Court File and Parties

COURT FILE NO.: CV-19-01292

DATE: November 22, 2022

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Jackman Construction Limited, Plaintiff/Defendant by Counterclaim

AND:

Collin Lee Brown and Cristen Lee-Ann Brown, Defendants/Plaintiffs by Counterclaim

AND:

Ironwood Developments Inc., Defendant by Counterclaim

BEFORE: MacNeil J.

COUNSEL: B. Carter – Lawyer for the Plaintiff/Defendant by Counterclaim E. D’Agostino – Lawyer for the Defendants/Plaintiffs by Counterclaim No one appearing on behalf of Ironwood Developments Inc., Defendant by Counterclaim

HEARD: May 19, 2022 (via Zoom videoconference)

REASONS FOR DECISION ON SUMMARY JUDGMENT MOTION

Overview

[1] The Plaintiff, Jackman Construction Limited (“Jackman Construction” or “Jackman”), commenced this action against the Defendants, Collin Lee Brown (“Mr. Brown”) and Cristen Lee-Ann Brown (“Ms. Brown”) (collectively, “the Browns”) seeking a declaration that it is entitled to a lien on the Browns’ lands in accordance with the Construction Lien Act and for payment of the sum of $68,790.00, plus interest, that Jackman Construction alleges is owing to it for renovation work performed at the Browns’ residential property.

[2] Jackman Construction makes this motion for summary judgment against the Browns for the amount owing and for all declarations and judgments necessary to give effect to its construction lien rights, among related relief.

[3] Jackman Construction submits that the only basis on which the Browns defend Jackman’s claim is their reliance on a penalty clause contained in the Browns’ contract with Ironwood Developments Inc. (“Ironwood”), the contractor originally retained to do the renovation work, which stipulated a penalty of $3500.00 per week to be paid by Ironwood on a late closing. Jackman contends that there was no assignment of the Ironwood contract to it and that it was not a sub-contractor on the home renovation project.

[4] It is Jackman Construction’s position that the Browns entered into a new contract with Jackman for the work to be completed at the Property. Jackman Construction argues that there is no genuine issue for trial because the penalty clause does not form part of this new contract and, even if it was somehow applicable to Jackman Construction, the penalty clause is void and unenforceable.

[5] Ironwood has not filed a statement of defence to the counterclaim and it did not appear at the summary judgment motion. (Jackman Construction argues that since this is a lien action, the Browns require leave to add Ironwood as a party.)

[6] Jackman Construction and the Browns filed supporting affidavits. Among the affidavits filed on behalf of Jackman were affidavits sworn by Ryan Subject, as president of Ironwood and an employee of Jackman Construction. Cross-examinations on the affidavits were held and transcripts were filed.

Background

[7] Jackman Construction carries on business as a general contractor within the construction industry.

[8] The Browns are the registered owners of a residential property in St. Jacobs (“the Property”).

[9] Ryan Subject was the principal, officer and director of Ironwood.

[10] On July 16, 2018, the Browns contracted with Ironwood for an extensive renovation at the Property which included demolition and removal of an existing rear garage, conversion of the existing master bedroom into a family room, and building an addition onto the existing house (“the Renovation”).

[11] The Browns and Ironwood signed a written contract that included, in part, the following relevant terms:

4. TERMS OF PAYMENT. The Client agrees to pay the Builder the Building Costs as follows, subject to holdbacks under the Construction Act (Ontario):

17.5% upon signing this Agreement $51,293.75

17.5% on commencement of project $51,293.75

17.5% progress draw (foundation/framing start) $51,293.75

17.5% progress draw (plumbing/electrical rough-in) $51,293.75

17.5% progress draw (drywall) $51,293.75

Balance upon substantial completion and occupancy $36,638.40

It being understood and agreed that the Builder shall pay, as due, all invoices, charges and expenses from all trades, sub-trades, suppliers and labourers required by them to perform the herein agreement as their invoices are submitted. Holdback of $14,655.37 due 60 days after completion.

6. COMPLETION DATE. The Builder agrees to complete the Renovations for occupancy and, where applicable, to obtain an occupancy permit for the Client on or before DECEMBER 15^TH, 2018 (date of completion) provided that the Builder diligently pursues the completion of the Renovations and is not prevented from doing so by some act or omission of the Client, strikes, weather conditions and, without limiting the generality of the foregoing, any other circumstances over which the Builder has no control.

7. COMPLIANCE. Failure on the part of either party to insist on strict compliance by the other with any provision of this Agreement shall not constitute any waiver of the other party’s obligation in respect thereof or any party’s right hereunder to require strict compliance therein the future.

