COURT FILE NO.: CV-10-0019-00 DATE: 2023-11-27

Superior Court of Justice – Ontario

IN THE MATTER OF the Construction Act, R.S.O. 1990, c. C. 30

Parties

B E T W E E N:

1022403 Ontario Ltd., C.O.B. Mirmil Products Plaintiff/Creditor

- and -

Man-Shield (NWO) Construction Inc. Defendant/Debtor

-and-

The Corporation of the City of Thunder Bay Garnishee

-and-

MBuilds (NWO) Limited Partnership, formally known as “Man-Shield (NWO) Construction”, a business style of Man-Shield (NWO) Construction Limited Partnership Interested Party

Counsel

C. Skipper, for the Plaintiff/Creditor R. Johansen, for the Defendant/Debtor and for the Interested Party

Heard

October 25, 2023, at Fort Frances, Ontario

Mr. Justice F. Bruce Fitzpatrick

REASONS FOR DECISION

[1] This was a motion for directions.

Introduction

[2] This is a garnishment motion for directions. The Plaintiff/Creditor 1022403 Ontario Ltd. c.o.b. as Mirmil Products ("Mirmil") has judgment against the Defendant/Debtor, Man-Shield (NWO) Construction Inc. ("Manshield") for $537,446.14. The Judgment has been partially paid, with a balance owing.

[3] Mirmil’s garnishment was pursuant to Rule 60.17 of the Rules of Civil Procedure. It also relied on Rule 60.08(17).

[4] The court is directed by that Rule to proceed in a summary manner. This matter did not proceed in any way that could charitably be described as “summary”. Manshield’s notice of motion, in effect to challenge the garnishment, was delivered in December 2019. On January 10, 2020, I directed the motion to be heard on March 26, 2020. The pandemic intervened. Three and half years later here we are.

[5] For the reasons that follow, I make the following directions:

a. Manshield, the judgment/debtor, is the party to the T-14 Contract with the City of Thunder Bay. b. $388,527.61 was validly garnished by Mirmil pursuant to a garnishment issued September 27, 2019. c. The Garnished Funds, paid into Court to the credit of this proceeding are not trust funds under the provisions of Section 7 of the Construction Act. d. There are no other creditors of the judgment/debtor who have a valid claim to the Garnished Funds. e. The Garnished Funds, are the property of the judgment/creditor (Mirmil) as of the date of the levy of the Garnishment; f. The Garnished Funds and any accrued interest held on account of this action and the garnishment are to be paid out forthwith by the Accountant of the Ontario Superior Court of Justice to 1022403 Ontario Limited c.o.b. as Mirmil Products.

Background

[6] Mirmil has judgment against Manshield for $537,446.14. The judgment has been partially paid, with a balance owing.

[7] The judgment arose from construction contract litigation. Mirmil was a subtrade to the general contractor, Manshield. Mirmil had a construction contract for millwork on a school in Fort Frances. The work was completed in 2010. Manshield did not pay Mirmil in full. Litigation ensued. A trial commenced in August 2016 and concluded in February 2017. Judgment was given against Manshield in January 2018. Manshield appealed. The appeal was dismissed in June 2019.

[8] Mirmil served a Notice of Garnishment dated September 27, 2019. The garnishment notice was served on the City of Thunder Bay respecting funds owing by the City to Manshield. The City responded by remitting to the Sheriff for the District of Thunder Bay the amount of $388,527.16.

[9] Manshield then brought a motion pursuant to Rule 60.08(16). Manshield initially argued that the City did not owe any money to Manshield, and that the funds should be released to Man-Shield Construction Inc., to whom the money was allegedly payable. However, over the course of the motion, Manshield changed its position. It said that in fact the entity to which the funds were owed was MBuilds (NWO) Limited Partnership (MBuilds).

[10] MBuilds was added as an interested party to this proceeding by court order in August 2020. MBuilds is represented by the same counsel as Manshield.

Positions of the Parties

[11] The City takes no position on this hearing.

[12] It is not disputed that Manshield had a construction contract with the City, known as the T-14 Contract. It is not disputed that Manshield was still working on this contract up to the spring of 2017.

[13] Manshield asserts that it ceased active construction work operations in the spring of 2017. Manshield says that the T-14 Contract was done in three phases. Manshield completed phase 1 and 2. Manshield, however, submits that it was MBuilds that completed phase 3. Thus, Manshield submits that the City owed MBuilds and not Manshield money when Mirmil served the garnishment in 2019.

