Executive Storage Inc., 2024 ONSC 2298
COURT FILE NO.: CV-23-91680
DATE: 2024-04-18
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
2388208 Ontario Inc., operating as RONEN MANAGEMENT SERVICES
Plaintiff
– AND –
SILVER SEVEN EXECUTIVE STORAGE INC., SILVER SEVEN CORPORATE CENTRE INC. and 19 FRANK NIGHBOR PLACE INC.
Defendants
Howard L. Shankman, Solicitor for the Plaintiff and Defendants by Counterclaim, The Responding Party
Daniel Fridmar, Solicitor for the Defendants and Plaintiff by Counterclaim, The Moving Parties
AND BETWEEN:
SILVER SEVEN CORPORATE CENTRE INC.
Plaintiff by Counterclaim
– AND –
2388208 Ontario Inc., operating as RONEN MANAGEMENT SERVICES and ELI RONEN
Defendants by Counterclaim
HEARD: February 20, 2024
R. Smith J.
REASONS FOR DECISION
[1] The defendants, collectively referred to as ("Silver Seven"), have brought a motion seeking an order that the plaintiff, hereinafter referred to as ("Ronen") post security for costs of $60,000 plus HST in accordance with Rule 56 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 ("Rules") and a stay of the action until the security is posted.
[2] Ronen has filed two construction liens under the previous Construction Lien Act, R.S.O., c, C. 30 (the "Act") for allegedly providing services and materials to two properties: 777 Silver Centre Road, Ottawa, Ontario (the "Silver Property") and 19 Frank Nighbor Place Inc. ("19 Frank").
[3] Ronen and Eli Ronen entered into an oral construction management services contract (the "contract") with Silver Seven for a construction project located at 777 Silver Centre Road, Ottawa, Ontario. Silver Seven submits that Ronen's construction liens do not qualify as "improvements" as defined under the Act on either the Silver Property or the property located at 19 Frank. In addition, Silver Seven submits that there is good reason to believe Ronen's claims for construction liens on both properties are frivolous and vexatious.
[4] For the Silver Property, Ronen submits that its construction management fee was to increase to $27,000 per month plus HST, inclusive of out-of-pocket expenses, from $10,000 per month plus out-of-pocket expenses once a conditionally approved building permit was obtained for the Silver Property, and not when the actual building permit was obtained. Ronen claims it should be paid at the higher rate starting in July 2022 even though a building permit had not yet been obtained.
[5] With regards to 19 Frank, Silver Seven submits that construction was completed in 2014 before Ronen ever met the principals of Silver Seven. Ronen's claim for a lien relates to negotiating a rebate to recover capital and construction costs for 33 parking spaces. Any recovery of such payments through Ronen's efforts would not amount to an "improvement" to the property or support a construction lien.
Issues
Does it appear that there is good reason to believe that Ronen's claims for construction liens on the Silver Property and 19 Frank are frivolous and vexatious?
If so, should Ronen be ordered to provide security for costs in the amount of $60,000?
Issue #1 – Does it appear that there is good reason to believe that Ronen's claims for construction liens on the Silver Property and 19 Frank are frivolous and vexatious?
[6] Rule 56.01 (1) (e) reads as follows:
56.01(1) the court, on motion by the defendant or respondent in a proceeding may make such order for security for cost as it is just where it appears that,
(e) there is good reason to believe that the action or application is frivolous and vexatious and that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent;
[7] Section 14 (1) of the Act states that a person who supplies services or materials to an improvement for the owner, contractor, or subcontractor, has a lien upon the interest of the owner and the premises improved for the price of those services or materials.
[8] Pursuant to Section 1(1) of the Act,
"improvement" means, in respect of any land,
a. any alteration, addition, or repair to the land,
b. any construction, erection, or installation on the land, including the installation of industrial, mechanical, electrical or other equipment on the land or on any building, structure or works on the land that is essential to the normal or intended use of the land, building, structure or works, or
c. the complete or partial demolition or removal of any building structure or works on the land; ("ameliorations")
[9] Section 17 of the Act, states that the lien of a person is limited to the amount owing to the person in relation to the improvement.
The Lien Claim on the Silver Property
[10] In 2021, Silver Seven agreed to pay Ronen a construction management fee of $10,000 plus HST per month plus agreed-upon out-of-pocket expenses until a building permit was obtained for the Silver Property.
[11] On or about June 2022, the parties agreed to increase Ronen's construction management fee to $27,000 plus HST per month inclusive of all of his out-of-pocket expenses once a building permit was issued for the construction of the Silver Property.
[12] On June 23, 2022, Ronen wrote an e-mail to Silver Seven confirming when his construction management fee would increase stating as follows: "The fee will be applicable from the time we have the building permit."
[13] Ronen argues that the fee increase started from July 2022 and in any event by August 17, 2022, when it alleges that the building permit was conditionally issued for the Silver Seven storage facility. Ronen further alleges that the building permit was not issued by the City because Silver Seven delayed in submitting a limiting distance agreement required before the building permit would be issued.
[14] In August of 2022, the building permit had not been applied for yet and was only applied for in October 2022. In August 2022, the City of Ottawa approved a request to phase the building permit application process and issued a foundation permit, but did not issue a building permit.
[15] In its e-mail of June 23, 2022, Ronen agreed that the increased monthly fee would start when the building permit was obtained. In addition, Ronen continued to send Silver Seven invoices of $10,000 per month plus HST plus his out-of-pocket expenses until February 2023. Ronen did not increase the amount of its monthly invoices in August 2022.
