Court File and Parties

COURT FILE NO.: CV-22-683250 DATE: August 16, 2023

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 1936230 Ontario Inc. and 5031991 Ontario Inc. v. Hari Kaush Developments Inc.;

BEFORE: ASSOCIATE JUSTICE C. WIEBE

COUNSEL: Antonio Conte for Hari Kaush Developments Inc.; Mark Klaiman for 1936230 Ontario Inc. and 5031991 Ontario Inc.;

HEARD: June 8, 2023.

Reasons for Decision

[1] This is a motion by the defendant, Hari Kaush Developments Inc. (“HKD”), for an order striking the statement of claim, discharging the plaintiff’s claim for lien and returning the posted lien security to HKD. The motion is brought under Construction Act, R.S.O. 1990, c. C.30 (“CA”), sections 47 and 44(5).

Background

[2] The following background facts are evident from the motion material and are undisputed.

[3] In 2019 construction on a four-story commercial building was underway on commercial land at 2225 Markham Road, Toronto. The general contractor hired 1936230 Ontario Inc. (“193”) to supply and install structural steel. Based on the disclosed company filings, 193 had the registered trade name of “Sun Steel Fabricators.”

[4] On September 4, 2019 2710201 Ontario Limited (“271”) acquired the land and pursued the project of building a four-story medical building. It used HKD as the general contractor.

[5] On October 19, 2019 HKD issued a purchase order to an entity called, “Sun Steel Fabricators Ltd.” whereby Sun Steel was to supply and install structural steel, stairs and railings for the project for a fixed price of $661,050. Sun Steel Fabricators Ltd. does not exist.

[6] Work proceeded. Based on the disclosed company filings, 5031991 Ontario Inc. (“503”) was incorporated on April 21, 2020 and acquired the registered name, “Sun Steel Fabricators.”

[7] The structural steel work was completed at some point in November, 2021 or March, 2022. That issue is in dispute. There were 8 extras totaling $294,765. These are also in dispute. HKD paid at least $403,208.45 on account of all this work. HKD says it paid more.

[8] On May 26, 2022, using lawyer Christopher Kozlowski, 193 and 503 registered a claim for lien in the amount of $554,530.50. The document states that the last day of supply was March 27, 2022.

[9] On June 7, 2022 HDK obtained an order from Associate Justice Robinson vacating this claim for lien upon the posting of $604,530.50 in cash security. This security was posted, and the lien was vacated.

[10] 193 and 503 purported to perfect this lien by commencing this action on June 27, 2022. On July 13, 2022 HDK delivered a statement of defence and counterclaim.

[11] On October 5, 2022 there was a section 40 cross-examination of Balwinder (Benny) Dhensa, the principal of 193 and 503. Mr. Dhensa gave 18 undertakings. Despite several demands from HDK’s lawyers, 193 and 503 did not comply with their undertakings.

[12] On February 3, 2023, without notifying HKD, Mr. Kozlowski brought a motion to be removed as lawyer of record for 193 and 503.

[13] In the meantime, HKD brought this motion on February 16, 2023 with a return date of March 13, 2023. The affidavit in support was sworn by Mr. Conte’s assistant, Ilona Isakovitch. Mr. Conte served the motion record on Mr. Kozlowski. The primary basis for the motion was the unanswered undertakings.

[14] The removal motion was heard on February 27, 2023 by Associate Justice Josefo and was granted. In the meantime, no responding material was served in the HKD motion.

[15] The HKD motion was scheduled to be heard by me. I required that Mr. Kozlowski appear before me on March 13, 2023. I had Mr. Kozlowski phone Mr. Dhensa. Mr. Dhensa advised me that the plaintiffs wanted to defend this motion and were seeking a new lawyer. I adjourned the motion to May 8, 2023 to allow the plaintiffs to do so.

[16] On May 8, 2023 Mr. Dhensa appeared and advised that Mr. Klaiman had just been hired by the plaintiffs. Mr. Dhensa said that it took this time to get the money for a retainer. Mr. Klaiman did not appear as he had another appointment, but Mr. Dhensa gave dates on which Mr. Klaiman could argue the motion. I adjourned the motion to one of those dates, June 12, 2023. Due to a conflict in my schedule and after consulting with counsel, I later changed the return date to June 9, 2023.

[17] On June 1, 2023 Mr. Klaiman sent Mr. Conte a letter purporting to answer 16 of the 18 undertakings. On June 2, 2023 Mr. Klaiman served a responding motion record containing the affidavits of Mr. Dhensa and two employees of 193, Buta Singh Dhillon and Gurjeet Mann.

