Court File and Parties

COURT FILE NO.: CV-16-105-00 DATE: 2018 08 14

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

SOUND SOLUTIONS (1997) INC. Plaintiff – and – CLADIT SIDING SOLUTIONS INC., GREGORY SCOTT BELL, and KIMBERLY ANN BELL Defendants

Counsel: Ian K. Latimer, for the Plaintiff Damien M.E. Buntsma, for the Defendant

HEARD: September 11 and 13, 2017

REASONS FOR JUDGMENT

L. Shaw J.

Overview

[1] The plaintiff, Sound Solutions (1997) Inc. (“Sound Solutions”) has commenced an action seeking damages from the defendant Cladit Siding Solutions Inc. (“Cladit”) for breach of contract in the sum of $119,635.55 plus interest and costs in connection with the sale of extruded concrete panels (the “panels”) to Cladit in August 2015 for use in a commercial construction project. It has also sought a declaration that Cladit and Gregory Bell (“Mr. Bell”) have breached their trust obligations pursuant to sections 8 and 13 of the Construction Act, R.S.O., c. C.30.

[2] Cladit has filed a defence seeking set-off against any amount held to be owing to Sound Solutions, representing costs it incurred to remediate deficiencies with the panels. Cladit has also brought a counterclaim seeking damages for intentional interference in contractual relations, loss of reputation and punitive damages, which it claims should also be set-off against any amount determined to be owing to Sound Solutions.

[3] Sound Solutions have brought this summary judgment motion pursuant to Rule 20 of the Rules of Civil Procedure for judgment for breach of contract and for breach of trust and a dismissal of Cladit’s counterclaim. Cladit did not file a cross-motion but filed material responding to Sound Solution’s motion seeking summary judgment.

[4] There is no dispute that Sound Solutions sold panels to Cladit to be used as part of the exterior siding for the construction of the Paramedic Services Reporting Station located at 25 Rising Hill Ridge in Brampton, Ontario (the “project”). The Regional Municipality of Peel (“Peel”) is the owner of the property. Dialog Design was the architect who designed the building and M.J. Dixon Construction Ltd. (“Dixon”) was the general contractor.

[5] There is no dispute that Cladit was awarded the contract to supply and install three types of siding for the project, which included the panels. The types of panels to be used were described in the architect’s specifications to be fibreC panels that were manufactured by Rieder, a company based in Austria. Sound Solutions was Rieder’s exclusive distributor of the panels in North America. Cladit therefore purchased the panels from Sound Solutions. Cladit subcontracted the installation of the siding, including the panels, to 7283733 Canada Inc. (“728”).

[6] There is no dispute that the panels were delivered to Cladit in February 2016 and were installed by 728. The total cost of the panels was $143,599.47. Cladit paid Sound Solutions a deposit of $25,093.91 on February 12, 2016, leaving a balance owing of $118,505.56 plus $1,130.00 for storage fees for a total of $119,635.56. Cladit disputes that it owes any storage fees.

[7] Cladit has not paid the balance owing to Sound Solutions, alleging the panels had two types of deficiencies, for which Cladit incurred costs to remediate. One deficiency related to the colour of the panels and the second to the size of the panels. In its Statement of Defence, Cladit claims the costs to rectify the deficiencies, which included cutting and installing new panels, was in excess of $42,000.

[8] There is no dispute that Cladit informed Sound Solutions that the architect expressed concern regarding colour variations in some of the panels, that Cladit had to do some remediation work, and that the work was performed by 728. Sound Solutions disputes, however, that the colour variations were a deficiency. It also disputes that the panels were cut to the wrong size, as claimed by Cladit.

[9] There is no dispute that Dixon has paid Cladit for Cladit’s work on the project, which, among other things, included supplying and installing the panels. Cladit was required to file a Notice of Lien for $135,004.48 in connection with the final amount owing from Dixon in October 2016. It settled that lien action for $110,867.55 in November 2016.

[10] In its counterclaim, Cladit is seeking damages for breach of contract in the amount of $60,000. It has also claimed $50,000 for intentional interference in contractual relations, $200,000 for loss of reputation and $250,000 for punitive damages. These claims relate to Sound Solutions and its lawyer’s conduct after the panels had been installed. Sound Solutions and its lawyer contacted Peel and Dixon to request payment, alleging that Cladit had breached its trust obligations and filed a false statutory declaration as to payment of its subcontractors and suppliers.

[11] Mr. Andrew Rogers, a principal of Sound Solutions, filed affidavits sworn February 15, 2017, and April 24, 2017, in support of the relief requested. Mr. Bell filed an affidavit sworn April 19, 2017. Cross-examinations were conducted on those affidavits and the transcripts were filed as part of this motion. In addition, Sound Solutions filed an affidavit sworn by Ilija Bilbija, an officer and director of 728, which Cladit hired to install the panels. He was cross-examined on his affidavit and that transcript was filed for the motion. Lastly, Mr. Jonathon Spiegel, a partner with the law firm of Spiegel Nichols Fox LPP, lawyers for the plaintiff, also filed an affidavit sworn April 21, 2017, responding to the allegations that he had contact with Peel and Dixon.

[12] Counsel for Cladit takes the position that the reply affidavit filed by Mr. Rogers sworn April 24, 2017, is not admissible as it was not proper reply but rather an attempt to split the plaintiff’s case. Counsel for Cladit also argued that the affidavit contained opinion evidence from Mr. Rogers regarding the size and cutting of the panels and that Mr. Rogers was not a properly qualified expert to give that opinion evidence. He also objected to paragraphs 13-16 dealing with Mr. Roger’s discussions with Mr. Beul from Rieder about quality control documents from Rieder regarding the cutting of the panels. Counsel for Cladit submits that Mr. Beul should have sworn an affidavit regarding that evidence.

[13] I do not agree that Mr. Rogers’ affidavit is improper reply evidence. Nonetheless, I have placed no weight on paragraphs 10-36 of the affidavit as it was not necessary to do so to reach my decision.

[14] While there is conflicting evidence between the parties, much of the conflict involves peripheral issues that do not impede a determination of Sound Solution’s claim for summary judgment and Cladit’s claim for an equitable set-off. For the reasons that follow, I grant Sound Solution’s claim for summary judgment for $118,505.56 (exclusive of storage fees of $1130, which remains in dispute) for breach of contract against Cladit, less a set-off of $2,340 for costs incurred to remediate the colour deficiency. Sound Solution’s claim for breach of trust against Mr. Bell and Cladit, together with Cladit’s counterclaim, are to proceed to trial to be scheduled before myself.

Position of the Parties

[15] Sound Solutions argues that this is an appropriate matter to be resolved by summary judgment as there is no dispute that it supplied the panels to Cladit, and Cladit has not paid the balance owing, the quantum of which is not in dispute.

[16] Sound Solutions also seeks summary judgment against Mr. Bell who is the sole officer and director of Cladit. Sound Solutions claims breach of trust against Cladit and Mr. Bell. Sound Solutions alleges that although Cladit was paid for the panels by Dixon, with Mr. Bell’s knowledge and consent, Cladit improperly used the funds for other purposes contrary to the provisions of the Construction Act. Sound Solutions is not pursuing summary judgment against the defendant Kimberly Anne Bell.