[16] Silver Seven terminated the contract with Ronen by letter dated February 13, 2023. Following his termination, Ronen sent an email to Silver Seven stating that the only amounts owing to Ronen at the time of termination was $22,600 which was for 2 months in lieu of notice at $10,000 per month plus HST as well as for the sum of $4,770.13 for unpaid expenses. Silver Seven paid Ronen the amount he requested.
[17] Ronen has subsequently alleged that Silver Seven had an obligation to pay it back pay at the rate of $27,000 per month from July 2022 until the date of termination and claims to be entitled to a construction lien for the amount it alleges is owed.
[18] Ronen alleges that the monthly fee increase commenced in July 2022, however this is contradicted by Ronen's own e-mail stating that the fee increase would occur upon obtaining a building permit from the City of Ottawa and his e-mail claiming $22,600 was owing to it following the termination. In addition, Ronen continued submitting monthly invoices of $10,000 plus out- of-pocket expenses from July of 2022 until February 2023. If Ronen understood that its management fee increased as of July 2022, it would have increased his monthly rate immediately and would not have continued to send invoices at $10,000 per month plus expenses until February 2023.
[19] I find that Ronen's claim to be entitled to a fee increase to $27,000 per month from July 2022 until February 2023 is contradicted by both its written confirmation of the agreement, his e- mail claiming two months' notice at $10,000 per month following termination and by Ronen's own conduct continuing to send monthly invoices of $10,000 per month until February 2023. Based on Ronen's own communications and conduct described above, I find that there is good reason to believe that its claim for a construction lien on the Silver Property for services provided from July 2022 until February 2023 at $27,000 per month is frivolous and vexatious.
The Lien Claim on the 19 Frank Property
[20] Ronen also claims to be entitled to a construction lien for an improvement on 19 Frank for allegedly negotiating a rebate on the capital and construction costs for 33 parking spaces. The construction of the 33 parking spaces was completed in 2014 which was before Ronen had met any of the principals of Silver Seven and long before Ronen attempted to negotiate a rebate which occurred in 2022. Ronen may have negotiated a rebate from Movatis in the 2022 time-frame but there is no evidence that Ronen was responsible for creating any improvement to 19 Frank within the time limit to register a lien, because the construction of the 33 parking spaces was completed in 2014, approximately 8 years before Ronen attempted to negotiate a rebate.
[21] In Hallum v. Canadian Memorial Chiropractic College (H.C.J.), 1989 CanLII 4354 (ON SC) at para. 13, the court stated that in order to succeed on a Rule 56.01(1)(e) motion, the defendant "only has to show that it appeared that there was good reason to believe that the action was frivolous or vexatious. It is not required to show that the action was in fact frivolous".
[22] Ronen's claim for a construction lien on 19 Frank 8 years after the work was completed is totally without merit and as such, I find there is good reason to believe that its claim for a construction lien on this property is also frivolous and vexatious.
Disposition of Issue #1
[23] For the above reasons, I find that there is good reason to believe that Ronen's claims for construction liens on the Silver Property and 19 Frank are frivolous and vexatious.
Issue #2 - Is there a good reason to believe that Ronen has insufficient assets in Ontario to pay the costs of the defendants?
[24] Silver Seven estimates that a trial will be required to assess the credibility of the parties and that it will incur costs of $60,000 plus HST to complete the trial.
[25] Eli Ronen and Silver Seven agreed that Eli would provide his construction management services through a corporation, namely, 2388208 Ontario Inc. operating as Ronen Management Services. The corporation has only one shareholder and one director, namely Eli or Eliahou Ronen.
[26] Ronen states that it has some assets in Ontario namely some unspecified accounts receivable from the sale of canola oil and a new project management role he has recently undertaken. However, Ronen has not provided any evidence of any assets in Ontario against which Silver Seven could collect the costs of this proceeding. Ronen's claim to have some Accounts Receivable does not provide adequate security for costs and does not adequately demonstrate the financial health of the corporation or that it has sufficient assets in Ontario to pay costs if it is unsuccessful in this proceeding.
[27] In addition, Eli and 2388208 Ontario Inc., operating as Ronen Management Services also have a history of poor financial health. For example, in June 2022, Silver Seven loaned Eli the
sum of $28,000 on an interest-free basis to prevent the Royal Bank from selling his residential property. Eli has not repaid this loan despite several requests for payment.
[28] For the above reasons, I am satisfied that there is good reason to believe that Eli and Ronen do not have sufficient assets in Ontario to pay Silver Seven's anticipated legal costs of completing this legal proceeding.
Disposition of Issue #2
[29] For the above reasons, Ronen is ordered:
a) to pay $15,000 into court as security for costs within 45 days;
b) to pay a further $20,000 into court within 90 days of the date fixed for trial;
c) to pay costs of $6,000 plus HST inclusive of disbursements for this motion; and
d) Ronen's action is stayed until the amounts ordered in a) and c) above are paid or until further order of this Court.
The Honourable Justice Robert Smith
Released: April 18, 2024
Executive Storage Inc., 2024 ONSC 2298
COURT FILE NO.: CV-23-91680
DATE: 2024-04-18
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
2388208 Ontario Inc., operating as RONEN MANAGEMENT SERVICES
Plaintiff
– AND –
SILVER SEVEN EXECUTIVE STORAGE INC., SILVER SEVEN CORPORATE CENTRE INC. and 19 FRANK NIGHBOR PLACE INC.
Defendants
AND BETWEEN:
SILVER SEVEN CORPORATE CENTRE INC.
Plaintiff by Counterclaim
– AND –
2388208 Ontario Inc., operating as RONEN MANAGEMENT SERVICES and ELI RONEN
Defendants to Counterclaim
REASONS FOR DECISION
R. Smith J.
Released: April 18, 2024