[18] On June 5, 2023 Mr. Conte served the reply affidavit of the principal of HKD, Sudhir Madan. On June 8, 2023 Mr. Klaiman sent Mr. Conte a letter purporting to answer the final two undertakings.

[19] At the outset of the argument on June 9, 2023, Mr. Klaiman challenged the admissibility of Exhibits B and C to the reply affidavit of Mr. Madan as being improper reply evidence. Exhibit B was a City of Toronto Automated Inspection Status Report showing the results of inspections for various aspects of the project as of February 21, 2023. I ruled that this document could not be admitted as reply evidence as the City inspection reports were available before the motion was brought, and should have been added to the motion record as proof of the timeliness point and to give the plaintiffs an opportunity to respond to them. Schedule C was a collection of the daily reports of the defendant’s project manager concerning the period discussed in the plaintiffs’ responding motion record, namely the period of March 17 to March 27, 2022. I allowed these documents to remain as the defendant did not know prior to the responding motion record what the plaintiffs would be relying on to prove the timeliness point. This evidence was responsive to that plaintiffs’ evidence.

Issues

[20] Having reviewed the motion material, I find that the issues to be determined are the following:

a) Is there a triable issue as to lien timeliness? b) Is there a triable issue as to whether the lien is frivolous, vexatious or abusive, or excessive?

Timeliness

[21] The process to be followed in a CA section 47 motion has now been clarified. The moving party must prove that there is no triable issue as to the basis on which the lien is sought to be discharged; see Maplequest (Vaughan) Developments. Inc. v. 2603774 Ontario Inc., 2020 ONSC 4308, at paragraph 25. Both parties must “put their best foot forward” in the evidence to assist the court in making this determination, and the court is entitled to make this assumption; see GTA Restoration Group Inc. v. Baillie, 2020 ONSC 5190, at paragraph 56. The lien claimant has this onus because it is invariably in the best position to provide the evidence; see GTA, op. cit., paragraph 55. However, under section 47, the court does not have the “enhanced powers” of a judge on a motion for summary judgment to weigh evidence, determine credibility and draw inferences from the evidence; see Louis Jones Construction Ltd. v. Rocque, 2022 ONSC 2362, paragraph 22. The evidence must indeed be clear for the motion to succeed.

[22] The first issue is timeliness. HKD submits that there is no triable issue that the claim for lien in this case was registered too late, and that the claim for lien should be declared expired and be vacated, and lien security returned as a result.

[23] It is undisputed that the lien claimants were “subcontractors” for the purpose of the CA. Their claim for lien was registered on May 26, 2022. Therefore, if the new CA applies and since there was no evidence of a certificate of substantial performance of the contract or of the completion, abandonment or termination of the contract, that means that, pursuant to CA section 31(3)(b), there must be clear evidence (ie. no triable issue) that the plaintiffs last supplied services and materials prior to sixty days before May 26, 2022, namely prior to March 27, 2022, for me to declare in this motion that this lien has expired due to untimely preservation.

[24] In his reply affidavit, Mr. Madan argued that the project’s inception predated July 1, 2018 and that the applicable lien period was, therefore, under the old CA, namely 45 days from the date of last supply. Under that lien period, the plaintiffs’ claim for lien was clearly registered too late. Mr. Conte raised this point briefly in oral argument. The evidence indicates that the project may have been started by the previous owner before 271 acquired the land on September 4, 2019. Mr. Dhensa said in his affidavit that he worked on this project for a contractor for the previous owner. But there is no clear evidence in the motion material as to when the project and its procurement actually commenced. Mr. Conte asked me to look at the drawings produced by Mr. Dhensa in his affidavit. I did and could not make out clearly their dates. This being the motion of the defendant, I find it remarkable the defendant made no more of an effort to clarify the issue of the transition rules as the defendant has the onus to “put its best foot forward.” Therefore, I find that there is at least a triable issue as to whether the old lien period applies.

[25] For the purpose of my further discussion about lien timeliness, I will apply the 60 day lien period under the new CA as it is the more generous one for the lien claimant. To reiterate, that means that HKD must prove definitively that the last date of supply was earlier than March 27, 2022.

[26] Mr. Conte pointed to several pieces of circumstantial evidence that, he argued, showed that the alleged last date of the plaintiffs’ supply was prior to March 27, 2022. He pointed me to what he described as the last cheque HKD wrote in favour of “Sun Steel Fabricators.” It is dated August 26, 2021. Furthermore, it is undisputed that HKD paid for the materials. Mr. Conte pointed me to the defendant’s balance sheet that he said showed that the defendant last paid for materials on this scope on November 1, 2021. Mr. Conte pointed me to a letter authored by engineer, Jelbert Real, dated November 8, 2021 wherein Mr. Real commented on four issues concerning the structural steel and stated that there were “no other concerning items.” Mr. Conte pointed me to text messages sent between Mr. Madan and Mr. Dhensa from May, 2021 to November, 2021 concerning the plaintiffs’ crane.

