Court File and Parties
Court File No.: CV-18-600535 Date: 2021-02-08 Superior Court of Justice - Ontario
IN THE MATTER OF the Construction Act, RSO 1990, c C.30, as amended
Re: CANCORE PRODUCTION LTD., Plaintiff
- and - RUDOLF HAU, RUDOLF DESIGN INC., JEFFREY NAGASHIMA, RACHEL NAGASHIMA and SCOTIA MORTGAGE CORPORATION, Defendants
Before: Master Todd Robinson
Counsel: M. Wiffen, for the defendants, Jeffrey Nagashima and Rachel Nagashima (moving parties) J. Chow, for the plaintiff E. Cappe, for the defendant, Scotia Mortgage Corporation
Heard: December 3, 2020
Reasons for Decision
1Jeffrey Nagashima and Rachel Nagashima (together, the “Owners”) move pursuant to s. 44(2) of the Construction Act, RSO 1990, c C.30 for an order vacating the lien of Cancore Production Ltd. (“Cancore”) in the amount of $292,611.74 against the Owners’ property at 120 Glenview Avenue, Toronto upon the posting of $38,000 plus 25% thereon for costs. That figure represents the Owners’ calculation of basic statutory holdback required to be retained by the Construction Act. Cancore opposes any reduction in necessary security. The balance of relief originally sought by the Owners in their notice of motion was resolved between the parties prior to the initial return before me on November 4, 2020, other than costs.
2For the reasons that follow, I have determined that the Owners have not met their onus of convincingly demonstrating that their maximum liability to Cancore will be no more than basic statutory holdback, or even another amount less than Cancore’s lien. The Owners’ motion is accordingly dismissed.
Background
3In November 2016, Rudolf Design Inc. (“RDI”) was contracted to perform substantial renovations to the house on the subject premises, including work on each of the three floors and in the basement. Two contracts are in evidence: one signed November 12, 2016 for $340,000 and another dated November 8, 2016, but unsigned, asserted by the Owners to be for $460,000. The latter contract is explained by Rachel Nagashima in her affidavit as a “side agreement” made between RDI and Ms. Nagashima’s father, Tom Liang, to contribute additional money to the renovation. On this motion, the unsigned contract is argued by the Owners to be the operative one.
4RDI (or its principal, Rudolf Hau) subcontracted Cancore to perform what appears to be the majority of RDI’s scope of work. There was no written subcontract. Cancore’s position is that its total subcontract price, including all agreed extras, was $568,160 plus HST. There is no direct evidence from Cancore on the base subcontract price, although Cancore’s principal, William Ma, gave evidence during his cross-examination that it was a fixed price subcontract. Mr. Ma confirmed that Cancore no longer has records of the calculations for its initial quote to RDI, but his cross-examination also confirmed that the quote would have been close to the total contract price less extras. Subtracting the extras quantified in his affidavit evidence, the base subcontract price appears to have been either $422,600 plus HST (based on Mr. Ma’s first affidavit) or $383,050 plus HST (accounting for an additional “forgotten” extra outlined in Mr. Ma’s supplementary affidavit).
5In March 2018, RDI either abandoned the project or its contract was terminated, by which time the Owners assert that RDI had been paid a total of $380,000. Substantial incomplete and deficient work is alleged. Cancore asserts that it ceased work on April 4, 2018 due to non-payment. It is undisputed that the project was left incomplete, since even Cancore acknowledges through Mr. Ma’s affidavit that it only completed “about 85% of what it was hired to do”. The parties dispute the extent of actual completion.
6On May 17, 2018, Cancore registered a claim for lien against the property. The lien was thereafter perfected by Cancore issuing this action and registering a certificate of action against title on June 29, 2018. The statement of claim was served in September 2018, but statements of defence were not delivered by the Owners and Scotia Mortgage Corporation until June 2020. RDI and Rudolf Hau have been noted in default. The action has been set down for trial.
7The property is currently rented by the Owners, who now reside in California. Ms. Nagashima’s affidavit evidence is that the Owners intend is to sell the property, but lack the finances to pay full security for the lien into court and cannot sell the property with Cancore’s lien on title.
Relevant Law
8Pursuant to s. 87.3 of the Construction Act, the act as it read on June 29, 2018, namely the former Construction Lien Act (the “CLA”), continues to apply to the improvement to the subject premises and, thereby, to Cancore’s lien and this lien action. I accordingly refer to the CLA and its provisions in these reasons.
