Court File and Parties

COURT FILE NO.: CV-16-559845 DATE: 20180723

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: FIRSTONSITE RESTORATION LIMITED, Plaintiff – AND – 4049 RIVER ROAD GP INC., 4049 RIVER ROAD LP, DEBBIE BUSH, ANDREZEJ KEPINSKI and HUNTER MILBORNE, Defendants

BEFORE: E.M. Morgan J.

COUNSEL: Raymond Slattery, for the Plaintiff Robert Kennaley and Joshua Winter, for the Defendants

HEARD: July 10, 2018

Endorsement

[1] The Plaintiff moves for summary judgment under Rule 20.01 of the Rules of Civil Procedure for payment of invoices it issued to the Defendant, 4049 River Road LP and its general partner 4049 River Road GP (collectively, “River Road”), and/or for damages for breach of trust against River Road’s officers, the Defendants, Debbie Bush, Andrezej Kepinski, and Hunter Milborne (collectively, the “Individual Defendants”).

[2] The Plaintiff is a restoration and renovation company that specializes in emergency construction situations. River Road is the owner of the Best Days Inn in Niagara Falls that was damaged in a fire on May 3, 2015. The Plaintiff did demolition and clean-up work required as a result of the fire damage, but remains unpaid on outstanding invoices rendered in respect of this work.

[3] River Road’s insurer contacted the Plaintiff in order to remediate the damage to the hotel caused by fire, smoke, and water. The remediation services were ultimately provided by the Plaintiff pursuant to two work authorization agreements duly signed by River Road, dated May 6, 2015 and May 29, 2015.

[4] Pursuant to the authorizations, the Plaintiff provided a number of services on site. These included breaking out the remaining windows and doors and securing the property with plywood, erecting temporary fencing around the property, demolishing interior finishes for the hotel rooms, common areas, and restaurant that were damaged by the fire and by water used to extinguish the fire, dispose of the heavily damaged contents, and a general clean-up of the site. It rendered invoices for these services between May 22, 2015 and June 30, 2015 in the total amount of $517,267.98.

[5] The insurer retained Specialized Property Evaluation Control Services Limited (“SPECS”) to conduct a cost audit report for the remediation work done by the Plaintiff. SPECS issued a report that recommended the Plaintiff’s overall bill be reduced by $91,228.50. The Plaintiff accepted this recommendation from River Road’s insurer’s auditor and issued revised invoices reflecting this reduction in price.

[6] Despite its agreement to a reduction in the invoiced amounts as recommended by the auditor appointed by River Road’s insurer, the Plaintiff still has not been paid. The total owing to the Plaintiff under its revised invoices is $426,039.48, plus HST and accrued interest.

[7] The Plaintiff’s printed invoices advise that interest accrues on unpaid accounts at the rate of 2% per month. However, there is no evidence that River Road ever agreed to this rate of interest. Indeed, the authorizations signed by River Road and agreed to by the Plaintiff indicate interest on unpaid amounts accrues at the rate 5% per annum. Accordingly, any interest accruing on the unpaid invoices clamed in this action accrues at 5% per annum, not at 2% per month.

[8] Try as it might, River Road has presented no real reason not to have paid the Plaintiff. The work was done as specified. Despite River Road’s counsel’s protestations that the Plaintiff has not been transparent in explaining its invoices, the Plaintiff has in fact produced every receipt, supplier’s invoice, workers’ time sheet, and other documentation one can imagine that a construction company would have in its files to back up its invoices.

[9] River Road retained another construction consultant that has inspected the Plaintiff’s invoices and other documentation. That consultant indicated that he would need “much more” information before he could accurately comment on the Plaintiff’s invoices. According to River Road’s affiant, that consultant has caused River Road to wonder whether the invoices are still too high.

[10] For example, River Road complains that although it can see on the time sheets precisely which worker was on site for precisely which hours, and it can see in the work descriptions and on inspection of the site itself precisely what work was accomplished, it is not clear exactly what each worker did for the time that they worked and why it took each one the length of time allocated to each task. River Road and its consultant would apparently have to question each and every construction worker to determine what they did, when they did it, why they did it, and whether the time it took to do any portion of a given task measured up to some undefined, external criterion.