8. ASSIGNMENT. This Agreement may not be assigned by the Builder or Client without the written consent of the other. Notwithstanding the foregoing the Client acknowledges and agrees that it will agree to sub-contracting by the Builder in the normal course of the Builder’s business.

9. SUCCESSORS AND ASSIGNS. Subject to the foregoing paragraph this Contract shall enure to the benefit of and be binding upon the heirs, executors, administrators and assigns of the Client and the Builder respectively (“the Ironwood Contract”).

[12] Schedule “A” to the Ironwood Contract sets out the renovation plans and building costs. Towards the end of Schedule “A”, under the heading “Draw”, the following term is found:

Draw

Draws as follows 17.5% upon signing estimate, draws follow on commencement 17.5%, following 17.5% per the 15^th of each month. Completion of project Dec 15, 2018. A per week penalty of $3500 will be applied on a late closing. This will be excluded if the delays are caused from unforeseen issues.

A hold back of 5% of each draw will be applied leaving a final balance due 1 month after closing of $14,655.37. This will be used if the completion deadline is not met.

[13] The Browns’ evidence is that, prior to signing their contract with Ironwood, they met with Ryan Subject in June 2018 to review the scope of the work to be done on the renovation and they told him that they wanted the work completed before Christmas 2018. Ryan Subject then sent the Browns a revised quotation, with a cost, a draw schedule, and a revised completion date of December 15, 2018 after which a penalty of $3500 per week would apply on a late closing (“the Penalty Clause”). The Browns state that the Penalty Clause “was the deciding factor” in them choosing Ironwood for the Renovation.

[14] In or about late August 2018, Ironwood commenced work on the Renovation, after the building permit for the project was obtained.

[15] By October 2018, Ironwood had encountered financial difficulties and was unable to complete the Renovation. As a result, Ryan Subject approached his brother, Nathan Subject, who was Vice President of Jackman Construction Renovation Division, to see if Jackman would be able to assist the Browns by completing the Renovation. Nathan Subject attested that he discussed Ryan’s request with Eric Jackman, President of Jackman Construction.

[16] Ryan Subject ceased operating Ironwood and became an employee of Jackman Construction on or about October 29, 2018.

[17] The parties differ substantially in their accounts of how Jackman Construction came to work on the Renovation. However, they do agree that the Browns met with Ryan Subject and Nathan Subject in mid-November 2018 to discuss the renovation work at the Property (“the Meeting”).

[18] Jackman Construction alleges that a new contract was entered into between it and the Browns at the Meeting on the following terms:

(a) Jackman would complete the Renovation on the basis of a costs plus 10% mark-up;

(b) Nathan Subject, on behalf of Jackman, would be the Browns’ “point-man” and all purchasing, budget and sub-contracting decisions would be managed by him and he would have final approval of all financial and contractual matters with the Renovation; and

(c) all payment for any work completed on the Renovation from the date of the meeting forward would be owing to and made payable to Jackman Construction.

[19] The Browns deny that they entered into any new contract with Jackman Construction at the Meeting or any time thereafter.

[20] Jackman Construction commenced work on the Renovation towards the end of December 2018 and the work was completed on or about June 19, 2019.

[21] Prior to Jackman Construction becoming involved, the Browns had made four draw payments to Ironwood, in accordance with the Ironwood Contract, on July 16, 2018, August 15, 2018, September 15, 2018 and October 15, 2018.

[22] No invoice was rendered to the Browns by Jackman Construction until March 2019.

[23] By email to Nathan Subject, copying Ryan Subject, dated March 14, 2019, Mr. Brown asked Ryan Subject to prepare an invoice in anticipation of the next expected draw. Ryan Subject prepared an invoice on Ironwood letterhead, dated March 15, 2019, for work completed at the Property in the amount of $82,694.19. It was comprised of a draw amount for $45,392.70, as scheduled within the Ironwood Contract, and for Extras.

[24] On March 18, 2019, Nathan Subject emailed the Browns, copying Ryan Subject, stating:

An invoice will be coming from accounting at the Jackman office. Ryan re did the invoice from Ironwood and passed it along to me as Jackman Construction will be billing for this draw. You will see both a copy from Ironwood and Jackman which line up with each other. Let me know if you have any questions.

[25] That same day, March 18, 2019, Jackman Construction rendered Invoice #1489 for the exact same amount as the Ironwood March 15, 2019 invoice. The invoice contained the description: “March progress billing for work completed at 10 Cedar, as per Ironwood Invoice, attached. Draw as per schedule” and then listed Extras, as had been noted on the Ironwood invoice.

