COURT FILE NO.: CV-21-654602
DATE: June 21, 2021
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Alumtech Bond Inc. v. Epic Precast Ltd., Suncity Development Ltd. and Ramesh Senthilnathan;
BEFORE: MASTER C. WIEBE
COUNSEL: Robyn Blumberg for Suncity Development Ltd.;
Aaron Grossman for Alumtech Bond Inc.
HEARD: June 17, 2021.
REASONS FOR DECISION
[1] This is a motion by Suncity Development Ltd. (“Suncity”) for an order declaring the claim for lien registered by Alumtech Bond Inc. (“Alumtech”) expired on account of a failure to be perfected. The motion also seeks orders dismissing this action in its entirety and returning the lien security posted by Suncity to Suncity.
[2] The following facts are not in dispute. Epic Precast Ltd. (“Epic”) is the registered owner of the subject lands, a commercial space. In 2013 the previous owner of the lands retained the architectural firm, Vanle Architect Inc. (“Vanle”), to prepare a design for the development of the lands as a commercial plaza. In 2017 a mortgagee commenced power of sale proceedings. On January 31, 2018 Epic purchased the lands pursuant to these proceedings.
[3] The next day, February 1, 2018, Epic signed a contract document with Suncity in the form of a CCDC 3-2016 Cost Plus Contract (“the Construction Contract”). In the Construction Contract Suncity committed to constructing the plaza at cost with a guaranteed maximum of $25,000,000. The Document also specified that Suncity would earn a fee of 3% of the cost. On February 28, 2018 Epic signed a contract document with Vanle (“the Archtect Contract”) whereby Vanle committed to do the design and contract administration for the project at a price of $8,000,000. The design was a continuation of the design Vanle had developed for the previous owner.
[4] The design was completed and Suncity proceeded to do the work. On June 19, 2019 Suncity entered into a subcontract with Alumtech Bond Inc. (“Alumtech”) whereby Alumtech was to, amongst other things, supply and install aluminum composite panel, fascia, capping and soffit for two of the buildings in the plaza. Alumtech proceeded with its work. It is undisputed that Alumtech’s last date of supply was September 30, 2020. On December 16, 2020 Suncity delivered a formal notice of contract termination to Alumtech.
[5] On October 21, 2020 Alumtech registered a claim for lien in the amount of $26,067.21. It is undisputed that this was in time. However, Alumtech waited until January 12, 2021 to commence this action. On January 13, 2021 it registered a certificate of action, a period of 109 days after the date of last supply. It is undisputed that there are no other claims for lien on title under which the Alumtech lien is sheltering. The 90 days for lien perfection specified under the Construction Act, R.S.O. 1990, c. C.30 (“CA”), section 36(2) as it read before July 1, 2018, hereinafter “the Old CA,” expired on December 29, 2020. If it applies, as Suncity argues, the Alumtech lien is indeed expired.
[6] Neither Suncity nor Epic have defended at this point. Suncity obtained an indulgence in that regard to facilitate the bringing of this motion. I was assigned to his motion. On February 16, 2021 I had a teleconference with Ms. Blumberg and Mr. Grossman’s predecessor, John David Martin. I set a schedule that had this motion to be argued on May 20, 2021.
[7] Three months later, on May 12, 2021, Mr. Grossman emailed a letter to the court advising that he had just been retained by Alumtech and that he wanted an adjournment of the motion. On May 13, 2021 he emailed the court again with an agreed upon new schedule for the motion that had the argument taking place on June 17, 2021. I adopted this new schedule.
[8] Alumtech argues that its lien is perfected as it says that the CA as it read after July 18, 2018, hereinafter “the New CA,” applies. It says that Alumtech is a “contractor” under the CA, that Suncity is an “owner,” that the Construction Contract is a sham contract document, that the Alumtech subcontract is in fact a “contract” under the CA and that the Architect Contract is not a “contract” under the CA. As a result, so the argument goes, the date of the Alumtech subcontract document, June 19, 2019, triggered the application the New CA to this case by operation of CA section 87.3(1)(a). Section 87.3(1)(a) is the first transition rule. It specifies that if “a contract for the improvement was entered into before July 1, 2018” the Old CA applies. Otherwise, the New CA applies.
