COURT FILE NO.: CV-13-489463

DATE: 2018 04 12

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

BEN AIR SYSTEMS INC.

Plaintiff

– and –

TORONTO TRANSIT COMMISSION, THE TORONTO TRANSPORTATION COMMISSION, TORONTO TRANSPORTATION COMMISSION, MAYSTAR GENERAL CONTRACTORS INC., AND OMICO MECHANICAL LTD.

Defendants

COUNSEL:

M. Drudi, for the Plaintiff mdrudi@dakllp.com

N. Volpe, for the Defendant, Omico Mechanical Ltd. norfivolpe@gmail.com

and

V. Scalisi for the Defendant, Omico Mechanical Ltd. vito@scalisilaw.ca

HEARD: September 27, 28, October 2, November 15, 16 and 17, 2017

WRITTEN SUBMISSIONS DELIVERED: November 17, December 8 and 22, 2017

JUDGMENT

Trimble, J.

[1] In this construction lien action, Ben Air Systems (Ben Air), claims damages for breach of contract against the owners of the property (one or more of the Toronto Transport defendants), Maystar General Contractors Inc. (Maystar - the general contractor) and Omico Mechanical Ltd. (Omico - the Mechanical subcontractor to whom Ben Air was subcontracted).

[2] Omico defended, counterclaiming for damages incurred in completing Ben Air’s contract. The action against the remaining defendants was dismissed once Omico bonded off the lien.

[3] The trial of this matter proceeded pursuant to the Order of Ricchetti, J. dated 9 September 2016. The Order addressed seven different lien claims. All other claims resolved. Ricchetti, J. ordered that there would be further a Trial Management Conference in this matter, and that this trial would proceed on three issues, only:

(A) Lien validity;

(B) Termination validity; and

(C) Other issues identified at Trial Management Conference.

[4] At the Trial Management Conference of December 9, 2016, Ricchetti, J. ordered the trial to proceed only on the first two issues, above, there being no other issue identified to be tried in this trial.

Issues

[5] Within the two questions Ricchetti, J. ordered to be tried, the following questions arise:

1. Breach of Contract?

a. What was the contract?

b. Was Ben Air justified in terminating the contract?

2. The Validity of the Second Lien.

a. Was the second lien valid?

b. If so, what is the proper subject matter of the second lien?

[6] The parties agreed that after I decided these questions, the parties either would settle the quantum of the claims or would move onto an accounting phase of the trial.

Facts

[7] In March, 2012, Omico entered into a contract with Maystar to provide mechanical work on an extension to the Toronto Transit Commission’s (TTC) Roncesvalles Car House Maintenance Facility. The Mechanical subcontract is dated March 7, 2012. Maystar sent it to Omico for signature on March 29, 2012. The subcontract provided that it shall be performed in accordance with, among other things, the Prime Contract and other documents as described in Appendix A to the subcontract. Article 4 of the subcontract provided a process by which payment would be made. Appendix A listed, among other things, the scope of work that was to be performed in accordance with the general conditions, supplemented conditions and general requirements of the Prime Contract.

[8] I was not directed to any correspondence to explain the 22 day difference between the March 7 date on the contract and it is being sent to Maystar for signature on March 29. I conclude, however, that Omico was awarded the job on March 7, although the full contract documents and draft contract were not sent to Omico for signature until March 29.

[9] Omico decided that it would do the plumbing and fire protection work under the mechanical contract, itself, but contract out the HVAC work. It approached Ben Air, with whom Omico was already working on other jobs.

[10] On March 13, 2012, Ben Air provided a quotation for the HVAC work. This was a revised quotation, for a fixed price of $1,085,700 plus HST. The quotation provided that it was based on specified mechanical drawings and specifications, and an addendum dated September 29, 2011. Neither the general and supplementary conditions, the Prime Contract, nor the contract between Maystar and Omico were referred to in the quote as part of the documents on which the quote was based.

[11] Over 70% of the price of Ben Air’s contract price comprised the cost of the purchase and supply of HVAC equipment.

[12] On March 21, 2012, Omico provided a purchase order accepting Ben Air’s revised quotation. Omico’s purchase order provided Ben Air with authorization to proceed with the HVAC and controls work, “…in accordance but limited to:

• mechanical drawings by TTC dated January 25, 2012

• Mechanical specifications by TTC, sections 20/23/25

• Addenda #11 to #8

• Your revised quotation dated March 13, 2012

• Your commitment to provide sufficient labour, equipment and materials to complete your Work in a safe and timely manner in accordance to schedule”

[13] Omico never took issue with the fact that Ben Air’s revised quotation did not incorporate the Prime Contract and all of the general and special conditions, and addenda.

[14] There was no reference in Omico’s purchase order to the general and supplementary conditions, the Prime Contract, or the contract between the Maystar and Omico.

[15] There is no evidence concerning the construction schedule that was in place at the time Omico issued its purchase order, which was referred to in the purchase order. A revised construction schedule update was produced dated May 31, 2012 which appeared to have the project complete by between March and May, 2013.

[16] Ben Air never took issue with Omico's additional conditions and requirement as set out in the purchase order.

[17] Because approximately 70% of Ben Air’s contract involved it purchasing specialized HVAC equipment from others, Ben Air began ordering the equipment shortly after Omico issued its purchase order. The parties agree, however, that Ben Air’s work was delayed by almost a year, fact for which Ben Air was not responsible.

