Slaven v. Azadian, 2020 ONSC 7571

Court File and Parties

COURT FILE NO.: CV-20-59501 DATE: 20201229

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Mike Slaven, c.o.b. as Benchwood Builders Lien Claimant

– and –

Mihran Azadian and Ann Azadian Owners

Brent Harasym, for the Lien Claimant

Joseph Gottli, for the Owners

HEARD: November 26, 2020 at St. Catharines

THE HONOURABLE JUSTICE J. R. HENDERSON

REASONS FOR DECISION

INTRODUCTION

1The Owners, Mihran Azadian and Ann Azadian (“the Azadians”), are the registered owners of a residential property known as 44 Harmony Drive, Niagara-on-the-Lake, Ontario (“the property”). The Lien Claimant, Mike Slaven (“Slaven”), is a general contractor who carries on business as Benchwood Builders (“Benchwood”).

2The Azadians entered into a written contract with Benchwood, signed on December 15, 2018, whereby Benchwood agreed to renovate the property for a stipulated price of $319,763, plus HST, plus agreed extras, payable in four installments (“the Renovation Contract”).

3The Renovation Contract provided for a completion date of April 1, 2019. Benchwood worked on the property during the winter, spring, and summer of 2019, but Benchwood never completed the renovation work. As of early August 2019, the Azadians had paid to Benchwood a total of $533,302, inclusive of HST.

4On October 11, 2019, Benchwood registered a claim for lien against the property pursuant to the Construction Act, R.S.O. 1990, c.C.30 (“the Act”) in the amount of $201,356. In the claim for lien Benchwood alleged that the last day of work was August 15, 2019.

5The Azadians bring this motion for a declaration that the lien has expired and for an order that the registration of the claim for lien be vacated pursuant to s.45(1) of the Act. The Azadians submit that the parties agreed to terminate the Renovation Contract and enter into a new contract in June or July 2019, and therefore any lien for work done pursuant to the Renovation Contract expired long before the registration of the claim for lien. Further, the Azadians submit that the last day worked by Benchwood was August 6, 2019, and therefore the lien expired prior to the registration of the claim for lien in any event.

6Slaven submits that the parties did not terminate the Renovation Contract, and that the last day worked by Benchwood was August 15, 2019. Accordingly, Slaven submits that the lien was preserved by registration before it expired.

7In the alternative, the Azadians request a declaration pursuant to s.47 of the Act that the lien is frivolous, vexatious, or an abuse of process, and for an order under s.44(2) that the registration of the claim for lien be vacated upon payment into court of an amount that this court determines to be reasonable. This request is based on the Azadians’ allegation that the amount of the lien is excessive and not supported by the documentation.

THE LAW

8A person who supplies services or materials to an improvement for an owner has a lien upon the interest of the owner in the premises for the price of those services or materials pursuant to s.14 of the Act. A lien will expire unless it is preserved under s.34 of the Act. Section 34(1)(a) provides that a lien may be preserved at any time before it expires by registration of a claim for lien on the title of the property.

9There are strict time limits for the expiry and preservation of liens. In the present case, there has been no certification or declaration of substantial performance, and therefore pursuant to s.31(2)(b) the lien expires “at the conclusion of the 60-day period next following the occurrence of the earlier of, ... (ii) the date the contract is abandoned or terminated.”

10Pursuant to s.45(1), where a lien that attaches to the premises is not preserved within the time limits set out in s.31 of the Act, the court shall declare that the lien has expired and order that the registration of the claim for lien be vacated.

11Section 47(1)(a) provides that a court may, on motion, order the discharge of a lien “on the basis that the claim for lien is frivolous, vexatious, or an abuse of process.”

12Section 44(2) of the Act provides, “Upon the motion of any person, the court may make an order vacating the registration of a claim for lien, and any certificate of action in respect of that lien, upon the payment into court or the posting of security of an amount that the court determines to be reasonable in the circumstances to satisfy the lien.”