[9] If this argument succeeds, there are at least two ways the Alumtech would be saved. First, the lien period for perfection starting September 30, 2020 would be 150 days, not 90 days. Second, the lien period would be that of a “contractor” and it may not start to run until the date of formal contract termination, December 16, 2020.
Admissions
[10] The first, and most critical, issue is whether Suncity was a “contractor” or an “owner.” Suncity alleges that it was all along a contractor. Alumtech argues it was an owner.
[11] Under the CA section 1(1) a “contractor” is defined as “a person contracting with or employed directly by the owner or an agent of the owner to supply services and materials to an improvement . . .” An “owner” is defined as “a person . . . having an interest in a premises at whose request and, (a) upon whose credit, or (b) on whose behalf, or (c) with whose privity or consent, or (d) for whose direct benefit, an improvement is made to the premises. . .” “Contract” is defined as being the contract between the contractor and the owner. If Suncity was a “contractor,” the Old CA applies and the Alumtech lien is expired. As the moving party, Suncity has the onus to prove it was a “contractor.
[12] Suncity relies amongst other things upon admissions made by Alumtech in its statement of claim. These admissions are telling. In paragraph 3 of the statement of claim, Alumtech states that, “Epic Precast Inc. (“Epic”) was at all material times the owner of the Property.” There is no reference to any other owner. In paragraph 4 of the statement of claim, Alumtech states that “Suncity Developments Ltd. (“Suncity”) is a corporation with which at all material times the Plaintiffs contracted for the work and supply of material hereinafter described as the general contractor.” In paragraph 15 Alumtech describes its registered claim for lien. This description contains the following bolded headings: “Name of Owners: Epic Precast Inc.”; “Name of the General Contractor: Suncity Development Ltd.”; “Name of the Director of the General Contractor: Ramesh Senthilnathan.” Mr. Senthilathan is the president of Suncity. In paragraph 16 there is the following sentence” “The Defendant Epic at all material times was the owner of the Property within the meaning of the Act.” The Alumtech claim for lien itself is attached to the statement of claim and describes Epic as the “owner” and Suncity as the person to whom Alumtech supplied services and materials.
[13] On the same day it commenced its lien action, January 12, 2021 Alumtech commenced a separate action against Suncity and Mr. Senthilathan claiming $200,000 in damages for breach of contract and breach of trust concerning the Alumtech contract on the plaza project. I will call this the “Trust Action.” I note that in the statement of claim in the Trust Action, Alumtech continues to describe Suncity as the general contractor and Epic as the owner. In paragraph 5 Alumtech states the following: “The Property is owned by Epic Precast Inc. (“Epic”) and the corporate Defendant [Suncity] acted as general contractor for the building project at the Property.” In paragraph 6 Alumtech describes Mr. Senthilathan’s obligations as officer and director of Suncity as being “a positive obligation imposed by the Act to hold in trust funds received from the owner of the Property and to pay through to the Plaintiff the funds that were required to be paid under the contract” (my emphasis).
[14] The above noted statements in the Alumtech lien action statement of claim are, in my view, clear admissions. They are concessions of material facts on which Suncity can rely. They are made in Alumtech’s pleading and, therefore, are facts that Suncity does not have to prove; see Yang v. The County of Simcoe, 2011 ONSC 6405 at paragraph 46. Giving the words in the statement of claim their plain and ordinary meaning, the admissions are simply that there was one owner on the project, Epic, and one general contractor, Suncity. No where in the statement of claim is Suncity described as or even alluded to as being a person with an interest in the premises, an “owner.”
[15] Rule 51.06(2) states that where there are admissions of fact in a pleading, the opposing party may move before a judge for such order that party may be entitled to on account of that admission “without waiting for the determination of any question between the parties.” That is what Suncity is doing with this motion.
[16] I am not be a judge. Suncity relies upon CA section 47(1) and (1.1) which authorizes “the court,” which includes masters, to make orders discharging a lien and dismissing an action on any “proper ground.” I find that pleading admissions are such a “proper ground,” and that CA section 47(1) can be used in a way that is comparable to Rule 51.06(2).
