1140676 Ontario Inc. v. 2650997 Ontario Inc. et al, 2020 ONSC 8176
COURT FILE NO.: CV-19-496-00
DATE: 2020-12-14
SUPERIOR COURT OF JUSTICE – ONTARIO
IN THE MATTER OF THE Construction Lien Act, R.S.O. 1990, c. C 30
RE: 1140676 Ontario Inc., O\A John Cress Contracting, Plaintiff (Moving party)
v.
2650997 Ontario Inc. and Derek Cress, Defendants (Responding parties)
HEARD: December 14, 2020
BEFORE: Fitzpatrick J.
COUNSEL: Anthony Potestio, for the Plaintiff
Nathan Wainwright, for the Defendants
Endorsement on Motions
[1] There are two motions before the Court.
[2] These motions were heard together. This endorsement will dispose of both motions.
[3] The first motion is by the defendant to discharge a $301,381.73 construction lien registered September 6, 2019 from its property (the “Discharge Motion”).
[4] The second motion is by the plaintiff to preserve approximately 400 cubic meters of harvested wood and 45,000 tons of blasted rock that is currently sitting on the defendant’s land (the “Preservation Motion”).
[5] Although the parties to this litigation are corporations, they are closely held private companies owned by two brothers, Derek and Keith. The Cress brothers are not speaking to each other at present as indicated by counsel. While this is perfectly acceptable, it adds a quality to this litigation that makes it somewhat different than a usual commercial dispute between parties who do not share common parents.
[6] The dispute about which I heard submissions has been going on since June of 2019. There are other issues in the background, like the defendant’s desire to sell the lands which are the subject of these motions. Both parties have engaged excellent counsel who have made thoughtful and important legal arguments that among other things attack the procedural approaches taken by the other party. While these arguments are all very interesting, in my view they do not assist the parties in getting to a resolution of what I now believe is a relatively straight forward problem.
[7] This dispute arises from an agreement by the defendant to allow the plaintiff to extract aggregate and wood from its lands (the “Agreement”). When the Agreement was first made, the representative of the plaintiff was John Cress. John is Derek and Keith’s Dad. Unfortunately, John died in May 2019. Shortly after John’s death, the facts occurred which were central to these parties now coming to court.
[8] The Agreement was not reduced to writing. This gives me yet another occasion in an endorsement to observe that where substantial sums of money and valuable property are involved, even in commercial dealings between family members, the services of solicitors in drafting appropriate written contracts can represent a long-term value proposition.
[9] Nevertheless, on these motions counsel agree that the essential terms of the Agreement are agreed between the parties. The fact that the parties are agreed on the essential terms came from the affidavit evidence of the parties before me on this motion.
[10] The defendant describes the material terms of the Agreement at paragraphs 6 and 7 of its factum on the Discharge Motion. The description is as follows:
The material terms of the contract were that the Plaintiff was granted access to the Property and permission to remove and sell aggregate and timber harvested from it. In return and upon the Plaintiff selling the resources, the Defendant was to get paid a percentage of the sale proceeds.
The parties agree about the terms of the contract save and except for the amount of money the Plaintiff is to pay the Defendant upon selling the resources. The Defendant swears the agreed upon price was $2.00 per ton of aggregate and $5.00 - $7.25 per meter of timber. The Plaintiff alleges the payment terms were never finalized.
[11] The plaintiff described the essential terms of the Agreement at paragraph 6 of its factum for the Preservation Motion as follows:
a) John Cress Contracting would provide the necessary labour, materials and equipment to construct a road on the Property for the purposes of gaining access to the various resources on the Property including timber and gravel;
b) John Cress Contracting would cut and de-limb timber located on the Property and thereafter skid and cut wood to a roadway and transport the wood to a mill for sale;
c) In order to develop the Property and access the resources on the Property, John Cress Contracting would develop quarry areas on the Property by grubbing, stripping the topsoil and expose the bedrock. Thereafter, John Cress Contracting would hire a licensed, outside drilling operator to drill and blast the exposed rock.
d) Payment terms of this Agreement were never finalized; however, it was agreed that Derek would be paid a flat rate per ton of crushed rock sold and a sum per cubic meter of wood sold.
[12] Based on these summaries of the evidence, I can make the following important findings of fact about the Agreement.
[13] First, this was an agreement about extracting aggregate and wood from the defendant’s land. It was not an agreement to improve the defendant’s lands. Any improvements to the defendant’s lands were entirely incidental to the Agreement. I find the improvements to land or buildings were not part of any consideration provided by the plaintiff with respect to the Agreement. While the plaintiff argued that the defendant benefitted by the construction of a road on to the lands and the stripping back of topsoil to access aggregate, I was persuaded by the arguments of the defendant to the contrary.
[14] Primarily the fact that the Agreement did not call for the defendant to pay the plaintiff anything, leads me to the conclusions that whatever construction was done of the defendant’s lands was wholly for the benefit of the plaintiff’s extraction operation. The only consideration flowing from what the plaintiff did pursuant to the Agreement was to pay the defendant a percentage of the sale proceeds of the material that was extracted.