ISSUES

1) Breach of Contract?

a. What was the contract?

i. Positions of the Parties

[18] Omico says that its subcontract with Ben Air incorporated the Prime Contract’s general and supplementary conditions and addenda. According to those specifications, in order to receive payment, Ben Air had to submit a progress report and billing proposal to Omico which Omico would incorporate into its progress report and billing proposal to Maystar. More specifically, Ben Air could not merely issue an invoice. Maystar would present the progress report and billing proposal to TTC. TTC would approve the work and fix the payments it was prepared to approve and fix based on its determination as to what was payable. How TTC made the determination as to what was payable at any given time is unclear as neither TTC nor Maystar gave evidence. Only after payment had been approved and the approved payments fixed by TTC, however, could any trade or sub trade submit an invoice for a draw, and the only amount subtrades could invoice for was the amount TTC approved. Ben Air tried to rely on its so-called fixed price contract, to avoid its contractual obligations under the contract, including regarding payment.

[19] Ben Air says that its contract with Omico was a fixed price contract, subject only to the conditions and specifications set out in its quotation and Omico’s purchase order. The fixed price contract did not incorporate any of the general or supplementary conditions. Omico was bound by TTC’s approval and payment process outlined in the supplementary conditions of its contract with Maystar; Ben Air, however, was not. Ben Air could and did invoice in instalments as the work was done or goods delivered. Instead of abiding by the fixed price contract, Omico continually tried to impose new terms on Ben Air, including regarding payment.

ii. Evidence.

[20] What is the evidence concerning the nature of the contract?

[21] On the evidence, there is no doubt that the Ben Air – Omico contract was a fixed price contract.

[22] Did it incorporate directly, or by reference, the general and supplementary conditions in, and the addenda to the main contract? The answer to this question turns on what contract information Ben Air was given to quote upon.

[23] Beny Quattrociocchi, the then principal of Ben Air, said that aside from the mechanical drawings and specifications, Ben Air was not given any other specifications as of the time of Ben Air’s quote. Specifically, Ben Air was not given the general and supplementary conditions, or a construction schedule before Omico issued its purchase order.

[24] Luciano Querin, Omico’s estimator, said that he instructed Doris Olivi to give Ben Air a disc containing the documents about the job. Omico received a disc from Maystar which contained all the drawings, specifications, conditions and supplementary conditions, payment details, and terms. He said that he told Ms. Olivi to give Ben Air a copy of the complete disc. It does not appear that Mr. Querin reviewed the disc before it was given. He cannot attest to its actual contents. He never had any discussions with anyone at Ben Air about payment provisions or the contents of the disc.

[25] Giuseppe/Joe Bottoni (Mr. Bottoni), Omico’s President, gave conflicting evidence about what information was given to Ben Air. On the one hand, he said that payment for the job was governed by the supplementary conditions, especially supplementary condition 11, which provided that all trades and subtrades had to submit monthly progress draw proposals for the work done in the month. Omico incorporated those progress draw proposals into its own, which Omico submitted to Maystar. Maystar submitted it to TTC. TTC reviewed the progress draw proposal and either approved it or decided how much it would pay of the progress draw proposals of the individual trades and subtrades. Once it released its decision, the trades and subtrades were permitted to invoice for the amount approved by TTC.

[26] According to Mr. Bottoni, this was the standard payment process in the industry. Mr. Bottoni said that this was also the way that Omico and Ben Air always handled payment on other jobs. Therefore, even if Ben Air did not receive the supplementary conditions, based on their standard business practices, Ben Air knew of, and was bound by the payment requirements on the TTC job.

[27] At another point in his examination in chief, Mr. Bottoni confirmed that other than Ben Air’s quotation and Omico’s purchase order, there were no other documents that formed the contract. In cross-examination on the terms of the contract, Mr. Bottoni admitted:

• the agreement between Ben Air and Omico did not say when and how payments would be made. He admitted he never provided to Omico a copy of Omico’s contract with Maystar.

• the certification process included the right by the trades and subtrades to contest decisions made with respect to progress draws. This was this was not referred to in the purchase order.

• the quote Ben Air submitted contained no reference to specifications (other than mechanical specifications 20, 23 of 25) supplementary conditions, the prime contract, or the contract between Omico and Maystar.

• Omico’s purchase order did not say that the contract included, directly or by reference, all of the specifications, general and supplementary conditions, the Prime Contract, or Omico’s contract with Maystar.

• it was TTC or Maystar that created the disc that Omico gave to Ben Air. Mr. Bottoni did not put together the CD.

• in order to determine exactly what was on the CD one would have to speak to Ms. Olivi.

[28] Notwithstanding the unequivocal nature of these answers, Mr. Bottoni said that Ben Air was given a CD that contained the drawings, specifications, general and special conditions, and the addenda. He said that Book One of the specifications (Exhibit 2, volume 1, tab 10, pages 19 through 37) would have been part of that CD.

[29] In another part of his evidence, Mr. Bottoni indicated that after July 2012 he dealt with Mr. Quattrociocchi directly about payment and the progress draw procedure. He had the discussion more than once. For example, he had such a discussion with Mr. Quattrociocchi in September 2012, when they were discussing, among other things, late submittals.