[17] Cladit’s position is that this is not an appropriate matter for summary judgment given the numerous factual disputes between the parties that require a full trial to resolve. It also takes the position that there are credibility issues that cannot be resolved without viva voce evidence. Its position is that Sound Solution’s claim and Cladit’s counterclaim must proceed to trial at the same time to avoid inconsistent findings.

[18] Cladit has also taken the alternative position that summary judgment be granted in connection with its counterclaim. It has not, however, filed a cross-motion seeking any relief. Even if it had filed a cross-motion, I would not have granted summary judgment on its counterclaim as it has filed no evidence regarding the damages claimed.

Background

a) Ordering the Panels

[19] The architect prepared drawings for the project, which included specifications for exterior glass fibre reinforced cement composite wall panels to be used on the exterior. According to the specifications, the panels should be fibreC panels, a product manufactured by Rieder.

[20] On August 5, 2014, Mr. Bell emailed Rakesh Rana, a representative of Sound Solutions, requesting quotes for the purchase of Rieder fibreC panels. Mr. Rana emailed Mr. Bell on August 6, 2014, providing a quote.

[21] On February 3, 2015, Mr. Bell emailed Mr. Rogers to inform him that Cladit had been awarded the contract. He requested a sample of two types of panels, identified as Anthracite Ferro Light and Matt (Anthracite is a colour and Ferro Light and Matt are different surface types).

[22] On February 9, 2015, Mr. Rogers couriered these samples to Mr. Bell together with a copy of Rieder’s fibreC Technical Manual. At his cross-examination on his affidavit conducted on May 15, 2017, Mr. Bell acknowledged receiving the manual, and acknowledged he did not give a copy to the architect.

[23] In June 2015, at Cladit’s request, Mr. Rogers couriered to Mr. Bell further samples of other panels.

[24] On August 12, 2015, Mr. Bell emailed Mr. Rogers and informed him that the architect had chosen to order the Anthracite panels.

[25] There is conflicting evidence regarding what, if any, representations were made regarding the colour of the panels. Mr. Bell’s evidence was that between August 2014 and August 2015 he had several discussions with Mr. Rogers regarding the architect’s insistence that the panels be of a distinct and singular colour, while also consistent in according to quality and colour specifications. Mr. Bell’s evidence was that Mr. Rogers assured him that once a colour/product was approved there would be no deviation, as Rieder fibreC was superior to other products on the market. Mr. Bell’s evidence was that Mr. Rogers was at all times aware that the project required the panels to be as per the samples in quality and colour and that Mr. Rogers guaranteed this.

[26] Numerous emails exchanged between Mr. Bell and Mr. Rogers were filed as evidence. The only reference in those emails to the architect’s insistence that the panels had to be according to specifications was in an email from Mr. Bell to Mr. Rogers dated May 28, 2015, wherein Mr. Bell stated: “They are adamant that we follow the specifications and provide them the MA Matt smooth.”

[27] Mr. Rogers denies that he ever made any representations to Mr. Bell about the quality or colour consistency of the panels. Specifically, Mr. Rogers denies that he ever assured Mr. Bell that there would be no colour variations from one panel to another. There are no emails filed as evidence from Mr. Rogers to Mr. Bell making these representations.

[28] Mr. Rogers relies on the Technical Manual which, at pages 17 and 21 states as follows:

Because concrete is a natural product, each glass fibre reinforced concrete panel is regarded as a single piece. Differences in colour, structure and texture are characteristic. Efflorescences or small, visible pores are not defects. The light resistance varies depending on the colour. Differences in the surface appearance, which do not affect the fitness for purposes of the panels, are permitted.

Colour differences

Glassfibre reinforced concrete is a natural material. The characteristics of the raw material such as the colour of cement can lead to variations in colour within a panel, between individual panels and between different production batches. To avoid any discrepancies, we recommend ordering the total amount instead of part orders, and ordering spare panels with the first delivery.

Due to technical reasons printed colours may differ from the original shade.

[29] While Mr. Bell acknowledges receiving a copy of the manual, he denies that Mr. Rogers ever directed his attention to any portion of it.

[30] On August 16, 2015, Mr. Rogers emailed Mr. Bell an Order Acknowledgment confirming Cladit’s purchase of 38 sheets of Ferro Light panels and 92 sheets of Matt panels. The purchase price was $132,738.82, inclusive of HST.

[31] The dimensions of one full sheet of panel were 1200 x 3600 mm.

[32] On August 17, 2015, Mr. Bell emailed to Mr. Rogers a Revised Order Acknowledgement changing the quantities being ordered. Pursuant to that Revised Order Acknowledgment, Cladit purchased 34 sheets of Ferro Light panels and 98 sheets of Matt panels for a total price of $134,962.54.

[33] According to the Order Acknowledgement, the payment terms were a 20% deposit with the balance to be paid “COD”, meaning cash on delivery.

[34] On August 24, 2015, Sound Solutions sent an invoice to Cladit for the 20% deposit in the sum of $25,093.91. According to that invoice, the payment was due on September 1, 2015.

[35] At some point after delivery of the first invoice, Cladit requested that Sound Solutions cut a number of the panels to specifications of 600 x 1800 mm. The request was that 12 sheets of Ferro-Light be cut into 48 smaller panels and 64 of the Matt panels be cut into 256 smaller panels. Essentially, a number of the larger panels were to be cut into four smaller panels. With these cutting instructions, the quantity and size of the panels that Cladit purchased from Sound Solutions was as follows:

Description	Full Size Panels 1200 x 3600	Smaller Size Panels 600 x 1800
Ferro-Light	22	48 (from 12 sheets)
Matt	34	256 (from 64 sheets)
TOTAL	56	304

[36] Based on these cutting instructions, a 2nd Revised Order Acknowledgment dated September 29, 2015, was prepared for the new contract price of $143,599.46. The payment terms again stated 20% deposit with the balance to be cash on delivery. According to the 2nd Revised Order Acknowledgement, when the panels arrived at Sound Solution’s warehouse, Cladit had three days before storage fees would accrue.

[37] According to Mr. Rogers, Cladit did not pay the initial deposit. In his affidavit, Mr. Rogers deposed that between September 9, 2015, and December 18, 2015, Mr. Bell gave a number of reasons as to why the invoice was not paid. Such reasons included that he was waiting for the deposit cheque from the customer. When cross-examined on his affidavit, Mr. Bell admitted that Mr. Rogers asked for payment of the deposit on numerous occasion prior to December 31, 2015, and that he gave a number of excuses regarding why Cladit could not pay the deposit. Despite this nonpayment, Sound Solutions ordered the panels from Rieder.

[38] Sound Solutions sent a second invoice to Cladit on December 21, 2015, for the sum of $118,505.56, which was the balance owing, less the deposit. At that time, the $25,093.91 deposit had not yet been paid by Cladit.