9Section 44(2) of the CLA provides as follows:
(2) 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.
10Determining a reasonable amount of security to vacate a lien is discretionary. The moving party bears the onus of establishing that security in an amount less than the claimed amount of the lien is reasonable in the circumstances. The court should only reduce the security required to vacate a lien if it is convincingly demonstrated that the maximum recovery by the lien claimant will be less than the amount of the lien: H.I.R.A Limited v. Middlesex Standard Condominium, 2018 ONSC 1526 para. 13. As acknowledged by the Owners’ counsel in oral submissions, this requirement is often equated in case law as being akin to a summary judgment motion. It places an onus on the moving party to demonstrate that there is no triable issue regarding the maximum recovery by a lien claimant.
11Two relevant holdback obligations exist for an owner in the CLA. First, there is an obligation to retain basic holdback equal to 10% of the price of the services or materials actually supplied under a contract, which is to be withheld until all liens have expired or have been satisfied, discharged or otherwise provided for under the CLA (s. 22(1)). Second, there is an additional obligation on a payer, upon receipt of a written notice of lien, to retain an amount sufficient to satisfy that lien before further payments on a contract or subcontract are made, which payments may not exceed 90% of the price of services or materials supplied, less the amount retained (s. 24). This is often referred to as “notice holdback”. Notwithstanding lack of privity of contract, an owner is personally liable to all subcontractor lien claimants having valid liens for the holdbacks that the owner was required to retain (s. 23(1)). Where, as here, the defaulting payer is a contractor, an owner’s statutory liability to subcontractor lien claimants does not exceed the extent of holdback the owner was required to retain (s. 23(2)).
12Also relevant to disposition of this motion is the statutory limitation on the quantum of a subcontractor’s lien. The value of a subcontractor’s lien is limited by the amount owing to the subcontractor, but is also limited to the least amount owed by a payer to the contractor whose contract was in whole or in part performed by the subcontractor’s lienable work (s. 17(1)). Outstanding debts, claims, or damages that a payer has against the contractor, whether or not related to the improvement, are properly taken into account in assessing the amount owing by the payer (s. 17(3)).
13The effect of these provisions is that, apart from entitlement to claim against basic holdback, the aggregate value of all subcontractor liens is restricted to the maximum potential amount that might be owed to the contractor that subcontracted with them. There is no legal basis to require an owner to post the amount of a subcontractor’s lien as security where that amount exceeds the contractual amount that might be found owing as between the owner and the contractor: LaFarge Canada Inc. v. B. Gottardo Construction Ltd., 2015 ONSC 6856 at paras. 13-14.
14Cancore points to Graham Mining Ltd. v. Rapid-Eau Technologies Inc., [2000] OJ No 3311 (SCJ) at paras. 15 and 17 to support its position that s. 44(2) of the CLA does not permit a lien to be vacated by only posting statutory holdback, and that it is incorrect to equate an owner’s lien liability with its holdback liability. However, in Graham Mining, Gauthier J. was only observing that it is an error to equate an owner’s liability with basic statutory holdback. She acknowledged the CLA scheme, as outlined above, and ultimately held that security equal to basic statutory holdback was not supportable in the absence of evidence on what was owing as between the owners and the general contractor. Such evidence is required to assess the extent of an owner’s notice holdback obligation.
15The foregoing are the principles I have applied in disposition of this motion.
Analysis
16The Owners’ evidence and argument focuses on their maximum holdback liability. They argue that, after accounting for payments and set-offs, no amounts are owing to RDI and thereby basic statutory holdback is their sole basis of liability to Cancore. In particular, the Owners calculate their maximum liability to Cancore as $38,000, representing 10% of the amount that the Owners say was paid to RDI. The Owners have tendered evidence solely from Rachel Nagashima. No evidence has been tendered from Jeffrey Nagashima, notwithstanding Ms. Nagashima’s cross-examination evidence that they both dealt with Rudolf Hau. Ms. Nagashima also confirmed during cross-examination that she was not aware of the “side agreement” between her father, Tom Liang, and RDI until shortly before the contract was terminated. No evidence has been tendered from Mr. Liang on his dealings with Rudolf Hau.
17Cancore argues that the Owners have not met their evidentiary onus to demonstrate the scope and price of the contract with RDI, amounts paid to RDI, or value of work performed. Cancore therefore submits that the evidence does not support any reduction in the security presumptively required by s. 44(1) of the CLA. Cancore has tendered affidavit evidence solely from its principal, William Ma.
