 2002, S.O. 2002, c.24 establishes in section 4 that a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which “the claim was discovered.” What constitutes “Discovery” for the purposes of the Limitations Act is defined in Section 5 (with my emphasis added):

“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).

[136] Section 5(2) establishes as well, a presumption that an entity with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, “unless the contrary is proved.”

[137] Based on the evidence before me I am satisfied that the Plaintiffs had all the information to bring their breach of trust claims before they signed the Minutes in 2009. The Plaintiffs were aware of their breach of trust claims in 2009. They started their Action in 2012.

[138] I am driven to this conclusion by the argument made by the Maidas (footnotes omitted):

45. Before the Minutes were signed, Georgian's lawyer gave the Plaintiffs a Firm Capital mortgage statement. It showed some $24 million in construction financing advanced to the Project. Campoli admitted to this knowledge on cross-examination:

61 Q. I want to understand this. You knew in

June of 2009 that more than $22 million had been advanced by Firm Capital. Correct?

A. Yes.

62 Q. You were content with the information that you received at that point in time. Correct?

A. Yes.

63 Q. Then at that point in time you believe that all of that money had been advanced for the benefit of the construction project, the Clairlea construction project Correct?

A. Correct.

46. The Plaintiffs acknowledged the Firm Capital advances in the Minutes:

The [Trades] Mortgage shall be postponed in favour of the mortgages against [the Project] in favour of Equitable Trust Company and Firm Capital Mortgage Fund Inc. (totaling approximately $24,818,748.00).

47. The Plaintiffs were aware the accounting was less than complete. They were specifically told this by their lawyer. Yet they still chose to enter into the Minutes of Settlement.”

[139] I therefore turn to what they now assert they were told and the relevant case law.

XXIII. Window in Time for Asserting Trust Claims

[140] Section 22 (3) of the Limitations Act does provide that limitation period under this Act “may be suspended or extended by an agreement made on or after October 19, 2006.” However I do not find anything in the Agreements relating to this dispute that there was ever any attempt to “toll” the running of the two year limitation period.

[141] This is relevant because the plaintiffs assert they relied upon legal advice and correspondence that they understood preserved their trust claims relating to the Project.

[142] I adopt the description of the timeline in this area from the Defendants’ factum:

48. The then lawyer for Campoli and EM Air, … wrote to Georgian's lawyer on the day the Minutes were signed, June 17, 2009. [He] requested a provision in the Minutes preserving his clients' breach of trust claims:

We also require a paragraph with respect to all other legal rights being maintained by the parties. Specifically, nothing in the minutes of settlement precludes our clients from starting a breach of trust claims in the future in the event that it is necessary. Additionally, there is no limitation on our clients' future lien rights under these minutes. It may be generally accepted that the exclusion of the item means that it is not addressed and it would be our preference to have it specifically addressed in the form of the minutes of settlement

[143] It is significant that there was no response to this letter. The Minutes were signed without adding the paragraph that had been requested. Specifically, nothing in the Minutes expressly preserved a breach of trust claim.

[144] I accept that a few weeks later, on July 8, 2009, their counsel apparently reported to Campoli and provided a confirmation that he had protected Campoli's breach of trust rights:

“I confirm that we protected any right that you may have by way of Breach of Trust under the provisions of the Construction Lien Act in the event that payment is not received.”

[145] Based upon the materials before me, I am not convinced that in any event there were any rights to pursue a breach of trust claim in this situation. If there were, it is possible that counsel may well have been in error in his assessment at that point in time. However, I need not determine that issue for my present purposes.

[146] In any event, I understand the Plaintiffs are now suing him in negligence.

[147] Based upon the existing contractual documents described to me and the Limitations Act, I am satisfied that even if the plaintiffs at some point had entitlements to “trust funds”, those rights were not protected on a timely basis and are no longer enforceable.

XXIV. Time for Asserting Trust Fund Claims: Caselaw

[148] Justice R.D. Reilly of Ontario Superior Court of Justice addressed this issue in Cast-Con Group Inc. v. Alterra (Spencer Creek) Ltd. (2008), 71 C.L.R. (3d) 54, 2008 CarswellOnt 1163 (Ont. S.C.J.); additional reasons at (2008), 2008 CarswellOnt 4940. The operative portion of his reasons read:

15 It is evident that the claims now sought to be pursued by the plaintiff would in the normal course be barred by the current Limitations Act, which provides a two year limitation period. The plaintiff, Cast-Con's claim was perfected on or about January 23, 2004. …

16 The plaintiff pleads the principle of discoverability. The plaintiff pleads, at least in part, that the limitation period should not start running until February 21, 2007 when it claimed for the first time a full accounting of the funds received in connection with the Spencer Creek Village project. The plaintiff also claims that it could not have known of the possible defendants to the proposed action until much later after the contract was completed. I disagree. By his letter dated August 16, 2006 to Mr. Rosenblatt and Mr. Skolnik, including a "Fresh as Amended" statement of claim, Mr. Chop, then counsel for the plaintiff, clearly identified the various defendants and the nature of the plaintiff's claim against them. It is also clear that reasonable diligence on the part of counsel for the plaintiff could have resulted in claims for breach of trust, quantum meruit and unjust enrichment soon after the contract price was not paid upon completion of the work by the plaintiff.

17 As noted above, a simple corporate search, which was undoubtedly ultimately taken by plaintiff's counsel would result in the revelation of this information. The plaintiff cannot start the "clock ticking" with respect to the limitation period simply by sending a letter requesting an accounting.

[149] The 2016 Annotated CLA summary of this decision observes in part:

“Where the plaintiff sought to add five defendants to the proceeding, and to amend the statement of claim so as to assert a breach of trust against certain defendants, the Judge dismissed the motion on the grounds that adding new causes of action to the existing contract claim would effectively circumvent the two year limitation period and therefore result in the existing and proposed defendants suffering prejudice that could not be repaired by costs or an adjournment prejudice to the defendants if that part of the trust claim proceeded.

The Divisional Court upheld the motion Judge’s ruling in this regard.

[150] I consider myself bound by the interpretations of the Divisional Court that the trust claim clock runs from when the default entitling a party to lien a project, is discovered.

[151] While in some circumstances this would seem a harsh interpretation of the discoverability provision, in this case, its guidance simply reinforces my inclination to find against the moving parties.

[152] However I do note that again while this matter was under reserve a decision on a motion refusing leave to appeal to the Divisional Court from a judgment of Justice Fieta was released.

[153] In Employment Professionals Canada Inc. v. Steel Design and Fabricators (SDF) Ltd., 2016 ONSC 4230, Justice E.M. Stewart dealt with an action arising out of the construction of the Strandherd-Armstrong Bridge in Ottawa, Ontario. The plaintiff alleged that it entered into a contract with SDF to supply labour for the project.

