COURT FILE NO.: CV-20-154 DATE: 2022/03/22

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: RJ Concrete & Construction LTD., Plaintiff (Responding Party) AND Eco Depot L.T.D., Defendant (Moving Party)

BEFORE: Madam Justice Heather J. Williams

COUNSEL: Matthew Smiley, for the Plaintiff (Responding Party) Michel R. J. Caza, for the Defendant (Moving Party)

HEARD: March 15, 2022, Thunder Bay

Endorsement

Overview

[1] Eco Depot Ltd. moves under the Construction Act, R.S.O. 1990, c. C. 30 for an order discharging a lien under s. 47 and vacating the related claim for lien and certificate of action. Eco argues that the claim for lien is an abuse of process because the amount of the lien was willfully exaggerated, and RJ Concrete & Construction Ltd. acted in bad faith when it registered the lien. In the alternative, Eco seeks a reduction in the amount of the lien. Eco also requests an extension of time to serve a statement of defence.

The Facts

[2] The parties entered into a written agreement on June 10, 2019. The scope of work included three tasks. The total price was $109,400.00 plus HST and other applicable taxes.

[3] The parties’ relationship broke down in January 2020.

[4] The parties agree that RJ completed only the first of the three tasks under the agreement. They also agree that, at Eco’s request, RJ performed some extra work, which involved trucking, for which Eco agreed to pay $6,695.50 plus HST. [1]

[5] Eco paid RJ a total amount of $60,905.50.

[6] The lien, registered May 11, 2020, is in the amount of $70,282.42.

The Issues

[7] The issues are the following:

1. Should the lien be discharged on the basis that the claim for lien is an abuse of process?
2. If the claim for lien is not an abuse of process, but the amount of the lien is higher than it should be, what is the proper remedy?

The Parties’ Positions

Eco

[8] Eco argues the amount of RJ’s lien should have been based on the actual market value of the services and materials RJ provided to Eco. Eco says the amount cannot be based on the parties’ agreement, because the work under the agreement was not completed and the agreement did not include milestones or milestone payments.

[9] Eco says that when RJ was asked to account for its lien claim, RJ substantiated services and materials of $33,720.25 and then took the position that any further questions related to the cost of its services and materials were irrelevant, because the value of the lien is properly based on the parties’ agreement and not on actual cost.

[10] Eco says because it paid RJ $60,905.50, RJ had no basis for a lien and in fact owes Eco $27,185.25, the difference between the amount Eco paid and the $33,720.25 RJ was able to substantiate. Eco says the value of the services and materials RJ provided would have been known to RJ at the time it registered its lien, that RJ knowingly registered an exaggerated lien, that RJ acted in bad faith and that, consequently, the claim for lien amounts to an abuse of process. Eco says for these reasons, the lien should be discharged.

RJ

[11] RJ argues that its agreement with Eco was for a fixed price and that RJ was entitled to register its lien based on the value the agreement attributed to the services and materials RJ provided.

[12] However, RJ acknowledges that the amount of the lien is too high. RJ says the amount was calculated using the total value of the parties’ agreement when it should have been based only on the value of the work under the agreement that RJ completed.

[13] RJ asks that the lien be reduced to $47,230.42.

Analysis

Issue #1: Should the lien be discharged on the basis that the claim for lien is an abuse of process?

[14] Under s. 47 of the Construction Act, the court may order the discharge of a lien, (a) on the basis that the claim for the lien is frivolous, vexatious or an abuse of process (emphasis added); or (b) on any other proper ground.

[15] To decide Issue #1, I must determine whether the amount of the lien was willfully exaggerated and, if so, whether, on the evidence before me, this amounts to an abuse of process that would justify the discharge of the lien.

(a) How should RJ have calculated the amount of the lien?

[16] A person who supplies services or materials to an improvement for an owner, contractor or subcontractor, has a lien upon the interest of the owner in the premises improved for “the price” (my quotation marks) of those services or materials. (Construction Act, s. 14(1).)