Unjust enrichment
18I first briefly address Cancore’s evidence that its work “benefitted and enriched” the Owners. Cancore pleads in its statement of claim that the Owners have been unjustly enriched by Cancore’s supply of services and materials and are accordingly liable to Cancore. William Ma, the principal of Cancore swears in his affidavit that Cancore’s work “benefitted and enriched” the Owners. In response to my question regarding whether Cancore’s unjust enrichment claim has any bearing on this motion, Cancore’s counsel argued that it should be considered in exercising my discretion under s. 44(2). I disagree.
19Without addressing whether Cancore’s claim for unjust enrichment is properly joined in its lien action given s. 55(1) of the CLA, any remedy that may be available to Cancore against the Owners for unjust enrichment is separate from the lien remedy. Moreover, the Divisional Court has recently confirmed that unjust enrichment is not a claim available to a subcontractor against an owner: Tremblar Building Supplies Ltd. v. 1839563 Ontario Limited, 2020 ONSC 6302 (Div Ct) at para. 18. I am not convinced by Cancore’s submissions seeking to distinguish that case. Cancore’s unjust enrichment claim is not a relevant consideration in this motion.
Maximum liability to Cancore
20As noted above, the Owners have the evidentiary onus of satisfying the court that the reduced security sought is a reasonable amount of security to satisfy Cancore’s lien. Since the Owners’ position is that nothing is owing to RDI and their maximum liability is thereby limited to basic statutory holdback, the Owners have the onus of demonstrating the contractual scope of RDI’s work, the state of completion when RDI abandoned, and the state of accounts as between the Owners and RDI. In my view, the Owners have not met their onus.
Base contract price
21The Owners argue that RDI’s contract was for a fixed price of $460,000, including HST. The unsigned contract that Rachel Nagashima puts forward as being the applicable contract (prepared between RDI and her father, Tom Liang, as noted above) is unclear as to the actual total contract price. It states as follows on the first page:
TOTAL CONTRACT $440,000 HST $26,000 TOTAL $466,000
22The above suggests a base contract price of $440,000, plus $26,000 in HST. However, $26,000 is only is only 5.91% of $440,000. If intended to be HST, it is the HST amount on a $200,000 base contract price. In any event, the $466,000 figure is crossed out, with “$440,000” written above and “$460,000” written below. Although not addressed in her affidavit evidence, Ms. Nagashima confirmed during her cross-examination that the second contract was obtained from her father shortly before RDI’s termination. Neither her affidavit nor cross-examination evidence explains who wrote the “$460,000” figure beside “TOTAL”, which the Owners rely upon as the total contract price. There are no initials. Her father has not given any evidence on the contract price or the handwritten changes.
23In my view, given these uncertainties, the record does not support a finding that the base contract price was $460,000, including HST. For the purposes of this motion, in the absence of evidence explaining the contradictory handwritten notations of “$440,000” and “$460,000” written above and below the $466,000 total price, I proceed on the basis that RDI’s base contract price was as typed in the contract, namely $466,000, including HST.
24Only two of the four pages of the contract are in evidence. Cancore argues that the missing two pages may be relevant to the contract price and/or scope of work. I am not convinced. On the second page, there are two columns of typed figures with totals and handwritten notations. The greater of the totalled typed figures is $441,000, which is consistent with a base contract price of $440,000, as noted in typed print on the first page. Nothing in evidence suggests that the remaining two pages would be contrary to the scope and price identified on the first page.
Extras
25Cancore argues that extras performed for RDI under its subcontract were also extras to the prime contract. The sole evidence tendered by Cancore to support that position is a general statement by William Ma that he was informed by RDI’s principal that the Owners agreed “to pay for various types of extra work at this subject property, which were over and above the scope of the work that [the Owners and RDI] had originally agreed to”. Mr. Ma’s evidence is that Cancore performed that work. He separately provides a list of 22 items of extra work allegedly performed and the alleged cost of for each item. Mr. Ma’s supplementary affidavit adds another extra for waterproofing that he “had forgotten to include” in his first affidavit. There is no evidence on the extent of any of the extra work allegedly performed. For example, “gas work” and “electrical alteration” are listed as extras, but there is no evidence on what that work entailed, where it was performed at the premises, and why it was extra to Cancore’s base subcontract or RDI’s base contract.