[26] Upon receiving the Jackman Invoice #1489, on March 18, 2019, Mr. Brown emailed Nathan Subject, copying Ryan Subject, asking who they should make the payment to, Ironwood or Jackman Construction. He wrote: “If its Jack can you guys send a separate email just saying that ironwood is now Jackman. Just for legal purposes as that’s who we signed the contract with and that’s where payment ts [sic] will be going now. …”

[27] Nathan Subject responded to Mr. Brown, copying Ryan Subject, by email on March 19, 2019 that the cheque should be made payable to Jackman Construction Ltd.

[28] On March 19, 2019, Ryan Subject sent an email to the Browns and to Nathan Subject, with the subject line: Ironwood Dissolution, stating:

This is to legally endorse that Ironwood Developments Inc. has been dissolved as a company. Jackman Construction now employs Ryan Subject, the previous owner/director of Ironwood Developments Inc.

Jackman Construction has been given permission to take over the contract and payment obligations for 10 Cedar St., St. Jacobs as well as collection of all payments from customers moving forward.

Ironwood developments Inc. relinquishes it’s rights to any form of collections or property management to Jackman Construction Ltd.

All cheque’s now payable to Jackman Construction Ltd.

Sincerely,

Ryan Subject

If everyone could respond to this email with agreement it will bind this document as acknowledged.

[29] The Browns forwarded Ryan Subject’s March 19th email to their lawyer, C. Loney, asking for advice on whether payment could be made to Jackman Construction based on Ryan’s email. Mr. Loney suggested that the Browns “ask Jackman … and Ryan to confirm that your contract has been assigned from Ironwood Developments Inc. to Jackman Construction Limited (including all terms, conditions and obligations under the contract)”. On March 21, 2019, in turn, Ms. Brown forwarded this request for confirmation to Ryan Subject.

[30] By email dated March 21, 2019, Ryan Subject responded to Ms. Brown, copying Nathan Subject and Mr. Brown, stating:

All contract obligations from Ironwood Developments inc. have been assigned to Jackman Construction Ltd. All change orders and variances in the original quote have already been transferred to Jackman Construction. Which have been tracked using spreadsheets for some time. All original quoted items will be assigned to Jackman Construction. Any new items or alterations are and will only be negotiated by Jackman Construction.

[31] The Browns paid the $82,694.19 invoiced amount to Jackman Construction, as directed.

[32] On May 31, 2019, Jackman Construction emailed Invoice #1526 to the Browns for payment. The attached breakdown indicates that it was for the “Scheduled Draw from Ironwood = $32,423.36” plus Extras of $12,091.50, amounting to $44,514.86 plus HST, for a total of $50,301.79.

[33] That same day, May 31, 2019, Ms. Brown responded to C. Weech of Jackman Construction by email that they had some questions regarding the invoice that they would discuss with Nathan Subject. She also wrote: “In addition, according to our contract with Ironwood our final draw is not due until completion, which as of the May 31st date on the invoice we are not. We will discuss our questions with Nathan and will require a new invoice once we hit completion, reflecting the true completion date.”

[34] By email dated June 20, 2019, Eric Jackman wrote to Ms. Brown as follows:

I didn’t want to include Ryan or Nathan on this response.

I am happy to hear you are happy with the progress the last couple of weeks and we are excited to see this project complete.

When I met with Collin on site a week or two ago we provided him with a breakdown of last month invoice and copy of what the next month’s invoice is going to look like, as we wanted to be up front with you guys. I don’t have a contract with you guys and those are the numbers I am looking to get paid as that’s what Jackman has paid on your project with a loss, that Ryan has already agreed to pay Jackman back for.

We had the township out on Wednesday for occupancy inspection and my understanding is that we passed. So I am hoping we can get paid for the work we did and come to agreement.

If you would like to chat more please feel free to call me on my cell listed below.

Thanks,

Eric Jackman

President

[35] In response, the Browns wrote to Eric Jackman, on June 21, 2019, stating among other things:

… We have been working since day one under the contract we signed with Ryan and Ironwood and the only reason Jackman was paid the previous invoice was because we received an email from Ryan, with Nathan cc’d as the project manager, stating that our contract had been reassigned to Jackman and had an Ironwood invoice also attached. You are now telling us that is not the case so to continue acting with in our contract we would need to pay Ironwood who would be responsible to pay the sub trades they hired which would include Jackman as we never hired Jackman to do this project it was all done through Ryan.

At the end of the day our goal is to get this finished and to have a reasonable solution reached for everyone, ideally without having to take this all to court. We … really want to simply get back to our life, ensure all of the people who worked on our home are paid what they are owed but that it is also recognized that we have incurred a lot of costs along the way as well that were not anticipated, the project moved at a snails pace keeping us out of our home fore [sic] more than 6 months with the exception of the last two weeks since you were onsite.