[154] The contract contained a term which required all payments, except for the first payment, to be paid within 30 days of the date upon which each invoice was rendered. SDF paid the first nine invoices it received. The next 17 invoices, totaling $205,501.33, were not paid. SDF and the other corporate Defendants are now bankrupt. EPC commenced its claim more than two years after the bulk of the monthly invoices relating to the work had been rendered.

[155] Justice Stewart observes:

9 EPC claims that the Moving Parties breached their trust obligations under the Construction Lien Act R.S.O. 1990, c-30, as amended (the "Act"), and should be liable for all amounts owing to EPC.

10 On November 16, 2015, the Moving Parties brought a motion for summary judgment to dismiss the majority of Plaintiff's claim for damages on the basis that the action had been commenced after the applicable limitation period had expired.

11 In support of their position, the Moving Parties argued before the motion judge that the limitation period for a breach of trust claim runs concurrently with any breach of contract claim for unpaid invoices. Thus, the limitation period had expired with respect to the first 12 of the remaining invoices (totaling $190,096.58) before the action was commenced. Only 5 invoices (totaling $15,413.75) remained viable and within the limitation period.

[156] The motion judge then considered the limitation defence issue advanced by the Moving Parties, including the legislative history and wording of the Act in that regard. Justice Stewart continues:

16 The Moving Parties rely on the decision in Carmen Drywall Ltd. v. BCC Interiors Inc., [2013] O.J. No. 3245, for the proposition that the claim arises when the payment is due. In that particular case, the Plaintiff had completed its work in December 2007 and had initially requested payment on January 8, 2008. The court determined as follows:

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 ought 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.

This raises the question regarding "discoverability" of a statutory construction trust by a beneficiary of the trust. In Cast-Con Group Inc. v. Alterra (Spencer Creek Ltd), [2008] O.J. No. 842 ...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

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 a statue barred.

17 The motion judge did not accept the submission that Carmen Drywall or the other authorities referred to in that decision stand for the invariable principle that a claim for breach of trust under section 13 of the Act must run concurrently with a claim for breach of a construction contract. Those cases merely applied the discoverability principle to the facts of the particular case.

18 In his reasons, the motion judge found as follows (at paras. 30 and 31):

As in Carmen Drywall, the Plaintiff as a beneficiary of the trust could have requested information on the state of the accounts between the SDF and the owner under section 39 of the Act. However, the assessment of when the Plaintiff should have discovered the claim in these circumstances, especially given the circumstances surrounding the Amendment, turns on the facts of this case and not the date on which payment was due under the Agreement. I accept the Plaintiff's submission that a breach of trust does not exist if the trust does not exist. The trust does not exist until monies have been received by the contractor from the general contractor or are payable. Nor is there a breach of trust if the funds were paid by the contractor to proper beneficiaries …[my emphasis]

[157] On the motion for leave Justice Stewart then applied the appropriate tests and observed in part:

27 With respect to the limitation period issue, the motion judge did not conclude that a breach of trust claim does not run concurrently with the breach of contract because the trust could not be said to exist. Any such conclusion was, in any event, independent of his statement as to when the trust came into existence. The issue for consideration was the discoverability of a breach of trust, not the discoverability of a trust.

28 The motion judge held that a determination of when EPC could have discovered the breach of trust claim turns on the facts of the case, and need not simply be the precise date payment was due under the contract. In his view, the evidence before him did not demonstrate conclusively that the limitation period had lapsed.

29 The correctness of the decision is therefore not, in my opinion, open to serious debate.

[158] I am satisfied on the facts of the case before me that the date when the alleged breaches of trust could have been discovered falls outside the two year period preceding the commencement of these actions.

[159] Moreover as indicated elsewhere I am not satisfied that adequate prove of a possible improper application of any trust funds has been established. In particular I turn to an examination of the apparent application of the construction financing obtained for the Project.

XXV. Settlement? The Trades Sue and the Project is Completed

[160] The one time limit which is clear was the time for asserting a lien claim, which at best was in late 2009. Nevertheless on April 10, 2012, despite the 2009 Settlement, Campoli registered a Claim for Lien against the Project. Campoli admitted that the lien was for the same debt covered in the Settlement and it ultimately withdrew the lien.

[161] Soon after, on June 18 and June 20, 2012, EM Air and Campoli launched for the first time their breach of trust actions against Georgian and the Maidas. Triumph began its action on January 22, 2013.

[162] The Defendants’ Factum continues with a succinct heading:

“Selling the Project: No Surplus for the Plaintiffs ... Or the Maidas

54. It took until April 2014 for the Project's villas and condominium units to be sold. The Plaintiffs' gravamen is that they got no payment under the Trades Mortgage from the sales. This is true. But it is only true because:

(a) After the Firm Capital mortgages were paid, as well as costs associated with the sale, tbere was no money left for anyone, including Georgian, its related companies and the Maidas;

(b) The Plaintiffs had agreed that the Trades Mortgage would be behind four other mortgages;

(c) In the result, the Project suffered a significant loss, estimated at $9 million.

55. Georgian and the Maidas have given a detailed breakdown of the receipts and disbursements of the sale proceeds. It shows that the three mortgages subsequent to Firm Capital's - the Lombard Insurance, KML Engineered Hornes Ltd. and 2075064 Ontario Limited ones (all prior in registration to the Trades Mortgage) -were unpaid.

56. Most importantly, none of the proceeds went to Georgian or the Maidas. The money went to pay the parties entitled by law to be paid in priority to the Trades. [my emphasis]

[163] I am not convinced by the Plaintiffs’ submission that suggests otherwise. In particular I believe that they have failed to account for mortgage proceeds acknowledged in the 2009 Minutes.

[164] They appear to have overlooked section 9(l)(b) of the CLA, which allows sales costs (e.g. real estate commissions and legal fees) and payments of existing mortgages to be made from monies subject to the trust provisions.

[165] At this stage I am not convinced that there is persuasive evidence before me that demonstrates that the payments were anything but proper.

[166] After the failure of the Project, all three Maidas suffered financial losses and filed proposals under the BIA.

XXVI. Proposals in Bankruptcy of Clairlea Gardens and Frank Maida

[167] To recapitulate, apparently the Project's villas and condominium units took 6 years to sell, until about April 2014. The result was a $9 million (approximately) loss to Georgian, its related companies and the Maidas. After prior mortgages and the costs of sales, there was no surplus. There was no money to pay the Trades Mortgage. Other mortgages remained unpaid.

[168] The Maidas made their proposals under the Bankruptcy and Insolvency Act" ("BIA") in 2014 (Frank), 2015 (Anthony) and 2016 (Gene). The Trustee in each case has recommended that the Proposals be accepted.