[39] The panels arrived from Rieder to the Sound Solutions storage facility in Mississauga in January 2016. At that time, the full amount of $143,599.46 was still outstanding.

[40] On January 5, 2016, Mr. Rogers emailed Mr. Bell informing him that Cladit had not yet paid the deposit that was due on September 1, 2015, and that if Sound Solutions did not receive the payment by January 11, 2016, he would contact Dixon. Mr. Bell responded by email that same day saying he had made calls to determine the status of the payment and that “with any luck they will be issuing the full payment this week which I will bring to you.” While copies of these emails were not attached to Mr. Roger’s affidavit, Mr. Bell did not deny the exchange in his affidavit.

[41] There is conflicting evidence regarding the payment terms of the invoice. Mr. Bell’s evidence was that at all times Sound Solutions was aware that Cladit and Dixon had a flow-through agreement and that Sound Solutions agreed that it would be paid as monies were released to Cladit by Dixon. According to Mr. Bell, Sound Solutions also agreed to accept the 20% down payment for the panels upon the materials being delivered to the site, and that the remainder would be paid upon the architect certifying the payment once the product was on-site and available for inspection.

[42] In support of this position, Cladit relied on an email from Mr. Bell to Mr. Rogers dated January 14, 2016, in which Mr. Bell informed Mr. Rogers that Dixon would be issuing a cheque the following day or Monday but that they could not get the architect to certify the entire payment as the material was not on site. In that same email, Mr. Bell asked if Cladit could take partial delivery and pay $90,000 plus HST. Mr. Rogers responded by email that same day saying that Sound Solutions would agree to the proposal. He also asked Mr. Bell to obtain a letter from Dixon confirming that it would send a cheque for the balance owing of $41,899.47 by no later than February 1, 2016.

[43] The $90,000 payment was not made and the panels were not delivered to Cladit.

[44] On February 9, 2016, Mr. Bell emailed Mr. Rogers asking if Sound Solutions could make an exception and ship the panels to the project site. Mr. Bell also attached an email from Dixon to Cladit which stated that the client had already paid 50% of the cost without having the material on site. Dixon also pointed out that it was behind schedule with the installation of the fibreC and was exposed to a series of costs.

[45] On February 12, 2016, before the panels were delivered, Cladit paid the deposit of $25,093.91 leaving an outstanding balance of $118,505.56.

[46] With respect to the balance owing, on February 17, 2016, Mr. Bell emailed Mr. Rogers stating that he gave his “personal assurance that I will make payment.” A copy of that email was not attached to Mr. Roger’s affidavit. Mr. Bell did not deny that he made this assurance in his affidavit.

[47] On February 18, 2016, Mr. Ali Farahzadi from Dixon emailed Mr. Rogers stating that “Dixon assures the payment for the fibreC material in the amount of $104,872.17 plus HST will be made to cover the order for the Peel Paramedic Project to Sound Solutions Architectural Products. We will include this cost in the February draw and make payment to Cladit Siding Solutions Inc. once the funds are received from the Region of Peel. Please proceed with releasing material to site to ensure Cladit Siding Solutions can continue with its installation.”

[48] On February 23, 2016, the panels were delivered to Cladit. It was Mr. Roger’s evidence that Sound Solutions agreed to deliver the panels to Cladit, although the invoice had not been paid in full, as Mr. Bell had personally guaranteed the payment and Dixon had also assured payment. According to Mr. Bell, however, Mr. Rogers agreed that the release of the remaining payment of $118,505.56 would be subject to inspection and approval of the panels by the architect. There were no emails exchanged between the parties that confirm this agreement. In the numerous emails filed, Mr. Bell never indicated that the final payment would only be made once the architect had inspected the panels.

[49] To date, Sound Solutions has not received payment of the remaining balance owing. I do not have to resolve any conflicting evidence regarding the parties’ respective understanding of when payment was to be made to Sound Solutions. The key issue is that Sound Solutions delivered the product to Cladit and Cladit has not yet paid the balance owing. That is not in dispute.

b) Deficiencies with the Panels

[50] In an email dated March 21, 2016, Mr. Bell informed Mr. Rogers that 15 panels appeared to be darker than the two that were approved and ordered. He attached a photograph. Mr. Bell indicated in that email that he knew that there could be variations within shades but this discrepancy was outside the normal range. He asked if someone from Sound Solutions could attend on-site.

[51] The colour discrepancy was referenced in on-site Meeting Minutes dated March 24 and 28, 2016. The Meeting Minutes were attached to Mr. Bell’s affidavit.

[52] Mr. Bell sent Mr. Rogers a second email on March 28, 2016, informing him that “Peel is turning this into a big deal that we need to have sorted out sooner than later [sic].” Mr. Rogers emailed to say he would attempt to attend on-site that day. He did not attend on-site that day.

[53] In an email dated April 1, 2016, Mr. Bell informed Mr. Rogers that he had “the guys replace the darker panels on-site to accommodate the architect and the Region.“ He indicated that he had two skids of dark panels that did not match anything. Mr. Roger’s evidence was that he responded and informed Mr. Bell that he would be away but if he needed someone to stop by earlier, he would arrange it. Mr. Bell said he would keep in touch.

[54] On April 14, 2016, Mr. Bell emailed Mr. Rogers and stated that no one from Sound Solutions had attended on-site. He informed Mr. Rogers that Cladit had to move ahead and cut some full sheet panels on-site into smaller panels to replace the darker panels. He also indicated that the architect pointed out that there were a few other dark panels he wanted replaced. Mr. Bell informed Mr. Rogers that Cladit had incurred additional time cutting and replacing panels. He informed Mr. Rogers that “I am not saying you will not be paid, but this has delayed them paying me.” He then told Mr. Rogers he would check with accounts payable to see if he could extend half of what was owing. He also asked for time to make sure the architect was satisfied.

[55] Mr. Rogers replied that day by email asking Mr. Bell to tell the architect that fibreC is natural concrete and as result there would always be natural variations. He also attached Rieder’s Technical Data sheet for the panels.

[56] Mr. Rogers’ evidence is that he attended on-site on April 22, 2016 when almost all of the panels had been installed and he only saw one Matt panel that was darker than the other Matt panels. Mr. Roger’s evidence was that he understood the colour variation had been resolved to the architect’s satisfaction after Mr. Bell had moved 15 Matt panels to another location on the building where the difference in colour was not as noticeable. Mr. Roger’s evidence was that he understood that Cladit had incurred some costs to deal with the colour issue, but he did not think it was a serious problem or that the costs were high.

[57] Mr. Rogers’ evidence is that he took a picture of the darker panel and sent it to Rieder, which subsequently told him that there was no problem with the panels.

[58] A letter dated May 11, 2016 from Rieder to Sound Solutions states:

“FibreC is a natural product and the characteristics of the raw materials such as the colour of the cement can lead to variations in the colour on the panel. If the panels are assembled and exposed to weather conditions the panels respectively the facade will even out [sic]. Very slight differences in the colour can remain — especially because “Anthracite” is a product at which no additional ferric oxide colour is admixed. We had pointed out this topic in our characteristics.”