[17] There was no motion before me from Alumtech under Rule 51.05 seeking an order granting leave to withdraw these admissions. Furthermore, there was no evidence containing an explanation for these admissions. Mr. Grossman talked about language issues, inadequate legal representation, and the meaning of the words, “general contractor” in the Alumtech Statement of Claim not having the meaning given to the word “contractor” in the CA section 1(1). None of this was in the evidence and I do not accept it.
[18] At one point in his argument Mr. Grossman verbally asked for leave to withdraw the admissions. I rejected this request immediately. The request was grossly unfair to Suncity who brought this motion based in part on the existing admissions and not anticipating a request for leave to withdraw them. Also, it is well established authority that a significant test for the withdrawal of admissions under Rule 51.06 is the existence of evidence that the admissions were made by inadvertence or wrong instructions; see Seal Tech Basement Sealing Inc. v. Prychitko, 2014 ONSC 6038 at paragraph 15. There was no such evidence.
[19] Indeed, the evidence in the Alumtech responding motion record contradicted its pleading admissions. There were two affidavits from Alumtech officials, one from Mostafa Shokri, a director of Alumtech, and the other from Mohammad Dadvaran, a project manager with Alumtech. I expected at minimum that these affidavits would attempt to explain the pleading admissions, such as perhaps being the result of limited available evidence at the time of pleading. They did no such thing. In both affidavits, the affiants state that they “always believed” that Suncity was an owner or part-owner of the subject lands. There was no corroboration for these statements. The statements directly contradict the Alumtech pleading admissions and give no explanation for the contradiction. As a result, these statements have no credibility. There was a third affidavit from a paralegal, Bita Maftou, who made no attempt to explain the pleading admissions.
[20] I make a comment about Mr. Grossman’s argument about word meaning. He referred again and again to Alumtech’s use of the words “general contractor” in the statement of claim as being a “colloquialism” with a different meaning than the stated meaning of the word “contractor” in the CA. He argued that this “colloquialism” as used in the statement of claim “could have” the meaning of ownership attached. Again, there was no evidence in support of that position, and I do not accept it for that reason.
[21] But I also find the proposition puzzling. In my experience, the common use of the words, “general contractor,” parallels exactly how the CA defines “contractor,” namely the party with the contract with the owner. It does not include the concept of ownership. That is how I interpret the use of the words, “general contractor,” in the statement of claim.
[22] For these reasons, I am driven to the conclusion, and do conclude:
• that Suncity is admitted as being a “contractor” as defined by the CA section 1(1),
• that Epic is admitted as being the “owner” as defined by CA section 1(1),
• that the contract between Epic and Suncity was, therefore, a “contract” as defined by the CA section 1(1), and
• that, as the date of that contract predated July 1, 2018, the Old CA applies thereby rendering the Alumtech lien expired on account of a failure to perfect.
I, therefore, declare the Alumtech lien expired and order that the posted security be returned to Suncity.
Other discussion
[23] While it is not necessary for my decision, I will briefly discuss the other aspects of the argument made by Mr. Grossman.
[24] There was the argument as to whether the evidence created a triable issue of a Suncity interest in the plaza as a co-owner. Evidence of a triable issue concerning the subject lien claim will defeat a motion under CA section 47; see Maplequest (Vaughan) Developments. Inc. v. 2603774 Ontario Inc., 2020 ONSC 4308 at paragraph 25.
[25] Alumtech’s motion material contained several items of circumstantial evidence in this regard as follows: Suncity introduced Epic to the property and entered into an alleged construction contract with Epic just a day after Epic bought the plaza; the Construction Contract had a fee for Suncity, 3%, that was well below market rate thereby creating an unusually favourable contract for Epic; Epic did not keep holdback on periodic payments to Suncity creating unusually favourable payments to Suncity and risk to Epic; Suncity admitted having a side agreement with Epic giving Suncity naming rights on signs in the plaza and in advertisements; Suncity marketed plaza properties for sale; and Suncity employees referred to the relationship between Epic and Suncity employees as a “partnership.”
[26] All I will say is that I doubt that this would be enough to create a triable issue as to whether Suncity had an ownership interest in the plaza. I agree that it is circumstantial evidence of a closer-than-usual relationship between a contractor and an owner. That is particularly the case with the evidence of the procurement of the land and the proximity between the land purchase and the construction contract.