[169] On August 27, 2014, Residences of Clairlea Gardens Inc. filed a Proposal pursuant to Part III, Division I of the BIA, thereby staying the various actions against it. The proposed Trustee was Surgeson Carson Associates Inc. (the "Trustee"). Georgian Clairlea would later file an assignment in Bankruptcy.

[170] On January 2, 2015, Frank Maida filed a Notice of Intention to File a Proposal and a First Creditors Meeting to vote on the proposal was scheduled for January 20, 2015 - the same day as the examination for discovery of the trades were scheduled to take place and which date had been set months previously.

[171] On July 7, 2015, Campoli and EM Air also brought motions to obtain an Order under s.69.4 of the BIA lifting the stay of proceedings imposed under the BIA in the Frank Maida Proposal to permit the Creditors to proceed with the Campoli Trust Action and EM Air Trust Action against Frank Maida. Orders lifting those stays were granted by Master Jean with Frank Maida’s consent.

XXVII. Proposals of Anthony Maida & Eugene Maida

[172] On November 25, 2015, Anthony Maida filed a Notice of Intention to File a Proposal. A Meeting of First Creditors was scheduled for December 14, 2015 but neither Campoli nor EM Air received notice of the Proposal or of the First Meeting of Creditors. Rather, their counsel received an email from William Ribeiro, counsel for Triumph, that referred to the Anthony Maida Proposal and Meeting of First Creditors. Once again the Trustee advised that neither Campoli nor EM Air received notice of the Anthony Maida Proposal and First Meeting of Creditors because, in the Trustee's opinion, Campoli and EM Air were "contingent creditors".

[173] Regardless of the Trustee's position, the Creditors each filed a Proof Claim, Voting

Letter (voting against) and Proxy in relation to the Anthony Maida Proposal.

[174] Then, on February 12, 2016, Eugene Maida filed a Notice of Intention to File a Proposal and on February 18, 2016, Campoli (and similarly EM Air) received notice of the Filing of a Notice of Intention by Eugene Maida. The Creditors filed a Proof Claim, Voting Letter (voting against), and Proxy in relation to the Eugene Maida Proposal.

[175] On March 23, 2016, Campoli and EM Air brought motions to extend the set down deadline dates in the Campoli Trust Action and the EM Air Trust Action. The Maidas opposed the motion on the basis that the Breach of Trust Actions were stayed under the Proposals. Upon hearing the motions, at that time, I ordered as follows:

"For oral reasons, given on my motion, I have determined to ensure that all six actions … will not be dismissed prior to June 30, 2016. This Order to be entered on all six files.

[176] On the subsequent return date I further ordered that to extent necessary any stay of actions in place “is lifted by me as Registrar, for purpose of dealing with action status only and is now restored.”

[177] I am now ordering that all the actions not be dismissed for delay prior to December 31, 2017. This should permit any appeals to be addressed without risking an administrative dismissal in the interim period.

[178] Before I turn to the specifics as to why I have determined that the stays of the two actions ought not to be lifted at this time, I need to address the approach to be taken to the previously lifted stay of the breach of trust action against Frank.

XXVIII. Reinstating a Stay?

[179] Counsel for Frank Maida seeks to restore the Stay previously lifted with Mr Maida’s consent. The factum (with footnotes omitted) argues:

“59. The Plaintiffs' actions have dragged on for four years. There is no end in sight. Scheduling orders have been made. Timetables set. Deadlines established. The Plaintiffs have ignored them all.

60. Meanwhile, the Maidas have had to make Proposals under the BIA:

a) Frank made his Proposal on December 29, 2014;

b) Anthony made his on November 25, 2015;

c) Gene made his on February 12, 2016.

The Trustee has recommended that the Proposals be accepted.

61. The stays of proceedings that these Proposals triggered are still in place regarding Anthony and Gene. The one against Frank was lifted by Master Jean on July 7, 2015 on the premise that these actions would proceed without delay.

62. This turned out to be untrue. Frank has suffered prejudice. He has been unable to bring his affairs in order. He has been unable to start over, the reason for his filing a Proposal."

63. Frank is asking this Court to have the stay reinstated. Anthony and Gene support his application.

64. There is now the prospect that these actions will drag on further. They will likely take years to be resolved. The Maidas will be unable to bring their affairs in order. They and their families continue to be burdened with the demands of litigation.

[180] The BIA in Section 187, dealing with Authority of the Courts, provides in part:

(5) Court may review, etc - Every court may review, rescind or vary any order made by it under its bankruptcy jurisdiction.

(6) Enforcement of orders - Every order of a court may be enforced as if it were a judgment of the court.

[181] The Order lifting the Frank Maida stay was made by Registrar Jean. In my view, it would be contrary to these provisions for me to vary an order made by my colleague. It is generally regarded that the jurisdiction given by section 187 (5) should be sparingly exercised. It is a matter of indulgence and must be carefully guarded. The court should not entertain an application under this section if the only purpose of the application to obtain another opportunity for appealing when the defendant has let the time for appealing go by.

[182] If the registrar’s order is to be varied, such an application at the minimum needs to be brought to the judicial officer making the order.

[183] I therefore decline to reinstate the stay originally generated upon Mr. Maida’s filing of his proposal under the BIA .

[184] However that does not necessarily resolve Frank Maida’s situation.

XXIX. Summary Judgments?

[185] The Maidas submit, as well, that even if the stays against the Maidas were lifted (or in Frank's case, reinstated), and even if the Plaintiffs' breach of trust claims succeeded, a judgment would make no difference:

“67. The Plaintiffs' claims total $1,107,657. The Canada Revenue Agency has a claim for $13,487,679. The Plaintiffs' claims are less than 10% of the total creditors' claims. If CRA votes in favour of the Proposals, they will be accepted. 1f they vote against, the Maidas will be bankrupt. Either way, the breach of trust claims cannot survive bankruptcy.”

[186] As will be apparent, this is not the only basis asserted on behalf of the Maidas for bringing this litigation to an end. Counsel for the Maidas asserts that allegations made by Triumph were significantly undermined on cross-examination:

“68. Triumph has alleged fraud against the Maidas. On cross-examination, the allegation fell apart. It is without foundation. Triumph has no evidence of fraud.

69. Campoli and EM Air have also alleged fraud. Specifically, they say the Maidas (and Georgian) "participated in a breach of trust by participating in a conversion and/or defalcation of the trust funds". This allegation also fell apart on cross-examination, in a moment where Plaintiffs' counsel did not obstruct the cross-examination:

36 Q. Do you understand that "defalcation" means misappropriation or theft?

A. No. I do now.

37 Q. How much money do you say that Anthony Maida personally misappropriated or stole from the trust funds?

A. At this time I don't know the exact figure.

38 Q. Do you have any idea?

A. Not at this moment, no. ”

[187] Taking all the arguments of all counsel in their compendious facta into account I turn to the relevant caselaw regarding the lifting of BIA stays.

