COURT FILE NO.: 1712/17
DATE: 20180306
ONTARIO
SUPERIOR COURT OF JUSTICE
IN THE MATTER OF the Construction Lien Act, R.S.O. 1990, c. C.30
BETWEEN:
H.I.R.A Limited
Lien Claimant
– and –
Middlesex Standard Condominium Corporation No. 823
Moving Party
Denise L. Bambrough, Counsel for H.I.R.A. Limited
Kevin Sherkin and Jeremy Sacks, Counsel for Middlesex Standard Condominium Corporation No. 823
HEARD: October 16 and November 3, 2017
Grace J.
A. Overview
[1] A four building, 332 unit residential complex sits on land municipally described as 1, 5, 9 and 15 Jacksway Crescent, London, Ontario (the “Lands”). Middlesex Standard Condominium Corporation No. 823 (“MSCC”) is the owner of the common elements. In May, 2015, MSCC solicited bids from companies interested in acting as the contractor responsible for substantially renovating the more than twenty-five year old buildings (the “Project”).[^1]
[2] H.I.R.A. Limited (“HIRA”) was the successful bidder. The parties entered into a stipulated price contract dated June 10, 2015 (the “Contract”).[^2] The price for the work the Contract contemplated was $4,498,212 exclusive of applicable taxes.[^3]
[3] The scope of the work expanded significantly as time went on. HIRA maintains that the revised contract price eventually reached $11,630,040 on account of all of the elements comprising its claim including applicable taxes.[^4]
[4] MSCC has paid more than $8.35 million to HIRA directly[^5] and has discharged some of HIRA’s obligations to third parties.
[5] Unfortunately the relationship between MSCC and HIRA deteriorated. On May 26, 2017, MSCC terminated the Contract. HIRA registered a Claim for Lien pursuant to the Construction Lien Act (the “CLA”) on June 30, 2017. It claimed that MSCC still owed $3,297,925 on account of the Project. HIRA’s claim had been reduced to $2,744,377 by the time argument of this motion was completed.
[6] MSCC disputes that amount. It maintains that the Claim for Lien is inflated. According to its calculations, the balance of HIRA’s claim is $396,954.
[7] MSCC seeks an order pursuant to s. 44(2) of the CLA permitting it to post security in that amount plus an allowance for costs.
[8] HIRA seeks security for the entire amount of $2,744,377.
[9] The issue on this motion is whether the payment or posting of security, as the case may be, should be based on the revised amount claimed by HIRA, the figure provided by MSCC or some other number.
B. The Legal Framework
[10] The lien created by the CLA serves two purposes. It creates a cause of action and the lien secures payment of amounts properly due to those who contribute services or materials to an improvement to land: HMI Construction Inc. v. Index Energy Mills Road Corp., 2017 ONSC 4075 (Div. Ct.) (“HMI”) at para. 9; the Act, s. 14(1).
[11] The court is given the power to allow other collateral to be substituted for the real property. Section 44(2) of the CLA provides as follows:
Upon the motion of any person, the court may make an order vacating the registration of a claim for lien, and any certificate of action in respect of the lien, upon the payment into court or the posting of security of an amount that the court determines to be reasonable in the circumstances to satisfy the lien.
[12] In such a case, the amount to be posted should be equivalent to the maximum sum that appears provable by the claimant: HMI, supra at para. 12.
[13] The owner bears the onus of establishing that the amount set forth in a claim for lien is excessive: 1246789 Ontario Inc. v. Sterling (1999), 1999 CanLII 15095 (ON SC), 46 O.R. (3d) 72 (S.C.J.) at para. 21. In Structform International Ltd. v. Ashcroft Homes Construction Inc., 2013 ONSC 4544 (Master) (“Structform”) Master MacLeod (as he then was) concluded the party moving for an order under s. 44(2) bears a high burden. At paras. 11 and 12 he wrote in part:
…the Act gives the court broad discretion…Obviously…the Act contemplate[s] that the amount of the security may be less than the amount of the claim for lien. It will however only be appropriate to reduce the security if it can convincingly be demonstrated that the maximum recovery by the lien claimant will be less than the amount it has liened for.
The test to be applied to a motion of this type is similar to the test on a summary judgment motion. That is the court must be satisfied on the basis of the motion material that there is no reasonable prospect of the Plaintiff proving a lien for the amount claimed. Despite the analogy to summary judgment, it is important to remember that a motion under s. 44…is not a full-fledged summary judgment motion…Several cases establish that a motion under the security provisions of the Act is not the venue for determining complex issues of contested facts going to the merits of the claim.