At this point we feel as though there has been a lot of miss-communication along the way that has lead to this unfortunate mess, extensive legal work and a home that ultimately is unfinished. …

[36] Subsequently, Jackman Construction sent the Browns Invoice #1533, dated June 26, 2019, in the amount of $11,946.24, for Extras completed at the Property; and Invoice #1534, also dated June 26, 2019, for “release of scheduled holdback – as per attached” in the amount of $14,655.37, which matched the holdback amount set out in the Ironwood Contract.

[37] On July 3, 2019, an email was sent by Ms. Brown to Ryan Subject, Nathan Subject and Eric Jackman following up on a conversation had the prior week. In it, Ms. Brown also asks Ryan if he has had “sometime to think things through on how you would like to proceed”. Eric Jackman responded to the Browns by email, on July 4, 2019, stating: “I was speaking with Ryan yesterday … I am not sure where Ryan is on his decision yet. Jackman will be sending a credit today for the couple of items that was not done in the upstairs washroom. We will also like to be paid early next week for the work we have complete at your place.”

[38] On July 5, 2019, Jackman Construction issued the Browns a credit memo, in the amount of $8,113.40, for items that had not been completed.

[39] On July 9, 2019, Jackman Construction caused to be registered against the Property a construction lien in the amount of $68,790.00 for services or materials it supplied including roofing, framing, HVAC, plumbing, electrical insulation, concrete, drywall, stairs & railing, trim & doors, paint, carpet, kitchen cabinetry and granite.

[40] Jackman Construction commenced the within claim on September 23, 2019. In addition to the construction lien, it pleads the doctrine of unjust enrichment and the doctrine of quantum meruit.

Leave to Bring Summary Judgment Motion

[41] Jackman Construction sought leave pursuant to s. 13 of O. Reg. 302/18 of the Construction Act, R.S.O. 1990, c. C.30, to bring this summary judgment motion. Section 13 provides that, interlocutory steps, other than those provided for under the Act, shall not be taken without the consent of the court on proof that, among other things, the steps would expedite the resolution of the issues in dispute.

[42] Counsel for the Defendants advised that the Browns did not take issue with leave being granted by the court.

[43] I was satisfied that, if successful, a summary judgment motion could serve to expedite the resolution of the matter and so leave was granted.

Position of Jackman Construction

[44] Jackman Construction takes the position that Nathan Subject, on behalf of Jackman, entered into a new contract with the Browns at the Meeting, and that Jackman only agreed to be retained by the Browns to complete the Renovation on the basis of that new contract. Jackman submits that it provided the Browns with revised costing and schedules for the completion of the Renovation, which pricing and schedules were approved by the Browns.

[45] Jackman Construction alleges that the Browns caused numerous delays in the completion of the Renovation by changing the scope of the work and not making decisions to changes in a timely manner.

[46] Jackman Construction alleges that the total agreed upon price for the Renovation work it completed, after credits and extras arising from changes to the scope, as approved by the Browns, was $151,484.19.

[47] Jackman Construction rendered invoices to the Browns for the supply of services and materials in the total amount of $151,484.19.

[48] The Browns have paid $82,694.19 on account of these invoices.

[49] Jackman Construction alleges that the Browns remain indebted to it for the outstanding difference of $68,790.00. Jackman Construction claims that the Browns are in breach of the terms of the new contract by not paying this amount despite repeated demands for same.

[50] Jackman Construction submits that the Browns’ entire defence is predicated on the enforceability of the Penalty Clause, regardless of whether Jackman Construction entered into a new contract with them to complete the Renovation or whether Jackman Construction took an assignment of the Ironwood Contract.

[51] Jackman Construction argues that contractual provisions which call for the payment of a penalty in the event of a breach are void and unenforceable. It relies on caselaw that holds that, in order to be enforceable, a penalty clause must provide for a payment which bears some relation to reality and constitutes a genuine attempt to make a pre-estimate of the damages which are likely to occur. If the clause cannot meet such a test, it is a penalty clause and will be void and unenforceable.

[52] Jackman Construction submits that the Penalty Clause was included in the Ironwood Contract by Ryan Subject through inadvertence, that the Browns had not requested it, that damages were never discussed between Ironwood and the Browns so the $3500.00 per week amount cannot be considered a “genuine pre-estimate” of damages, and that it is an excessive amount that does not reflect the costs that would be reasonably incurred by the Browns.

[53] Jackman Construction further argues that the Browns have not provided any evidence of loss suffered by them as a result of the fact that the Renovation was not completed by December 15, 2018, and so it is clear that the penalty clause bears no relation to reality.

[54] Jackman Construction submits that, on cross-examination, Ms. Brown testified that the Browns “never intended on pursuing the whole penalty clause”.

[55] Jackman Construction contends that, had the Browns given Jackman notice that they believed they had a right to assert the Penalty Clause against Jackman Construction, it would have refused to become involved in the Renovation.