[11] River Road also complains that it is suspicious that there may be some undisclosed relationship between the Plaintiff and SPECS. Its counsel observes that the Plaintiff has not produced an affidavit of anyone from SPECS. River Road’s counsel submits that he should have been given an opportunity to cross-examine a representative of SPECS, and that without the evidence that might come from a SPECS representative the Plaintiff has not put its “best foot forward”. Accordingly, River Road submits that the matter is not put in a position to be granted summary judgment.

[12] River Road’s suspicion that there may be some relationship between the Plaintiff and SPECS is both unlikely and unsupported by any evidence. SPECS was appointed by River Road’s insurer, not by the Plaintiff. If River Road wanted to call a representative of SPECS to testify, it was as capable of making that arrangement as the Plaintiff was. Indeed, if anything, SPECS was River Road’s agent in auditing the Plaintiff, and River Road could expect more cooperation from a SPECS representative than the Plaintiff could expect.

[13] SPECS was so independent from the Plaintiff that the result of its audit was to recommend that the Plaintiff reduce its invoiced amount by over $90,000. That is not exactly a sign of collusion between the two companies. All that River Road’s affiant can say is that he wonders about the relationship between SPECS and the Plaintiff. There is nothing produced by River Road that would explain why he should harbor such doubts or questions. It comes across as idle speculation, designed primarily to avoid payment of the Plaintiff’s invoices.

[14] In making his submissions regarding summary judgment, River Road’s counsel fundamentally misapprehends the “best foot forward” rule. It is, of course, the Plaintiff’s burden to prove its case on the balance of probabilities. But to counter the evidence put forward by a moving party, a responding party is required to put all of its evidence forward: see Bergen v Fast Estate, 2018 ONCA 484. As it has often been put, each party in a summary judgment motion must “lead trump or risk losing”: 1061590 Ontario Limited v Ontario Jockey Club (1995), 1995 CanLII 1686 (ON CA), 21 OR (3d) 547 (Ont CA). It is not enough for a responding party’s affiant to simply speculate as to whether the moving party is really telling everything that the responding party would like to know.

[15] Here, the Plaintiff has proved a contractual debt – its evidence shows that the contract was signed, the remediation tasks were accomplished, the Plaintiff’s expenses were incurred, its supplies were delivered, and its labour was performed. If River Road seeks to cast doubt on that evidence or on that proof, it must either bring evidence of its own or undermine the Plaintiff’s evidence through cross-examination. It has done neither. River Road’s counsel did not cross-examine the Plaintiff’s affiant, nor did he summons a representative of SPECS to testify on the pending motion. It was not for River Road to sit back and wait for the Plaintiff to produce evidence that River Road’s principal wanted to hear. Having done so, River Road effectively put no foot forward at all.

[16] What River Road did do is to raise every conceivable objection to the Plaintiff’s level of disclosure regarding its invoices and the work it performed. River Road’s demands for itemization are so detailed as to be impossible to fulfill. It is apparently not satisfied to know what worker was on site at what times and what work was accomplished; it wants to know why and how each task was performed and why it took whatever time it took to do. This would require each labourer in the Plaintiff’s construction team to testify and explain why it took, for example, an hour-and-a-half to erect a length of fence or two hours to remove a fire-damaged portion of the ceiling, etc. An audit of the invoices has already been done by SPECS on River Road’s insurer’s behalf, and the time sheets have all been produced. The Plaintiff has nothing more to disclose.

[17] I have no trouble concluding that there is no genuine issue requiring a trial with respect to River Road’s liability for the Plaintiff’s invoices. The record before me allows the court “to make the necessary findings of fact, apply the law to those facts”, and to come to this conclusion in a way that is “a proportionate, more expeditious and less expensive means to achieve a just result than going to trial”: Hryniak v Mauldin, 2014 SCC 7, [2014] 1 SCR 87, at para 4.