[17] “Price” is defined in s. 1(1) of the Act as “(a) the contract or subcontract price, (i) agreed on between the parties, or (ii) if no specific price has been agreed on between them, the actual market value of the services or materials that have been supplied to the improvement under the contract or subcontract…” (Subsection (b) of the definition is not relevant to this motion.)

[18] The price of contract work is measure by the stipulated price contract, not by the contractor’s costs. [2] It is only where there is no agreement on price that the actual value of the services that have been supplied to the improvement becomes relevant. [3] Where there is a fixed price contract, it may be necessary to determine the actual value of the services and materials supplied if work ended before the completion of an identifiable task or milestone, but otherwise, the price of the work is measured by the contract price. [4] The proper calculation for claims for extras may be made in different ways, depending on the nature of those claims and the terms of the contract. [5] (I have already indicated that the proper calculation for the claim for the extra trucking work in this case is not in dispute.)

[19] Eco and RJ had agreed on a contract price. It was $109,400 plus HST and other applicable taxes. Eco argues that the agreement did not include milestones or provide for milestone payments. Eco argues that because the relationship between Eco and RJ broke down before RJ completed all of the work contemplated by the contract, the price, and therefore the amount of RJ’s lien, must be based on the actual value of the services and materials supplied. As I noted above, Eco says that RJ has only proven an actual value of $33,720.25.

[20] I do not accept Eco’s argument.

[21] Although Eco maintains that the parties’ agreement did not include milestones, the scope of work under the agreement was clearly broken down into three separate tasks. The parties agree that RJ completed the first task and did no work in respect of the second or the third task. Eco argues that the contract did not provide for milestone payments, however, RJ’s uncontradicted evidence is that a progress statement (Exhibit C to the affidavit of Daniel Matson) was delivered to Eco with the June 10, 2019 agreement. The progress statement allocated a price to each of the three tasks in the agreement’s scope of work: $89,000 for the first task (two large slabs); $9,200 for the second task (walls); and $11,200 for the third task (one smaller slab.) HST was to be applied to all of these amounts.

[22] Eco argues that the progress statement was not part of the agreement, because Article 2 of the agreement provided that the only document that formed part of the agreement was the agreement itself. RJ disagrees. RJ says the progress statement was attached to the agreement and that the agreement provided that the contractor was to perform the work as specified in the scope of work article of the agreement and “any attached documents and drawings.”

[23] Regardless of whether the progress statement was incorporated into the agreement, I am satisfied, on the evidence before me, that it was in the hands of both parties when they entered into the agreement. The progress statement is, at the very least, a useful tool for measuring the value, under the agreement, of the work completed by RJ. The price breakdown in the progress statement is consistent with an August 2020 email in which Eco acknowledged that the first task in the agreement’s scope of work, the two large slabs, was by far the most significant of the three, allocating $84,000 to it. [6] A progress statement with a similar, although not identical, price breakdown was prepared in respect of a similar project involving the parties in 2018.

[24] I am satisfied that the price of the services and materials provided by RJ, and therefore the amount of RJ’s lien, is to be measured with reference to the parties’ agreement. RJ completed only the first task under the scope of work. In accordance with the breakdown in the progress statement, I find that, under the agreement, the price of the first task was $89,000 plus HST.

[25] RJ acknowledges that the amount of its lien is too high. It argues that the proper amount is $89,000 (for the first task under the scope of work) plus HST of $11,570 plus $6,695.50 (the agreed-to price for the extra trucking) plus HST of $870.42 minus the $60,905.50 paid by Eco, for a total of $47,230.42.

[26] There is no evidence that Eco has suggested that there were any deficiencies associated with RJ’s work.

[27] I agree with the basis for RJ’s assessment and its arithmetic and find that the proper amount of RJ’s lien is $47,230.42.

(b) Was RJ’s lien wilfully exaggerated?

[28] Eco argues that RJ should have known that a lien that included an amount for services and materials that were not provided would constitute an exaggerated lien and, as such, the lien was willfully exaggerated.