[56] Jackman Construction submits that the Browns would be entitled to claim damages for any loss which they actually suffered as a result of Ironwood’s breach of the Ironwood Contract as against Ironwood. However, the Browns have provided no evidence of any damages actually suffered as a result of the Renovation not being completed by December 15, 2018 on this motion or in their documentary productions.

[57] It is Jackman Construction’s position that, since the Penalty Clause is void and unenforceable and since the Browns have tendered no evidence of any actual damages suffered due to any purported delay, there is no genuine issue for trial on this defence.

[58] Jackman Construction also argues that the Browns have waived compliance with the Penalty Clause and are estopped from now relying on it as against Jackman. In the alternative, Jackman Construction submits that it would be appropriate for the court to grant relief against forfeiture pursuant to s. 98 of the Court of Justices Act.

[59] In the alternative, Jackman Construction submits that if the court is not prepared to grant summary judgment, it should make a determination that (i) Jackman was not a subcontractor; and (ii) the Penalty Clause is void and unenforceable.

Position of the Browns

[60] It is the position of the Browns that the only contract they entered into for the Renovation was the Ironwood Contract.

[61] They submit that they do not owe any money to Ironwood in relation to the Ironwood Contract and that they have actually overpaid by more than $45,000.00. They allege that they have paid $298,487.25 and the total amount payable by them under the Ironwood Contract was $253,289.40.

[62] The Browns take the position that the determination as to the contractual arrangements between Ironwood and Jackman Construction is a triable issue. If the Ironwood Contract was assumed by or assigned to Jackman Construction then Jackman Construction stands in the shoes of Ironwood and the Browns owe Jackman Construction nothing, due to the overpayment they have made. However, if Jackman Construction was a subcontractor of Ironwood, with a personal guarantee having been given by Ryan Subject to Jackman, its entitlement as against the Browns is determined according to the Construction Act.

[63] The Browns deny that Ryan Subject told them that he wanted them to enter into a new contract with Jackman Construction for completion of the Renovation or that it was to be done on a “costs plus” basis. The Browns point out that, on or about October 15, 2018, they had just paid Ironwood approximately $50,000 (according to the draw schedule) for work that still had to be done.

[64] The Browns attest that, in November 2018, they had been told by Ryan Subject that Nathan Subject would be “taking over lead on the Project”. They met with Nathan Subject and Ryan Subject at the Meeting. The Browns deny that they entered into a verbal contract with Jackman Construction at the Meeting. It is the Browns’ position that Ryan Subject and Nathan Subject entered into an arrangement between themselves for the completion of the Renovation and that the Browns understood that Jackman Construction, at all times, was working at the Property pursuant to its agreement with Ironwood.

[65] The Browns also point to a November 27, 2018 email sent by them to Ryan Subject wherein they expressed that they were starting to feel concerned about the progress of the Renovation and set out their understanding of the change:

I understand that this project has now been assumed by Jackman Construction as they have acquired Ironwood, however since we have not yet received contact information from Nathan or anyone else from Jackman we are reaching out to you. …

[66] The Browns argue that the subsequent conduct of the parties does not support that a contract was entered into between the Browns and Jackman Construction. There was never any written communication from either Nathan Subject or Ryan Subject after the Meeting setting out the terms of the supposed new contract. The Browns did not receive contact information for Nathan until December 5, 2018. Various communications they had with Ryan and Nathan, after Jackman had commenced work at the Property, reference the original scope and budget as set out in the Ironwood Contract; and the cost summary provided by Nathan in February 2019 included budget numbers that came directly from the Ironwood Contract. They contend that all Jackman Construction invoices were prepared in accordance with the Ironwood Contract and reference its scheduled draw payments. They further submit that the Jackman Construction invoice, dated March 18, 2019, was not for “costs plus 10%” but was identical to the Ironwood invoice and referred to the next draw required by the Ironwood Contract. The Browns argue that Jackman Construction was invoicing them in accordance with the Ironwood Contract, as if the Ironwood Contract had been assumed by or assigned to Jackman Construction.

[67] The Browns also rely on the statement of Eric Jackman, President of Jackman, found in his email to them of June 20, 2019, wherein he wrote that he did not have a contract with the Browns.

[68] In December 2018, Nathan Subject and Ryan Subject asked the Browns to move out of their house so they could have full access to complete the Renovation. The Browns were out of their home for approximately 6 months. The Browns deny that they ever waived compliance with the Renovation completion date or that they ever agreed that the Penalty Clause in the Ironwood Contract would not be enforced.

[69] The Browns argue that, if the contract was assigned to Jackman Construction, as Ironwood stated to them it was, Jackman acquired not only the rights but also the obligations set out in the Ironwood Contract, including the penalty set-off.