26I agree with the Owners that Cancore has not put forward a sufficient evidentiary foundation to support its assertions that extras were agreed, or even that the extras were performed as stated by Mr. Ma. However, it is the Owners who bear the primary evidentiary onus on this motion, not Cancore. Assessing maximum holdback liability of the Owners to RDI’s subcontractor requires a determination on whether there were any extras to the prime contract. Discussions between the Owners, Tom Liang, and RDI regarding extras are pertinent to that determination. The Owners, not Cancore, are in the best position to tender evidence on what extras were discussed or agreed with RDI.
27The Owners argue that only one minor in-floor heating extra was agreed, for which no price was ever negotiated and for which the work was not completed. That extra is accordingly argued to have no bearing on this motion. The Owners also point to Mr. Ma’s acknowledgments during his cross-examination that he was not present for any discussions between the Owners and Mr. Hau regarding any extras and that he was unaware of any written agreement to perform extras.
28The problem with the Owners’ position is that the Owners have elected to tender no evidence on extras at all. Ms. Nagashima’s affidavit is silent on extras. Although a letter from the Owners’ counsel in evidence acknowledges an agreement with RDI for “installation of heated floors for two bathrooms and the basement” as an extra, Ms. Nagashima’s affidavit says nothing about that in-floor heating extra or other extra work. The only evidence from Ms. Nagashima on extras is from her cross-examination, where she confirmed that tile heating was an agreed extra that Ms. Nagashima instructed RDI to perform. However, Ms. Nagashima’s cross-examination also demonstrated a lack of personal knowledge, or at least any recollection, about what work was required to be performed and was actually performed. There is no evidence from Jeffrey Nagashima or Tom Liang. The absence of evidence from Tom Liang is particularly notable since it is acknowledged that Mr. Liang’s relied-upon “side agreement” and direct dealings with Rudolf Hau were unknown to the Owners until shortly before the end of their relationship with RDI.
29Cancore argues that the alleged extras were put to Rachel Nagashima during cross-examination, and her lack of recollection regarding them combined with the lack of any evidence from Jeffrey Nagashima on his discussions with RDI’s principal about extras supports an adverse inference for the purpose of this motion that the extras were agreed. I do not agree. Propositions put to Ms. Nagashima during her cross-examination are not evidence of work actually being performed by Cancore, or that such work was performed with knowledge or approval of the Owners. In my view, absent a cogent evidentiary foundation for the work being performed, Ms. Nagashima’s responses that she does not remember or recall if certain work was or was not performed do not support any proper adverse inference regarding that work.
30Nevertheless, Mr. Ma’s sworn evidence on this motion is that RDI’s principal told him the Owners agreed to extras and that Cancore performed the extras noted in his affidavits. The Owners tendered no reply evidence disputing the alleged extras or agreements with RDI’s principal to perform extras. During William Ma’s cross-examination, he confirmed that the extras listed in his affidavit were for extra work not initially part of Cancore’s quote to RDI. He further stated that he was told by RDI’s principal it was extra work requested by the Owners. Details of certain work performed by Cancore were also given during his cross-examination.
31Based on the record before me, I agree with the Owners that Cancore appears to have a number of evidentiary challenges in proving its claim. Mr. Ma confirmed during cross-examination that there was no written subcontract, that Cancore has no written records of any quotes, that no interim invoices were issued, and that Cancore has disposed of the records supporting the calculation of amounts used to generate its invoice. However, the Owners bear the primary evidentiary burden on this motion. William Ma’s affidavit evidence and evidence during cross-examination on extras was given under oath and affirmation, respectively. No convincing argument was made for why I should completely disregard such sworn/affirmed evidence.
32One extra that was addressed in some detail during the cross-examination is Cancore’s claim for upgrading to 200-amp service and relocating an electrical panel and wiring. It appears the work may not have been an extra under the prime contract, even if it is proven to be an extra under the subcontract. However, there is no direct evidence from the Owners on electrical service and what was contemplated by “S/I NEW 200AMP ELEC PANEL” in RDI’s contract. Mr. Ma’s cross-examination evidence on what it may have meant is unhelpful, since he was not involved in negotiating the contract and had no role in drafting it. In my view, the cross-examination evidence, unsubstantiated by any other evidence from the Owners on the scope of electrical service intended under RDI’s contract, is insufficient to support that there is no triable issue that Cancore’s work was an extra to both the subcontract and prime contract.