[59] Upon receipt, Mr. Rogers emailed this letter to Mr. Bell.

[60] On May 30, 2016, Mr. Rogers emailed Mr. Bell asking him if all of the panels had been installed. Mr. Bell responded informing him that he had sent the letter from Rieder to the architect and he would follow up with him on whether the fibreC was acceptable.

[61] There is no evidence of any other contact between the parties until July 20, 2016, when Mr. Rogers emailed Mr. Bell asking how we was making out on payment. Mr. Bell responded that day by saying he was still waiting but that Sound Solutions would get paid. Mr. Rogers emailed again asking “when?”

[62] On that same day, Mr. Tom Richardson from Sound Solutions also sent emails to Mr. Bell. He told Mr. Bell that Sound Solutions needed a letter of direction to Dixon to pay Sound Solutions directly. Mr. Bell responded that day saying he had been trying to get funds for the project. He asked if there was a possibility of payment by way of installments. Mr. Rogers then responded asking about the details of the payment installments that Mr. Bell proposed. Mr. Bell responded, saying he was working out his expected receivables, and told Mr. Rogers that he was owed a large amount of money and everybody was delaying for no reason and he would know closer to Friday.

[63] In response, Mr. Rogers emailed Mr. Bell that day saying that the payment needed to be secured and if not, Sound Solutions needed a draft to Dixon to pay the outstanding invoice.

[64] Mr. Bell responded to Mr. Rogers by email that day informing him that he had incurred “large cost to cut the material on site after paying for the material to be cut at your shop due to the colour differences not being accepted by the Architect delaying payment approval.” He told Mr. Rogers that he was trying to work with him to come up with a payment plan.

[65] It appears that no such agreement was reached and on August 16, 2016, this action was commenced.

[66] Based on the emails from Mr. Bell, at the time this action was commenced, Cladit acknowledged that it owed money to Sound Solutions but claimed it had incurred costs to cut the panels due to colour deficiencies. It had not provided Sound Solutions with any particulars of those costs. It had also not informed Sound Solutions that there were any deficiencies with respect to the size of the panels.

[67] In his affidavit sworn April 19, 2017, Mr. Bell deposed that in addition to the inconsistencies with the colour, the panels that were to be cut to 600 x 1800 mm were cut to 605 x 1810 mm. There was no mention of the size of the panels being an issue in any of the email exchanges filed as evidence for this motion. It was not referenced in the on-site Minute Meetings.

[68] In his affidavit, Mr. Bell did not depose that he informed Mr. Rogers about the size of the panels before the litigation was commenced. Mr. Rogers denies that Mr. Bell ever expressed an issue with respect to the size of the panels until after the litigation was commenced.

[69] When cross-examined on his affidavit, Mr. Bell said he raised the issue about the panels being cut to the wrong size with Mr. Rogers when he attended for an on-site visit on April 22, 2016. He confirmed that he did not send any emails as his main concern was the colour.

c) Cost to Remedy the Deficiencies

[70] According to Mr. Bell, when Cladit became aware of the deficiencies, 728 began on-site cutting of the panels to mitigate any damages associated with any further delays.

[71] In his affidavit, Mr. Bell attached two invoices from 728 dated April 23, 2016, (invoice 9) and May 7, 2016, (invoice 10) which he deposed detailed the additional costs to replace the deficient panels. Those invoices total $21,445.05. The handwritten notation on the invoices say “Peel Paramedic”. There are no specifics with respect to what work 728 did to replace any panels. In the “Hours” column of invoice 9 it states “10 extra” and in the “Rate” column it states “90”. In the “Amount” column it states “900”.

[72] Mr. Bell attached two other invoices from 728 to his affidavit dated March 26, 2016, (invoice 7) and April 9, 2016, (invoice 8) which total $16,572.19. Those invoices also contain the descriptor “Peel Paramedic”. On invoice 7, the term “fibreC Panels” is also written with an amount of “8000”. Invoice 8 includes “extra 16” in the “Hours” column and “90” in the “Rate” column and “1440” in the “Amount” column.

[73] Mr. Bell deposed in his affidavit that those invoices include the labour costs incurred to rectify the deficiencies at a total cost of $36,268.05, which is part of the set-off claimed. Other than the words “extra” in invoice 8 and 9, there are no details of what, if any, work 728 did in connection with cutting and replacing the panels.

[74] In his affidavit responding to this summary judgment motion, Mr. Bell provided no other particulars of 728’s work and the costs incurred other than attaching these invoices. Cladit did not file an affidavit from 728 with any details or specifics of the additional work it performed.

[75] On re-examination at the cross-examination of Mr. Bell on his affidavit, his evidence was that he was present when the remediation work was done and he made handwritten notes on the invoices from 728 contemporaneously while the work was being done. He deposed that based on his notes, $5,680 from invoice 8 was for cutting the panels. He also deposed that $8,900 on invoice 9 and $9,000 on invoice 10 was in connection with remediation work for a total of $23,580. This differs from what he deposed in his initial affidavit. Furthermore, these notes were not filed as evidence by Mr. Bell.

[76] Mr. Rogers attached a document to his affidavit that his lawyer received from counsel for Cladit after this action was commenced. That document purported to provide particulars and specifics of the costs incurred by Cladit to rectify the deficiencies in size and colour of the panels. Counsel for Cladit objected to that document being relied upon on the basis that it was a document provided to counsel for Sound Solutions as part of their settlement discussions and therefore ought not to be disclosed to the court. He relied on Sable Offshore Energy Inc. v. Ameron International Corp, 2013 SCC 37, [2013] 2 S.C.R. 623 in support of that position. At para. 2, the court held that the purpose of settlement privilege is to promote settlement and that the privilege “wraps a protective veil around the efforts parties make to settle their disputes by ensuring that communications made in the course of these negotiations are inadmissible.” As a result, given Cladit’s objections to it use, I will not rely on this document or refer to it in these reasons.

[77] Mr. Bilbija, an officer and director of 728 swore an affidavit dated May 31, 2017. He was contacted by Sound Solutions to secure this affidavit. His evidence was that 728 was retained by Cladit to install the three types of siding at the project for a total contract price of $90,000 plus HST. The contract price was comprised of five separate items of work, one of which was the installation of the Fibre C panels at a price of $54,000 plus HST. Cutting the panels was not included in 728’s contract. A copy of the document was attached to his affidavit.

[78] Mr. Bilbija deposed that 728 removed some panels due to a colour issue as directed by Mr. Bell. Although he could not recall the exact numbers, he estimated that 15 to 20 panels were removed. He deposed that the panels he removed were replaced with panels that he cut from larger sized panels. The time to remove and replace the panels and the cutting was an extra to the contract, as was cutting of smaller sized panels to fit around the perimeter and around windows and doors.