[14] Addressing an analogous subsection in Ledcor Construction Limited v. Canalfa Liberty Village Homes Inc. et al., 2008 CanLII 87009 (Ont. Master), Master Albert wrote at para. 35:
A motion to reduce security under section 44(5) of the Construction Lien Act cannot succeed where there are genuine issues of fact that require a trial to determine whether the entire amount claimed or some lesser amount is appropriate. Only where the evidence clearly and unequivocally proves that the lien as registered is excessive or improper should the court reduce or release security at an interlocutory stage. A motion is not a substitute for a lien trial.[^6]
[15] However, the court must do its best to ensure that the lien claimant does not falsify, mischaracterize, misstate or exaggerate its claim. As Herold J. wrote in Boehmers v. B.E. Project Managers Inc., [1993] O.J. No. 4481 (Gen. Div.) at para. 7, “a good hard look at the facts contained in the material before the court is permitted” in a motion of this kind. The court should not turn a blind eye if the evidence leads to the conclusion the lien claimant has overreached: Kamali Design Home Inc. v. Bondarenko. (2013), 30 C.L.R. (4th) 87 (Ont. S.C.J.).
[16] Consequently, if the moving party establishes the amount specified in the claim for lien is not reasonably supported by the evidence, the court may order that security be provided for the sum that has a proper evidentiary foundation: HMI, supra at para. 25. However, if the decision-maker is wavering, the factual issues should be left for determination at trial and the amount of the security set at a level which is equivalent to the maximum sum that may, reasonably, be the subject of a claim for lien: Wasero Construction (1991) Ltd. v. 1024963 Ontario Ltd., 1994 CarswellOnt 3593 (Gen. Div.) at paras. 6-8; Torold Management Inc. v. 1317621 Ontario Inc., 2007 CarswellOnt 10003 (Master) at para. 28; City Star Roofing v. Abewe, 2014 CarswellOnt 18234 (S.C.J.
C. The Procedural History and the Evidence Compiled
[17] The court’s task in this case has been a daunting one.
[18] MSCC’s motion was originally returnable on August 1, 2017. It filed a modest motion record containing a relatively brief affidavit of Don Dickenson of Dickenson Property Management (“Dickenson”) sworn July 27, 2017. Dickenson is the current property manager of the buildings at the center of the parties’ dispute.
[19] MSCC asked that the motion be heard urgently. Mr. Dickenson explained that MSCC was unable to obtain a lien bond for the full amount of HIRA’s Claim for Lien. Its registration was said to be adversely affecting the efforts of unit owners to sell or finance their units.
[20] HIRA opposed the motion. Given the estimated time required for argument, the parties were required to select a long motion/special appointment date. They did so cooperatively on August 1, 2017, the original return date.
[21] A timetable for completion of intervening steps was contained in the Certificate of Readiness of Special Appointment the parties filed. The schedule was compressed given the fact the motion was to be heard on October 16, 2017.
[22] Responding and reply affidavits were delivered in accordance with the timetable. HIRA filed a three volume responding record containing affidavits of Justin Harper, the president of HIRA and Rajat Jain, a former employee of project consultant exp Services Inc. (“EPI”). An affidavit of the president of MSCC, Salvatore Pacifico, was filed in reply.
[23] Cross-examinations were to be completed by August 31, 2017. Mr. Harper was cross-examined on that day. The other affiants were not cross-examined by the date specified.
[24] Thereafter, the parties filed more material, although not contemplated by the timetable. MSCC filed a supplementary motion record dated September 15, 2017. The amended notice of motion sought leave to file the supplementary affidavit of Don Dickenson it contained.[^7]
[25] Not surprisingly, HIRA felt compelled to respond to Mr. Dickenson’s further affidavit. It delivered a supplementary responding record of its own containing a further affidavit of Mr. Harper sworn September 29, 2017. As mentioned, he had already been cross-examined on his first offering.
[26] Cross-examinations of Messrs. Dickenson, Pacifico and Jain followed on October 2, 3 and 6, 2017 respectively. By my tally, the transcripts of the four cross-examinations occupy almost seven hundred pages.
[27] Five more volumes of documents were filed afterward containing exhibits, excerpts from the transcripts, answers to undertakings and, on occasion, responses to questions taken under advisement.
[28] In addition, the parties assisted the court by including within the factual material detailed calculations of the amounts they alleged were properly the subject of HIRA’s Claim for Lien. Revised calculations were reflected in charts and tables contained within the factums. More changes were made prior to the return date and amended computations were then filed on the first day of argument.
[29] Each party also served and filed, without leave, a factum far in excess of the twenty page limit set forth in the Consolidated Provincial Practice Direction.[^8] In the end, the materials filed filled two boxes. One cannot help but wonder whether that volume is reasonable and proportionate given the legal principles that apply.
D. Analysis and Decision
i. The Parties’ Positions and the Disputed Items
[30] As noted earlier, the amount originally set forth in HIRA’s Claim for Lien was $3,297,925. HIRA has made a number of adjustments since then which has resulted in the reduction of the lien claim of HIRA to $2,744,377.31 inclusive of applicable taxes.