[30] Doris Olivi, who has been with Omico 25 years, is the office administrator and controller. She does payroll, coordinates jobs, make submittals, and is Omico’s receptionist. She is usually instructed either by Mr. Bottoni or Mr. Querin.

[31] In examination in chief, Ms. Olivi was asked what information she gave to subtrades for tendering purposes. She replied that she normally sends all the specifications and drawings so that the tendering party can price the job. At another point, she said that the CD she sent to Ben Air in 2012 contained all files with drawings and specifications and procedures referred to by the TTC. With respect to Ben Air, Ms. Olivi said she sent this to them a couple of months before the contract was entered into. It was also sent, again, on April 30, 2013 to Mr. Cumming. No correspondence was provided indicating that the disc was given to Ben Air.

[32] Ms. Olivi was not asked specifically what specifications were sent. She was not asked, specifically, if the CD included the supplementary or general conditions.

iii. Adverse Inference

[33] Omico requests that I should draw an adverse inference to the effect that Ben Air had the complete specifications and general and special conditions, including those related to payment. Omico says that Ben Air could have, but did not call the following witnesses on the following issues:

Gianni Tazzioli –Ben Air’s project manager whom Ms. Olivi identified as the recipient of the CD, as well as emails dealing with Ben Air’s submittal problems.

Joe Primerano - president of Secroft who has knowledge of site conditions and Ben Air's limited work done on site.

Albert Bakos – with Secroft, who has knowledge of site conditions and progress of the job after Secroft left the site.

Rocchina Quattrociocchi - Beny Quattrociocchi's wife and Ben Air’s bookkeeper who has knowledge of the state of accounts with Omico.

[34] Omico says that these witnesses were not called because they would have given testimony unfavourable to Ben Air’s position. Omico cites no law with respect to its position on adverse inferences.

[35] In Greenough v. Maple Ridge Media Inc., 2018 ONSC 660, Gomery, J. succinctly set out the most recent statement of the law with respect to adverse inferences. A negative inference may be drawn against a party who does not call a witness where the party has exclusive control over the witness (see: Sidney N. Lederman, Alan W. Bryant & Michelle K. Fuerst, The Law of Evidence in Canada, 4th ed. (Toronto: LexisNexis, 2014) at para. 6.450).

[36] None of the witnesses that Omico says Ben Air ought to have called are witnesses over which Ben Air has exclusive control. Those individuals named could have been called by anyone.

[37] In R. v. Degraw, 2018 ONCA 51, the Court of Appeal put it this way:

[29] In some limited circumstances, a trier of fact may draw an adverse inference from the accused’s failure to call a witness. The adverse inference principle is “derived from ordinary logic and experience”. It is not intended to punish the accused for failing to call a witness: R. v. Jolivet, 2000 SCC 29, [2000] 1 S.C.R. 751, at para. 24.

[30] An adverse inference may only be drawn where there is no plausible reason for not calling the witness: R. v. Lapensee, 2009 ONCA 646, 99 O.R. (3d) 501, at para. 42. Even where it is appropriate to draw an adverse inference, it should not be “given undue prominence and a comment should only be made where the witness is of some importance in the case”: R. v. Koffman (1985), 1985 3640 (ON CA), 20 C.C.C. (3d) 232 (Ont. C.A.), at p. 237.

[31] Commenting upon the failure of the defence to call a witness runs the clear risk of reversing the burden of proof: R. v. Ellis, 2013 ONCA 9, 113 O.R. (3d) 641, at para. 49; and Lapensee, at para. 45. As well, trial counsel will frequently make choices about not calling potential witnesses, the reasons for which are often entirely unrelated to the truth of any evidence a witness may give. For instance, an honest person may have a poor demeanour, resulting in a strategic choice not to have the individual testify. Or, the evidentiary point to be made by a person may already have been adequately covered by others: Jolivet, at para. 28. Allowing an adverse inference to be taken from the failure to call a potential witness runs the risk of visiting strategic litigation choices upon the accused. Accordingly, an adverse inference should only be drawn with great caution: R. v. Zehr (1980), 1980 2964 (ON CA), 54 C.C.C. (2d) 65 (Ont. C.A.), at p. 68; R. v. Charrette (1982), 1982 3738 (ON CA), 67 C.C.C. (2d) 357 (Ont. C.A.), at p. 359; Koffman, at p. 237; Lapensee, at para. 45; and Ellis, at para. 49.

[32] Where comment is appropriate, the “only inference that can be drawn” is not one of guilt, but an inference that, had the witness testified, his or her evidence would have been unfavourable to the accused: Koffman, at p. 238; and R. v. Marshall (2005), 2005 30051 (ON CA), 200 C.C.C. (3d) 179 (Ont. C.A.), at para. 47. This inference can impact on an assessment of the accused’s credibility: Koffman, at p. 238; Charrette, at p. 359; R. v. Dupuis (1995), 1995 1543 (ON CA), 98 C.C.C. (3d) 496 (Ont. C.A.), at p. 508; and Marshall, at paras. 44, 47-48.

[38] I decline to draw the requested adverse inferences for the following reasons:

1. Ben Air submits that the contract is a fixed price contract subject to specific terms and conditions, which did not include the Prime Contract’s payment process. Given the form of contract Ben Air must prove, there is no reason for it to call the witnesses Omico suggests that it should have called.