[79] Mr. Bilbija deposed that 728 rendered 10 invoices to Cladit for the installation of the three types of siding. Each of the invoices were attached to his affidavit. Each of the invoices has the same handwritten description “Paramedic Centre Brampton” or “Peel Paramedic”. Invoice 7 includes the term “Fiber C Panels”. Only Invoice 8 and 9 include the term “extra” in the “hours” column. Invoice 10 includes a listing of five amounts in the “rate” column that are the same as in the contract document. Beside each is a percentage which Mr. Bilbija explained when cross-examined related to the percentage each item of work was completed as at May 6, 2016. The amount for the fibre C panels at $54,000 is noted as being 100% complete.

[80] The total of the 10 invoices is $87,213.62. According to Mr. Bilbija, he did not finish the work.

[81] Mr. Bilbija deposed that the “extra” referred to in the invoices total $2,340, which was the amount 728 charged Cladit to cut, remove and replace 15 to 20 panels. This amount was based on the time it took to replace the panels at an hourly rate of $45.00.

[82] When Mr. Bilbija was cross-examined on his affidavit, his evidence was that he had not reviewed his affidavit before he signed it. He deposed that a lady brought it to him and he signed it. He also indicated that he had spoken to a lawyer before the affidavit was brought to him. On re-examination, he deposed that he had read the affidavit before being cross-examined and there was nothing in it that was inaccurate.

[83] On cross-examination his evidence was that he had to cut some of the panels as they were the wrong size. On re-examination, his evidence was that the cutting he did was to cut the panels into four. He gave no evidence regarding the actual size of the panels.

[84] With respect to the colour issue, his evidence on cross-examination was that the architect said it had to be fixed and so the panels had to be changed. He said he put in the invoice “I think, 10 or 16 hours” and “I don’t know how many I charged for that.” His evidence was that he could not say how much more was charged.

[85] Beginning at question 42, he was asked and answered as follows:

Q Would it be accurate to say that roughly because of, let’s say the deficient panels, wrong size and wrong colour, that, you know, there was an extra, let’s say 36,000 roughly that was charged to Greg? A Maybe but I’m not sure Q Right. Well, because there’s no notes on your invoices so you wouldn’t be able to tell? A Yeah

d) Sound Solutions Contacts Peel

[86] Mr. Bell’s evidence was that Sound Solutions’ lawyer contacted the legal department at Peel regarding the alleged failure of Cladit to pay. Mr. Spiegel, counsel for Sound Solutions, filed an affidavit denying that he contacted Peel. On August 4, 2016, he sent correspondence to Dixon requesting information pursuant to s. 39 of the Construction Act. In that correspondence, Mr. Spiegel stated that he suspected that Cladit had breached its trust fund obligation and filed false statutory declarations as to payment of its subcontractors and suppliers and that Sound Solutions would be commencing an action immediately and would join Dixon in the action. Mr. Spiegel denied that he had any telephone conversations with anyone at Dixon and did not make “various specious allegations of impropriety, unlawful behaviour and the like” or any “false and defamatory allegations” about Cladit as claimed by Cladit.

[87] Mr. Bell’s evidence was that these actions caused Peel to withhold all payments on the project including those to Dixon. This does not appear to be accurate. An email from Dixon to counsel for Sound Solutions dated December 15, 2016, states that the total contract with Cladit was for $450,000 plus HST. Of that amount, $291,300 plus HST was for the supply and installation of the panels. According to the Notice of Lien dated October 17, 2016, filed by Cladit, the amount owing to it as of that date was $135,004.48. Before it filed a Notice of Lien, Dixon had paid Cladit $384,032.15 between July 2015 and May 2016. According to a Release dated November 30, 2016, Cladit settled the lien matter for $102,287.65.

[88] Cladit signed Statutory Declarations on January 25, 2016, March 24, 2016, and April 25, 2016, which it provided to Dixon in connection with payments made to it by Dixon. According to the Declarations, all accounts for labour, products and services had been paid in full except for amounts withheld by reason of legitimate dispute which have been identified to the party or parties from whom payment has been withheld.

[89] Sound Solutions’ position is that these Declarations were false as Cladit had not paid it the money owing to it for the panels and the dispute with Sound Solutions arose after March 21, 2016. Cladit’s position is that Sound Solutions was aware of the dispute and that Cladit was entitled to withhold payment due to the deficiencies.

Review of the Law

[90] The court must determine whether this is an appropriate case for summary judgment and, if so, whether or not the plaintiff is entitled to judgment for the debt owing.

[91] The test for summary judgment is set out in Rule 20.04(2) in the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (“the Rules”). Summary judgment is to be granted where the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence. Rule 20.04(2.1) and (2.2) provide additional fact finding powers available to the court. Specifically, Rule 20.04(2.1) permits the court to weigh evidence, evaluate the credibility of a deponent, and draw any reasonable inferences from the evidence in order to consider whether there is a genuine issue requiring a trial.

[92] In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 66, the Supreme Court of Canada held that, on a motion for summary judgment, the court should first determine if there is a genuine issue requiring trial based only on the evidence in the motion record without using any of the enhanced fact finding powers available under Rule 20.04 (2.1) and (2.2). The court should review the record and grant summary judgment if there is sufficient evidence to fairly and justly adjudicate the dispute. The court should also consider if summary judgment would be a timely, affordable, and proportionate procedure. The Supreme Court specifically found that summary judgment rules are to be interpreted broadly; the focus must be on providing access to justice in a timely manner. At para. 50, Karakatsanis, J. wrote:

When a summary judgment motion allows the judge to find the necessary facts and resolve the dispute, proceeding to trial would generally not be proportionate, timely or cost effective. Similarly, a process that does not give a judge confidence in her conclusions can never be the proportionate way to resolve a dispute. It bears reiterating that the standard for fairness is not whether the procedure is as exhaustive as a trial, but whether it gives the judge confidence that she can find the necessary facts and apply the relevant legal principles so as to resolve the dispute.

[93] In Sweda v. Egg Farmers of Ontario, 2014 ONSC 1200, [2014] OJ No 851, affirmed 2014 ONCA 878, [2014] OJ No 5815, Corbett J. reviewed the process by which the court considers the appropriateness of summary judgment. At para. 33 he found:

…the court on a motion for summary judgment should undertake the following analysis:

1. The court will assume that the parties have placed before it, in some form, all of the evidence that will be available for trial;

2. On the basis of this record, the court decides whether it can make the necessary findings of fact, apply the law to the facts, and thereby achieve a fair and just adjudication of the case on the merits;

3. If the court cannot grant judgment on the motion, the court should:

a. Decide those issues that can be decided in accordance with the principles described in 2), above;

b. Identify the additional steps that will be required to complete the record to enable the court to decide any remaining issues;

c. In the absence of compelling reasons to the contrary, the court should seize itself of the further steps required to bring the matter to a conclusion. [Footnotes omitted.]

[94] The moving party has the burden to demonstrate that there is no genuine issue for trial. If that is established, the burden shifts to the responding party to prove that its claim has a real chance of success. The responding party must “lead trump or risk losing.” (1061590 Ontario Limited v. Ontario Jockey Club (1995), 21 O.R. (3d) 547 (C.A.), at pp. 18-19.)