[31] MSCC, on the other hand, initially took the position that $1,380,757.97 was the maximum amount of HIRA’s lien. By the time argument of the motion was completed, the amount had fallen to $396,954 inclusive of H.S.T.
[32] The most substantial amounts claimed by HIRA and disputed by MSCC in their entirety are:
i. Sixteen unapproved change order requests (“CRXs”) made by HIRA and bearing various dates beginning August 10, 2015 and ending June 29, 2017 in the aggregate amount of $512,456 plus H.S.T. of $66,619 (the “disputed CRX claim”); and
ii. An extended duration claim asserted by HIRA in the amount of $1,175,601 plus H.S.T. of $152,828 (the “extended duration claim”).
[33] In addition, there are a number of contentious items that involve less money. I will deal with each category in turn.
ii. The Disputed CRX claim
[34] HIRA explained its position in respect of the disputed change order claim at para. 26 of its factum as follows:
…HIRA was expressly and impliedly directed to perform certain additional work with a value of $512,455.61, exclusive of HST, for which HIRA claims that it is entitled to additional Change Orders, which Change Orders MSCC No. 823 has, to date, wrongfully refused to issue…
[35] Part 6 of the Contract dealt with changes in the work. Additions, deletions or other revisions were to be made by way of a Change Order or Change Directive: the former when MSCC and HIRA agreed to the adjustments required, including price and the latter when MSCC required HIRA to proceed with the change in work before the corresponding adjustments had been negotiated.
[36] The significance of a contract stipulating a set price was addressed in HMI, supra. There the motions judge said:
With a fixed price contract, in the absence of approved change order, a contractor cannot include in a claim for lien extra charges for the work…simply because costs were more than usual or anticipated…When a party signs a fixed price contract, the party assumes risks of cost changes.
[37] The Divisional Court agreed.
[38] None of the items that comprise this portion of HIRA’s claim were evidenced by a Change Order or Change Directive. MSCC’s president, Sal Pacifico, deposed that the board of directors of MSCC never approved revisions or upgrades outside of the Contract and signed change orders.[^9]
[39] If matters ended there, I would accept MSCC’s position and deduct this claim in its entirety from HIRA’s Claim for Lien. However, the matter is more complicated.
[40] The evidence of Mr. Pacifico of MSCC on this point cannot be accepted. It is clear from the existing record that the parties deviated from the process the Contract mandated. HIRA’s application for payment number 19 dated January 31, 2017 provides a good example. It sought payment of the total amount of $301,559.15 net of the holdback and inclusive of taxes. A detailed schedule was appended. A portion of the requested amount ($77,422.69) was attributable to work set forth in the Contract. The balance related to “additions to contract”. The itemized list that followed included five of the sixteen CRX’s presently in dispute.
[41] ESI has been mentioned before. It was the consultant on the project. ESI’s role was described in the Contract’s general conditions. General condition GC 2.2.5 provided in part:
Based on the Consultant’s observations and evaluation of the Contractor’s applications for payment, the Consultant will determine the amounts owing to the Contractor under the Contract and will issue certificates of payment…
[42] ESI approved HIRA’s progress billing 19 as delivered. It issued a contract payment certificate for the entire amount on April 6, 2017. Payment was made by MSCC the next day. It included $88,820.98 on account of CRXs 138, 144, 164 and 166 even though none of the work they described was contained in a signed change order.
[43] Conceptually, therefore, HIRA has established a basis for its claim on account of the disputed CRXs. I turn to quantum.
[44] As mentioned, MSCC terminated its relationship with HIRA on May 26, 2017. Five days later, HIRA submitted its twentieth application for payment. It sought compensation in the amount of $617,378.74. Once again, a detailed calculation was attached. The supporting document included a reference to fourteen of the sixteen disputed CRXs.
[45] On June 22, 2017, ESI provided its response. HIRA was asked to reduce ten of the claims to zero; once because the consultant claimed the item was included in the original contract and the rest of the time because the proposed change order had not been approved.
[46] Four of the items (CRX numbers 138, 144, 164 and 166) were not the subject of comment and therefore, appear on their face to have been accepted by the consultant on behalf of MSCC. The amounts set forth in those documents totaled $90,566. However, it appears from the documentary record that HIRA has not taken into account the $301,559.15 payment made by MSCC on April 7, 2017. As noted, it included $88,820.98 on account of CRXs 138, 144, 164 and 166. MSCC is entitled to a credit for that amount.