2. Those potential witnesses who are alleged to have some knowledge of the formation of the contract and the terms that apply are not exclusively within the control of Ben Air. It was equally open to Omico to call those witnesses.

3. Those potential witnesses who are alleged to have some knowledge of the state of the construction job are germane to the counterclaim. The onus is on Omico to prove the counterclaim. Those witnesses are not exclusively within the control of Ben Air. It was equally open to Omico to call those witnesses.

4. Drawing an adverse inference in respect of the counterclaim from Ben Air's alleged failure to call a witness, reverses the onus on the counterclaim.

iv. Conclusion re Form of Contract

[39] Ben Air’s position is that it had a fixed price contract, unencumbered by the general and supplementary conditions, and addenda contained in the Prime Contract, or by Omico’s contract. Ben Air bears the onus of proving that form of contract on a balance of probabilities.

[40] Omico’s position, both as an affirmative defence and as part of its counterclaim, is that the contract between Omico and Ben Air incorporates the general and supplementary conditions, and addenda, including those dealing with payment. Omico bears the burden of proving its version of the contract, on a balance of probabilities.

[41] On the whole of the evidence, I conclude that the contract that existed between Ben Air and Omico was a fixed price contract that included only those documents, specifications and conditions, and addenda mentioned on the face of Ben Air’s revised quotation to Omico and on the face of Omico’s purchase order accepting Ben Air's revised quotation. Specifically, the Omico-Ben Air contract did not contain specifications, conditions, addenda, or other terms not referred to on the quotation’s and purchase order’s face, including TTC’s terms concerning the payment process. I say this for the following reasons:

a) Ben Air’s March 13, 2012 revised quotation does not mention that it is subject to any terms or conditions other than those specified on its face.

b) Omico’s March 21, 2012 purchase order specifically said that Ben Air’s authority was to proceed with the HVAC and controls work “… in accordance but limited to…” various documents specified, none of which included the general or supplemental conditions or addenda. Omico argues that the word “not” was left out of the purchase order by error, and that it ought to have read “... in accordance, but not limited to…” This submission is contrary to the plain wording of the purchase order. Reading that change into the contract runs contrary to the plain meaning of the proposal and purchase order and would change the agreement fundamentally.

c) Mr. Quattrociocchi said that the general conditions, supplementary conditions, addenda, and the contract between Omico and Maystar were not given to him before he received Omico’s purchase order.

d) Mr. Bottoni gave evidence that the disc that was sent to Ben Air contained all of the drawings, mechanical drawings, mechanical specifications, general conditions, supplementary conditions and addenda. His evidence is unhelpful. It was inconsistent. Further, he did not prepare or review the disc. He left this up to Ms. Olivi.

e) When Ms. Olivi was asked what she sent to Ben Air for tendering, she said that she sent a disc containing specifications and drawings or other information so that the subcontractors could do their pricing. She was not asked specifically if the CD contained the general conditions, supplementary conditions, and addenda. She was invited to do so. Her answer about what the disc contained was specifically qualified by the word “pricing”.

f) According to Omico, TTC or Maystar created the disc that Omico copied and sent to Ben Air. That disc was not produced at trial. I was not directed to any properly proved document in the seven volumes of documents provided to the Court that indicated what the disc contained. Omico sent the disc again in 2013. That disc was not produced at trial. I was not directed to any properly proved document in the seven volumes of documents that indicated what the 2013 disc contained. I do not know whether the second disc was an exact copy, or a re-creation of that which Omico says it sent to Ben Air in 2012.

g) The only direct evidence before me as to what was given to Ben Air upon which it issued its quote was that of Mr. Quattrociocchi and Ms. Olivi. Mr. Quattrociocchi’s evidence was clear and I accept it. Ms. Olivi was specifically invited to list all of the documents that were on the CD that she says was sent to Ben Air for tendering purposes. Her response was clear. She only provided that which was necessary ‘for pricing’. The process for payment is not necessary to price a job.

[42] I conclude on the balance of probabilities that the contract was as proffered by Ben Air. Omico has failed to discharge its onus to prove the version of the contract it proffered.

[43] Omico says that even if I find that the Omico – Ben Air contract is a fixed price contract and did not incorporate the general and supplementary conditions, I should still find that the Prime Contract’s payment provisions were as set out in the Prime Contract and supplementary conditions. Omico says this for two reasons: first, the payment requirements in the TTC contract were just like those in the other contracts that Omico had with Ben Air at the time, and second, they are standard payment arrangements in the industry. In respect of the second argument, Omico relies on Marden Mechanical Ltd. v. West-Con Developments Inc., 2007 8637 (S.C.J.)