[95] In Sweda, Corbett J. noted at paras. 27-28 that on a motion for summary judgment, the court is entitled to assume that the record contains all of the evidence the parties would present at trial. If there is evidence that one of the parties alleges is necessary, the burden rests on that party to show that it has taken reasonable steps to obtain the evidence it needs on the motion for summary judgment and that the missing evidence would be material to the disposition of this motion.

[96] Since this matter was argued, the Court of Appeal released its decision in Butera v. Chown, Cairns LLP, 2017 ONCA 783. In that case, the Court of Appeal overturned an award for partial summary judgment. One of the bases for that was that partial summary judgment would create, rather than solve a number of problems. On a motion for summary judgment, the court should take into account a number of factors in determining if the relief should be granted. These factors include delay, expense, limited judicial resources, and inconsistent findings. The court must consider the litigation as a whole and whether partial summary judgment would serve the objectives of proportionality, efficiency, and cost effectiveness. (See Butera at paras. 30-34, 38.)

[97] Cladit is claiming an equitable set-off for the deficiencies and damages it alleges it has sustained. The costs include the amounts incurred to rectify the deficiencies. It is also claiming a significant amount for interference with contractual relations, loss of reputation, and punitive damages.

[98] The relevant principles governing equitable set-off are set out in Holt v. Telford, [1987] 2 S.C.R. 193, at p. 212:

1. The party relying on a set-off must show some equitable ground for being protected against his adversary’s demands;

2. The equitable ground must go to the very root of the plaintiff’s claim before a set-off will be allowed;

3. A cross-claim must be so clearly connected with the demand of the plaintiff that it would be manifestly unjust to allow the plaintiff to enforce payment without taking into consideration the cross-claim;

4. The plaintiff’s claim and the cross-claim need not arise out of the same contract; [and]

5. Unliquidated claims are on the same foot as liquidated claims. [Citations omitted.]

Issues

[99] The issues on this motion therefore are:

1. Is there a genuine issue requiring a trial of the claim against the defendants for an unpaid debt subject to any claims for set-off advanced by the defendants; and,
2. Are those claims intertwined with the remaining claims involving declaration of breach of trust obligations, punitive damages, fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity, breach of contract, intentional interference in contractual relationships, or loss of reputation such that there is a risk of duplicative or inconsistent findings. In considering the litigation as a whole, would partial summary judgment serve the goals of proportionality, efficiency, and cost effectiveness.

Analysis

a) Summary Judgment

[100] Based on the principles as set out Hryniak, the evidence required to fairly and justly adjudicate this matter are not in dispute. The following facts are not in dispute:

a. Cladit entered into a contract with Sound Solutions to supply panels manufactured by Rieder; b. Cladit paid the deposit for the panels, but has not paid the balance of $118,505.56 plus $1,130.00 for storage fees; c. The architect had issues with colour variations in the panels and Cladit removed and replaced some of the panels; d. The work was performed and some amount paid to 728 to remove and replace panels; e. 728 had to cut some of the panels on-site; f. Cladit has received payment from Dixon. It filed a Notice of Lien for the last payment of $135,004.48 and settled the lien matter for $102,287.65.

[101] There is no dispute that Sound Solutions had a contract with Cladit to provide it with panels, which it did. Cladit paid the deposit, but has breached the contract by failing to pay Sound Solutions the balance owing. Cladit, however, takes the position that it is entitled to an equitable set-off in connection with the deficiencies with the panels and for the damages it alleges to have sustained when Sound Solutions contacted Dixon and/or Peel and demanded payment and made allegations of breach of contract.

[102] A trial is not needed to determine that Sound Solutions is owed money for the panels it supplied to Cladit. The only issue in dispute are the storage fees of $1,130. Although not disputed in his affidavit, at Mr. Bell’s cross-examination, his evidence was that there was an oral agreement that the storage fees would be waived. Other than that issue, there are no credibility issues to resolve. Subject to the dispute regarding the storage fees, the facts, as set out above, are not in dispute. What is in dispute, however, is Cladit’s claim for an equitable set-off.

b) Equitable Set-off

i) The Counterclaim

[103] In relying on the principles set out in Holt, set-off would be available to Cladit for its claims regarding deficiencies with respect to the colour and size of the panels. With respect to the counterclaim, however, the amounts being claimed by Cladit do not relate to deficiencies with the product supplied by Sound Solutions, but with respect to allegedly improper conduct after the panels were installed.

[104] In both Tubacex & Cotubes Canada Inc. v. Scan Tube & Steel Services Limited, [2009] O.J. No. 1303 (Ont. S.C.) and Amhil Enterprises Ltd v. Select Inc., [2001] O.J. No. 4517 (Ont. S.C.), affirmed [2002] O.J. No. 1232 (C.A.)](https://www.canlii.org/en/on/onca/doc/2002/2002canlii28001/2002canlii28001.html), this court found that in connection with summary judgment motions, equitable set-off was not available for counterclaims filed by the defendants. In both cases, the court held that the defendant had not attempted to quantify the counterclaim in any respect or filed any evidence to support the damages claimed. (See: Tubacex at para. 16; Amhil Enterprises (Ont. S.C.) at paras. 7-10.)

[105] Cladit is claiming substantial damages flowing from one letter that Sound Solutions filed as an exhibit. The letter, dated August 4, 2016, is from Mr. Spiegel and is addressed to Dixon. Cladit has not filed any evidence on this motion with respect to the damages it is claiming for intentional interference with contractual relations, loss of reputation, and punitive damages. As in Amhil, I am not prepared to conclude that the counterclaim is a sham but it appears to be completely disproportionate to the amount in dispute in the main action. Furthermore, the only document that has been filed as evidence in support of the claim is the letter from Mr. Spiegel.

[106] In paragraph 29 of his affidavit, Mr. Bell deposes that he was also told by Mr. Farahzadi from Dixon that Mr. Spiegel made specious allegations of impropriety and unlawful behaviour regarding Cladit to Dixon. In paragraph 30, Mr. Bell deposes that Cladit has been eliminated from consideration on projects with Dixon as a result of the knowingly false and egregious actions of Sound Solutions.

[107] These are serious allegations but nothing more than bald assertions by Mr. Bell. There are no particulars of exactly what Mr. Spiegel said to Mr. Farahzadi. Cladit did not file an affidavit from Mr. Farahzadi providing any such details. In addition, there are no particulars or details of the projects from which Cladit claims Dixon has eliminated it from consideration.

[108] Lastly, unlike the claim for deficiencies with the panels, I do not find that any connection exists between the claims. I find that it would be unjust for Sound Solutions’ motion for summary judgment to be defeated by a claim for a set-off for which no specific or cogent evidence has been presented in support of the damages claimed. If Cladit believes it has a valid counterclaim, it can proceed to trial.

ii) The Size Issue

[109] As I have found that Cladit has a claim for an equitable set-off in relation to the alleged deficiencies with the panels, the next issue is whether its claim for set-off raises a genuine issue for trial. As Sound Solutions has demonstrated that there is no genuine issue for trial regarding its claim for damages for breach of contract, the burden then shifts to Cladit to prove that its claim for equitable set-off has a real chance of success. As held at pp. 18-19 of Ontario Jockey Club, the responding party must “lead trump or risk losing.” The court is entitled to assume that the record contains all the evidence that Cladit would present at trial in support of its claim for equitable set-off regarding the deficiencies.