33Case law supports that, if the decision-maker is wavering, then factual issues should be left for determination at trial with the amount of security set at the maximum sum that may reasonably be the subject of a claim for lien: H.I.R.A Limited, supra at paras. 16 and 82. The evidentiary record before me regarding extras from both parties is less than ideal. While I agree with the Owners that some “extras” claimed by Cancore may be work within RDI’s base contract scope, the evidence before me does not convincingly demonstrate that the work claimed by Cancore as extras to its subcontract were not also extras to the prime contract with RDI. Similarly, I am not satisfied that the record supports a finding that there were no extras other than the in-floor heating work acknowledged by the Owners. I am particularly mindful that, as discussed, the Owners have elected to tender no direct evidence on extras, particularly when at least one extra was evidently discussed and agreed (albeit argued not to have been performed).
34In my view, for the purposes of this motion, there is enough evidence to raise a triable issue that the extras claimed by Cancore may have been performed. I also accept that, if proven, it appears arguable that such extra work, in whole or in part, may have been beyond the scope of work outlined in RDI’s contract, and could reasonably be found to constitute extras to the prime contract.
35The two pages of the prime contract in the record are silent on how extras were to be charged by RDI. I see no basis in the evidence to infer that the missing two pages contain information on extras, as Cancore argues. Cancore’s counsel conceded that there is no evidence supporting what, if any, markup may have been charged by RDI. It was not put to Ms. Nagashima during her cross-examination. No argument was made regarding how to value the extras under the prime contract. Cancore’s counsel acknowledged there is no evidence on what RDI’s markup would have been, but suggested the minimum charge to the Owners would be the costs claimed by Cancore. In my view, that is a fair way to approach the value for these disputed extras for the purposes of assessing reasonable security on this motion.
36William Ma’s initial affidavit quantifies Cancore’s extras in the amount of $145,560 plus HST. After cross-examinations, Cancore tendered a supplementary affidavit by Mr. Ma providing answers to certain undertakings from his cross-examination. That affidavit also sought to tender new evidence on a “forgotten” waterproofing extra purportedly agreed with RDI in the amount of $39,550, plus HST, for which $10,000 was paid. Mr. Ma asserts that this extra was included in Cancore’s final invoice, but that he had “forgotten” to include the extra in his first affidavit. This evidence was tendered in breach of Rule 39.02(2) of the Rules of Civil Procedure, RRO 1990, Reg 194. It is accounting evidence reasonably available to Cancore prior to cross-examination. I see no basis upon which to grant Cancore leave to tender this new evidence, so have not considered it in assessing extras for the purposes of this motion.
37I accordingly accept that there is a triable issue regarding the extent of approved extras under RDI’s contract, and whether all extras asserted by Cancore in William Ma’s first affidavit are extras under the prime contract. For the purposes of this motion, I value the total disputed extras in the amount of Cancore’s claimed extras, namely $145,560, plus HST, for a total of $164,482.80.
State of completion
38The record is unclear on the state of completion of RDI’s work. No progress invoicing, emails or other documentation provided by RDI on work progress are in evidence. Rachel Nagashima confirmed during her cross-examination that RDI provided no invoices to the Owners. Ms. Nagashima’s affidavit states that the Owners have assessed the value of completed work as “approximately $185,000” (although stating earlier in her affidavit that RDI “had completed less than $184,000 worth of work on the project”). Ms. Nagashima’s specific evidence is as follows:
Based on our review of the work complete (leaving aside issues of whether that work was completed negligently), including our review of costs that we were required to pay personally and the work done by subsequent contractors, we have determined that approximately $185,000 in work under the contract was actually completed by RDI.
39Although some work outlined in Ms. Nagashima’s affidavit is itemized as “not done by RDI” or only partially completed, there is no evidentiary basis to quantify the contractual value of that work, even if those statements by Ms. Nagashima are accepted. During cross-examination, Ms. Nagashima confirmed that the $185,000 figure was calculated by the Owners from their review of costs contained in a spreadsheet prepared by Ms. Nagashima. That spreadsheet was kept on a former work computer no longer available to the Owners. Ms. Nagashima apparently did not retain a copy.
40The only evidence tendered by the Owners to substantiate their position on incomplete and deficient work is a review report from HP Design Consultant Inc. The report purports to “identify as best possible the extent of work still to be completed and to identify general deficiencies in the work performed to date.” The report is evidently relied upon by the Owners for the truth of its contents. However, the author of the report, Hector Portelance, has not given any evidence on this motion. Tendered through Ms. Nagashima’s affidavit, the report is double hearsay, but that hearsay use has not been addressed. In any event, it is not clear from the report that each item listed was within RDI’s contractual scope of work nor is there any valuation of the costs of rectifying and completing the items. Nothing in the report or evidence indicates that Mr. Portelance had the contract available to him or reviewed or considered RDI’s contractual scope of work in the course of his inspection. For these reasons, in my view, the report does not assist the Owners on this motion.