[47] HIRA’s claim for lien also includes $151,915.06 on account of CRX 63. That amount is problematic too. The schedule to the nineteenth application for payment referred to that item. It confirmed that $150,000 had previously been billed. Nothing more was included in that request and “0.00” appeared in the column “Balance to complete”. Stopping there, CRX 63 appeared to have been fully satisfied.[^10]
[48] HIRA reversed course in its May 31, 2017 request. It sought payment of $106,490.95 on account of CRX 63. No explanation for the change in position was given. As noted, the number has grown even more since then. The format of CRX 63 filed by HIRA on this motion is markedly different than all of the others. On this record it appears that HIRA has rethought its position on CRX 63. For the purposes of s. 44(2) of the Act, the court declines to allow it to do so. The entire amount ($151,915.06) should be deducted from HIRA’s claim.
[49] Deduction of the two amounts ($88,820.98 plus $151,915.06) from HIRA’s claim of $512,455.61 results in a balance of $271,719.57. The Claim for Lien of HIRA should have included that amount only.
[50] Factual disputes abound in respect of the other disputed CRXs. They cannot be fairly resolved on this record. Assessments of credibility and reliability are required. Hearing evidence in real time is required. A review of transcripts is not an adequate substitute.
[51] I turn to the extended duration claim.
iii. The Extended Duration Claim
[52] This aspect of HIRA’s claim is significant. The amount included in the Claim for Lien on account of the extended duration claim was $1,226,576. By the time the motion was argued HIRA had adjusted the sum to $1,175,601.
[53] The law is clear that the CLA is to be given a strict interpretation when determining whether a claimant is entitled to assert a lien. However, if the threshold is met, the statute is to be liberally construed when analyzing the rights conferred on those entitled to its protection: Clarkson Co. v. Ace Lumber Ltd., 1963 CanLII 4 (SCC), [1963] S.C.R. 110 at para. 11. Claims based on an owner’s delay may give rise to a lienable claim provided they are “reflective of the value of the work done on the improvement.”[^11]
[54] HIRA’s president, Justin Harper, explained the components of the claim in his August 21, 2017 affidavit. At para. 73 he said HIRA wished to be paid:
…on account of the value of the services, equipment and materials which [HIRA] had supplied to the Project as a result of the extended duration of the Project and the additional labour supplied to the Project in order to accelerate the Work.
[55] HIRA’s rationale for the extended duration claim is as follows:
i. It was apparent early on that the scope of the work would be significantly greater than first contemplated;
ii. Consequently, it was clear that the work would take much longer to perform;
iii. HIRA was required to perform services during two winter seasons which was not contemplated when HIRA bid on the project. In fact, HIRA had originally been prohibited from working during the winter season;
iv. HIRA incurred significant costs in performing the additional work and accelerating the time frame for its completion;
v. The extended duration claim relates to the value of the services (including labour costs), equipment and materials HIRA supplied to the project during the period from the fall of 2016 when the work was originally scheduled to be completed until MSCC terminated HIRA’s contract on May 26, 2017.
[56] HIRA also claims that it has suffered other damages arising from periods during which there was a loss of productivity, additional overhead and financing costs. HIRA says it has recognized that those items cannot be included in its Claim for Lien.
[57] MSCC disputes HIRA’s right to any payment on account of an extended duration claim. Alternatively, MSCC challenges each element of this category. I turn to the issues of entitlement and quantum.
i. Entitlement
[58] In his first affidavit Mr. Harper deposed that HIRA notified MSCC of its intention to assert an extended duration claim “[i]n or around the summer or early fall of 2015”.[^12] However, he added, the parties agreed at a meeting of MSCC’s board that a change order request would not be submitted until the conclusion of the project. Mr. Harper did not provide a date of the meeting but the clear implication was that it followed the notification referenced earlier.
[59] HIRA also relied on the affidavit of Rajat Jain who was employed as the manager of ESI’s Building Science Group until August, 2016. In his August 21, 2017 affidavit, Mr. Jain also referred to a board meeting and an agreement to defer submission of HIRA’s claim for extra compensation until all of the required work was done. Once again, no date was stated.
[60] Mr. Pacifico replied on behalf of MSCC. He said MSCC was unaware of an extended duration claim until shortly after an August 19, 2016 meeting that included its financier, the TD Bank, CB Ross Partners, the cost consultant the bank had retained and HIRA. Thereafter, Mr. Harper authored an August 25, 2016 e-mail summarizing the costs HIRA estimated were still to be incurred. It included a $50,000 allowance for contract extension costs.
[61] Additional information was provided during and following the August 31, 2017 cross-examination of Mr. Harper. During that attendance he said, for the first time, that the agreement concerning extended duration costs was reached during a June 25, 2015 pre-construction meeting Mr. Pacifico attended.