[29] RJ denies the lien was willfully exaggerated. RJ says the amount of the lien was based on the total contract price, rather than the price of the work it had completed, and that it was not significantly in excess of the amount it now acknowledges was appropriate. RJ also says that in May 2021, when Eco took issue with the amount of the lien, RJ offered to reduce the lien to $47,796.83, but Eco refused. RJ made its offer after it received Eco’s notice of motion but before Eco completed its motion record. (Counsel for both parties agreed to waive any privilege associated with RJ’s offer and Eco’s response.)

[30] Although RJ’s counsel argues that, at the time the lien was registered, RJ genuinely believed it had calculated the amount of the lien correctly by basing it on the total value of the contract, there is no reference to RJ’s genuine belief in the Matson affidavit. It is, however, evident both from the amount of the lien and a letter dated February 5, 2020 from RJ’s counsel to Eco (Exhibit G to the Matson affidavit) that the lien was indeed based on the full contract amount, plus the cost of the extra trucking, less the amount paid by Eco.

[31] Eco argued that RJ’s lien was more than twice the value of its work and that Eco had in fact overpaid RJ by more than $27,000. I have rejected Eco’s argument about how the lien should have been calculated. I have concluded that the proper amount of RJ’s lien is $47,230.42, about 67 per cent of the amount of the $70,282.42 lien RJ registered. RJ has explained how it calculated the lien, acknowledged that it was in error and offered to reduce the lien to an amount within $600 of the amount I have found is proper. In these circumstances, Eco has not satisfied me that the amount of the lien, although too high, can properly be characterized as having been “wilfully exaggerated.”

[32] Even if I should have found that the lien was wilfully exaggerated, I would not be prepared to find that RJ’s claim for lien was an abuse of process. As such, there is no basis for discharging the lien under s. 47.

Issue #2: If the lien should not be discharged, what is the proper remedy?

[33] As I noted at the outset of this endorsement, Eco requested, as alternative relief, an order reducing the value of the lien.

[34] RJ was more specific: It argued that the appropriate disposition of the motion is an order under s. 35(2) of the Construction Act reducing the lien amount to $47,230.42. RJ argued that it had attempted to reduce the lien on consent, but Eco would not consent, and RJ could not amend the lien unilaterally or without a court order.

[35] Accordingly, in accordance with the alternative relief requested by Eco, RJ’s position on the motion and my conclusion with respect to the proper amount of the lien, RJ’s lien shall be reduced to $47,230.42.

Disposition

[36] I order under that RJ’s lien shall be reduced to $47,230.42 from $70,282.42.

[37] I further order that Eco shall have 30 days to deliver a statement of defence.

Costs

[38] Both parties have filed costs outlines.

[39] I urge the parties to agree on the costs of this motion.

[40] If the parties are unable to agree, they may, within 14 days, deliver brief written costs submissions to supplement their costs outlines.

[41] If the parties file written costs submissions, it would be helpful to me if the submissions were to address the issue of whether RJ’s offer of May 18, 2021 should have a bearing on my costs decision.

Date: March 22, 2022

Madam Justice Heather J. Williams Released: March 22, 2022

Footnotes

[1] See Exhibit E to the affidavit of Daniel Matson: “Invoice.” See also, at Exhibit F the Matson affidavit, an email dated August 7, 2020 in which “Lori” of Eco includes in her pricing breakdown $6,695.50 plus HST for “trucking.”

[2] HMI Construction Inc. v. Index Energy Mills Road Corp., 2017 ONSC 4075 (Div.Ct.) at para. 17, citing Marino v. Bay-Walsh Ltd., [2002] OJ No. 2211 (SCJ), paras. 110-112; Selectra Inc. v. Penetanguishene (Town), 2016 ONSC 2293, para. 28.

[3] (Marino v. Bay-Walsh Ltd. [2002] O.J. No. 2211, at para. 112.)

[4] HMI, at para. 22.

[5] HMI, at para. 17.

[6] See Exhibit F to the Matson affidavit, an email dated August 7, 2020 in which “Lori” of Eco includes in her pricing breakdown $84,000.00 for the two slabs.