13In the present motion, I must consider certain factual disputes between the parties. Therefore, although it is not framed as such, in my view, this is a motion for partial summary judgment. Thus, rule 20 of the Rules of Civil Procedure and the principles set out in Hryniak v. Mauldin, 2014 SCC 7, apply.

14At para. 66 of Hryniak, the Supreme Court of Canada set out a two-part test for the consideration of a summary judgment motion. The motions judge must first determine if there is a genuine issue for trial based on the evidentiary record. If so, the motions judge should then determine if the trial could be avoided by using the judge’s fact-finding powers to resolve the issue. At para. 49 of Hryniak, the Court explained that no genuine issue requiring a trial will exist only “when the judge is able to reach a fair and just determination on the merits” at the summary judgment motion.

THE FACTUAL BACKGROUND

The Renovation Contract

15The property is a one-storey bungalow that was purchased by the Azadians with a closing date of December 6, 2018. At all material times it was the intention of the Azadians to extensively renovate the property before moving into the property.

16Prior to purchasing the property, the Azadians had discussions with Slaven about the proposed renovations. As a result of these discussions, the Azadians and Benchwood signed a document called “Estimate and Contract” (“the Estimate”) on October 14, 2018. The Estimate set out the scope and price of the proposed renovation work, and it was incorporated into the Renovation Contract as Schedule A. The Azadians and Benchwood signed the Renovation Contract on December 15, 2018.

17The Renovation Contract was a printed standard form agreement that was drafted by Benchwood. Relevant portions of the Renovation Contract are as follows:

1. THE CONTRACT DOCUMENTS (the “Agreement”) CONSIST OF THE FOLLOWING

a) This Renovation Contract

b) Drawings attached hereto as Schedule “B”

c) Specifications on the agreement outlining all work to be done which was signed by the contractor and homeowners on October 24th (sic), 2018 (which take precedence over the drawings) attached hereto as Schedule “A”.

d) Additional documents signed by both parties during the course of this contract. (Note that extras and deletions are effective only if documented in writing and initialled or signed by both parties).

2. DESCRIPTION OF WORK

The Renovation Contractor agrees to supply all the materials and perform all the work (the “Work”) as described in the Agreement and as set out below:

This Work includes only the following: SEE SCHEDULE “A”

3. TIMING

The Renovation Contractor shall commence the Work (the “Commencement Date”), on or before December 7th, 2018 and Substantial Performance of the Contract will be completed (the “Completion Date”) on or before April 1st, 2019.

4. TERMS OF PAYMENT

The “Contract Price” is a stipulated lump sum of AMOUNT ($319,763.00). Applicable taxes are not included in the Contract Price and shall be paid on each payment in addition to the Contract Price. Payments shall be due and payable as follows:

I. Upon signing the contract: $79,940.75 +HST

II. Upon first day of Work; $79.940.75 +HST

III. Upon commencement of drywall stage; $79,940.75 +HST

IV. Upon Completion Date, the balance of the Contract Price together with allowance made for any deletions or credits. $79,940.75 +HST

TOTAL CONTRACT PRICE $319,763.00 +HST

5. ALLOWANCES

The following allowances shall form part of the Agreement. Any amount unused from an allowance shall be credited in full to the noted allowance amount. Any amount which exceeds the noted allowance plus all additional labour, material, overhead and profit shall be due and payable. All allowances do not include applicable taxes.

All cabinetry $37,000.00

All counters $15,000.00

All flooring and wall tile $25,000.00

Windows and exterior doors $25,000.00

Two fire places $ 8,000.00

Four toilets, five vanity sinks, five faucets, five drain assemblies, two shower faucets, one bath tub and shower faucet, one standalone faucet, kitchen sink, deep laundry tub sink, utility sink and taps for pot filler tap $11,000.00

6. CHANGES IN WORK

No single change or cumulative change in work greater than $500.00 shall be made by either the Renovation Contractor or the Owner without a written “Additional Investment Request” (AIR) or other amending agreement in writing.