[62] Mr. Dickenson addressed that topic in his supplementary affidavit. He said that his firm had a copy of the minutes of all meetings involving MSCC and that nothing had been uncovered that related to June 25, 2015. That drew a further response from Mr. Harper. He attached his own handwritten notes of a “Pre-con meeting” bearing that date. The long list of attendees included Messrs. Pacifico, Jain and a second ESI representative, Nathan Oegema. Mr. Dickenson was not among them.
[63] Mr. Harper’s comments covered a number of topics. The extended duration claim was not one of them. Mr. Harper maintained that was because his focus was on “construction…and action items”.
[64] The balance of the cross-examinations were undertaken soon after the additional affidavits were delivered. Mr. Jain told MSCC’s lawyers that he recalled the June 25, 2015 discussion because it “was a very important meeting”. He was not asked about the subjects that were discussed. Mr. Jain did say that he no longer had access to documents created while at ESI.
[65] When cross-examined Mr. Pacifico agreed there had likely been a June 25, 2015 meeting. However, he could not recall what was discussed. Mr. Harper was questioned before but not after his supplementary affidavit was sworn.
[66] Mr. Harper had been asked about the extended duration claim when cross-examined on August 31, 2017. He maintained that subsequent events corroborated his testimony concerning the agreement reached on June 25, 2015. By way of example, HIRA’s president said that Mr. Jain asked the contractor to revise and resubmit change order requests from time to time. He was asked to produce those documents and undertook to do so. Copies of CRXs 12, 24, 25, 28-30, 33 and 35-37 were later provided. Each of them included a charge for “supervision”. That item was deleted when those CRXs were reissued in early October, 2015.
[67] Mr. Jain was asked to explain why CRXs were reissued during his oral testimony. In part he said:
…the first quotation had additional site costs and supervision costs…So what we decided…was…let’s take those out for now. We will assess that impact if [it] actually delays the project, this change or any further changes, subsequent changes. We’ll add those at a later stage…
[68] The transcript of Mr. Jain’s cross-examination also recorded this exchange:
Q. Right. So your expectation was that they would be tracking any additional cost that they would have and…present it later to you. Correct?
A. I would be doing that.
[69] Mr. Jain was not asked whether he had, in fact, accrued any – or what - amount on account of the extended duration claim while employed by ESI. However, nothing of that kind is included in the voluminous record that was compiled.
[70] The cross-examination of Mr. Jain on this topic finished with this discussion:
Q. Right. Now did you send a memo to the board and to HIRA confirming that understanding?
A. There was nothing sent. It was all discussed at the board meeting in front of the board.
Q. All right. Now…the first time it was presented at the June 25th board meeting?
A. Yes.
[71] HIRA also supports its version of events with a paragraph included on the first page of each quotation for change order it generated. Same read:
This Quotation for Change covers only the costs directly associated with the proposed change in the work described above. At this time we see the contract completion date being delayed by (0) working days. We reserve the right to assess the accumulative [sic] effect of this and other change orders on productivity, costs, and time at a later date and to submit these costs and time extensions as they become known.
[72] The reference to “(0) working days” appeared consistently throughout the period covered by the quotations. However, the final sentence of each quotation read:
Extra Days Required for contract: TO BE ADVISED
[73] As mentioned, MSCC maintained that it had never heard of HIRA’s intention to pursue an extended duration claim until receiving an e-mail from Mr. Harper on August 25, 2016. Some context for that message is necessary before addressing its content.
[74] TD Bank had agreed to provide MSCC with a $5 million credit facility at the inception of the Project.[^13] An increase in the credit limit was needed to fund the additional costs. A June 22, 2016 terms letter reflected a new loan limit of $9.5 million. The escalating costs were of significant concern to the TD Bank as evidenced by the attendance of its employee and the cost consultant it had retained at an August 19, 2016 meeting. A week later a representative of the bank confirmed that HIRA’s progress draws were being processed on an exception basis.
[75] For those reasons, MSCC maintains that it was critical that HIRA provide a comprehensive and accurate estimate of costs still to be incurred. Consequently, MSCC argues that the maximum amount HIRA can claim on account of this item is the sum of $50,000 that appeared in line 10 of Mr. Harper’s August 25, 2016 e-mail to the cost consultant alongside the words “Contract Extension Costs”.
[76] HIRA maintains that MSCC has taken an excerpt from the e-mail out of context. Contract extension costs was the last in an inventory of items. Mr. Harper introduced the list by saying it constituted HIRA’s “current best estimate of potential extras yet to be incurred above and beyond those contained in Change Orders #1 to #11.” HIRA submits that Mr. Harper’s e-mail addressed costs that had not yet been incurred and had nothing to do with expenses that had already accrued. It is HIRA’s position that the Claim for Lien was in no way inconsistent with the e-mail. The $3,297,925 amount it specified included the contract extension claim for the entire Project, not only the period from August 25, 2016 onward.
