COURT FILE NO.: CV-19-614333

DATE: 2022 01 26

SUPERIOR COURT OF JUSTICE - ONTARIO

IN THE MATTER OF the Construction Act, RSO 1990, c C.30, as amended

RE: THE FIFTH WALL CORP., Plaintiff

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RICHARD TONELLI and MARIA TONELLI, Defendants

AND RE: RICHARD TONELLI, Plaintiff by counterclaim

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THE FIFTH WALL CORP., Defendant by counterclaim

BEFORE: Associate Justice Todd Robinson

COUNSEL: T. Brook and T. Morrison, for the defendants / plaintiff by counterclaim B. Kuchar and J. Philteos, for the plaintiff / defendant by counterclaim

HEARD: November 8, 2021 (by videoconference)

REASONS FOR DECISION (Leave for summary judgment motion)

[1] On November 8, 2021, I heard submissions on whether to grant leave to the defendants to bring their proposed motion for partial summary judgment. By subsequent endorsement dated November 16, 2021, I granted leave for reasons to follow. I now provide my reasons for that decision.

Overview

[2] The Fifth Wall Corp. (“Fifth Wall”) was contracted to build a new house for the defendant spouses. Richard Tonelli is the sole registered owner of the property. There is a dispute over whether Fifth Wall and both of the defendants or only Mr. Tonelli were the parties to the contract. The construction contract was a costs-plus contract, and included an itemized budget and schedule that detailed the work that would be performed with estimated costs for each item of work, totalling almost $1.25 million.

[3] Fifth Wall invoiced nearly $1.9 million for its work, of which it was paid some $1.6 million. It ultimately ceased work for non-payment. The defendants allege, among other defences, that Fifth Wall unjustifiably invoiced (and was paid) for extra work and additional charges well in excess of the authorized construction budget, which was contrary to certain provisions of the Consumer Protection Act, 2002, SO 2002, c 30, Sched A (the “CPA”), which provide that a supplier cannot charge a consumer an amount that exceeds an estimate by more than 10%. Fifth Wall’s position is the defendants were aware of the additional work and additional charges and authorized them.

[4] The defendants submit that if the CPA applies to the construction contract, if the construction contract is a “consumer agreement”, and if Fifth Wall breached the CPA by charging in excess of the 10% statutory limit, then Fifth Wall has overbilled by $426,109.16. That amount exceeds the Fifth Wall’s claim. Since not all of Fifth Wall’s invoices were paid, the defendants’ position is that Fifth Wall was overpaid by $212,982.55. Mr. Tonelli seeks to recover that overpayment in his counterclaim, in addition to other damages.

[5] The defendants sought leave to bring a motion for partial summary judgment essentially to address whether the CPA applies to the construction contract and, if so, to what extent, as well as whether Fifth Wall breached the 10% statutory limitation on charges above an estimate. Fifth Wall opposed leave primarily on the basis that the motion was premature, at least pending examinations for discovery. Since Fifth Wall’s position is that the parties agreed to additional work and additional charges that exceeded the construction budget, it argued that discovery evidence is necessary before a proper assessment may be made on whether a summary judgment motion would expedite resolution of the issues in dispute.

Analysis

[6] It is common ground that, by operation of the transition provisions in s. 87.3 of the Construction Act, RSO 1990, c C.30, the provisions of the act and its regulations as they read on June 29, 2018, namely the former Construction Lien Act (the “CLA”), apply to Fifth Wall’s lien and this lien action. The contract at issue pre-dates the July 1, 2018 amendments to CLA.

[7] Interlocutory steps, other than those provided for in the CLA, first require “consent of the court” to be obtained “upon proof that the steps are necessary or would expedite the resolution of the issues in dispute”: CLA, s. 67(2).

[8] As framed by the defendants, the proposed motion for partial summary judgment will essentially turn on determining five issues, as follows:

(a) Does the CPA apply to the construction contract?

(b) If the CPA does apply:

(i) Is the contract a “consumer agreement” within the meaning of the CPA?