[44] I do not accept either of these propositions for the following reasons:

a) The process for payment on any job is governed by the contract for that job. The contracts for the other Ben Air – Omico jobs were not produced in evidence. They are irrelevant.

b) What the industry standard may be is proved by expert evidence, usually. No such evidence was produced at trial.

c) Omico says that the fact that Ben Air filled out the Construction Cost Breakdown form (Ex. 1, T 3, p. 11, and Ex. 1, T1, p. 3 to 7) is evidence that Ben Air knew that its payment would depend on progress draws submitted to and approved by TTC. I disagree. While the Cost Breakdown might have been required by TTC with respect to payment processes under its contract, there is no indication in the Cost Breakdown that Ben Air submitted would be subject to TTC’s progress draw process. Instead, the fax cover sheet sent by Omico to Ben Air attaching the Construction Cost Breakdown , says that the document will be used “when submitting payment draws”, presumably by Ben Air to Omico. The fax cover sheet did not refer to "proposed payment draws" or refer to the payment approval process referred to in the Prime Contract.

d) Omico did not question the cost breakdown Ben Air submitted. It accepted it and sent it on to TTC. Omico usually billed according to Ben Air’s Construction Cost Breakdown for the work within Ben Air’s scope of work.

e) The Cost Breakdown is equally consistent with Ben Air’s position of a fixed price contract, billed in instalments as work was done and goods delivered.

f) Marden Mechanical Ltd., supra, is of little assistance. In that case, the trial judge found that the payment arrangements such as those Omico insisted apply to the Omico – Ben Air contract, are standard payment arrangements in the industry. I do not know what evidence was before the learned judge in Marden. I had no evidence of standard industry practices except for Mr. Bottoni’s statement to that effect and Mr. Quattrociocchi’s denial.

b. Was Ben Air justified in terminating the contract?

i. The Parties’ Positions

[45] Omico says that Ben Air abandoned the project in July, 2013 without justification, thereby breaching the contract. It had been paid everything that TTC had approved up to that time. Ben Air did not provide submittals as required under the contract. It would not abide by payment procedures. It billed for work not done or expenses not incurred at the time of the specific invoice. In its counterclaim, Omico says that Ben Air is responsible for the costs Omico incurred to finish Ben Air’s scope of work. Omico’s position in its counterclaim that Ben Air abandoned the contract is contingent on Omico's position as to what the contract is.

[46] Ben Air said that it followed the Omico-Ben Air contract. Ben Air accused Omico of breaching the contract. The project was almost a year delayed. Omico did not pay the interim bills fully or in a timely way. Rather, it hid behind its misconceived view of the terms of the contract. It attempted to force other terms on Ben Air that were not part of its contract. Omico and TTC were unreasonable in their requirements which they said (improperly) Ben Air was not meeting.

[47] I note that both parties’ submissions extended beyond the questions Ricchetti, J. framed for this trial.

ii. Alleged Events of Breach

[48] Both parties’ positions on the question of who breached the contract are contingent on each parties' version of the contract being accepted.

Failure to Abide by Payment Procedures and Failure to Pay:

[49] I have already found that the contract between Omico and Ben Air is a fixed price contract governed by the terms set out in Ben Air's March 13, 2012 revised quotation and Omico's March 21, 2012 purchase order, and is otherwise unencumbered by the Prime Contract's terms, conditions, special conditions, and addenda.

[50] I find that Omico breached the contract by failing to pay according to invoices Ben Air submitted in accordance with Ben Air's progress draws, so long as those draws complied with Ben Air’s Construction Costs Breakdown. Further, Omico attempted to impose on the Omico-Ben Air contract, terms that were not included in that contract.

[51] On March 13, 2012, Omico requested that Ben Air submit the Cost Breakdown which Omico said was to be used for billing purposes. On March 15, 2012, Ben Air provided it. Omico never complained about it, or said that the Cost Breakdown would not be followed. Omico, however, never made payments to Ben Air in accordance with the Cost Breakdown or the invoices Ben Air submitted. To that extent, Omico breached the contract. Failure to make payments in accordance with a contract is a fundamental breach (see Heyday Homes Ltd. v. Gunraj, 2004 34324 (Ont. Master), para. 345; Chomedy Aluminum Co. v. Belcourt Const’n (Ottawa) Ltd., 1980 CarswellOnt 117, para. 4 (SCC). Ben Air was justified in terminating the contract given Omico’s fundamental breach.

[52] Omico argues, in defence, that any payment can only be made after that payment is certified. On the TTC job, payment is certified only when the senior contract administrator, the resident superintendent, and the project manager have signed off on the certification of payment. That is the process dictated by TTC in its contract. Those provisions however were not incorporated into the Omico-Ben Air contract. Even if they did apply to the Omico-Ben Air contract, Omico never provided payment certificates to Ben Air. Omico incorporated Ben Air’s full progress draw invoices with its progress draw request to Maystar and TTC. Omico then relayed to Ben Air TTC’s position regarding payment, and paid Ben Air that which TTC had approved for Ben Air. At no time did Omico do its own assessment with respect to the progress draws as compared to the progress on the ground.

Billing for Work Not Performed or Expenses Not Incurred:

[53] There was a great deal of evidence concerning the fact that Ben Air billed Omico for certain items of equipment (such as the Make Up Air units and door Air Curtains) before they were delivered. Omico argued this was breach of contract.

[54] Ultimately, this is not an issue. As of Ben Air’s July, 2013 termination date, the units had all been delivered to the site.

[55] The disputes over the delivery and payment for this equipment is still relevant for two reasons. First, they illustrate the extent to which the relationship between the two parties had deteriorated, and second they illustrate the extent to which Omico was prepared to characterize matters to its advantage.

[56] As indicated, over 70% of the value of Ben Air’s quotation comprised the cost of HVAC equipment Ben Air had to purchase and install. Two significant equipment purchases were the Make-up Air Units, and the Air Curtain units. As indicated, Ben Air ordered these units shortly after the subcontract was awarded as the equipment had to be manufactured and delivered.