[77] It is clear that the issue of entitlement is one that cannot and should not be determined on the basis of the documentary record that has been assembled. Issues of credibility and reliability abound. Undoubtedly evidence from additional witnesses is material to the issue at hand. While HIRA’s right to an extended duration claim in any amount is less than clear, I cannot say that it is without merit. The issue is a dark shade of grey. Dispositive findings will have to await a trial. I turn to quantum.
ii. Quantum
[78] HIRA’s extended duration claim of $1,175,601 is comprised of the following categories: (i) site supervision costs associated with a supervisor, site coordinator and site labourers; (ii) temporary services related to a site trailer/office, site equipment, toilet rental, site fencing, hoarding, scaffolding and safety; (iii) insurance costs; (iv) an accelerated work labour charge; and (v) overhead and markup.
[79] MSCC challenges the amount claimed on account of every item. It notes that “supervision” was the only claim excised from the CRX’s reissued by HIRA. Further, MSCC questions the hourly rates HIRA has applied. It argues that adverse inferences should be drawn from HIRA’s refusal to answer certain questions posed during the cross-examination of Mr. Harper. Some requests for supporting documentation were denied by HIRA. It notes that HIRA has applied rental rates to pieces of equipment the contractor owns. Some of the amounts claimed by HIRA are estimated.
[80] HIRA has responded in detail. Hourly rates mirror those contained in CRX’s approved and paid by MSCC. Charges imposed for self-owned equipment are legally permitted and factually appropriate.[^14] Refusals were properly provided to overreaching questions. HIRA submits that ample supporting documentation has been provided for the purposes of motions of this kind. Estimated amounts are amply supported by proven facts, supportable assumptions and industry standards. Supervision costs were not the only ones reserved until a future date.
[81] HIRA submits that this motion is not the time to try to resolve the myriad of factual issues that are in dispute in respect of the quantum of its extended duration claim. Its position is set forth in detail in para. 99 of its factum:
Issues such as whether it is appropriate for a contractor to claim for extra labour charges or overtime charges under a fixed price contract, whether a contractor is charging extra labour in connection with the extended duration of a project that may already be included in approved Change Orders, and whether appropriate rates have been charged for various personnel who supplied services to a project are all triable issues, and the probability that a lien claimant will be unable to prove 100% of its claim is not, in itself, sufficient to reduce the lien security which it is otherwise entitled to.
[82] That statement accurately reflects the current state of the law in Ontario. In Structform, supra Master MacLeod (as he then was) wrote at para. 12:
Despite the analogy to summary judgment…it is important to note that a motion under s. 44 of the [CLA] is not a full-fledged summary judgment motion…Several cases establish that a motion under the security provisions of the [CLA] is not the venue for determining complex issues of contested facts going to the merits of the claim.[^15]
[83] Structform also contained commentary concerning an extended duration – or delay – claim. The following excerpts from paras. 14 and 16 are instructive:
To properly be the subject of a lien the claim must be reflective of the value of the work done on the improvement…Thus additional expenses incurred because the project takes longer than anticipated such as labour costs, equipment rental and similar costs of remaining on the job will readily be found to be the basis for a valid claim. Damages at large…such as lost opportunity costs, loss of profits…will not be. Additional costs incurred offsite such as administrative overhead…and even onsite office overhead costs have been held not to be lienable. If a portion of the lien claim is attributable to damages that are not properly the subject of a lien then the security should be reduced to take that into account.
Mathematical and addition errors in calculating the lien or other admissions obtained on cross-examination may be taken into account in assessing the amount of the security. That said, however, the lien claimant should not be held to a standard of strict mathematical or scientific proof at this early stage of the litigation. Given the short timelines, lien claims must often be registered using the best information available at the time and as long as the amount claimed is not grossly excessive it may nevertheless be proper. It is not inherently unreasonable to include amounts in a claim for lien that must be estimated.
[84] In that case, the evidentiary record allowed the court to conclude that some of the claims were inflated. A number of adjustments flowed from that conclusion. However, the court declined to make all of the deductions requested even though the judicial officer was “highly skeptical” of some of the components.[^16] As the court explained at para. 17:
There are numerous triable issues which will call for findings of credibility and interpretation of events and evidence. These determinations cannot be made on a motion of this nature.[^17]
[85] Similarly, in Wasero Construction (1991) Ltd. v. 1024963 Ontario Ltd., 1994 CarswellOnt 3593 (Gen. Div.) at para. 8, Goodearle J. concluded that if the evidence left the motion judge uncertain, the court should require the posting of security in an “amount that might reasonably equate to the gross total exposure of all parties claiming.”
[86] I turn to this case.
[87] While unable to determine when the issue of an extended duration claim was first discussed, Mr. Harper’s August 25, 2016 e-mail was the first time HIRA quantified any portion of it.