XXX Caselaw on Appropriate Approach to Lifting of Stays

[188] The statutory provisions for a the lifting of a BIA stay require an application to the court for a declaration that those sections no longer operate in respect of that creditor. In response the court may make such a declaration, subject to any qualifications that the court considers proper, if it is satisfied

(a) that the creditor or person is likely to be materially prejudiced by the continued operation of those sections; or

(b) that it is equitable on other grounds to make such a declaration.

[189] What is clear from the case law that there ought to be no “automatic” granting of orders lifting the stay.

[190] Justices Abella, Charron and Sharpe, then of the Ontario Court of Appeal explained Sec. 69.4 of the BIA in Re:Ma, 2001 24076 (ON CA), 143 O.A.C. 52; 24 C.B.R. (4th) 68;104 A.C.W.S. (3d) 261; 2001 24076:

“2 In our view there is no requirement to establish a prima facie case and no inconsistency in the case law. We do not agree that Bowles v. Barber imposes a prima facie case requirement. More importantly, that requirement is not imposed by the statute. Under s. 69.4 the court may make a declaration lifting the automatic stay if it is satisfied (a) that the creditor is "likely to be materially prejudiced by [its] continued operation" or (b) "that it is equitable on other grounds to make such a declaration." The approach to be taken on s. 69.4 application was considered by Adams J. in Re Francisco (1995), 1995 7371 (ON SC), 32 C.B.R. (3d) 29 at 29-30 (Ont. Gen. Div.), a decision affirmed by this court (1996), 1996 10233 (ON CA), 40 C.B.R. (3d) 77 (Ont. C.A.):

In considering an application for leave, the function of a bankruptcy court is not to inquire into the merits of the action sought to be commenced or continued. Instead, the role is one of ensuring that sound reasons, consistent with the scheme of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, exist for relieving against the otherwise automatic stay of proceedings.

3 As this passage makes clear, lifting the automatic stay is far from a routine matter. There is an onus on the applicant to establish a basis for the order within the meaning of s. 69.4. As stated in Re Francisco, the role of the court is to ensure that there are "sound reasons, consistent with the scheme of the Bankruptcy and Insolvency Act" to relieve against the automatic stay. While the test is not whether there is a prima facie case, that does not, in our view, preclude any consideration of the merits of the proposed action where relevant to the issue of whether there are "sound reasons" for lifting the stay. For example, if it were apparent that the proposed action had little prospect of success, it would be difficult to find that there were sound reasons for lifting the stay.” [my emphasis]

[191] In my view based upon the entirety of issues in this case I am satisfied the plaintiffs have little prospect of success, based upon a number of the defences evaluated throughout these reasons. Any one of which would be fatal to the plaintiffs’ case.

[192] Moreover, in this particular factual matrix dealing with the CLA trust claims, it is “apparent that the proposed action [has] little prospect of success”. Not only for the reasons elaborated above; but for the additional reason that the Plaintiffs' claims cannot survive bankruptcy.

[193] In this respect, I restate the salient parts of section 178(1) of the BIA:

An order of discharge does not release the bankrupt from [...]

(d) any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity…

[194] In Toro Aluminum Ltd. v. Revah, 1999 14847 (ON SC), 18 C.B.R. (4th) 134; 3 C.L.R. (3d) 1; Molloy J. sitting on the Commercial List observed:

Where a fiduciary commits a breach by inadvertence, negligence or incompetence, his or her conduct should not fall within s. 178(l)(d) of the Bankruptcy and Insolvency Act. It is only where there is "some element of dishonesty, wrongdoing or misconduct" that conduct can be said to amount to misappropriation or defalcation while acting in a fiduciary capacity as these words are used in the Bankruptcy and Insolvency Act.

• Test Under Section 178(1)(d) of the Bankruptcy and Insolvency Act

8 The trust provisions of the Construction Lien Act provide additional protection for trades and suppliers on construction projects beyond the right to file liens against the property. Essentially, a contractor or subcontractor who receives money on account of its contract, holds that money in trust for those who provided services or materials on the project. The trustee must, subject to certain exemptions, use those monies first to pay those who provided services and materials. Failure to do so constitutes breach of trust….

9 Section 178(1) of the Bankruptcy and Insolvency Act sets out a number of situations in which liabilities of a debtor survive his discharge from bankruptcy. These include section 178(1)(d) which provides that a discharge does not relieve a bankrupt from "any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity".

[195] The Court of Appeal decision in Simone and Daley, 1999 3208 (ON CA), 43 O.R. (3d) 511; 170 D.L.R. (4th) 215; 118 O.A.C. 54; 8 C.B.R. (4th) 143; 24 R.P.R. (3d) 1; 86 A.C.W.S. (3d) 271 held that “not all breaches of a fiduciary are breaches of a fiduciary obligation”. Where a fiduciary commits a breach by inadvertence, negligence or incompetence, his or her conduct should not fall within section 178(1)(d) of the Bankruptcy and Insolvency Act. It is only where there is "some element of dishonesty, wrongdoing or misconduct" that conduct can be said to amount to misappropriation or defalcation while acting in a fiduciary capacity as these words are used in the Bankruptcy and Insolvency Act. Blair J. ad hoc, as he then was, delivering the unanimous decision of the Court of Appeal held at page 526 of the O.R. version:

“…The courts have resisted a rigid approach to the determination of what constitutes a fiduciary relationship, as previously noted, emphasizing that it is "the nature of the relationship and not the category of actors involved" which is important for purposes of that exercise. In this same spirit, it seems to me, the courts should avoid attempting to sweep into concepts such as "misappropriation" or "defalcation" -- which in their ordinary meanings connote some element of wrong doing, improper conduct, or improper accounting -- any and all failures by the fiduciary to comply with the obligations attending upon that capacity. When it comes to the application of insolvency legislation, the results of not resisting that temptation can be far reaching and inconsistent with the purposes of such legislation.”

[196] Justice Molloy further observed in Toro Aluminum:

13 Based on the reasons of the Court of Appeal in Simone and Daley, it cannot be said that any finding of liability under the trust provisions of the Construction Lien Act will constitute a liability falling within section 178(1)(d) of the Bankruptcy and Insolvency Act. One can imagine situations in which there could be breach of the trust provisions in the CLA without any deliberate wrongdoing on the part of the trustee. For example, funds might be paid out to third parties due to inadvertence or an accounting error. Such conduct might not fall within the Court of Appeal test as articulated in Simone and Daley. However, there will certainly be some breaches of trust under the Construction Lien Act which will fall clearly within section 178(1)(d) of the Bankruptcy and Insolvency Act. An obvious example is where a trustee deliberately misappropriates trust money for his own use so as to defeat the claim of beneficiary. In between these two extremes, there is a spectrum of conduct which breaches the CLA, but which may or may not fall within section 178(1)(d) of the Bankruptcy and Insolvency Act, depending on the extent to which there was any wrongdoing or improper conduct by his bankrupt in his fiduciary capacity.