18There was only one written Additional Investment Request for a change to the work (hereinafter called a “change order”). That change order was dated December 15, 2018, and referenced extra work to be done to a great room and to the patio for a total price of $42,592 plus HST. That change order is not in dispute.

19Therefore, the total contract price as described in the Renovation Contract and the change order was $362,355 plus HST, or $409,461 inclusive of HST.

The Progress of the Work and Changes to the Contract

20I find that Benchwood commenced work on the property in December 2018 and worked through the winter of 2019. There is no dispute that there were some extras and changes to the Renovation Contract that were not documented by a change order. These are evidenced, in part, by emails between the Azadians and Charles Elwell (“Elwell”) who was a designer for the project, although the details are not completely clear.

21There is also no dispute that during the first few months of work the Azadians made their final selections for the property and that some of those selections exceeded the amounts of the allowances set out in the Renovation Contract. Slaven deposed that the Azadians’ selections exceeded the allowances by approximately $112,000, but the Azadians dispute this figure.

22Slaven also deposed that the extras, the changes to the scope of work, and the selections over the allowances, resulted in additional labour charges, but again the details are not clear. Neither party has been able to provide precise particulars, with supporting documentation, of the agreed changes to the contract, the selections that exceeded the allowances, or the additional labour charges.

The New Arrangement

23The parties agree that there were delays in the completion of the work. Slaven deposed that the delays were caused by the Azadians’ requests for changes to the contract. The Azadians submit that Benchwood did not work diligently on the job.

24By March 2019, the Azadians had paid the first three installments due under the Renovation Contract, and they had made additional payments of approximately $80,000 to Benchwood on account of extras and changes. I accept that the Azadians promptly paid all of the invoices rendered by Benchwood. By early June 2019, the Azadians had paid a total of $385,011, inclusive of HST.

25Ann Azadian (“Ann”) deposed that by early June 2019 the Azadians had sold their previous home and were anxious for the renovation work to be completed so they could occupy the property. However, Ann deposed that Benchwood appeared to be doing very little work. She stated that there were many days on which no work at all was being done on the property, and that the Azadians regularly made enquiries of Slaven as to the progress of the work.

26In response to the Azadians’ enquiries, on June 6, 2019, Slaven texted the Azadians to give them a move-in date of June 21, 2019. I accept that the Azadians were doubtful, but made arrangements to occupy the property on that date.

27On June 16, 2019, the Azadians met with Slaven and Gail Slaven (“Gail”). I note that Gail is Slaven’s wife and his partner in Benchwood. There is no dispute that Slaven told the Azadians on that day that Benchwood was having financial difficulties related to the Renovation Contract. I specifically find that Slaven told the Azadians that the cost overruns were causing financial problems.

28The parties agree that at the meeting, Slaven requested a further payment of $100,000 from the Azadians to finance the project. The Azadians did not agree to this request, but they offered to pay a further sum of $50,000 in order to alleviate Benchwood’s financial problems. This amount was accepted by Benchwood, and the Azadians paid the additional $50,000 a few days later.

29The parties do not agree on the legal effect of the June 16th meeting. The Azadians submit that the Renovation Contract was terminated, and the parties entered into a new oral contract. Benchwood submits that the Renovation Contract was not terminated, but that the parties had agreed to an additional $50,000 payment toward the cost overruns.

30In her affidavit, Ann deposed that Slaven stated at the June 16th meeting that Benchwood would not continue under the present contract. She deposed that Slaven told them that he would not return to the job under the present contract; that the contract was done. He wanted out of the Renovation Contract and he told the Azadians that they could finish the contract work for the cost of the remaining installment payment. Mihran Azadian (“Mihran”) swore an affidavit agreeing with Ann’s testimony.

31Ann and Mihran both deposed that, after June 16, 2019, they believed that Benchwood was working pursuant to a new contract. The new arrangements were that the Azadians would pay the subtrades directly and that they would pay the invoices for Benchwood’s work on a C.O.D. basis.