[88] Other written communications on the topic soon followed. In a September 9, 2016 e-mail, Mr. Harper advised Mr. Pacifico and others of HIRA’s intentions. In part he wrote:
…rather than leave the issue outstanding till the end of the project, HIRA will be submitting an interim contract extension claim up till the end of the 2016 season. We can then assess additional costs at the end of the project in Spring 2017. [Italics in original]
[89] Nothing had been sent by September 30, 2016 when Harper advised MSCC that he would update MSCC’s board “on HIRA’s delay claim progress” at a meeting to be held a few days later.
[90] On November 14, 2016, Mr. Harper advised ESI that HIRA was “preparing a baseline schedule to show the delay impacts for submission with our contract extension claim.”
[91] The subject does not appear to have been addressed again until early the following year. On February 8, 2017 Mr. Oegema of ESI asked Mr. Harper to “provide the contract extension claims as soon as possible.”
[92] HIRA responded two days later. Mr. Harper wrote:
Absolutely Nathan. We’re working on the Contract Extension Claim currently. I’ll keep you posted. Likely by March 1st we’ll have a draft for you to review.
[93] That date came and went too. At para. 73 of his August 21, 2017 affidavit, Mr. Harper explained that “HIRA was not able to determine the final amount of its claim until after it left the Project.” He did not explain why.
[94] As mentioned, the extended duration claim consists of a number of items. Supervision costs are the only ones initially mentioned in and then excised from CRX’s issued by HIRA. Furthermore, there is nothing that suggests HIRA or ESI was tracking and accruing any amount on account of those costs. Indeed, Mr. Oegema’s e-mail of February 8, 2017 would have been unnecessary had the consultant been doing so. In my view, that is significant and on its own warrants a healthy dose of suspicion.
[95] Given the expansion of the original project, the increase in the TD Bank facility, the retention of a cost consultant and the special assessment MSCC levied, it is inconceivable that the entirety of the extended duration claim would not have been carefully and consistently tracked by HIRA, ESI and by MSCC.
[96] In my view, with the exception of the supervision component at an hourly rate of $105 ($240,240), the elements of the extended duration claim are more than doubtful. They were asserted unilaterally following termination. All of the other aspects of the claim lack an evidentiary foundation and should be deducted. That results in a downward adjustment of $935,360.75.
iv. Other Items
[97] Other smaller items were also debated. I will deal with them in turn.
[98] The Contract Price included a $400,000 contingency allowance. HIRA takes the position that same had been completely utilized by the time its Claim for Lien was registered. MSCC disagrees. It argues that one-half ($200,000) had not yet been used.
[99] MSCC relies on a June 22, 2017 letter ESI sent to HIRA. ESI’s letter related to HIRA’s twentieth application for payment. HIRA’s request for payment of $617,378.74 included a number of items that were described in detail in a listing that accompanied it. ESI asked that the amount claimed by HIRA on account of the contingency allowance be reduced “to 50% to account for outstanding deficiencies”.
[100] MSCC’s position is problematic. Application for payment 20 only sought $10,715.19 on account of that item. At the time it was submitted, $386,970.42 of the contingency had already been billed and paid by MSCC without objection as evidenced by ESI’s approval of the nineteenth application for payment on April 6, 2017. Furthermore, Mr. Oegema of ESI had addressed the contingency specifically in an April 12, 2017 e-mail. After referencing various items he concluded “this brings the total amount of the allotted contingency to the full $400,000.”
[101] With respect, ESI attempted to reverse its position on June 22, 2017 and continues to do so. The evidence is clear. HIRA’s position on this point is correct. No adjustment on account of the contingency is required.
[102] The parties acknowledge an adjustment is to be made in respect of work described in change order 12 that had not been completed at demobilization. They do not agree on the amount.
[103] HIRA advanced the figure of $1,047,527.44 while MSCC used $1,130,392.44. With one small adjustment, HIRA’s figure is the one to be utilized at this stage. MSCC sought a $23,900 reduction. However, HIRA had already subtracted that amount from the value of the base contract work not completed at demobilization. In addition, HIRA had properly subtracted $52,228 on account of CRX 2 because it had already recognized that the change order request had not been approved and none of the work undertaken.
[104] On the other hand, HIRA stated that it had performed tasks set forth in CRX 105 having a value of $5,737. However, that position is inconsistent with the application for payment it delivered post-termination. According to that document, the work had not yet commenced. No explanation for the change in position was provided. I have concluded MSCC is entitled to a credit in that amount ($5,737).