[110] In Total Electrical Systems Inc. v. College Boreal d’Arts Appliques & Technologies, 2011 ONSC 4586, 107 O.R. (3d) 27, the plaintiff brought a motion for summary judgment against a general contractor for electrical work performed. The defendant claimed a set-off and took the position that there were genuine issues which required a trial with respect to the set-off. At para. 50, Hennessy J. held:

A defendant cannot rely on a baldly asserted claim to defeat a motion for summary judgement. The parties must lead evidence that the court can weigh and from which it can draw inferences. Tribury has given no reason why it could not or did not put forward more detailed and relevant evidence. Where a defendant responds to a summary judgement motion with a set-off claim, it bears the onus to put its best foot forward with respect to that claim, not solely on the issue of liability, but on the issue of damages as well. Otherwise, it would be possible to defeat an otherwise successfully pleaded motion for summary judgement even where the amount of the set-off is a significantly lesser amount.

[111] With respect to the size issue, Cladit has not presented any evidence that the panels were cut to the wrong size as it alleges. In his 35 paragraph affidavit, Mr. Bell makes one reference to the panels being cut to the wrong size in paragraph 12. In that paragraph, he deposes that the panels were cut to 605 x 1810 rather than 600 x 1800 as ordered. Although Mr. Bell emailed Mr. Rogers about the deficiency with the colour, there are no emails regarding concerns with the size of the panels. Cladit did not provide any evidence, such as photographs or measurements, demonstrating that the panels were 605 x 1810 and not 600 x 1800 as ordered.

[112] The best evidence regarding the deficiencies with the panels would have been from Mr. Bilbija, who had an agreement with Cladit to install the siding, including the panels, and then performed panel remediation work at Cladit’s request and direction. In an unusual twist, it was Sound Solutions and not Cladit who arranged to meet Mr. Bilbija and have him swear an affidavit for these proceedings. Counsel for Cladit then cross-examined Mr. Bilbija.

[113] Rule 20.02(1) of the Rules of Civil Procedure states that the court may, if appropriate, draw an adverse inference form the failure of a party to provide the evidence of any person having personal knowledge of contested facts. Given the paucity of Cladit’s evidence regarding its claim for a set-off, I do not have to make any adverse inference. Furthermore, the party with the best knowledge of the work done, Mr. Bilbija, has filed an affidavit. If I was required to do so, however, I would have drawn an adverse inference against Cladit for failing to provide evidence from 728.

[114] Mr. Bilbija’s evidence was that he had to cut the panels as they were the wrong size. However, his evidence was “wrong size” meant he had to cut more panels into four. He did not give any evidence about the actual size of the panels and whether they were 605 x 1810 or 600 x 1800. The inference that can be drawn is that he needed more of the smaller-sized panels than Cladit had ordered from Sound Solutions.

[115] There is no dispute that Sound Solutions provided Cladit with the number of panels that Cladit ordered. There is no dispute regarding the size of the larger panels at 1200 x 3600. Cladit then requested that some of those larger panels be cut into smaller panels. By cutting into quarters, the panels would be 600 x 1800. It seems illogical that the larger panels, being cut into quarters, would then measure 605 x 1810.

[116] Cladit has the onus of presenting the evidence that the panels were not the right size and that it incurred costs to remediate that deficiency for which it would be entitled to claim a set-off. In its response to this summary judgment motion, it has a duty to put its best foot forward. It has failed to do so other than making a bald allegation that the panels were the wrong size. If it incurred costs to cut the larger panels into four smaller panels, that is not an additional cost it can claim from Sound Solutions as that is not a deficiency with the panels.

iii) The Colour Issue

[117] There is a dispute as to whether or not the colour variation with the panels was a deficiency and whether Mr. Rogers made any representations to Mr. Bell regarding the colour issue. There is no conflicting evidence that the architects were concerned and requested that the panels be changed. There is also no dispute that 728 changed some panels. Accordingly, for the purpose of these reasons, I accept that the panels had colour variations that required remediation and that Cladit incurred costs to do so.

[118] The next issue is the cost of the remediation work for the colour issue. Based on the evidence presented by Cladit, I am not satisfied that it has put it best foot forward and provided the evidence to support the amount it claims it incurred for those costs.

[119] Paragraphs 17 and 18 of Mr. Bell’s affidavit addresses the damages issue. According to Mr. Bell’s affidavit, the attached invoices from Mr. Bilbija reflect the labour costs to rectify the deficiencies, which total $36,269.05. I have reviewed the content of those invoices above. The invoices are vague and provide no details or specificity as to what work was actually performed by 728. Furthermore, at the re-examination during his cross-examination on his affidavit, Mr. Bell’s evidence changed and he deposed that he had made notes on those invoices contemporaneously when the work was done and that by his recording, the cost incurred to remediate the deficient panels was $23,580.

[120] I am concerned with the close to $13,000 discrepancy in Mr. Bell’s evidence regarding the cost incurred to remedy the deficiency. Furthermore, any cost that Cladit incurred for 728 to cut panels into the smaller-sized panels is not a cost that it can recover as part of its claim for a set-off for the reasons I have set out above. Mr. Bell has not provided any details as to what portion of the work done by 728 related to replacing the panels that had a colour deficiency. In his email to Mr. Rogers dated March 21, 2016, he told him that there were 15 panels that appeared to be darker. The on-site Meeting Minutes of March 24 and 28, 2016, do not state how many panels had to be replaced.

[121] Again, the best evidence regarding the work could have been obtained by Cladit from 728, who did the work. As noted above, however, it was Sound Solutions who arranged for Mr. Bilbija to file an affidavit. Alternatively, an affidavit from the architect could have been filed describing his/her concern and how many panels were required to be replaced.

[122] Mr. Bilbija’s evidence was that 15 to 20 panels had to be removed as a result of a colour issue. That is consistent with what Mr. Bell told Mr. Rogers in his March 21, 2016, email. Mr. Bilbija deposed that the work he did to replace the panels was an extra to the contract and was noted in the invoices as $2,340.

[123] Based on the invoices and Mr. Bilbija’s evidence, I find that Cladit incurred a cost of $2,340 to replace the panels that the architect identified as having a colour variation and that it is entitled to a set-off in that amount.

iv) Lien Claim

[124] Cladit argues it is entitled to an equitable set-off of $14,000 as damages in connection with the settlement it reached with Dixon for the Notice of Lien it filed against Dixon for $135,004.48. At his cross-examination on his affidavit, Mr. Bell deposed that when Cladit settled the lien claim, it agreed to pay Dixon’s legal fees of $14,385.36 in order to mitigate the damages caused to its reputation by Sound Solutions.