[70] If Jackman Construction is found to have a sub-contract with Ironwood, with lien rights, then the Browns submit that its entitlement as against them is determined in accordance with the Construction Act.

[71] It is the Browns’ understanding that Ryan Subject agreed to pay Jackman Construction any losses it suffered on the Renovation.

[72] The Browns do not take issue with Jackman Construction bringing the within summary judgment motion but they oppose the relief being sought. The Browns request that the court make a determination that there was no contract between them and Jackman Construction and dismiss the motion for summary judgment.

Issues

[73] The main issues to be determined on this motion are:

(a) Is this an appropriate case for summary judgment?

(b) Was there a waiver of the Penalty Clause by the Browns?

(c) Is the Penalty Clause void and unenforceable?

Analysis

(a) Is this an appropriate case for summary judgment?

[74] In Frame v. Watt, 2016 ONSC 718 (Ont. S.C.J.), at paras. 25-30, Henderson, J. summarized the law on Rule 20 motions as follows:

25 Rule 20.04(2)(a) provides that the court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.

26 Rule 20.04(2.1) and (2.2) provide the motions judge with additional powers that may be used to determine whether there is a genuine issue that requires a trial.

27 It is trite law that on a Rule 20 motion a judge must take a hard look at the evidence to determine whether or not there is a genuine issue for trial. Further, the onus of establishing that there is no genuine issue for trial is on the moving party. See the case of 1061590 Ontario Ltd. v. Ontario Jockey Club (1995), 1995 CanLII 1686 (ON CA), 21 O.R. (3d) 547 (Ont. C.A.) at para. 35.

28 In the case of Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87 (S.C.C.), the Supreme Court of Canada established a two-step approach to Rule 20 motions. In the first step, the motions judge is to take a hard look at the evidence to determine whether there is a genuine issue requiring a trial. If there is no genuine issue for trial, summary judgment will be granted.

29 In the second step of the process, a motions judge shall consider the evidence submitted by the parties, and may exercise the additional powers of weighing the evidence, evaluating credibility, and drawing reasonable inferences as set out in Rule 20.04(2.1) to determine whether there is a genuine issue, unless it is in the interest of justice for such powers to be exercised only at a trial. See Hryniak at paras. 49-52.

30 The use of the additional powers available on a motion for summary judgment will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability, and proportionality in light of the litigation as a whole. See Hryniak at para. 66.

[75] There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination based on the merits on a summary judgment motion. This is the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to those facts, and (3) is a proportionate, more expeditious, and less expensive means to achieve a just result than going to trial: Hryniak v. Mauldin, 2014 SCC 7, at para. 49.

[76] On a motion for summary judgment, the court is entitled to assume that the record contains all the evidence that the parties would present if the matter proceeded to trial and that each party has “put their best foot forward” with respect to the existence or nonexistence of material issues to be tried: see Galal v. Hale, 2018 ONSC 5502, at para. 14; Georges v. Nahri, 2016 ONSC 2294, at para. 19.

[77] Rule 20.02(1) provides that an affidavit for use on a motion for summary judgment may be made on information and belief but, on the hearing of the motion, the court may, if appropriate, draw an adverse inference from the failure of a party to provide the evidence of any person having personal knowledge of contested facts.

[78] Rule 20.02(2) provides that, in response to affidavit material or other evidence supporting a motion for summary judgment, a responding party must set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue requiring a trial.

Credibility Issues

[79] Jackman Construction’s claim is primarily premised on the court finding that a new contract was entered into between Jackman Construction and the Browns. In support of such a finding, it relies upon the evidence of Nathan Subject and Ryan Subject and what they say happened with the Browns at the Meeting.

[80] However, some of the evidence of Nathan Subject and Ryan Subject is directly contradicted by the evidence of the Browns whose evidence is consistent with emails exchanged between the parties and attached as exhibits to their supporting affidavits.

[81] As well, the conduct of the parties following the Meeting does not align with Jackman Construction’s position that there was a new contract entered into with the Browns. For instance, why would Ryan Subject and Nathan Subject have to send emails directing the Browns to pay Jackman Construction if such a payment term was already agreed to by the parties? Why would Ironwood have rendered an invoice on its letterhead in March 2019? (Jackman Construction alleges that the Browns advised Ryan that its lender required that invoices be delivered by Ironwood as the original contractor listed on the Renovation; the Browns deny this.) Why would Ryan Subject send an email to the Browns stating that Ironwood’s contract had been assigned to Jackman Construction? Why were Jackman’s cost summaries based on the costs set out in the Ironwood Contract if there was a new price being charged of “costs plus 10%”? Why did Jackman Construction request payment of progress draws based on the schedule set out in the Ironwood Contract? And why did Eric Jackman, President of Jackman, send an email to the Browns stating that he does not have a contract with them?