[57] With respect to the Make-up Air Units, they were ordered and ready to be delivered in November, 2012 but could not be delivered as the site was not ready to accept them due to delays Omico admits were not within Ben Air’s control. They were delivered by the end of the year and partially installed. Ben Air invoiced for work done on the Make-up Air Units. Omico submitted the total Ben Air invoice to Maystar/TTC for payment.

[58] The Make-up Air units (or any other equipment) could not be considered to be fully installed until all inspections had been done, and the units declared to be operational and compliant with regulations regarding installation.

[59] The Air Curtain units were also a sticking point. Ben Air ordered them shortly after the contract was awarded. They were delivered to the site on June 3, 2013.

[60] On April 11, 2013, Ben Air invoiced $300,015.00 for the units ($295,000 invoiced by the supplier, less 10% holdback, plus HST - see Ex. 1, Vol. III, T. 4, P. 665). At that time, Mr. Quattrociocchi said that the units were ready but were being stored by the manufacturer until payment was made. The manufacturer, however, was charging storage fees. Ben Air invoiced for the storage fees.

[61] A dispute arose as to who should pay the storage fees and when the Air Curtain units could be invoiced. Omico criticized Ben Air for invoicing for the Air Curtain units before they were delivered to the site. Omico, at the behest of Maystar/TTC, told Ben Air that it would not be paid for the units until they were delivered to the site. Omico also told Ben Air that the units could not be delivered to site until Ben Air agreed to accept terms as to storage, liability, and insuring requirements as set out in the Prime Contract’s terms and conditions. Omico said that storage fees imposed by the manufacturer were for Ben Air to pay.

[62] Ben Air refused to accept Omico/Maystar/TTC’s terms in respect of billing and storage fees, saying that Omico and others were trying to impose additional terms on Ben Air that were not in the original Omico-Ben Air contract. Ben Air objected to the fact that TTC, Maystar and Omico were requiring Ben Air to finance purchase of the equipment that had to be stored because the job site was not ready for the equipment for reasons not related to Ben Air.

[63] Notwithstanding that Omico criticized Ben Air for billing for the Air Curtain units before they were delivered, it did exactly the same thing. On May 25, 2013, Omico billed Maystar/TTC $181,074.64 for the Air Curtain units ($178,074.84 less 10% holdback plus HST). In its Construction Cost Breakdown submitted to Maystar Omico justified its billing by describing item 190 on the Breakdown as “Supply only of Door Heaters”. Omico listed the cost as $197,830.93, which was reduced to 90% as someone determined they were only 90% completed (see Ex. 1, Vol. III, T. 18). On May 25, 2013, Maystar/TTC approved the payment as submitted and made payment to Omico. How Omico arrived at its billing value is unclear.

[64] What did Omico pay to Ben Air for the Air Curtains? Not what Maystar paid Omico.

[65] Notwithstanding that on May 25, 2013, Omico received payment from Maystar for the full submitted amount for the Air Curtain units of $181,074.64, Omico did not pay Ben Air. Omico did not tell Ben Air what Omico had submitted for and been paid. Instead, when Ben Air, demanded payment, and after it liened for the unpaid work, in late May, 2013 Mr. Bottoni asked to meet Mr. Quattrociocchi and Juan Cumming (the new owner of Ben Air).

[66] The meeting occurred on May 30, 2013. What was agreed to at that meeting is the subject of disagreement. What is not contested is that Omico agreed to pay Ben Air $158,000.00 on account of the Air Curtains (not $181,000) and that Ben Air agreed to remove its lien. No one minuted the meeting, although Mr. Cumming said that he asked Mr. Bottoni to do so.

[67] Shortly after the meeting, Ben Air accused Omico of not abiding by the agreement reached on May 30, although no one confirmed its terms. By letter dated June 25, 2013 (Ex. 1, Vol. IV, T. 43, p. 1023) Omico said of that agreement “We have tried to accommodate you by advancing monies ($158,000.00) on account of the Air Curtain units, even though the monthly draw relating to that item has not been approved and Omico had not yet received payment from the general, Maystar.”

[68] This is simply not true. Omico tried to “spin” the facts by implying that it was financing the $158,000 payment to Ben Air from its own resources, although it had no obligation to do so. Omico never told Ben Air after May 25 that it had asked for and been paid $181,000 by Maystar/TTC for the same item it was paying Ben Air only $158,000.

[69] Part of the explanation for Omico’s actions may be found in the fact that by this time, Omico and Ben Air were disputing payments between them on other, unrelated jobs. Omico appears to have been using the Air Curtain payment to gain leverage or payment in respect to this or the other jobs.

Failure to provide Submittals:

[70] Given my finding about the contract, the issue of “submittals” is irrelevant since, by the time Ben Air terminated the contract for non-payment, it had not invoiced for “submittals”. This issue, too, is illustrative of problems that plagued the job, and further poisoned the relationship between the parties.

[71] It is clear that the parties understood what the term “submittals” meant. The evidence as to what “submittals” meant, however, is vague. Omico’s witnesses described “submittals” as a collective term for the paperwork relevant to a specific piece of equipment delivered to the job, including the owner’s manuals, operation manuals, specification sheets, CSA or ASTM specification sheets and approvals, and the inspection, clearance or approval certificates by the appropriate building, utility or regulatory authority, all of which would be required before the unit could be put into service.