[15] On the other side of the equation, the plaintiff has expended significant efforts to cut wood and blast rock. The plaintiff was prevented from removing same from the defendant’s land. Obtaining the wood and the rock was the essence of what the Agreement was about for both parties. The dispute arises because the parties cannot agree on what the respective share the parties will obtain from the sale of these things. It seems to me to be in their mutual interest to have the existing extracted wood and rock sold, the money divided and the parties to move on with their lives.
[16] The defendant cannot unilaterally prevent the extracted material from being removed and sold by preventing the plaintiff from finishing the process of extraction which necessarily involves moving the material to market. Also, the plaintiff should account for what has been removed and sold to date and consider making an interim payment to the defendant.
[17] Accordingly, I make the following dispositions.
[18] I am granting the defendant’s motion to discharge the lien.
[19] I am satisfied based on the material filed, and the agreement about what was the nature of the Agreement, I can make the following findings of fact. I find that lien was not preserved within the 60 day time period provided for in sections 31 and 34 of the Construction Act, R.S.O. 1990 c. C-30. I find the plaintiff did not provide lienable services to the defendant’s land from which a construction lien could properly arise. I make no findings with respect to the allegation of the defendant that filing the lien represented an abuse of process.
[20] I am granting the plaintiff’s motion for an interim order for the preservation of property. I find that the plaintiff has satisfied the four-fold test for such an order under Rule 45.01 as articulated by the Divisional Court in BMW Canada Inc. v. Autoport Limited, 2019 ONSC 4299 at paragraph 53 as follows:
a. the property sought to be preserved is the property in question in a proceeding or relevant to an issue in the proceeding;
b. there is a serious issue to be tried with regard to the property;
c. the interim preservation or custody of the property is necessary to enable a party to advance or defend its claim; and
d. the balance of convenience favours granting the relief sought by the applicant or moving party.
[21] I appreciate the defendant’s argument that the plaintiff has crafted its claim as a construction lien action. I do not agree that the manner in which the plaintiff has pleaded his case at this point in the litigation precludes this court from ordering certain property to be preserved at this point in the litigation. I say this because the essence of the contract in dispute has been agreed upon by the parties as previously noted. The only real problem now lies in what should be paid by the plaintiff to the defendant for what has been extracted and sold and what should be paid for the material that I have now ordered preserved. I expect these amounts will be subject of a counterclaim by the defendant.
[22] The Discharge Motion raises some important issues concerning the administration of the Construction Act. I will need some additional time to elaborate why I agree with the defendant’s submission that the lien should be discharged. In addition, I see it as appropriate to elaborate as to why I think a preservation order should issue at this point in the litigation.
[23] The defendant should realize that it will have some obligation to facilitate the plaintiff in moving the harvested wood and blasted rock off its property. I appreciate this may raise practical problems in the near term. To be clear, my view of the contract is that monies are only to flow from the plaintiff to the defendant. Any obligation to facilitate the operation of the preservation order will not see the defendant paying the plaintiff any monies. The preservation order is in no way to be seen as an opportunity for the defendant to extract any new resources from the defendant’s land. Also, the preservation order is not a licence for the plaintiff to disturb any work that has been done on the defendant’s lands to facilitate the material extracted to date.
[24] Consequently, I direct that the orders flowing from this endorsement be stayed until the release of more further reasons for this decision or until a further order from the court in the event of any need for emergency relief. Calculation of the time for any appeal will run from the date of the release of further reasons. I do not anticipate having these reasons prepared until perhaps the end of January 2021. The delay in the preparation of the reasons is due to the Christmas season, the pandemic and the fact our courthouse operations have been severely hampered given the fire that occurred on October 4, 2020. This has posed some unique problems in the day to day operation of the court at this time and has lengthened time for turning around decisions.
[25] Also, I envision the possibility that additional conferencing may be necessary to work out the practical details of the preservation order. I will need more detailed submissions from the parties if they cannot resolve matters themselves. I appreciate the tension that may be present between the principals of the parties. I will try and make myself available to assist the parties on short notice if need be.
[26] I wanted to let the parties know where their motions were going to land so that they might take the occasion of a brief delay in my providing them with further reasons for decision to continue a process of working out the details of how to either resolve the matter or better prepare same for trial.
[27] As I am familiar with the background of this matter, I will be seized with hearing any further motions and conferences concerning this case.
[28] I will hear submissions on costs for today’s attendance following release of further reasons.
“original signed by” The Hon. Mr. Justice F.B. Fitzpatrick
DATE: December 14, 2020
1140676 Ontario Inc. v. 2650997 Ontario Inc. et al, 2020 ONSC 8176
COURT FILE NO.: CV-19-496-00
DATE: 2020-12-14
SUPERIOR COURT OF JUSTICE - ONTARIO
IN THE MATTER OF THE Construction Lien Act, R.S.O. 1990, c. C 30
RE: 1140676 Ontario Inc., O\A John Cress Contracting, Plaintiff (Moving party)
v.
2650997 Ontario Inc. and Derek Cress, Defendants (Responding parties)
HEARD: December 14, 2020
BEFORE: Fitzpatrick J.
COUNSEL: Anthony Potestio, for the Plaintiff
Nathan Wainwright, for the Defendants
ENDORSEMENT ON MOTIONS
Fitzpatrick J.
DATE: December 14, 2020
/lvp