[82] Accordingly, I am of the view that there is an issue of credibility as it relates to the evidence of Nathan Subject and Ryan Subject that there was a new Jackman contract that cannot be determined on the basis of the written record alone.

Arrangement between Ironwood and Jackman Construction

[83] Jackman Construction denies that it entered into any agreement whatsoever with Ironwood, subcontract or otherwise. However, this does not correspond with the June 20, 2019 email sent by Eric Jackman to the Browns, wherein he wrote: “… I don’t have a contract with you guys and those are the numbers I am looking to get paid as that’s what Jackman has paid on your project with a loss, that Ryan has already agreed to pay Jackman back for.”

[84] As a result, it remains a live issue whether or not Jackman Construction meets the definition of “subcontractor” as found in s. 1(1) of the Construction Act, which reads:

“subcontractor” means a person not contracting with or employed directly by the owner or an agent of the owner but who supplies services or materials to the improvement under an agreement with the contractor or under the contractor with another subcontractor …

[85] Jackman Construction also denies that it took an assignment of the Ironwood Contract from Ironwood. However, this completely disregards the emails sent by Ryan Subject to the Browns, copying Nathan Subject, stating that all contract obligations from Ironwood have been assigned to Jackman Construction. At no point did Nathan Subject, on behalf of Jackman Construction, correct the Browns regarding this statement.

[86] There is also the issue of whether the Ironwood Contract could be assigned without the written consent of the Browns since paragraph 14 of the Ironwood Contract required same. It may be that a trial judge could find that the Browns had impliedly consented to an assignment of the Ironwood Contract in that, upon receiving the email from Ryan Subject that the Ironwood Contract had been assigned, they did not object and they proceeded to make payment of the March 18, 2019 invoice to Jackman Construction as directed by Nathan Subject and Ryan Subject.

[87] I am of the view that a court would be unable to ascertain exactly what the arrangement was between Jackman Construction and Ironwood without the evidence of Eric Jackman on this point. Nathan Subject’s evidence is that he discussed the taking over of the Renovation by Jackman Construction with Eric Jackman in the Fall of 2018. Eric Jackman also had his own discussions with the Browns on-site at the Property and sent emails to them regarding his understanding of what had been agreed to between Jackman Construction and Ironwood. There is no affidavit sworn by Eric Jackman filed on this summary judgment motion containing his evidence relating to the issues. (A court can draw adverse inferences from a party’s failure to provide relevant evidence.)

[88] Summary judgment will provide a fair and just adjudication when the procedure “gives the judge confidence that she can find the necessary facts and apply the relevant legal principles so as to resolve the dispute”: see Hryniak, at para. 50. A judge must be confident that he or she can fairly resolve the dispute: see Hryniak, at para. 57.

[89] In Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, at para. 44, the Court of Appeal discussed the difficulty faced by a summary judgment motion judge in trying to make findings of fact where credibility is a central issue:

What happened here illustrates one of the problems that can arise with a staged summary judgment process in an action where credibility is important. Evidence by affidavit, prepared by a party's legal counsel, which may include voluminous exhibits, can obscure the affiant's authentic voice. This makes the motion judge's task of assessing credibility and reliability especially difficult in a summary judgment and mini-trial context. Great care must be taken by the motion judge to ensure that decontextualized affidavit and transcript evidence does not become the means by which substantive unfairness enters, in a way that would not likely occur in a full trial where the trial judge sees and hears it all.

[90] In this case, I find that there is a genuine issue for trial with respect to the characterization of the relationship between Jackman Construction and Ironwood and the relationship between Jackman Construction and the Browns. These are not issues that I can resolve on the basis of the affidavit evidence and transcripts that are before me given the clear conflict in that evidence. The written record does not allow me to fairly make the necessary findings of fact and, in particular, findings of credibility on this summary judgment motion.

[91] Accordingly, I find that this is not an appropriate case for summary judgment and that a trial is required for the fair resolution of the case. In my view, the issues requiring determination at trial include:

(a) The relationship or arrangement made between Ironwood and Jackman Construction as it relates to the Browns’ home renovation project.

(b) How the relationship or arrangement between Jackman Construction and Ironwood/Ryan Subject relates to the Browns and impacts, if any, on the Penalty Clause.

(c) The applicability and quantum, if any, of the Penalty Clause and whether there were delays caused by unforeseen issues.

(d) Whether the penalty amount, if any, is extravagant or unconscionable such that the Penalty Clause should be held void and unenforceable.

(e) The credibility of the witnesses.

(b) Was there a waiver of the Penalty Clause by the Browns?