41William Ma’s affidavit states that Cancore’s work, which represents a substantial portion of RDI’s total scope, was 85% complete. That percentage is as self-serving as Ms. Nagashima’s estimate of the value of RDI’s completed work. No evidence has been tendered to substantiate it. However, demonstrating that work was less than 85% complete is the Owners’ evidentiary onus.
42On the limited evidence before me, I am unable to fairly determine the state of completion and, accordingly, a value for services and materials actually supplied by RDI. Since Cancore was apparently responsible for most of RDI’s scope and William Ma’s evidence is that Cancore’s work was 85% complete, it is highly unlikely that, at a trial, the overall project will reasonably be demonstrated to be more than 85% complete. Accordingly, I am satisfied there is no genuine issue that the project was at most 85% complete. The Owners have not convincingly demonstrated that the actual state of completion will be demonstrated to be less than that.
Basic Holdback
43The Owners argue that maximum basic holdback for which they may potentially be liable is $38,000, representing 10% of the $380,000 they allege was paid to RDI. That calculation is inconsistent with s. 22(1) of the CLA, which requires holdback retention equal to 10% of “the price of the services or materials as they are actually supplied under the contract.” The proper calculation of basic holdback is 10% of the amount earned under a contract, not 10% of the amount paid.
44Since I am unable to ascertain the state of completion, it follows from the discussion above that, for the purposes of this motion, the maximum basic holdback for which the Owners may be found liable to have retained is based on 85% of the total contract price, including extras and HST. Based on the figures discussed above, that equates to basic holdback liability of $53,591.04.
45However, maximum basic holdback liability is the minimum potential total liability of an owner to subcontractors on account of their liens. Upon registration of Cancore’s lien, the Owners were also required to retain an amount sufficient to satisfy the lien from amounts owing to RDI. The calculation of amounts owing to RDI includes consideration of payments made to RDI as well as the Owners’ set-offs, both of which must accordingly still be considered in assessing the Owners’ maximum potential liability to Cancore on account of its lien.
Payments to RDI
46The Owners’ evidence is that they paid $380,000 directly to RDI. There is no evidence of any written notice of lien being provided prior to Cancore registering its lien on May 17, 2018. Ms. Nagashima’s evidence is that the $380,000 was paid to RDI prior to termination of the contract, which her evidence supports was in March 2018. I am accordingly satisfied that there is no issue on this motion that payments to RDI were made contrary to s. 24(2) of the CLA.
47With respect to amounts paid to RDI, prior to cross-examination, the extent of evidence tendered by the Owners was a statement in Ms. Nagashima’s affidavit that RDI had been paid a $300,000 by the Owners, and a further $80,000 by Ms. Nagashima’s father. No details of when payments were made and in what amounts was provided. No documents substantiating proof of payment were tendered. Ms. Nagashima’s affidavit is further silent on how she is aware of the amount of payments made by her father. On a motion of this nature, I would not have accepted such an unsubstantiated, self-serving statement by an owner on payments made to a contractor when seeking an order that has the effect of reducing a subcontractor’s lien.
48Fortunately for the Owners, during cross-examination, Ms. Nagashima was asked about payments and confirmed that the Owners do have records and evidence of at least some payments to RDI. Cancore requested an undertaking to produce copies of all records of payments. A partial answer was provided, as a result of which I am satisfied that payments of $35,000, $70,000, $22,000, $50,000, and $22,000 were made by cheques to RDI, which were cashed. For the purposes of this motion, I have not accepted the remaining evidence given in answer to the undertaking for the following reasons:
(a) Two cheques totalling $37,500 made payable to Tom Liang were provided, explained in the covering letter from the Owners’ lawyers as “payments made to Ms. Nagashima’s father which were then paid forward to RDI.” Ms. Nagashima provided no evidence in her affidavit or cross-examination that the Owners made payments to RDI through Mr. Liang. There is also no evidence from Mr. Liang confirming that he did, in fact, make payment of these amounts to RDI.
(b) A handwritten note dated “March 13” was also produced, purportedly signed by Rudolf Hau. It confirms receipt of cash payments of $29,000 and $19,000, as well as a $22,000 cheque. In the absence of any evidence confirming the circumstances of when this note was prepared, who was present when it was prepared and/or signed, and that the signature is that of RDI’s principal, I cannot accept it as proof of any payment.