[197] In the present case I have no sense from the evidence placed before me that any of the Maidas deliberately misappropriated trust money for their own use. I adopt the submission of the Defendants counsel in this regard:

83. The Plaintiffs cannot show that the Maidas are guilty of “fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity". If they can show it, they have not done so on this motion, although they are obliged to.”

[198] I now turn to my decision, sitting as a Registrar in Bankruptcy, in Re: Ieluzzi , 2012 ONSC 1474; 88 C.B.R. (5th) 215; 2012 CarswellOnt 2534 (affirmed; 2012 ONSC 3447; 216 A.C.W.S. (3d) 825; 2012 CarswellOnt7608). In that case I dealt with a motion to lift the BIA stays in a non-lien act breach of trust action and held:

30 The words in s. 178(1)(d) "while acting in a fiduciary capacity" refer to the whole of the clause and not only to "misappropriation or defalcation". In order for a creditor to bring its claim within s. 178(l)(d), it is necessary for the creditor to prove that the debtor was acting in a fiduciary capacity: Re Brant (1984), 52 C.B.R. (N.S.) 317 (Ont. S:C), The breach of a fiduciary duty does not, however, of itself lead to the survival of a debt or liability following a discharge; there must, in addition, be fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity: Turner v. Midland Doherty Lid.(1992), 1992 2304 (BC SC), 13 C.B.R. (3d) 16, 70 B.C.L.R. (2d) 268 (S.C.)

32 In order for a breach of fiduciary duty by a bankrupt to constitute "misappropriation or defalcation" within the meaning of s. 178(l)(d) so as to give rise to a judgment debt that survives the bankrupt's discharge, there must be some improper dealing with property entrusted to the fiduciary and some element of moral turpitude in the sense of dishonesty, wrongdoing or misconduct: Re Di Paola (2006), 2006 23935 (ON SC), 2006 CarswellOnt 4272, 24 C.B.R. (5th) 30 (Ont. S.C.J.); affirmed 2006 37117 (ON CA), [2007] O.J. No. 128, 2007 CarswellOnt 150,217 O.A.C. 95 (Ont. C.A.).

[199] In MG Electric Ltd. v. (CSE) Control Systems Engineering Inc. et al., 47 2004 MBQB 145 at para. 4, affd 2004 MBCA 178. the Court applied Toro Aluminum, supra and observed:

[ ... ] there is little point in getting leave to continue its action if the court finds that this is not the sort of case where the judgment should survive bankruptcy.

[200] These observations apply here. Based upon the evidence and arguments placed before me, I conclude that the Plaintiffs have failed to convince me that their claims will fall within sec. 178(1) of the BIA. Any judgment they might get would not survive bankruptcy. There are no sound reasons, or equitable grounds, for lifting the stays as against Anthony and Gene Maida.

XXXI. Jurisdiction of a Master to Grant Summary Judgment

[201] In 2014 Master C.U.C. MacLeod, as he then was considered the impact of the amendments to the Rules of Civil Procedure dealing with obtaining summary judgments in Pammett v. 1230174 Ontario Inc.;2014 ONSC 2447:

21 On January 1, 2010 significant amendments to the rule came into effect. These were designed to make summary judgment more available in appropriate cases and were triggered by recommendations made by the Honourable Coulter Osborne in his review. The most significant of these changes were as follows:

• i Change of the wording of the rule from "no genuine issue for trial" to "no genuine issue requiring a trial" (Rule 20.04 (2));

• ii. Addition of powers for judges (but not masters) to weigh evidence, make determinations of credibility and draw inferences even if the court determines that there is a genuine issue and to conduct a "mini-trial" if necessary. (Rule 20.04 (2.1) & (2.2));

• iii. Enhanced powers to define the issues to be tried and to give direction concerning the manner of trial (Rule 20.05); and,

• iv Abolition of the presumption that an unsuccessful moving party should pay costs on a substantial indemnity scale and limiting such awards to specific circumstances (Rule 20.06).

22 The amendments to Rule 20 were part of a package of amendments passed by the Rules Committee including a specific interpretive principle of proportionality. The impact of the amendments to Rule 20 in the context of proportionality and in light of the exigencies of modern civil litigation has now been examined by Supreme Court of Canada in Hryniak, supra. That is now the governing case concerning the application and interpretation of Rule 20 in particular and the appropriate use of summary judgment rules in general. It is required reading.

23 At paragraph 5 of the decision the Supreme Court articulated the principle that "summary judgment rules must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims". At paragraph 27 the Court enunciates the principle that "alternative models of adjudication are no less legitimate than the conventional trial" and at paragraph 28 that "the proportionality principle means that the best forum for resolving a dispute is not always that with the most painstaking procedure". In short if issues can be fairly decided without the full forensic mechanism of the traditional trial then they ought to be decided. If the outcome is evident, justice is not served by putting off the fateful day until the parties have both incurred the enormous expense of a trial.

24 The Supreme Court is abundantly clear that under Rule 20, summary judgment should always be granted in appropriate cases and even if summary judgment is not granted the court should use the powers set out in the rule to fashion a summary trial process unless it is clearly not in the interests of justice to do so. In the case of a judge hearing the motion, the judge may conclude that there is a genuine issue of credibility but may then go on to utilize the enhanced fact finding powers set out in Rule 20.04 (2.1) and for that purpose may hear oral evidence and conduct a mini trial. Indeed, the Supreme Court says the judge should ordinarily exercise those powers unless it is in the interests of justice that those powers be exercised only at trial.

[202] As a Master, I exercise only a subset of the jurisdiction of a judge and accordingly under the rule as currently drafted, I do not have access to the enhanced fact finding role in Rule 20.04 (2.1) or the mini trial process in (2.2). For that reason the decision in Hryniak is extremely instructive because it endorses what the court calls the "roadmap approach" to summary judgment:

First the court should determine if there is a genuine issue requiring trial based on the evidence before the court and without using the new fact finding powers. If the court is satisfied under Rule 20.04 (2) (a) then summary judgment must be granted.

Secondly, if the court is of the view there is a genuine issue requiring a trial, then the judge should determine if the trial can be avoided by using the new powers under Rule 20.02 (2.1) and (2.2). Though the exercise of these powers is presumptive, this step remains discretionary.