32Slaven deposed that he did not refuse to return to the job, and that he always intended to complete the Renovation Contract. He said that he asked for money to pay for the extras that the Azadians had requested. Both Gail and Slaven deposed that they believed that the Renovation Contract was not terminated.

33Benchwood returned to work on the property after June 16, 2019. The Azadians moved into the property on approximately July 8, 2019. On July 9, 2019, Slaven and Gail came to the property and met with the Azadians. Ann asked Slaven to sign a note that she had handwritten on the bottom of the last page of the Renovation Contract. Slaven signed this handwritten note and Gail witnessed his signature.

34The handwritten note reads as follows:

July 9 – 2019

Benchwood Builders hereby verify that the original payment terms of this contract have been vacated and that there are no monies due. The contract balance is $0.00.

35Ann and Mihran deposed that this note confirmed the terms of the discussion at the June 16th meeting, at which time they say a new contract was formed. Slaven acknowledged that he signed this note, but he deposed that there was nothing written on the page when he signed it. He said that Ann told him that it was a receipt for the $50,000 payment that had just been made.

The Claim for Lien and the Last Day of Work

36Benchwood continued to work on the property and provided two further invoices for its work. The first invoice was dated July 9, 2019, in the amount of $67,491, and the second invoice was dated August 1, 2019, in the amount of $21,539. The Azadians promptly paid both of these invoices.

37Also, after July 9, 2019, the Azadians paid $9,266 to Benchwood for an invoice from a subtrade, T-Danill Contracting, plus the Azadians paid $17,074 directly to four subtrades and another $22,197 to other subtrades to repair deficiencies.

38By early August 2019, I find that little or no work was being done on the property. Accordingly, the Azadians hired a lawyer to write to Benchwood. By letter dated September 4, 2019, from the Azadians’ lawyer, the Azadians confirmed that the Renovation Contract had been terminated on July 9, 2019. The Azadians also confirmed through this letter that all invoices that had been rendered by Benchwood had been paid in full.

39By responding letter from Benchwood’s lawyer, dated October 9, 2019, Benchwood disputed that the Renovation Contract had been terminated, and demanded a further payment of $201,356 for unpaid work. However, Benchwood does not deny that all of its rendered invoices had been paid.

40On October 11, 2019, Benchwood registered the aforementioned claim for lien in which Benchwood claimed that $201,356 was owing and that the last day of work was August 15, 2019.

41In the course of this litigation, some of Benchwood’s records were produced. The time sheets from Benchwood show that the last employee of Benchwood who worked on the job was Matt Lupia who attended the property for approximately eight hours on August 6, 2019. There are no records of any employee of Benchwood or any subtrade attending the property thereafter.

42In his affidavit sworn on September 25, 2020, Slaven deposed that he personally attended on the job site on August 16, 2019, although he did not provide any details about the work that he did on the property at that time. However, in his cross-examination on the claim for lien on December 4, 2019, Slaven deposed that on August 16th he fitted some trim on the bathtub to correct a deficiency, and took measurements for a toe kick, cabinets, and bookshelves. There is no documentation in support of this statement.

The Amount Owing

43The parties do not agree as to the amounts that were charged by Benchwood, the amounts that were paid by the Azadians, and the amounts that are owing.

44In summary, the Azadians state that they have paid a total sum of $533,302 to Benchwood, paid $17,074 directly to subtrades, and paid another $22,297 to subtrades for deficiencies, for a total out-of-pocket expense of $572,673.

45Benchwood states that the Azadians have paid to Benchwood the total amount of $560,550 but that another $250,417 remains owing. No invoices have been rendered for these additional amounts owing.

ANALYSIS

Did the Parties Terminate the Renovation Contract?

46The question of whether the parties terminated the Renovation Contract and entered into a new contract in June 2019 is a genuine issue. However, I find that this is an issue that I can resolve on this motion given the court’s fact-finding powers.