[18] It would appear from the evidence that River Road turned out to be under-insured. Accordingly, some of the expenses of remediation and repair of its fire-damaged property have to be borne by it rather than by its insurer. That is unfortunate for River Road, but it is not something that impacts on the Plaintiff’s entitlement to be paid. River Road is indebted to the Plaintiff for the invoiced amount, as amended by the Plaintiff, whether or not River Road has an insurance policy that will cover all or part of it. River Road cannot use endless and futile disclosure requests in order to avoid liability for whatever time it takes to get to trial. Its liability to the Plaintiff under the contract is established.

[19] Turning to the personal claim brought by the Plaintiff against the Individual Defendants, counsel for the Plaintiff concedes that this aspect of the case is “more esoteric”. The Individual Defendants are the principal employees and officers of River Road. The Plaintiff claims that because River Road settled its claim against the insurer, the funds paid to it by the insurer were impressed with a trust. The Plaintiff further argues that since River Road received those funds but the Plaintiff has not been paid, a breach of trust has occurred and the Individual Defendants are therefore personally liable.

[20] The insurer settled with River Road for a payment of $1,604,810.57 in respect of the fire damage to River Road’s hotel property. The Plaintiff performed the first part of the remediation – primarily the demolition of fire damaged portions of the property and the clean-up of the site. Other construction companies performed the work of re-building and re-furbishing the hotel that had been on the property.

[21] The Plaintiff claims that $426,039.48 (plus interest and HST) of the insurance payout should have gone to it. That said, counsel for the Plaintiff is candid in conceding that River Road, as the insured party that received the funds, can choose the order in which it pays its contractors and suppliers. As long as the funds are utilized for the purpose for which the insurance company paid them to River Road – remediation and rebuilding the fire damaged property – the order of payment gives rise to no legal claim.

[22] As indicated, River Road was under-insured. That means that, one way or another, one of its construction contractors was going to be unpaid or under-paid from the insurance proceeds. The payments would have to be completed by River Road itself after it used up all of the insurance funds.

[23] River Road has submitted uncontroverted evidence that the entire insurance payout was used to pay other suppliers and contractors in the remediation and re-building of the hotel. After those payments, there is apparently nothing left of the insurance proceeds to pay the Plaintiff. There is no evidence in the record establishing that any of the insurance proceeds were earmarked especially for the Plaintiff.

[24] The Plaintiff complains that some of the insurance proceeds appear from the invoices produced by River Road to have gone to non-construction related items such as bedding and other supplies. Counsel for River Road explains that there is noting wrong with purchasing those items with the insurance proceeds. The insurance coverage was for the hotel on the property, and as such it included not only the building but the chattels and other essential supplies that were damaged inside the building. Among other things, it covered the bedding that was in the hotel.

[25] What is essential to the Individual Defendants’ defence is that there is no evidence whatsoever that the insurance funds were misused for their personal benefit. Indeed, there is no evidence that the insurance funds were used for any purpose other than what they were intended for – the remediation and re-building of the property and the hotel.

[26] That evidence puts an end to the claim against the Individual Defendants. Section 13 of the Construction Act, 1990, c.C30, as amended, 7–13, provides that individuals in control of a corporate trustee can be held liable for the corporation’s breach of trust only if they consent to or acquiesce in the face of conduct that they know or ought to know constitutes breach of trust. The onus of establishing this test lies with the party claiming the breach: Belmont Concrete Finishing Co. Limited v. Marshall, 2012 ONCA 585, at para 10. The Plaintiff has failed to meet the test here.

[27] River Road shall pay the Plaintiff $426,039.48, plus HST and accrued interest at the rate of 5% per annum since the date of the Plaintiff’s revised invoices.

[28] The claim against the Individual Defendants is dismissed.

[29] The results of this motion are mixed. The Plaintiff was successful in establishing River Road’s liability for payment of the Plaintiff’s invoices. At the same time, the Individual Defendants were successful in defeating the Plaintiff’s claim of breach of trust. I will therefore exercise my discretion under s. 133 of the Courts of Justice Act to refrain from ordering costs. There will be no costs of this action paid by either party to each other.

Morgan J.

Date: July 23, 2018