Finally, if the court determines there is a genuine issue requiring a trial and if the court cannot decide the issue by means of the enhanced fact finding powers or in the interests of justice declines to do so then the court should try to salvage the resources invested in the summary judgment motion by devising a summary trial procedure under Rule 20.05.

[203] Now, Justice MacLeod describe this as a three step process in which the second and third steps remain discretionary. The mandate from the Supreme Court to approach each of these steps separately is particularly helpful when a master is hearing the motion because the first and last step are within the jurisdiction of the master whereas the second step is not. “Most importantly resort to the enhanced fact finding powers is only necessary and appropriate if the court has first concluded that there is a genuine issue after determining if the evidence or lack of evidence justifies judgment without a trial in the absence of those powers.”

[204] The possibility of a lack of evidence is important in applying rule 20.02. That Rule specifically permits the court to assess the quality and sufficiency of the evidence. The court may under that rule draw a negative inference if a party seeks to rely on information and belief and does not put forward direct evidence of an important point. Under that rule as well the party responding to a motion for summary judgment must "put its best foot forwards" by "setting out in affidavit material or other evidence specific facts showing that there is a genuine issue requiring a trial".

[205] Master MacLeod specifically concludes that “It is not enough to speculate about potential evidence, the responding party must demonstrate the contested issue is a genuine issue by putting forward cogent and probative evidence.” In Pammett he continues:

28 There are subtle distinctions here. The court may assess the sufficiency of the evidence, admissibility of evidence and reliability of evidence without access to enhanced fact finding powers. The court may also apply the law to the facts without deciding a genuine question of law. In Mehdi-Pour v.Minto Developments Inc. I foresaw the "roadmap approach" and I found that the first inquiry was for the court (either a master or a judge) to determine whether or not there was a genuine issue under Rule 20.04 (2). [Minto Citation: 2010 ONSC 5414 (Master); aff'd 2011 ONSC 3571 (Div.Ct.); leave to appeal refused, Oct 20, 2011, Docket M40188 (C.A.).]

[206] I agree with my former colleague that, in essence Rule 20 now encompasses three processes. “Although called summary judgment, the first is really a motion for judgment based on the fact that the other party cannot succeed at trial.” This may be so because the responding party lacks necessary evidence or because it is wrong in law:

31 A plaintiff will be entitled to judgment if the plaintiff can prove all elements of the cause of action and the defendant either has no defence or is missing critical elements of proof necessary to maintain that defence. A defendant will be entitled to judgment if the plaintiff cannot prove an essential element of its case or if the defendant has a complete defence. In Mehdi-Pour for example, the plaintiff could not prove that the allegedly defective water heater was venting carbon monoxide into the home, that the carbon monoxide built up to toxic levels or that carbon monoxide in the home was the cause of symptoms reported by the plaintiff to his physician. In the present case, if the action is statute barred that is a complete defence.

[207] In coming to my conclusions I adopt the guidance of now Justice Macleod and ends this section of my reasons highlighting his guidance on the appropriate approach in such cases:

35 I have taken the time to outline these other processes because much of the decision in Hryniak deals with them. But it is important for purposes of this motion to focus on Rule 20.02 (2) (a). The Supreme Court also mandates a robust and fearless application of that portion of the rule. It is not appropriate to simply defer the question to a trial judge if the evidence does not establish that the party having the onus to prove something has a reasonable prospect of doing so.

XXXII. Recapitulation

[208] In my view, for the above reasons this motion for summary judgment may be determined under Rule 20.04 (2) (a) and there is therefore no reason to engage either of the other processes now contemplated by the rule The evidence before me demonstrates that there is no air of reality to the argument that the cause of action against these defendants was only discoverable two years before the action was commenced. If there was an existing trust obligation, the case law mandates that the time period for bringing the case expired long before the action was commenced. In any event I am not convinced that there is any meaningful evidence of any misappropriation of funds by the Maidas.

[209] Moreover, I am convinced that the parties with their eyes wide open, entered into a clear written agreement to give up their Lien Act entitlements in exchange for the prospect of a later recovery of their arrears by way of the postponed mortgage and an opportunity to be paid on an ongoing basis for work to complete the Project. It would be inappropriate and in my view inequitable to permit the plaintiffs to ignore the bargain made by them.

[210] In reaching this conclusion I need not exercise any of the powers reserved to judges under the new subsections of the Rule 20.02 (1). In fact I need not draw even the negative inferences I am entitled to draw under Rule 20.02 (1). I am however entitled to assume that the plaintiffs have each put their best foot forwards and the evidence now before the court is the best they can do at trial.

[211] Not only does Rule 20.02 (2) require the plaintiff to prove there is a genuine issue requiring a trial, the Supreme Court has specifically cautioned that the purpose of summary judgment is undermined if a motion can be defeated by speculation about what evidence the responding party might be able to adduce if given a chance. The motion for summary judgment must be decided on the basis of the evidence actually before the court on the motion.

[212] In this case the lack of robust evidence of any payment of trust funds to a recipient not covered by a statutory entitlement under the CLA means the plaintiffs failed to meet the onus placed upon them.

[213] Moreover I believe that the doctrine of promissory estoppel is also in play in this case and ratifies my ultimate conclusions.

XXXIII. “Equity Must Prevail”: Lord Denning and Promissory Estoppel

[214] Section 96 of the Courts of Justice Act. R.S.O. 1990, c. C.43, provides:

Rules of law and equity

96 (1) Courts shall administer concurrently all rules of equity and the common law.

Rules of equity to prevail

(2) Where a rule of equity conflicts with a rule of the common law, the rule of equity prevails

[215] In my recent decision in Hua v. Estate of Deng, 2017 ONSC 2010 I had occasion to consider the concept of promissory estoppel. Here again I observe that it is now been 70 years since Lord Denning defined the equitable principles to be addressed when a party seeks to rely on matters outside the original contractual agreements of the parties.

[216] The headnote in his King's Bench Division decision in Central London Property Trust, Ltd. V. High Trees House, Ltd.,[1947] KB 130, [1956] 1 All ER 256, [1946] WN 175, describes the nature of the test case heard by His Lordship:

“Landlords let a new block of flats in 1937 to H. Ltd. on a ninety-nine years' lease at a ground rent of £2,500 a year. Few of the flats had been let at the outbreak of war in 1939, and, in view of the tenants' difficulty in paying the rent out of profits in prevailing conditions, the landlords agreed in writing in 1940 to reduce the rent to £1,250. No duration of the reduction of rent was specified and there was no consideration for it. The tenants paid the reduced rent. By early in 1945 the whole block of flats was let. On Sept. 21, 1945, the landlords wrote asking that the full rent of £ 2,500 should be paid and claiming arrears…”

[217] His Lordship held that the promise of a reduction of rent, being intended to be legally binding and to be acted on, and having been acted on by the tenants, was binding on the landlords to the extent that they would not be allowed to act inconsistently with it, although it was not the subject of estoppel at common law.