47In my view, the evidence supports a finding that the parties terminated the Renovation Contract and entered into a new oral contract on June 16, 2019, and that they confirmed the termination of the Renovation Contract in writing on July 9, 2019.

48The most significant factor in support of this finding is that the initiative for the termination of the Renovation Contract and the creation of a new contract came from Benchwood. Just prior to June 16, 2019, the Azadians appeared to be content with the terms of the Renovation Contract. The Azadians had worked with Benchwood’s designer, Elwell, in making their selections for the renovations; the Azadians had paid the three instalments that had come due pursuant to the Renovation Contract; and the Azadians had promptly paid Benchwood’s invoices for extras and changes. The Azadians primary focus as of early June was to complete the Renovation Contract according to its terms.

49However, by mid June 2019, as was acknowledged by Slaven, Benchwood was having financial difficulties because of the Renovation Contract. The Azadians had paid all of Benchwood’s invoices and they were not obliged to make any further payment at that time. The fact that Slaven requested an additional payment from the Azadians is clear evidence that Slaven was proposing a change to the existing contractual arrangement.

50I accept that the Azadians were reluctant to pay more money to Benchwood, but I find that they were motivated to do so because they wanted to get the renovations done. By agreeing to make a payment to Benchwood that they were not bound to make, the Azadians were accepting Benchwood’s offer to change the Renovation Contract.

51The terms of the new arrangement are evidenced by the manner in which the parties dealt with the renovation work after June 16, 2019. Instead of waiting for the fourth and final instalment payment as per the terms of the Renovation Contract, Benchwood delivered invoices to the Azadians on July 9, 2019, and on August 1, 2019, both of which were promptly paid by the Azadians. Further, the Azadians directly paid four subtrades and indirectly paid another subtrade through Benchwood. None of those payments were contemplated by the Renovation Contract.

52Therefore, I find that the net effect of the discussion of June 16th was that the parties agreed to terminate the Renovation Contract and enter into a new contract. I find that the parties agreed that in consideration of a $50,000 payment, Benchwood would invoice the Azadians for Benchwood’s services from time-to-time and that the Azadians would pay those invoices as they were rendered. Moreover, I accept the evidence that the parties agreed that the Azadians would pay the subtrades directly.

53The final piece of evidence in support of this finding is the handwritten note of July 9, 2019. I do not accept Slaven’s evidence that there was no writing on the page when he signed the note. His evidence is internally inconsistent as at one point he deposed that there was nothing on the page when he signed it, and on another occasion he deposed that he thought he was signing a receipt.

54Further, the handwritten note is set up with signing lines for each of Slaven and Gail, and their signatures encroach upon the signing lines. It is very unlikely, in my view, that the signing lines were not present and there were no words written on the page when Slaven and Gail signed the page.

55Still further, the original contract was drafted by Benchwood using a standard form. It is five typed pages long, with Schedules attached, and with handwriting inserted into the form. I do not believe that Slaven would draft the Renovation Contract in such a precise manner and then simply sign a blank page that might contain other terms about the agreement.

56Therefore, I find that the handwritten note was on the page when Slaven signed it and Gail witnessed his signature. Moreover, the note is short and Slaven could have read it completely in a few seconds. The words are very clear. Under those circumstances, I do not accept that Slaven believed that the note was a receipt. I find that Slaven read the note and understood its contents.

57Accordingly, I find that the July 9, 2019, handwritten note is written confirmation of the June 16th oral agreement to change the contractual relationship. The note confirms that the parties agreed to terminate the Renovation Contract, and it supports a finding that they had entered into a new contract. Thus, I find that the Renovation Contract was terminated on June 16, 2019.

58In this decision I will not make any finding as to whether any money was owing on the Renovation Contract as of July 9, 2019. Although the handwritten note refers to this issue, in my view, the very loose arrangements between the parties and the unclear details as to changes, cost overruns, and set-offs limit my ability to determine if any money is in fact owing. The accounting between the parties is a matter for trial.

Has the Lien Expired?