[92] Jackman Construction argues that the Browns have waived the Penalty Clause since they did not raise the issue of delay or claim a penalty amount prior to paying the March 18, 2019 Jackman Construction invoice. It argues that payment of its invoice supports its position that the Browns did not believe the Penalty Clause applied to Jackman Construction.

[93] The Browns submit that they were focused on getting the Renovation completed before raising any issue of penalty since such a discussion with Nathan Subject or Ryan Subject could have slowed down construction or caused it to cease altogether.

[94] In light of the wording of the Penalty Clause, I am not persuaded that the Browns had any obligation to apply a penalty amount to any payment made prior to the final balance due one month after closing. However, given my view that the Penalty Clause issue needs to be determined on evidence at trial, I decline to make a finding whether or not the Penalty Clause was waived by the Browns.

(c) Is the Penalty Clause void and unenforceable?

[95] Jackman Construction submits that this court should find that the Penalty Clause is unconscionable given the $3500 per week penalty amount for late completion and, therefore, is void and unenforceable.

[96] If there was no assignment or assumption of the Ironwood Contract by Jackman Construction, then the Ironwood Contract does not apply to Jackman and there may be no need for the court to determine if the Penalty Clause is void and unenforceable.

[97] If it turns out that a ruling on the enforceability of the Penalty Clause is required, it is possible that a trial judge could find that holding Ironwood to a term that it freely contracted for, and that was relied upon by the Browns, does not constitute unconscionability in the result. The Penalty Clause was a term inserted by Ryan Subject himself and was reviewed by Ironwood’s lawyer and by the lawyer for the Browns prior to the Ironwood Contract being signed.

[98] I am of the view that it is not possible to determine whether the Penalty Clause amount is unconscionable until it has been determined whether there were any delays “caused from unforeseen issues” that serve to reduce the penalty amount. That will require evidence from both parties that is not currently before me.

Conclusion

[99] I am required by Hryniak and Rule 20 to consider whether using the court’s expanded fact-finding powers on a summary judgment motion would allow me to fairly resolve the issues in this case.

[100] I have considered whether I should order a mini-trial on any of the issues. I am of the view that there is no discrete issue that could be determined on a mini-trial that would resolve the proceeding; and that all of the witnesses who provided affidavit evidence on the summary judgment motion are likely needed to be called as witnesses at trial. In the circumstances, I find that using the fact-finding powers will not shorten or reduce the resources or time needed to determine this matter compared to a trial. Accordingly, I decline to exercise my discretion to do so.

[101] In the circumstances, I find that the Browns have shown that there is a genuine issue requiring a trial. Accordingly, the motion for summary judgment is denied.

Additional Relief Requested by Jackman Construction

[102] Jackman Construction seeks an order compelling the Browns to respond to a request for information under s. 39 of the Construction Act that was served by Jackman Construction’s counsel on August 9, 2019. Jackman Construction submits that the responses received from the Browns’ lawyer, to date, are deficient since they do not include the amount of the applicable holdbacks, if any, that the Browns have retained, which is information prescribed by s. 39(4.1) of the Act. I order the Browns to provide this information.

[103] Jackman Construction also requests leave to amend its Reply and Defence to Counterclaim to plead relief against forfeiture, waiver, and estoppel. I grant such leave. I also order that the Defendants can file a reply to Jackman’s defence to counterclaim upon being served with the amended pleading.

Disposition

[104] For the foregoing reasons, I find that there is a genuine issue requiring a trial. The motion for summary judgment is dismissed.

[105] The Browns are ordered to provide all information required of them under s. 39(1) of the Construction Act, including the amount of the applicable holdbacks, if any, that the Browns have retained.

[106] Leave is granted to Jackman Construction to amend its Reply and Defence to Counterclaim to plead relief against forfeiture, waiver, and estoppel.

[107] The Browns are permitted to file a reply to the defence to counterclaim, in accordance with the Rules of Civil Procedure, upon being served with Jackman Construction’s amended Reply and Defence to Counterclaim.

Costs

[108] I would urge the parties to agree on costs. If they are unable to do so, then costs submissions may be made as follows:

(a) By December 16th, 2022, the Defendants shall serve and file their written costs submissions, not to exceed three pages, double-spaced, together with a draft bill of costs and copies of any pertinent offers; and

(b) The Plaintiff shall serve and file its responding costs submissions of no more than three pages, double-spaced, together with a draft bill of costs and copies of any pertinent offers, by January 6th, 2023; and

(c) The Defendants’ reply submissions, if any, are to be served and filed by January 13th, 2023 and are not to exceed two pages.

(d) If no submissions are received by January 13th, 2023, the parties will be deemed to have resolved the issue of the costs and costs will not be determined by me.

MacNEIL J.

Released: November 22, 2022