[14] Mirmil disputes Manshields’ account of the facts. Mirmil argues that the evidence reveals that the City owed Manshield the money. Mirmil argues that the evidence reveals that MBuilds was an entity organized for tax purposes, but that it did not have a contract with the City in 2019. Mirmil submits Manshield’s motion should be dismissed and that the funds remitted by the sheriff of Thunder Bay should be paid to Mirmil.

The Issue

[15] In this matter, the issue is straightforward. Did the City owe Manshield or some other entity the monies that have been seized pursuant to the garnishment. If the City owed money to Manshield in September 2019, the garnishment has been properly levied and the funds should be released to Mirmil. If not, the funds should be turned over to MBuilds.

Trust Issue

[16] Manshield raised a preliminary issue. Manshield asserts that the funds seized pursuant to the garnishment were subject to a statutory trust and on that basis alone were immune to seizure. Manshield relies on section 7(2) (3) and (4) of the Construction Act which states:

Amounts certified as payable

(2) Where amounts become payable under a contract to a contractor by the owner on a certificate of a payment certifier, an amount that is equal to an amount so certified that is in the owner’s hands or received by the owner at any time thereafter constitutes a trust fund for the benefit of the contractor.

Where substantial performance certified

(3) Where the substantial performance of a contract has been certified, or has been declared by the court, an amount that is equal to the unpaid price of the substantially performed portion of the contract that is in the owner’s hands or is received by the owner at any time thereafter constitutes a trust fund for the benefit of the contractor. R.S.O. 1990, c. C.30, s. 7 (3).

Obligations as trustee

(4) The owner is the trustee of the trust fund created by subsection (1), (2) or (3), and the owner shall not appropriate or convert any part of a fund to the owner’s own use or to any use inconsistent with the trust until the contractor is paid all amounts related to the improvement owed to the contractor by the owner. R.S.O. 1990, c. C.30, s. 7 (4).

[17] At the time the garnishment was issued, there were no subtrades who were unpaid pursuant to the T-14 Contract. Nevertheless, Manshield submits that the amounts at issue were being held in trust for its benefit and were therefore the funds were not subject to execution.

[18] I disagree. The obligations of the trustee created by section 7 of the Construction Act are defined by section 7(4). In this case, all the subtrades were paid, and the City did not appropriate or convert any part of a fund to the owner’s own use or to any use inconsistent with the trust until the contractor is paid. The City paid monies to the Sheriff that they believed were owed to the garnishee, Manshield.

[19] This action by the City was not a breach of the trust created in section 7. A garnishment is a mechanism to allow creditors to seize property belonging to their debtors. The City in responding to the garnishment was not appropriating or converting trust monies to itself. In responding to the garnishment, the funds were acknowledged by the City as belonging to Manshield; that is the reason they were capable of being redirected to the Sheriff pursuant to the garnishment.

[20] The fact that Manshield had the right to contest the garnishment in this process is evidence that its entitlement to ownership either by contract or by statutory trust was preserved and recognized by this process. However, that ownership interest is not of a nature that immunizes the funds from garnishment. Neither is the act of responding to a garnishment an act of a breach of trust by a payor, like the City in this case.

[21] The trust issue is a red herring. I find this trust issue is irrelevant for the ultimate purpose of determining the issue on this kind of a motion for directions.

The Facts

[22] The evidence from Manshield and for the Interested Party on this motion was proffered mainly by Peter Belluz. I will discuss this evidence later.

[23] There was also an affidavit given by a Manitoba corporate solicitor, Ms. McCurdy for “the Man-Shield group of companies, which includes the defendant Man-Shield (NWO) Construction Inc.”.

[24] Ms. McCurdy’s evidence was helpful only insofar as it identified that Manshield changed its name to MBuilds (NWO) Limited Partnership on March 19, 2019. The legal work was done in Manitoba and the change of name was registered in Ontario on March 25, 2019.

[25] The balance of Ms. McCurdy’s affidavit deals with the fact that ManShield (NWO) Construction Inc. was a limited partner of an entity called MBuilds (NWO) Limited Partnership as of March 2020. She deposes that the MBuilds (NWO) Limited Partnership operates in the province of Manitoba and has never carried on business in the Province of Ontario.

[26] MBuilds (NWO) Limited Partnership was created for tax planning purposes and for no other reason.

[27] In my view, Ms. McCurdy’s evidence does nothing to advance Manshield’s position that MBuilds was the entity to which the City actually owed money at the time of the garnishment.

[28] Rather, Ms. McCurdy’s evidence that the MBuilds (NWO) Limited Partnership never carried on business in Ontario, contradicts the evidence of Mr. Belluz and the position taken by Manshield on this motion that Manshield was not the creditor of the City at the time the garnishment was levied.