[105] Disputes concerning work described in the base contract[^18] and in other change orders that had not been completed at the time of demobilization[^19] simply cannot be resolved based on the written record compiled to date. Those are matters that will require a trial. Oral evidence is also needed to determine whether MSCC is entitled to a credit for amounts paid to Brad Baker ($70,000) and Lovett Electric ($18,806) and/or for the sum posted as security to discharge a lien filed by 2376378 Ontario Inc. ($58,267.33). No deduction should be made in respect of those items at this time.
E. Conclusion and Costs
[106] For the reasons given, I am of the view that the amount required to discharge HIRA’s Claim for Lien should be reduced by a further $1,181,833.79.[^20] I will let the parties make the arithmetical calculation that reflects, as well, the necessary reduction in H.S.T. HIRA’s Claim for Lien[^21] shall be deleted from the parcel registers relating to the Property upon MSCC paying or posting security for the adjusted amount into court plus the sum of $50,000 on account of costs.
[107] If the parties are unable to resolve the issue of costs of the motion by agreement, cost submissions not exceeding five pages are to be served and filed by the close of business on March 23 and April 9, 2018 by MSCC and HIRA respectively. The parties will undoubtedly recognize that there has been mixed success.
“Justice A. D. Grace”
Justice A. D. Grace
Released: March 6, 2018
COURT FILE NO.: 1712/17
DATE: 20180306
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
H.I.R.A Limited
Lien Claimant
– and –
Middlesex Standard Condominium Corporation No. 823
Moving Party
REASONS FOR DECISION
Grace J.
Released: March 6, 2018
[^1]: The initial memorandum inviting HIRA to attend a site meeting and bid said the work encompassed “a building envelope restoration and mechanical heating and cooling refurbishment”. [^2]: The Contract actually bears the name of H.I.R.A. General Contractors Limited. Nothing currently turns on that point. Same was in Canadian Construction Documents Committee (“CCDC”) form CCDC-2-2008. [^3]: Inclusive of taxes the contract price was $5,082,980.45. [^4]: That number was drawn from Schedule “C” handed up by HIRA’s counsel during argument on October 16, 2017. [^5]: MSCC says $8,353,002 has been paid to HIRA. HIRA says the amount is $8,483,002.49. [^6]: See, too, Selectra Inc. v. Penetanguishene (Town), 2016 ONSC 2293 (S.C.J.). [^7]: Leave was required by rule 39.09(2) of the Rules of Civil Procedure. [^8]: The limit is set forth in para. 45 c. [^9]: The statement was made in para. 6 of his affidavit sworn August 25, 2017. [^10]: CRX 63 was first mentioned in payment request 17. It sought payment of $31,682.50. The balance to complete was said to be $118,317.50. The request was approved as rendered. [^11]: Selectra Inc. v. The Corporation of the Town of Penetanguishene, 2016 ONSC 2293 (S.C.J.) at para. 14. See, too, David Bristow, Duncan Glaholt, Bruce Reynolds and Howard Wise, Construction Builders’ and Mechanics’ Liens in Canada, 7th ed. (Toronto: Thomson Reuters, 2016) at p. 7-48; K-Line Maintenance & Construction Ltd. v. Toronto (Metropolitan) (1979), 1979 CanLII 1924 (ON SC), 99 D.L.R. (3d) 752 (Ont. Div. Ct.) at p. 3 and Stucor Construction Ltd. v. Brock University, [2001] O.J. No. 4060 (S.C.J.) at paras. 13-16. [^12]: This excerpt is drawn from para. 22. [^13]: The terms letter was dated June 4, 2015 and accepted by MSCC on June 10, 2014. [^14]: See, for example, Dean Construction Co. v. M.J. Dixon Construction Ltd., 2011 ONSC 4629 (Master) at para. 71. [^15]: See, too, Wasero Construction (1991) Ltd. v. 1024964 Ontario Ltd., 1994 CarswellOnt 3593 (Ont. Gen. Div.) at paras. 6-8; Ledcor Construction Limited v. Canalfa Liberty Village Homes Inc., 2008 CanLII 87009 (Ont. S.C.J.) at para. 35. [^16]: Structform, supra at para. 28. [^17]: See, too, Ledcor v. Canalfa Liberty Village Homes Inc. et al., 2008 CanLII 87009 (Ont. Master) at para. 35; Torold Management Inc. v. 1317621 Ontario Inc., [2007] O.J. No. 5435 (Master) at paras. 28 and 30. [^18]: MSCC and HIRA have advanced figures of $101,908.51 and $84,246 respectively. [^19]: MSCC and HIRA have advanced figures of $269,795.45 and $200,840.38 respectively [^20]: The adjusted amount claimed by HIRA was $2,744,377 inclusive of H.S.T. Deductions totaling $1,181,833.79 are required ($88,820.98 from para. 46, $151,915.06 from para. 48, $935,360.75 from para. 96 and $5,737 from para. 104). [^21]: So, too, should any Certificate of Action registered in respect of HIRA’s lien.