59Because the Renovation Contract was terminated on June 16, 2019, the time for preserving the lien for any work done pursuant to the Renovation Contract lapsed on August 15, 2019. Therefore, the lien for work done pursuant to the Renovation Contract expired. The part of the claim for lien that relates to the Renovation Contract should be discharged.

60Next, having found that Benchwood continued to work on the property under a new contract after June 16, 2019, I must consider whether the lien for any work done pursuant to the new contract has expired. To answer that question, I must determine when the new contract was abandoned or terminated. Again, I find that this is a factual issue that I can resolve on this motion.

61As discussed earlier, I find that Slaven’s evidence about the events of June 16, 2019, and July 9, 2019, are implausible. In my view, Slaven’s credibility issues extend to his testimony about the last day worked on the job.

62Slaven has no records of the dates he worked on this job or the work that he did on any particular date. There is apparently no Benchwood document that records Slaven’s last day on the job. Therefore, one must question how on October 11, 2019, when the claim for lien was registered, Slaven was able to state with confidence that the last day he worked on the job was August 15, 2019, exactly 57 days prior to the registration of the claim for lien. There is no good answer to that question.

63Also, again Slaven’s evidence is internally inconsistent. The claim for lien states that August 15, 2019 was the last day worked, but in his affidavit Slaven deposes that August 16, 2019, was the last day worked. There is no explanation for this inconsistency.

64Still further, in his affidavit Slaven provides no information as to the nature of the work that he did on the last day. One would expect some detail about the nature of the work given that Slaven’s last day of work is a significant issue in the dispute between the parties. The details, scant as they were, came out on Slaven’s cross-examination.

65In my view, on October 11, 2019, when the claim for lien was registered, Slaven knew that the lien may have expired. He did not know when he last worked on the job, and he simply picked a date that was within the lien period, so as to preserve the lien. For these reasons, I cannot accept Slaven’s evidence about the last day that he worked on the job.

66The only hard evidence as to the days worked on the job is contained in Benchwood’s time sheets. Based on the time sheets, I am prepared to accept that one of Benchwood’s employees worked on the job on August 6, 2019. There is no reliable evidence that Benchwood worked on the job thereafter. After August 6, 2019, the Azadians wanted Benchwood to finish the job, but Benchwood had stopped working. I find that by September 4, 2019, the date of the Azadians’ lawyer’s letter, Benchwood had not returned to the job.

67For these reasons, I find that the work that Benchwood was doing pursuant to the new contract was abandoned on August 7, 2019, the day after the last day on which a Benchwood employee worked on the job. Therefore, the time for preserving the lien for work done pursuant to the new contract lapsed on October 6, 2019. Thus, the lien for this new contract work expired prior to the registration of the claim for lien; that part of the claim for lien should also be discharged.

Is the Lien Frivolous, Vexatious, or an Abuse of Process?

68Given my decision set out above, there is no need for me to consider the alternative issue of whether the lien is frivolous, vexatious, or an abuse of process. There is also no need to determine a reasonable amount to be paid into court to vacate the lien. Moreover, it is obvious that the parties must engage in more disclosure and accounting before any court could determine what, if any, amount remains owing. Therefore, I decline to make any findings with respect to this issue.

CONCLUSION

69For all of these reasons, I find that the Renovation Contract was terminated on June 16, 2019, at which time the parties entered into a new contract. The new contract was abandoned on August 7, 2019. Therefore, the liens under both the Renovation Contract and the new contract expired prior to the registration of the claim for lien.

70Accordingly, it is ordered that the registration of the claim for lien, and any related certificate of action, be vacated.

71If there are any other issues, including costs, that cannot be resolved, I direct that the party seeking relief shall deliver written submissions to the trial co-ordinator at St. Catharines within 20 days of the release of this decision with responding submissions to be delivered within 10 days thereafter. If no submissions are received within this timeframe, the parties will be deemed to have settled all of the remaining issues as between themselves.

J. R. Henderson J.