The Evidence of Peter Belluz

[29] In the first affidavit filed in this matter, dated December 20, 2019, Mr. Belluz swore that the funds garnished by the City belonged to Man-Shield Construction Inc. (Manshield) and not Man-Shield (NWO) Construction Inc. (Debtor) In the affidavit, Mr. Belluz stated: “Man-Shield Construction Inc. (Man-Shield) and Man-Shield (NWO) Construction Inc. (“Debtor”) are separate legal entities”. The affidavit goes on to assert that “On or about July 30, 2014, Man-Shield was successful in securing a contract with the Corporation of the City of Thunder Bay (“Garnishee”)”. In his affidavit, Mr. Belluz admits that Man-Shield (NWO) Construction Inc. owes money to Mirmil. However, he states that Man-Shield does not.

[30] Mr. Belluz evidence is not believable. His statements in his first affidavit are untrue based on the other evidence I have on this hearing. Moreover, his statements in his first affidavit are belied by his own subsequent evidence and the ultimate position taken by Manshield that in 2014 the City contracted with Manshield and not Man-Shield Construction Inc.

[31] In the materials filed with the Court, I find Mr. Belluz is saying two different things. His original affidavit was an important statement. It caused the Sheriff to withhold funds and was the basis for commencing what turned out to be a fairly drawn out and arduous process. A subsequent affidavit told a different story. This happens sometimes. But in this case, I find it is a badge that indicates a lack of credibility on the part of the deponent.

[32] In Mr. Belluz’s affidavit, the misidentification of the entity that contracted with the City appears sloppy at best. However, I agree with the submissions of Mirmil that this was not an inadvertent error on the part of Mr. Belluz. I find it was an attempt to obfuscate and to confuse the Court in pursuit of obtaining an order that the garnished funds not go to Mirmil.

[33] Manshield filed a further affidavit of Mr. Belluz dated June 25, 2020, where Mr. Belluz deposes “However, as a result of further investigations into the history of the contractual relationship with the City of Thunder Bay involving the Prince Arthur’s Landing Marina and the T 14 Contract I have secured additional information which is relevant to the Court’s assessment”. He then goes on to depose how in fact it was MBuilds and not Manshield that was contracting with the City in respect of the funds seized.

[34] This is a material misrepresentation. It was unpersuasive. Mr. Belluz is not a credible or reliable witness. He was not a minor player in this piece. He deposes he is an officer of a variety of entities that include the name “Man-Shield”. Manshield refuses to pay Mirmil monies owing on a judgement that had been obtained after significant due process was afforded to both parties. In a commercial context this is an important consideration for assessing evidence. This is because this process is a summary proceeding where a garnishment has been properly issued, and in my view, properly responded to by a garnishee. This process comes at the “end of the show”. The civil process is supposed to support an orderly satisfaction of the orders of the court. It is not designed to permit last minute “rope a dope” delay and obfuscation. It is not convincing when the story told by a debtor, about something as important as who is actually doing business with who, keeps changing. At issue here was an entity that owed a significant amount of money to a legitimate creditor.

[35] Senior persons in positions of authority with major construction companies doing business with sizeable municipalities should know the name of the particular corporation that is involved with major projects. On the face of the material filed, Mr. Belluz would have me believe he made an inadvertent error in December 2019 in identifying what was going on between a company he was involved with and the City. I find otherwise.

[36] I find Mr. Belluz’s evidence is not credible about which corporate entity was owed a debt by the City when the garnishment was levied. I also take note of evidence filed by Mirmil that Man-Shield Construction Inc., a federal corporation was not registered to do business in Ontario. Yet Mr. Belluz initially attempted to persuade the Court otherwise.

[37] There are other sworn documents that were exhibited in this matter which reinforce my view that Mr. Belluz is incorrect when he attempted in his material to persuade the Court that the monies should not be paid to Mirmil.

[38] Statutory declarations in relation to the T-14 Contract were introduced as exhibits. CCDC 9A-2001 statutory declaration dated September 30, 2019, but sworn October 28, 2019, indicates the Contractor for the Tender 14 Prince Arthur’s Landing-Marina” project was “Manshield (NWO) Construction”. It was not MBuilds. Mr. Belluz swore this statutory declaration, which he disingenuously now attempts to say was a mistaken statutory declaration. I draw a negative inference from this statutory declaration document that adversely impacts on Mr. Belluz’s credibility on this motion.