[27] I do not find this evidence sufficient to meet the HKD onus of proof on this motion. Indeed, I am not impressed with this evidence. These were all documents attached to the affidavit of Mr. Conte’s assistant, Ms. Isakovitch, and were not explained by her. In short, they were not introduced or explained by anyone with direct knowledge or experience with the project. The letter from Mr. Real is hearsay and does not on its face say anything about the conclusion of the plaintiffs’ work.

[28] The only evidence from the defendant that was in any way compelling on this point were the daily reports that Mr. Madan introduced in his reply affidavit for the period, March 17, 2022 to March 28, 2022. Mr. Madan stated in this reply affidavit that these were prepared and signed by the HKD project manager, Micah Clarke. On their face, they appear to be daily reports of parties present, and work being done. They appear to make no reference to the plaintiffs in this period. They also show that the alleged last day of work, March 27, 2022, was a Sunday. There is no report from Mr. Clarke for that Sunday. This is all indeed suspicious.

[29] But I find this evidence problematic as well. No attempt was made to qualify these reports as under the business records exception to the hearsay rule, and there was no affidavit from Mr. Clarke explaining that these reports represent a true and complete picture of whatever happened on site each day at that time. Mr. Madan asserted in his affidavit that Mr. Clarke would have had to authorize weekend work in writing and did not do so for the weekend of March 26-27, 2022. Again, there is no evidence from Mr. Clarke himself confirming that he did not give such written authorization that weekend, or that he made no exception to this rule on this weekend.

[30] Against this evidence there is the evidence that the plaintiffs proffered. Mr. Dhensa’s affidavit states that between March 17 and March 27, 2022 the plaintiffs had men on site installing bolts between the concrete pads and the steel, welding on the roofs, painting touch-ups on the steel beams, welding plates and cleaning up. There was no evidence that this work, if true, was deficiency correction work, which does not extend the lien period. Mr. Dhensa also attached a photograph of a worker on a step-ladder on what Mr. Dhensa says was March 21, 2022. However, most importantly, the plaintiffs proffered two affidavits sworn by men who say they worked for 193 on the project at this time. One was Butta Singh Dillon and the other Gurjeet Mann. Both men swore that they did the work described by Mr. Dhensa between March 17 and March 27, 2022. Mr Dhensa stated in this affidavit that these men were paid in cash and that he did not have payroll records for them. None of these affidavits were made subject to cross-examination.

[31] In my view, there is a genuine conflict in the evidence on this point that justifies a trial. There needs to be better evidence and the witnesses need to be cross-examined. As a result, I conclude that there is a serious issue to be tried concerning the timeliness of the plaintiffs’ claim for lien. I am not prepared to declare the lien expired in this motion on this ground.

Frivolous, vexatious, abuse of process and excessive

[32] Under the new CA section 47, a defendant can have a claim for lien discharged on the grounds that it is frivolous, vexatious or an abuse of process, or “on any other proper ground.” HKD asserts that the quantum of the plaintiffs’ claim for lien meets that test, or at least that a large part of the claim for lien meets that test.

[33] What constitutes frivolousness, vexatiousness and an abuse of process? The caselaw provides some guidance in this regard. “Frivolous” is used to describe an action that is so highly unlikely to succeed that it is apparently devoid of practical merit; “vexatious” includes actions that obviously cannot succeed and that are brought for an improper purpose; “abuse of process” is a flexible doctrine that gives the court the inherent power to prevent the misuse of its process; see XPL Construction Solutions Inc. v. North Bay Capital Investments Ltd., 2023 ONSC 238, at paragraphs 34 to 39.

[34] HKD also relies upon CA section 44(5). This is the subsection that allows the court to reduce security posted for a claim for lien, and thereby effectively reduce the lien, “where it is appropriate to do so.” The test on such a motion is whether “the evidence supporting the calculation of the claim for lien fails to establish a reasonable basis for the amount claimed;” see Pentad Construction Inc. v. 2022988 Ontario Inc., 2021 ONSC 824, at paragraph 80 and H.I.R.A. Limited v. Middlesex Standard Condominium Corporation No. 823, 2018 ONSC 5931, at paragraph 10. The evidence on such a motion is assessed in the same way that the evidence is assessed on a motion for summary judgment; see Pentad, op. cit., paragraph 81.