49Accordingly, the evidence before me only convincingly demonstrates a total of $199,000 in payments to RDI, which are properly considered in assessing the maximum amount of Cancore’s lien pursuant to s. 17(1) of the CLA.
Claimed set-offs
50The Owners argue that they have incurred costs to rectify deficiencies and complete RDI’s scope of work. The set-offs quantified in Rachel Nagashima’s affidavit are as follows:
(a) $112,377.37 paid to a new general contractor to complete the project; (b) $28,318.58 paid to a decking contractor to supply and install a deck that was never started by RDI; (c) $7,500 paid to pave the driveway; (d) $2,100 paid for countertops and laundry cabinets; and (e) $87,976.38 paid to various suppliers for kitchen cabinets, stone tile, bathroom appliances, closets, and a kitchen countertop and backsplash.
51I am satisfied that, including the answers to undertakings given on cross-examination, the record supports that much of these amounts were paid by the Owners. What is lacking, though, is evidence supporting that the work performed by these various trades was performed to rectify deficiencies in RDI’s work or to complete outstanding work within RDI’s contractual scope. In particular, I am not satisfied the record supports a finding that there is no triable issue that work performed by these trades was the same scope as RDI’s contract work without betterment. Several examples exemplify the evidentiary gaps, as follows:
(a) A work proposal has been tendered by Ms. Nagashima from the replacement general contract, Decorative Details Inc., which itemizes various work to be performed at the premises for a total price of $112,377.37. There is no clear evidence, however, that all of this work was performed or that the full amount was paid. There is also no cogent evidence connecting the itemized work to specific items in RDI’s scope of work, whether that work was incomplete or deficient, or supporting that the same scope was performed without betterment. During cross-examination, Ms. Nagashima’s stated that Decorative Details Inc. did the same work as RDI and did not do more than what RDI was supposed to do. However, since Ms. Nagashima was demonstrated to have little recollection of what RDI was supposed to do, I have doubts regarding her certainty that Decorative Details Inc.’s scope of work did not exceed RDI’s scope.
(b) The Owners claim set-off for the full cost of flooring purchased from Stone Tile International Inc. for $30,125.59, but Ms. Nagashima acknowledged during cross-examination that the flooring purchased was more expensive than the cost provided in RDI’s contract. The invoice tendered indicates flooring at $9-$12 per sq. ft. whereas the contract provides for flooring at $5 per sq. ft.
(c) The quote/invoice for supply and installation of a deck from The Custom Deck Company confirms supply and installation of a deck of approximately 12’ x 25’ (i.e., 300 sq. ft.). RDI’s contract provides for supply and installation of a 200 sq. ft. deck.
(d) RDI’s contract does not appear to include driveway paving, although the Owners claim a set-off for the cost of that work.
(e) Ms. Nagashima’s affidavit does not state that RDI failed to supply any bathroom fixtures. There is also no evidence regarding the extent and nature of bathroom fixtures required under RDI’s contract as compared to the bathroom fixtures outlined in the Roman Bath Centre invoices tendered on this motion. The only evidence before me, which does it assist the Owners, is a confirmation from Ms. Nagashima during her cross-examination that the Owners gave no instructions to RDI on the bathroom fixtures.
(f) The sole evidence tendered regarding purchase of kitchen countertops and closet cabinetry is Ms. Nagashima’s statement that $11,197.01 was paid to ZNY Brothers Marble Corp. and $2,200 was paid to C2C Cabinetry Inc. The only documentary support tendered in Ms. Nagashima’s affidavit are two uncashed cheques for those amounts with no payee, said to have been subsequently filled out. There are no purchase orders, invoices, or other evidence supporting what kind of countertops and cabinetry were to be supplied, that they were supplied, and that they were the same countertops and cabinetry required by RDI’s contract. During cross-examination, Ms. Nagashima stated that C2C Cabinetry Inc. was RDI’s supplier and that she “just paid for the bill”. In answer to an undertaking the completed and cancelled cheque to C2C Carpentry Inc. was provided. However, the totality of this limited evidence is insufficient to meet the Owners’ evidentiary onus.
52While I do not doubt the veracity of Ms. Nagashima’s statements that RDI left incomplete and deficient work on the job and that costs were incurred to complete the project and rectify deficiencies, courts must make determinations based on proper evidence. If the Owners wish to summarily defeat a substantial portion of the $292,611.74 claim against them, doing so requires more than Ms. Nagashima’s bare statements on costs of rectification and completion supported by only reports and invoices that she did not author regarding inspections and work that she did not perform.