[218] Writing in 1947 his analysis reflects a concern as to the appropriate approach to such cases:

What, then, is the position in view of developments in the law in recent years? The law has not been standing still even since Jorden v. Money .[(1854) (5 H.L. Cas. 185)]….There has been a series of decisions over the last fifty years which, although said to be cases of estoppel, are not really such. They are cases of promises which were intended to create legal relations and which, in the knowledge of the person making the promise, were going to be acted on by the party to whom the promise was made, and have in fact been so acted on. In such cases the courts have said these promises must be honoured. There are certain cases to which I particularly refer: Fenner v. Blake ([1900] 1 Q.B. 426), Re Wickham (4) (1917) (34 T.L.R. 158), Re William Porter & Co., Ltd. ([1937] 2 All E.R. 361) and Buttery v. Pickard (1946) (174 L.T. 144). Although said by the learned judges who decided them to be cases of estoppel, all these cases are not estoppel in the strict sense. They are cases of promises which were intended to be binding, which the parties making them knew would be acted on and which the parties to whom they were made did act on. …. In each case the court held the promise to be binding on the party making it, even though under the old common law it might be said to be difficult to find any consideration for it. The courts have not gone so far as to give a cause of action in damages for breach of such promises, but they have refused to allow the party making them to act inconsistently with them. It is in that sense, and in that sense only, that such a promise gives rise to an estoppel.” [my emphasis]

[219] In the present cases I am satisfied The Minutes of Settlement and the related Trades Mortgage amounted to promises which were intended to be binding, which the parties making them knew would be acted on and which the parties to whom they were made did act on. Based on the evidence before me I am satisfied that if the stays were lifted and the actions proceeded, the ultimate result, guided by the rules of equity, would be a finding that the trust claims were intended to be released and a judgment giving effect to that agreement.

XXXIV. Bringing the Strands Together

[220] Counsel for the Defendants submits that if the stays are lifted (or in Frank's case, reinstated), the Plaintiffs' actions “should in any event be dismissed summarily.” Amongst the grounds he asserts are the following which I find meritorious:

• The limitation period expired in 2011.

• The CLA requires the Plaintiffs to prove that Georgian was in breach of trust and that the Maidas controlled Georgian and that that assented to or acquiesced in a breach of trust. They Plaintiffs have not proved any of this. Their claim against Georgian is stayed. The Plaintiffs have taken no steps to lift that stay.

• There is no genuine issue requiring a trial. There was no breach of trust.

• The actions are an abuse of process or barred by estoppel.

• The Plaintiffs claims cannot survive the Maidas' bankruptcies, under sec. 178(1) of the BIA.

[221] I accepted and adopt, these grounds. Anyone would likely be sufficient to justify my conclusion, if I am in error with respect to one or more of these findings, I nevertheless rely upon the balance of the grounds set out and regard them as more than adequate to justify the result.

[222] Counsel for the Maidas argued an additional ground which I do not feel ought to be determinative of the central other issues before the court; but nevertheless it does cause me significant concern. His factum asserts in this regard:

“The Plaintiffs Campoli Electric Ltd. ("Campolin) and EM Air have been aggressively obstructive in examinations. They have made grave and unfounded allegations against the Maidas of fraud and defalcation. They refused to answer proper questions about the allegations. Counsel obstructed the Maidas' cross-examination rights.”

[223] With respect to the nature of the aggressive obstruction item I have appended as Appendix “A” to these reasons, transcript extracts of what I regard as being an inappropriate manner for a moving party “to lead trump” and to put its “best foot forward.”.

[224] Weighing all the factors in the present case and in particular, the clear terms of the contractual documents, both in 2009 and later I conclude that it would be neither fair nor just to expose the individual defendants to the expense and stress that would result from a lifting of the existing stays.

[225] Lord Denning referred to cases decided in this way, for over 50 years prior to his decision. It has now been 70 more years and I see no reason not to apply an equitable estoppel against the moving parties.

[226] Specifically having regard to the alternate tests in section 69.4 of the BIA it is my conclusion that:

(a) having regard to the historical documentary settlement evidence and the impact of the Limitations Act ; it is not likely that the moving parties will ultimately be materially prejudiced by a failure to lift the existing stay and

(b) that it would not be equitable having regard to the steps taken in reliance upon the Trades Mortgage and the related confirmatory documents to make such a declaration.

XXXV. Conclusion

[227] Rule 1.04, requires that the court should strive to have matters resolved on the merits. Hryniak encourages an approach that avoids lengthy trials.

[228] I am obliged to all counsel for their written and oral advocacy. I regret time is taken to review, analyze and consider all the issues within this very complex background.. My rough approximation of the total height of the motion records and materials filed before me approximated 4 ½ feet. In light of that voluminous authorities and the combined advocatory effort , I felt it appropriate to give fair consideration to all the arguments made, and to set out the legal background against which I was required to make my determinations.

[229] With respect to costs, the defendants argued that they were entitled to a punitive costs order and justified the request on this basis:

“The Plaintiffs have made unfounded fraud allegations. They have flouted the Settlement. They have needlessly prolonged this litigation. EM Air and Campoli have been exceptionally obstructive on examinations, wasting the parties' time and money.

[230] While I appreciate the basis for such costs award, I am satisfied that awarding partial indemnity costs against the moving parties in an amount to either be agreed upon by counsel or to be determined by the on the basis of written submissions to be filed with my office within 45 days of the release of these reasons. I have no doubt that counsel be able to agree on a protocol for the exchange of their materials. Counsel for the defendant will be responsible for putting together a package of all the materials to be filed with my ATC.

XXXVI. Disposition

[231] Based on the foregoing unduly long reasons for coming to my conclusions and make the following brief orders.

[232] As indicated earlier I am now ordering that all six actions not be dismissed for delay prior to December 31, 2017. This should permit any appeals or other applications to be addressed, without risking an administrative dismissal in the interim period.

[233] Ultimately, these unduly long reasons come down to these short determinations:

1. The motions seeking the lifting of the stays regarding Eugene and Anthony Maida under the BIA of actions: No. CV-12-456478 (the "EM Air Trust Action"); No. CV-12-456667 (the“Campoli Trust Action” and No. CV-13-472420.(the “Triumph Trust Action”) are hereby dismissed with costs

2. The motion to reinstate a stay of those actions as against Frank Maida is dismissed.

3. The motion of Frank Maida to have the above three actions dismissed as against him is granted. Having considered all the circumstances in this case, that dismissal Order is made without costs.