[72] Submittals became an issue on this job. Maystar/TTC complained to Omico that Ben Air was either not providing its submittals, or not providing adequate submittals. Omico relayed this to Ben Air. Ms. Olivi and Mr. Bottoni both testified as to the inadequacy of the submittals, and that they relayed the concern to Ben Air.

[73] Mr. Quattrociocchi and Mr. Cumming confirmed that Omico, Maystar and TTC complained about the sufficiency of the submittals. Both said, however, that no one provided Ben Air with clear direction about the problem with the submittals. They tried, repeatedly, to address the concerns they received. TTC, Maystar, and Omico were never satisfied with what they were given. Mr. Quattrociocchi and Mr. Cumming both testified that eventually, they put the equipment suppliers in touch with Maystar and TTC directly so that the experts could satisfy Maystar and TTC. In early 2013, TTC imposed, arbitrarily, a further 23% holdback on Ben Air’s payments until the “submittals” issue was resolved.

[74] Even if the “submittals” issue was a defence open to Omico to Ben Air’s claim, I would have dismissed it. Omico has the onus to establish this defence. The evidence about "submittals" was very general. I was given no specific evidence about any specific submittal or any deficiency with a specific submittal. Omico fails to discharge its onus on this issue.

Ben Air Terminates or Abandons:

[75] Omico argues that Ben Air terminated or abandoned the work by making demands for payment, failing which it would walk off the job, which is a repudiation of the contract. Therefore, Ben Air is not entitled to further payment.

[76] To the extent that Ben Air made these demands and threats, it never acted on them. To the extent that the demands and threats constituted Ben Air’s repudiation of the contract, Omico never accepted or acted on Ben Air’s repudiation. Given my findings on the nature of the contract and Omico’s breach of it for want of payment of invoices, Ben Air did not improperly terminate or repudiate.

2) The Validity of the Second Lien.

[77] On May 24, 2013, Ben Air issued to Omico a Notice of Default (Ex. 1, Vol. IV, T. 21, p. 963), followed on May 28 by a Notice of Termination (Ex. 1, Vol. IV, T. 23, p. 968). Ben Air registered its Claim for Lien (the first lien) of $449,867.47 on May 30, 2013 at 11:57 a.m. (Ex. 1, Vol. IV, T. 26, p. 974).

[78] On May 30, after Omico was served with the Lien, Messrs. Quattrociocchi, Cumming and Bottoni met. What was discussed and decided is in dispute. The three agree that two things were decided. First, Omico would pay Ben Air $158,000.00 on account of the Air Curtain units, and second, Ben Air would vacate its lien. Ben Air vacated the first lien on June 3, 2013.

[79] Because of what Ben Air said was Omico’s alleged failure to abide by the oral agreement of May 30, on July 16, 2013, Ben Air delivered a new Notice of Default advising that if Ben Air was not paid what it was owed, it would terminate the contract (Ex. 1, Vol. IV, T. 51, P. 1045). On July 24, Ben Air served its Notice of Termination (Ex. 1, Vol. IV, T. 59, p. 1075). It registered its lien (the second lien) for $449,607.94 on August 30, 2013 (Ex. 1, Vol. IV, T. 69, p. 1085).

[80] At trial, the parties agreed that once one deducts from the second lien the payments that Omico made to Ben Air’s suppliers on account of services and goods supplied up to August 30, 2013, the amount of the lien should have been $273,359.09 (comprising $223,359.09 in security plus $50,000 for costs), subject to whether the second lien is valid and if so, what was properly claimable under the second lien. By agreement, this lower amount was secured by an irrevocable letter of credit.

a. Was the second lien valid?

[81] The second lien is valid on its face.

[82] There is no dispute about the law.

[83] Section 48 of the Construction Lien Act, R.S.O. 1990, c. C.30 (as amended), says:

Discharge irrevocable

48 A discharge of a lien under this Part is irrevocable and the discharged lien cannot be revived, but no discharge affects the right of the person whose lien was discharged to claim a lien in respect of services or materials supplied by the person subsequent to the preservation of the discharged lien. R.S.O. 1990, c. C.30, s. 48; 2017, c. 24, s. 68.

[84] Section 48 makes it clear that the discharge of a lien means that the claimant cannot lien again for the services performed and materials supplied before the date of the perfection of the first, discharged lien (see: Southridge Constructions Group Inc. v. 667293 Ont. Inc. (1992), 2 C.L.R. (2d) 177 (Ont. Master), para. 18). Lien rights continue for services and/or materials supplied after the perfection of the discharged lien (see: Khalimov v. Hogarth, 2015 ONSC 6244 (Ont. Master), para. 23). A claimant can lien for the unpaid balance of the contract only if it stays on the job and intends to finish the job (see: Landmark II Inc. v. 1535709 Ontario Limited, 2011 ONCA 567, para. 25). By logical extension, where a party terminates the contract because he or she accepts the breach by the other party, the party may lien only for services and goods delivered to the time of the termination.

[85] In this case, there is no basis to conclude that the second lien is purely duplicative of the first. The dollar values claimed are slightly different. On its face, the second lien is valid.

b. What is the proper subject matter of the second lien?