(ii) Did the contract include price estimates within the meaning of s. 10(1) of the CPA?

(iii) Did the parties agree to amend the price estimates under s. 10(3) of the CPA?

(iv) Did Fifth Wall breach s. 10(1) of the CPA by exceeding the price estimates by more than 10%?

[9] The defendants allege that Fifth Wall exceeded the 10% statutory limit for 33 of the approximately 160 estimates included in the construction budget. Their proposed motion will essentially focus on deciding if the CPA applies to the construction contract and, if so, the quantum of Mr. Tonelli’s CPA damages for charges by Fifth Wall in excess of the statutory limit (if any). The motion would not seek judgment on the balance of Mr. Tonelli’s counterclaim. It will deal exclusively with the 33 budget items that Fifth Wall’s billing is alleged to have exceeded.

[10] The proposed motion is clearly not necessary. All of the issues to be addressed on the motion are as readily addressed at trial. The real dispute is over whether a motion for partial summary judgment will genuinely expedite resolution of issues in dispute between the parties.

[11] Procedure in lien actions is to be as far as possible of a summary character, having regard to the amount and nature of the liens in question: CLA, s. 67(1). Motions that seek only partial summary judgment often trigger concerns about whether they will genuinely expedite resolution of the disputed issues, or whether deferring all issues to trial will result in a more summary disposition. In many cases, determining some triable issues by way of interlocutory motion while leaving the remaining issues for trial would be contrary to the summary nature of lien proceedings. Nevertheless, in the particular circumstances if this case, I was and remain satisfied that a motion seeking only partial summary judgment will likely expedite resolution of issues in dispute.

[12] As already noted, Fifth Wall’s substantive arguments against granting leave mostly focused on factual disputes that should first be explored through examinations for discovery (for which leave was previously granted). Specifically, Fifth Wall argued that the motion cannot be decided in a factual vacuum and determining it will largely turn on whether the defendants were aware of the evolving nature of the cost-plus contract and whether they approved changes and additional charges. Evidence of the parties’ understanding of the contract and whether the defendants gave verbal approval for the changes was submitted to be “critical” to a just and fair determination of the proposed motion.

[13] In my view, Fifth Wall overstates the significance of examination evidence prior to the proposed motion being brought. Detailed Scott Schedules and productions have already been exchanged. I agree that evidence on the parties’ understanding of the contract and, in particular, knowledge and approval of additional work and additional charges will directly bear on disposition of the motion. However, in my view, it would not be unfair or prejudicial to address challenges to the defendants’ positions and evidence on those matters by cross-examination.

[14] Fifth Wall submitted that the court should be cautious of making factual determinations based on a limited evidentiary record. However, in response to the defendants’ evidence on what changes and additional charges were known and agreed (if any), Fifth Wall will have both the opportunity and ability to put forward its own evidence supporting its position that changes and extras were agreed and approved (expressly or impliedly), or at least that the approval of extra work and charges is a triable issue that should not be resolved by motion. I do not accept Fifth Wall’s argument that it is being prevented from putting its best foot forward by being denied an opportunity to conduct examinations prior to the motion being brought. Having an opportunity to conduct discovery on Mr. Tonelli about his understanding of the “evolving nature” of the contract prior to the motion should not change Fifth Wall’s own evidence on why it says changes and extras had been approved. It may buttress that evidence, but cross-examination could readily achieve the same result.

[15] Cross-examination will presumably be used to explore the factual disputes that may support a finding that there are genuine issues requiring a trial. However, even if I ultimately find that the factual disputes require a trial, the legal issues around applicability of the CPA will still remain and they seem likely to be resolvable on the motion. Whether or not the CPA applies at all is a key disputed issue in this litigation from which many of the defence positions flow. Although facts will have some bearing when considering the relevant definitions and provisions of the CPA, I am not convinced that the factual circumstances on the parties’ understanding of their agreement will substantively bear on whether the provisions of the CPA apply to the contract. As observed by Horkins J. in Wright v. United Parcel Service Canada Ltd., 2011 ONSC 5044, at para. 268, making consumer knowledge a relevant inquiry in whether and how the CPA applies could have the effect of shifting responsibility from the supplier to the consumer. That may undermine the legislative intent behind the CPA, which permits consumers to rely on the fact that unfair practices are prohibited without having to assess themselves whether a supplier’s actions are unfair.