[125] Relying on the Holt principles, I do not find that any connection exists between the claims. This claim is related to the claims raised by Cladit in its counterclaim and is not connected to the purchase of the panels, the alleged deficiencies, or costs to remedy the deficiencies. The amount it is seeking as an equitable set-off for legal fees it paid to Dixon relates to its claim that Sound Solutions’ conduct caused interference with contractual relationships and damage to its reputation.

c) Breach of Trust Claim

[126] Sound Solutions relies on s. 8 and 13 of the Construction Lien Act which provide as follows:

8(1) All amounts,

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

(b) received by a contractor or subcontractor,

on account of the contract or subcontract price of an improvement constitute a trust fund for the benefit of the subcontractors and other person who have supplied services or materials to the improvement who are owed amounts by the contractor or subcontractor

13(1) In addition to the persons who are otherwise liable in an action for breach of trust under this Part,

(a) every director or officer of a corporation; and

(b) every person, including an employee or agent of the corporation, who has effective control of a corporation or its relevant activities,

who assents to, or acquiesces in, conduct that he or she knows or reasonably ought to know amounts to breach of trust by the corporation is liable for the breach of trust.

[127] Sound Solutions relies on the decision of Forest City Fire Protection Ltd. v. 1099516 Ontario Inc., 2015 ONSC 2346, which was a summary judgment motion brought by the plaintiff seeking money pursuant to a contract it had with the defendant for the installation of equipment on a construction project. The defendant acknowledged that the plaintiff was owed money and its excuse for non-payment was that it was unsuccessful in negotiating a payment schedule with the plaintiff. The court relied on Sunview Doors Ltd. v. Academy Doors & Windows Ltd., 2010 ONCA 198, 101 O.R. (3d) 285 at paras. 83-84, and found that the four elements of the trust were proven. Those elements are as follows:

a) The defendant was a contractor or subcontractor; b) The plaintiff supplied materials to the project on which the defendant was a contractor; c) The defendant received or was owed moneys on account of its contract price for those projects; and d) The defendant owed the plaintiff money for those materials.

[128] Once these elements are met, the onus then shifts to the defendant to demonstrate that payments made from the trust monies were made to proper beneficiaries. In Forest City, the court found that the defendant had failed to provide an accounting of what it did with the money it was paid and found that it had committed a breach of trust. The court also found the personal defendants knew or ought to have known that the corporate defendant committed a breach of trust and were therefore jointly and severally liable for that breach of trust (at para. 39).

[129] In Forest City, the court held at para. 37 that it could make an inference that the trust money the defendant received went somewhere else. Based on the material before me, I am not prepared to make that inference, nor am I prepared to find a breach of trust in the context of this motion for summary judgment. In this matter, Cladit’s position is that there were deficiencies with the panels for which it claimed a set-off. It has also claimed a set-off with respect to its counterclaim. This distinguishes the matter from Forest City, where the only issue raised by the defendant was a payment schedule.

[130] Sound Solutions also alleges that Cladit swore false Statutory Declarations on January 25, 2016, March 24, 2016, and April 25, 2016.

[131] Mr. Bell’s evidence at his cross-examination was that while Dixon had paid Cladit for other work it had performed at the project, it did not pay Cladit for the work for the fibreC panels which was the reason Cladit had to file a Notice of Lien in October 2016. Mr. Bell therefore denies that that Statutory Declarations were false as Cladit had not received payment for the fibreC panels. In addition, Cladit claims that Sound Solutions was aware that there were deficiencies with the panels even though Cladit had not yet provided it with any particulars of those costs until after the litigation was commenced.

[132] In an email from Dixon to counsel for Sound Solutions dated December 15, 2016, Dixon stated that in connection with the FibreC panels, the percentages and payments approved and paid for the supply and installation were as follows:

January 2016	71%
February 2016	81%
March 2016	94%
April 2016	99%

[133] Based on this email, Cladit had received 99% of the payment from Dixon for the installation of the panels by April 2016, before this litigation was commenced. This appears to conflict with Mr. Bell’s evidence. This raises a credibility issue which cannot be resolved on this summary judgment motion.

Partial Summary Judgment

[134] Based on the reasons set out herein, I grant Sound Solutions’ motion for summary judgment subject to Cladit’s claim for the deficiency with the colour variation with the panels. Cladit’s counterclaim, which I have found cannot be advanced by way of a set-off, can proceed to trial.

[135] As I have granted partial summary judgment, I am therefore mindful of the issues raised in Butera. In this matter, the claims raised in the main action are not intertwined with the remaining claims involving declaration of breach of trust obligations, punitive damages, fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity, intentional interference in contractual relationships, or loss of reputation such that there is a risk of duplicative or inconsistent findings. In considering the litigation as a whole, partial summary judgment dealing with the claim for breach of contract and equitable set-off in connection with the deficiencies serves the goals of proportionality, efficiency, and cost effectiveness.

[136] In King Loft Toronto v. Emmons, 2014 ONCA 215, at paras. 14 and 15 the court referred to the “culture shift” requiring judges to manage the summary judgment process in line with the principles of proportionality and sensible management of the court process. This is a matter where such principles are applicable. The plaintiff seeks to recover $119,635.55 for a product it supplied to the defendant, for which it was not fully paid. That is not in dispute. The defendant is seeking some amount as a set-off for costs incurred because of alleged deficiencies with the product, which are less than what is owed to Sound Solutions. Despite the relatively modest amounts claimed in the main action and for the costs to remedy the deficiencies, the counterclaim includes large claims for breach of trust, fraud, embezzlement, misappropriate of funds, intentional interference in contractual relations, loss of reputation, and punitive damages that total $560,000.

[137] I find that the issues raised in the counterclaim and the issues of breach of trust are readily bifurcated from issues in the main action and this summary judgment motion is a cost effective manner to deal with the claim of breach of contract and equitable set-off. This is the most just and least expensive means of determining the issues raised in the main action on its merits.

[138] The issues raised in the counterclaim deal with conduct of the parties after the panels had been installed and the deficiencies remedied. Any findings of fact on the issues of breach of contract and deficiencies are separate and distinct from any findings that need to be made in connection with Cladit’s counterclaim or the claim for breach of trust.

[139] Partial summary judgment will not delay the resolution of the main action. I do not find that Sound Solutions’ motion for summary judgment was part of any sort of delay tactic but was bona fide. There is no reason why adjudication of its claim for breach of contract, subject to equitable set-off, should be delayed to schedule a trial dealing with the separate issues raised by Cladit in its counterclaim.

[140] If the parties cannot reach an agreement on the remaining issues, the trial of those issues shall be scheduled before myself. I will make appropriate orders pursuant to Rule 20.05(2) of the Rules of Civil Procedure and request that counsel schedule a date before me prior to November 1, 2018, to make submissions regarding such directions and terms for an efficient trial that may be necessary pursuant to the Rule.

[141] If the parties cannot agree on costs, they are to file a Bill of Costs and written submissions of no more than two pages by September 21, 2018.

L. Shaw J.

Released: August 14, 2018