[86] The issue here is whether any services or materials that are claimed as part of the second lien were claimed as part of the first lien. If any services claimed in the second lien were claimed in the discharged first lien, while the claim in contract survives, security in the lien does not.

[87] This question can only be answered in the abstract, at this point.

i. Positions of the Parties

[88] Ben Air agrees that any services or goods supplied that were the subject of the first lien, cannot be sought in the second lien. Ben Air says that its first lien claimed for all services and goods delivered to the job site before May 30, 2013, less payments made, plus HST and the applicable holdback. None of this was claimed in the second lien.

[89] Omico says either Ben Air’s second lien is the same as its first lien, or that the second lien merely reflects the total outstanding net amount Ben Air claims on the job. Omico claims that it is entitled to many reductions from the lien amount for payments it made to Ben Air’s suppliers and subtrades on Ben Air’s behalf. In part, Omico submitted that these payments were incurred in order to complete Ben Air’s scope of work, and in part on account of services and materials Ben Air’s suppliers and subtrades had already billed for and not been paid for, by the time Ben Air terminated the contract.

ii. Analysis

[90] What, if anything, in the second lien should be eliminated as having been claimed in the first, discharged lien? This will have to be determined at the accounting phase of the action. I say this for several reasons.

1. First, based on the evidence at trial, it is unclear as to what, specifically, formed part of either of the two liens. With respect to the first lien, one assumes that it covered all services and materials supplied up to May 30, 2013. This is not entirely clear.

2. With respect to the second lien, Mr. Cumming was asked at the end of his examination in chief about how he arrived at the amount for the second lien. He said that he included a) amounts “outstanding”, b) invoices received from suppliers after May 30, and c) the holdback. It is not clear from his evidence, however, whether the amounts “outstanding” related only the cost of services and materials provided after May 30 (net any payments), or were all receivables since the outset of the job (net any payments). Ben Air submits it is the former and Omico, the latter.

Mr. Cumming was then asked whether he ‘deducted’ the amount of the first lien from the second. In response he said that the second lien was not part of the first lien.

Based on this evidence, I cannot make the determination as to whether the second lien covered any services or materials supplied to the job before May 30, 2013.

3. Ben Air concedes that it included in the second lien the holdback from the beginning of the job to the date of termination in July 2013. Therefore, the second lien claims the holdback up to May 30. The holdback for services and materials supplied from the outset to May 30, 2013 must be deducted from the second lien. I cannot determine this amount.

4. Third, Omico claims significant deductions from the second lien claiming that it made significant payments to Ben Air’s former suppliers and subtrades on Ben Air's behalf in order to complete Ben Air's scope of work. In light of my findings concerning Omico’s breach of the contract and Ben Air having the right to terminate the contract, claims by Omico against Ben Air for set off of the costs Omico incurred to complete Ben Air’s scope of work after termination, are dismissed. Evidence was not led, however, about which of those invoices Omico paid were for the cost of materials and services delivered between May 30, 2013 and August 30, 2013 that were within the scope of Ben Air’s work, that were approved extras during that time, or that were for services and materials provided after Ben Air’s termination.

To the extent that services Omico paid a) relate to services and goods Omico paid for, b) which were performed and delivered before Ben Air's termination, and c) relate to Ben Air's scope of work including any approved charge orders or extras, Omico may still have, a claim for those payments.

5. In paragraph 63 of its Reply Submissions, Ben Air appears to be taking the position that since the Air Curtain units were not delivered until June 2, 2013, some portion of the costs is properly the subject of the second lien, even though it might have been part of the first lien. I cannot determine this issue on the evidence before me.

Order:

[91] In light of the foregoing, I order as follows:

1. The contract between Omico and Ben Air was a fixed price contract, payable in instalments as invoiced by Ben Air as the job progressed, subject to the drawings, specifications, terms, conditions, and addenda stated on the face of Ben Air’s March 13, 2012 revised quotation and Omico’s March 21, 2012 purchase order. The Omico-Ben Air contract did not incorporate specifically, by reference, or by inference, any other drawings, specifications, terms, conditions, and addenda contained in the Prime Contract or the Maystar-Omico contract.

2. Omico breached the contract by not paying invoices as rendered and by requiring Ben Air to abide by payment restrictions, preconditions and conditions or other terms that were not part of the contract. Ben Air’s termination was proper.

3. Omico’s crossclaim or claim for set-off for amounts paid to Ben Air’s suppliers or subtrades, is dismissed to the extent that those claims pertain to goods or services provided by those suppliers and subtrades are for work outside the scope of Ben Air’s scope of work, or pertain to services or material supplied by those suppliers and subtrades after Ben Air terminated the contract.

4. The second lien is valid.

5. Since the first lien was discharged, any claim for any services or materials provided up to May 30, 2013, including any holdback in relation to those services or materials, cannot form part of the second lien.

6. The accounting phase of the action shall determine whether, and the extent to which, any materials and services that are the subject of the second lien, were part of the services and materials that were the subject of the first lien.

7. The parties shall have 90 days within which to resolve the quantum of Ben Air’s claim, and any other issue arising from these proceedings. Failing resolution, the parties shall convene a conference call with me shortly after the end of the 90 day period to discuss further procedural steps. Such conference call shall take place between 7:30 and 10:00 a.m. any day I am sitting and shall deal with scheduling issues only.

TRIMBLE, J.

Released: April 12, 2018