[16] I tend to agree with the defendants’ submission that much of the motion will likely turn on interpretation of the CPA in the context of a home construction contract and changes to that contract. Application of the CPA is an issue that must be resolved in any event. Determinations on the applicability (or inapplicability) of the CPA and whether the construction contract is a “consumer agreement” are likely to be decided on the motion and thereby need not be addressed at trial, even if determining the application of the CPA ultimately requires trial.

[17] I also accept that, if the motion is successful, it may defeat Fifth Wall’s claim entirely. The amount of Fifth Wall’s lien and contract claims are less than the amount by which its billing is alleged to exceed the statutory limits in the CPA. A successful motion could thereby result in a dismissal of those claims. Even if unsuccessful, or only partially successful, the motion is likely to narrow or focus issues in dispute around application of the CPA, which will assist the parties in the oral discovery process. I also see no reason why cross-examinations on the summary judgment motion should not or could not also stand as discovery evidence in the action.

[18] Fifth Wall put forward a number of cases in which the court held that lien claims were not defeated by the provision of the CPA. Each of the cases cited by Fifth Wall turned on its facts. In my view, Fifth Wall’s arguments are more appropriately raised during argument of the proposed motion or at trial. I do not view them as bearing on whether leave is granted.

[19] Although not necessary to my determination on leave, I still wish to address the parties’ arguments on the appropriateness of summary judgment motions in lien actions.

[20] The defendants’ submitted that the threshold for leave on a summary judgment is low. They pointed specifically to comments by Perell J. that “case law tends toward the proposition that the leave requirement is a statutory anomaly and rarely should be refused” and comments by Healey J. that requiring a party to seek leave for a summary judgment motion contradicts the mandate that lien actions be as far as possible of a summary nature: Industrial Refrigerated Systems v Quality Meat Packers, 2015 ONSC 4545 at para. 75; Bradhill Masonry v. BWK Construction Company Limited, 2011 ONSC 6230 at para. 3. The defendants further submitted that leave for partial summary judgment motions dealing with only some issues in dispute have previously been authorized in lien actions: Quad Pro Construction Inc. v. Canadian Leaseback (GP) Inc., 2021 ONSC 4740 (Master) at para. 13.

[21] In response to that submission, Fifth Wall pointed to the Court of Appeal’s caution that summary judgment motions remain the exception to disposition by trial, not the rule: Mason v. Perras Mongenais, 2018 ONCA 978 at paras 43-44. It argued that trials should be viewed as the default procedure for resolving lien actions absent compelling evidence, submitting that a summary judgment motion is not necessary to expedite a judicial process that is already summary by its nature.

[22] I agree with Fifth Wall that summary judgment motions are the exception, not the rule. However, the scheme of the CLA is different than the Rules of Civil Procedure, which governed the action before the Court of Appeal in Mason. Nevertheless, I do not agree with the defendants that the threshold for assessing leave for a summary judgment motion under s. 67(2) of the CLA is “low”, or that it should be viewed differently than for other interlocutory steps requiring leave. Determining whether a step is necessary or whether it will expedite resolution of issues in dispute is a case-specific exercise. It requires the court to consider the specific circumstances of the specific case in the context of the overall scheme of the CLA. In my view, it would be contrary to the CLA to apply a general “one size fits all” approach on the appropriateness of summary judgment motions, including partial summary judgment, in all lien actions.

Disposition

[23] For these reasons, I granted leave for the defendants to bring their proposed motion for summary judgment.

ASSOCIATE JUSTICE TODD ROBINSON

DATE: January 26, 2022