Released: June 8, 2017

Master D. E. Short

DS/ R.171

APPENDIX “A”

Nature of Cross Examination

Transcript extracts from Cross-Examination of Natale Prete, August 3, 2016

contained in Maida Defendants’ Factum (footnotes omitted, highlighting in original):

“68. Triumph has alleged fraud against the Maidas On cross-examination, the allegation fell apart. It is without foundation. Triumph has no evidence of fraud.

69. Campoli and EM Air have also alleged fraud. Specifically, they say the Maidas (and Georgian) "participated in a breach of trust by participating in a conversion and/or defalcation of the trust funds". This allegation also fell apart on cross-examination, in a moment where Plaintiffs' counsel did not obstruct the cross-examination'":

36 Q. Do you understand that "defalcation" means misappropriation or theft?

A. No. I do now.

37 Q. How much money do you say that Anthony Maida personally misappropriated or stole from the trust funds?

A. At this time I don't know the exact figure.

38 Q. Do you have any idea?

A. Not at this moment, no.

70. But Plaintiffs' counsel did obstruct cross-examination:

39 Q. Do you have any evidence that Anthony Maida stole, misappropriated, or took a penny of the money from this project?

MR. BISCEGLIA: Well, Counsel, the difficulty with that is we have evidence of the --

MR. DAVIS: I don't want you to answer this question. I want the witness to answer.

MR. BISCEGLIA: No, no. This is a legal question on a pleading.

MR. DAVIS: No, it's not. This is a factual question --

MR. BISCEGLIA: Counsel --

MR. DAVIS: -- and I'm asking how much money he accuses my clients of stealing.

MR. BISCEGLIA: Counsel, you can enjoy yourself and sort of leave the theatrics for later.

We've given you evidence based on the bank statements that you've produced, which are incomplete, of monies being removed from the accounts of Georgian Clairlea. We've got, I think, about $600,000 approximately --

MR. DAVIS: Mister -- stop right there --

MR. BISCEGLIA: -- to Georgian Properties –­

MR. DAVIS: I do not want you suggesting evidence to the witness.

MR. BISCEGLIA: It's not.

MR. DAVIS: Mr. Bisceglia, stop it.

MR. BISCEGLIA: Counsel --

MR. DAVIS: Stop it. I'm entitled to –

­MR. BISCEGLIA: -- leave the theatrics for elsewhere.

MR. DAVIS: -- examine this witness. This is a cross-examination.

MR. BISCEGLIA: It is, Counsel.

MR. DAVIS: So do not answer for the witness.

MR. BISCEGLIA: Counsel, let me tell you something. Don't tell me what to do.

MR. DAVIS: Well, stop interfering.

MR. BISCEGLIA: I've given you the answer.

I've given you the --

MR. DAVIS: I don't want your answer.

MR. BISCEGLIA: -- answer, Counsel. I don't care. I've given you our position, I've given you the answer --

MR. DAVIS: I don't want your position.

MR. BISCEGLIA: Ask a proper question if you have one. We've answered the question. Go ahead, Counsel. Next question.

BY MR. DAVIS:

40 Q. How much money do you say that Gene Maida stole or misappropriated?

MR. BISCEGLIA: We've answered that question for all three of the Maidas and we've given the --­from the evidence we have, which is incomplete, Counsel.

MR. DAVIS: I'm entitled to ask this question of this witness.

MR. BISCEGLIA: And I've answered the question on behalf of the witness.

MR. DAVIS: Well, I disagree. You are not entitled to do that.

MR. BISCEGLIA: You can disagree and we can take it up in court, Counsel.

41 Q. How much money do you say Frank Maida stole?

MR. BISCEGLIA: It's the same position with respect to all three brothers, Counsel.

MR. DAVIS: So you're refusing to permit this witness to answer those questions?

MR. BISCEGLIA: No. We indicated to you in the materials --

MR. DAVIS: I'm asking under oath.

MR. BISCEGLIA: Let me finish, Counsel. Don't interrupt yet. Let me finish my answer.

MR. DAVIS: Go ahead.

MR. BISCEGLIA: We've indicated to you –

MR. DAVIS: Just don't suggest any numbers.

42 Q. When you issued this Statement of Claim how much did you understand that Anthony Maida, Frank Maida, or Gene Maida had misappropriated or stolen?

MR. BISCEGLIA: That's not a proper question. I'm refusing.

--- REFUSAL

43 Q. In paragraph 11 you say that the defendants participated in a breach of trust by participating in a conversion and/or defalcation of the trust funds described above. In what way do you say, Mr. Prete, that they converted or participated in a defalcation of the trust funds?

MR. BISCEGLIA: Counsel, we've already answered that it's the removal of funds from the Georgian Clairlea bank account.

MR. DAVIS: No. He has not answered that and I don't accept your answer.

MR. DAVIS: You want to obstruct this examination, the Court --

MR. BISCEGLIA: I'm not sure --

MR. DAVIS: -- will draw the appropriate inference.

71. Counsel's exceptional obstruction meant that the Maidas were denied evidence of, and the right to test, the serious allegations against them. This should attract the inference that no evidence exists.

72. The Maidas in fact committed no fraud.

More Obstruction By Counsel

74. The obstructive conduct by Plaintiffs' Counsel did not end with questions about the fraud allegations his clients have made (see above). For example:

44 Q. In paragraph 12 you say that the defendants or any of them have been unjustly enriched. By how much do you say each of Anthony, Gene, or Frank Maida have been enriched?

MR. BISCEGLIA: We've already -- it's the same answer, Counsel, to all of them. The plaintiffs --

MR. DAVIS: I'm asking personally how much· have they been enriched.

MR. BISCEGLJA: Counsel, at this point in time -- let's be clear about this -- we've indicated in some of the materials that your clients haven't accounted for the trust funds so we're obviously limited in what we can respond to. We think -- and this is a legal argument -- just wait.

MR. DAVIS: This is not a legal argument. Let the witness say he doesn't know.

MR. BISCEGLIA: No, no. No, we do have some evidence --

MR. DAVIS: Well, let this witness answer it.

MR. BISCEGLIA: We've given you evidence of the cheques. It's already in the affidavit.

MR. DAVIS: I don't want you to make statements. I want the witness to answer questions. That's why we're here.

MR. BISCEGLIA: What we have, Counsel, is in the materials in terms of whatever limited accounting you provided.

MR. DAVIS: I want the witness to answer the question. Are you refusing?

MR. BISCEGLIA: Repeat your question, Counsel.

BY MR. DAVIS:

45 Q. By how much have each of Anthony, Gene, and Frank Maida been personally enriched?

MR. BISCEGLIA: Do you have an exact number at this point?

THE DEPONENT: I do not have an exact number at this point.

BY MR. DAVIS:

46 Q. Do you have any number?

A. No, I do not. ”