[35] I have examined the evidence in this regard and find that HKD has failed to meet either test. The following are my reasons:

a) The accounting for the plaintiffs’ claim concerning contract amounts is unclear. The issue is the credits the defendant is entitled to. The plaintiffs’ accounting of their $554,530.50 claim is contained in paragraph 15 of the statement of claim. Mr. Conte argued that the plaintiffs did not account for $10,000 in payments he said HKD made to the plaintiffs. Mr. Conte also argued that the plaintiffs failed to account for some $200,000 he said HKD paid to suppliers on behalf of the plaintiffs. In his reply affidavit, Mr. Madan alleges HKD paid in total $678,020.97 for labour and materials, plus $22,409.46 for the plaintiffs’ payroll. He refers to a Vendor Balance Detail schedule for HKD that has a list of numbers with a total that comes close to these amounts. This is $297,221.98 more than what the plaintiffs account for concerning these items. Yet, in his answers to undertakings, Mr. Dhensa took issue with the inclusion of certain back-charges as not being within the plaintiffs’ scope. He provided invoices to back up the plaintiffs’ position on the credits. He was not cross-examined on this affidavit. To get to the bottom of these issues will require a thorough and detailed review of the supporting accounting documentation. That was not done in the motion material. There was simply no clear evidence here as to which side is correct as to the accounting, or whether either side is correct. This will have to be determined in a trial.

b) Most of the argument was about the $294,765 the plaintiffs claim on account of eight alleged extras. The defendant alleged that the plaintiffs did not get prior written approval for the changes. There is no dispute that the contract document required that all chargeable extras have HKD’s prior written approval. The plaintiffs did not provide proof of such prior written approval from HKD. However, as Justice Perell pointed out in D & M Steel Ltd. v. 51 Construction Ltd., 2018 ONSC 2171, at paragraph 60, “an owner or contractor cannot orally request extra work be performed outside the scope of a contract, and then not pay for the work by relying on the written terms of the contract requiring confirmation of extras in writing.” Acquiescence in the extra work or oral approval of it by HKD is what essentially the plaintiffs allege in this case. That is what Mr. Dhensa alleges in his affidavit, and he was not cross-examined. Interestingly, HKD does not deny that the extra work was done.

c) The plaintiffs rely on handwritten calculations made by Mr. Dhensa concerning each extra after the work was done. These claims concern only labour. The calculations were delivered to HKD at the time. Mr. Klaiman skillfully took me through each of these calculations, and correlated them to the steel drawings showing where the changes were made on the drawings by the defendant’s structural engineer. Extra 1 concerned extra beams around the added elevator; Extra 2 concerned additional heating and air conditioning ductwork due to plan revisions; Extra 3 concerned 32 additional pieces of steel that were required by the engineer on each floor; Extras 4 and 5 concerned additional plates the engineer required for each floor; Extra 6 concerned the addition of a railing on the roof; Extra 7 concerned the addition of a steel beam on each floor; and Extra 8 concerned the installation of heavier beams on the roof. Indeed, Mr. Dhensa did not provide time sheets for this work and provided no explanation for this failure. He said that he and Mr. Madan trusted each other concerning the accounting. Nevertheless, this evidence was cogent enough to satisfy me that there is a real issue as to the existence of this extra work and the approval the plaintiffs got to do it given the changes that were evident on the drawings.

[36] As a result, I am not prepared to find that any part of the plaintiffs’ claim for lien is frivolous, vexatious, abusive or excessive for the purpose of this motion. There is a triable issue concerning the entire quantum of the plaintiffs’ claim.

Conclusion

[37] I, therefore, dismiss this motion in its entirety.

[38] Concerning the costs of this motion, the defendant filed a costs outline that showed substantial indemnity costs of $24,370.61 and partial indemnity costs of $17,251.61. The plaintiffs filed a costs outline that showed actual costs of $11,384.75 and partial indemnity costs of $6,830.85. It appears that the plaintiffs claim the partial indemnity amount.

[39] I am not prepared to order any costs in this motion. The plaintiffs succeeded in defeating the defendant’s motion. Therefore, the defendant does not deserve costs. But the plaintiffs also do not deserve costs. The major reason this motion was brought was the failure of the plaintiffs and Mr. Dhensa to comply with the undertakings that were given at the s.40 cross-examination in a timely way. That was evident from the defendant’s motion record. Mr. Dhensa gave these undertakings on October 5, 2022, but did not comply with them until the eve of the argument of the motion eight months later. This conduct is egregious and nullifies any claim the plaintiffs might otherwise have to the costs of this motion.

DATE: August 16, 2023

ASSOCIATE JUSTICE C. WIEBE