[39] October of 2019 is more than six months after the MBuilds (NWO) Partnership name was registered in Ontario in March 2019. Yet the Manshield name continues to be used in important legal documents provided by Manshield. This evidence corroborates my finding that I cannot rely on the evidence of Mr. Belluz.

[40] I do not accept Manshield’s submission that the City of Thunder Bay somehow issued a new contract to MBuilds in 2019. The monies garnished resulted from the obligation the City had to Manshield for a contract it signed in 2014. There is no evidence before the Court that a new contract was signed. There is no evidence that the City agreed to an assignment of the obligations and liabilities of the T-14 Contract to an entity other than Manshield. The evidence of a witness for the City on this motion Mr. Brian Newman confirms that at no point during the course of T-14 Contract did the City receive a request from Man-Shield to assign the T-14 contract to a new entity, nor did the City at any point during the T-14 Contract consent to such an assignment.

[41] The City had assigned a vendor number to Manshield. It was that number that Manshield was using to obtain funds. Mr. Belluz tried to have the City change the names on the documents being used to pay out under the T-14 Contract after March 2019. For example, Manshield asserts a change order dated July 4, 2019, from the project certifier Brook McIlroy indicates that somehow the third phase of the project work was to be done by an entity other than the one that had contracted with the City in 2014.

[42] However, the change order does no such thing. Manshield did not provide me with any authority that a municipality could agree to change the entity with which it was contracting solely on the strength of a document issued by a payment certifier, as opposed to the Mayor or Council. Section 5 (3) of the Municipal Act, 2001 provides that a municipality must carry out its power by its council as exercised by by-law. The resolution of Council authorizing the T-14 Contract in June 2014 was produced on this motion. The City contracted with Manshield. There was no by-law provided on this hearing demonstrating that the City agreed Manshield was no longer the contracting party in respect of the T-14 Contract.

[43] After the garnishment was issued on December 5, 2019, Mr. Belluz sent an email attempting to have the City change its purchase orders to match the fact that after March 2019 Manshield had been submitting invoicing identifying itself as MBuilds. In my view, this was evidence that confirms that Manshield was at all material times the party contracting with the City and that the funds garnished were those belonging to Manshield and not MBuilds. Mr. Belluz’s efforts were designed to frustrate the garnishment that had been issued.

[44] The City had one vendor number, one job number and one bank account into which monies from the T-14 Contract were being deposited. This is evidence which in my view confirms the contracting parties were the same in 2014 as they were when the garnishment was levied in September 2019.

[45] It is trite law that a corporate name is merely a means of identification, and a change of name does not affect the identity of the company nor its continued existence as the original body corporate. A very old case (1881) from the Ontario Court of Appeal, Provincial Insurance Co v. Cameron, (1881) 31 UCCP 523 notes that just as changing a human person’s family name has no bearing on that person’s debt obligations or assets, so too does changing a corporate person’s name have no bearing on the corporation’s legal obligations or entitlements. Manshield’s attempts to utilize another name for itself in its dealings with the City, does not mean another legal entity was now entitled to the funds payable under the T-14 Contract.

[46] The facts presented in this motion lead me to conclude the only reasonable determination on the evidence is that Manshield (ie. Man-Shield (NWO) Construction Inc.) was the party to the contract under which the City was advancing funds that were garnished by the Sheriff of Thunder Bay in September 2019.

[47] I find that the attempted change of name in March 2019 by Manshield to MBuilds is not of sufficient legal force or effect to change the fundamental fact that Manshield and no other entity was doing the construction work for which the City was paying in September 2019.

[48] I find there was no evidence presented on this motion from which I could find that there are other creditors who have a claim to these funds including the entity MBuilds (NWO) Limited Partnership.

[49] Accordingly, I accept the submissions of Mirmil that Manshield’s motion should be answered with the declarations and orders set out in the introduction to these Reasons for Decision.

Costs

[50] At the commencement of the proceeding, I asked counsel for a rough estimate of what they would expect to pay the other side if they were not successful on this motion. Both counsel gave an estimate of partial indemnity costs of $15,000.00 inclusive, plus HST. I agree this an appropriate amount of costs given what was at issue in this matter despite how long it took to complete. In the event there are no Rule 49 compliant offers to settle this motion, I order that MBuilds (NWO) Limited Partnership and Man-Shield (NWO) Construction Inc. jointly and severally pay to the responding party 1022403 ONTARIO LTD., c.o.b. as Mirmil Products costs of $15,000.00 inclusive of HST forthwith.

“original signed by” The Hon. Mr. Justice F.B. Fitzpatrick

Released: November 27, 2023