[27] But, as Ms. Blumberg pointed out, the proffered evidence could point in other directions or in no direction. A close relationship between an owner and contractor is not unheard of and does not per se make the contractor an owner. One does not have to be an owner to sell units in the plaza. The agreement about naming rights could be a license agreement and nothing more. There was no evidence as to what the market rate for a management fee for a project of this size was at the time and, therefore, it is unclear whether the contract was indeed favourable to Epic. Furthermore, 3% of $25,000,000, namely $750,000, is not an insignificant amount of money. In addition, a failure to retain holdback by an owner, while not common, is not unheard of, particularly when there is inadequate legal advice on the matter. As to the references to “partnership” in emails, I was not shown evidence that the authors of those emails clarified what they meant by those references. They could, as a result, have been talking about a “contract” relationship.
[28] However, I make no finding on this point as it is not necessary to my decision.
[29] Mr. Grossman also made other arguments. He argued that the Architect Contract is not a “contract” as defined by the CA as it was not a contract for the supply of services and material to the improvement. He argued that the Architect Contract concerned a different improvement and therefore did not qualify as a “contract for the improvement” under CA section 87.3(1)(a). He also argued that Ms. Blumberg’s predecessor made representations in settlement discussions about the Alumtech claim for lien concerning the application of the New CA, representations that Alumtech reasonably relied upon in perfecting its lien. Ms. Blumberg objected to the inclusion of this evidence since it was about settlement discussions. I made no ruling on that point.
[30] I will now also make no ruling on the additional points made by Mr. Grossman as that is not necessary to my decision. Suffice it to say that I doubt these arguments. I found the issue estoppel point particularly puzzling as Alumtech had its own lawyer during these settlement discussions, thereby undermining the alleged reasonable reliance Alumtech placed on the representations of Suncity’s lawyer.
Conclusion
[31] I, therefore, grant the motion to declare the Alumtech lien expired, order that it be vacated and order a return of the posted security to Suncity.
[32] The next issue is whether I also dismiss the Alumtech action. Under CA section 47(1) I have the authority to impose “terms and conditions that the court considers appropriate in the circumstances.” I find that I should dismiss the Alumtech action for various reasons. First, the action is in its infancy. There are no defences. Second, the action should be discontinued against Epic in any event given the security that has been posted by Suncity. Third, the amount in issue is within the monetary jurisdiction of the Small Claims Court and, therefore, at minimum the Alumtech claim should be pursued in a separate action in that court. There is no limitation barring that process. Fourth, Alumtech joined a breach of trust claim to its lien action which is prohibited under the Old CA. Fifth, Alumtech has already commenced a breach of contract and breach of trust action in the Trust Action, an action which includes the claim made in the Alumtech claim for lien. Therefore, Alumtech will not be prejudiced by an order dismissing this action. I, therefore, dismiss this action as well.
[33] As to costs, I ordered that the parties deliver costs outlines. On June 18, 2021 Ms. Blumberg delivered a Bill of Costs concerning not only the costs of this motion, but also the costs of this entire action. The Bill shows three totals: $34,238.05 in partial indemnity costs; $47,865.85 in substantial indemnity costs; and $56,752.51 in actual costs. On June 17, 2021 Mr. Grossman delivered a costs outline concerning the costs of this motion. It showed three totals: $14,767.80 in partial indemnity costs; $21,241.68 in substantial indemnity costs; and $24,553.60 in actual costs.
[34] Costs usually follow the event. In this motion, Suncity was entirely successful and would appear to deserve an order for costs.
[35] If the parties cannot agree on costs, Suncity must deliver written submissions on costs of no more than three pages on or before July 2, 2021. Alumtech must in that event deliver responding written submissions of no more than three pages on or before July 13, 2021. Suncity must deliver reply written submissions of no more than two pages on or before July 16, 2021.
[36] The parties are required to address all of issues concerning costs as they apply to this case. However, they must address in detail the question of proportionality and CA section 86(2).
DATE: June 21, 2021 __________________________
MASTER C. WIEBE