53The Owners have not met their evidentiary onus of convincingly demonstrating valid set-offs pursuant to s. 17(3) of the CLA. It follows that there is a triable issue regarding whether the claimed set-offs are properly considered in assessing the maximum value of Cancore’s lien pursuant to s. 17(1). For the purposes of this motion, I thereby do not accept the claimed set-offs as reducing maximum potential liability to Cancore for its lien.
Additional factors
54The Owners argue in their factum that the alleged oral extras are contrary to the requirements for “future performance agreements” and “direct agreements” in ss. 22 and 42 of the Consumer Protection Act, 2002, SO 2002, c 30, Sched A. As noted earlier in these reasons, in the absence of any evidence from the Owners on the issue of extras (other than through cross-examination), I have an insufficient record to assess if there were agreed extras, so also cannot assess any impact of the provisions of the Consumer Protection Act, 2002.
55The Owners further point out that RDI has not brought any claim against them, as would be expected if a contractor took the position that funds were owing. The time to bring such an action has now expired pursuant to the Limitations Act, 2002, SO 2002, c 24, Sched B. There is nothing in the record supporting the reasons for RDI’s cessation of work or even if RDI continues to operate. I find no basis to draw any proper inference from the fact that RDI has not pursued a claim against the Owners and, thereby, it is not material to assessing the value of RDI’s contract or amounts that may be owing for the purposes of this motion.
Quantum of lien
56Another consideration on this motion is the provable quantum of Cancore’s lien. Although properly considered, the evidentiary onus still lays with the Owners to demonstrate that the maximum potential recovery by Cancore is less than the amount of its lien. The Owners evidence is primarily focused on amounts owing to RDI. In challenging Cancore’s lien, they rely on skepticism, the limits of evidence tendered by Cancore in response to this motion, and a cross-examination focused almost entirely on Cancore’s invoicing, quotes, and how the amounts in William Ma’s affidavit were determined. The evidence tendered and the cross-examination questions posed to Mr. Ma do not challenge his affidavit evidence that the work was performed by Cancore. In fact, Mr. Ma’s cross-examination evidence provided specificity on the nature and extent of extra work performed by Cancore. As I have already noted, there are triable issues on the claimed extras.
57In my view, the Owners have not met their onus of convincingly demonstrating that Cancore cannot prove its supply of services and materials, including extras, or the quantum of the debt claimed as owing.
Inaction by Cancore
58The Owners also argue that I should also consider Cancore’s delay in advancing this proceeding, which has seen little progress since its commencement, and Cancore’s failure to pay the costs thrown away ordered at the first return of this motion. In the circumstances of this motion, I do not view these as being material to assessing a reasonable amount of security, although they may support other relief at a later date.
Disposition
59For the foregoing reasons, based on the record before me, I assess the maximum amount that may be found owing to RDI to be $336,910.38, being 85% of the aggregate of the maximum base contract price of $466,000.00 plus $164,482.80 in potentially provable extras, less $199,000 in demonstrated payments to RDI. The Owners may ultimately prove their position that the agreed base contract was $460,000, that there were no authorized or completed extras, that $380,000 in payments were made, that there was substantial incomplete and deficient work, and that the set-offs claimed were in respect of rectifying deficiencies in RDI’s work and completing the same scope of work as contemplated by RDI’s contract. However, on this motion, they have not convincingly demonstrated that will be the case on a balance of probabilities.
60Since the evidence on this motion supports a maximum potential liability of the Owners to RDI that is greater than the amount of Cancore’s lien, I find no reasonable basis upon which to limit the value of Cancore’s lien and order a reduction in the security required to vacate it. The Owners’ motion is accordingly dismissed.
Costs
61Costs outlines have already been exchanged and filed. I encourage the parties to resolve costs of the motion on their own. If they are unable to do so, then a case teleconference may be arranged through my Assistant Trial Coordinator to make oral costs submissions. Submissions shall be a maximum of 10 minutes per side, with 5 minutes of reply. Any case law or offers to settle relied upon by a party shall be exchanged and submitted to my Assistant Trial Coordinator by email at least three (3) days prior to the teleconference.
62In the absence of a case teleconference being booked (although not necessarily heard) within two weeks from the release of this decision, the parties shall be deemed to have agreed on costs.
MASTER TODD ROBINSON DATE: February 8, 2021