Court File and Parties

COURT FILE NO.: CV-19-618562 DATE: September 25, 2024

ONTARIO SUPERIOR COURT OF JUSTICE

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

BETWEEN:

QUALITY GENERAL CONTRACTOR’S INC. Plaintiff David Marcovitch for the plaintiff, Tel.: 416-783-7770, Fax:: 416-783-9568, Email: dmm@law-in-to.com;

-and-

JUDY WU, IVAN ZEE HIN CHAN, RANNA HOMES AND RENOVATIONS INC., ANTHONY RANALLO and THE TORONTO-DOMINION BANK Defendants Amir Sodagar for Judy Wu and Ivan Zee Hin Chan; Tel.: 416-365-1110, Fax:: 416-365-1876, Email: asodagar@weirfoulds.com.

DECISION: May 22, 2024 Associate Justice C. Wiebe

COSTS DECISION

[1] On May 22, 2024 I rendered my judgment on the trial of what in the end were two issues: I found that there was no contract between Judy Wu and Ivan Zee Hin Chan (together “the Owners”) and the subcontractor on the subject project, Quality General Contractor’s Inc. (“Quality”); and I found that Quality did not do lienable work after January 22, 2019 and that its lien, therefore, expired for not being preserved in time.

Background

[2] Concerning costs, in my Reasons I ordered that the parties make written submissions on the costs of the trial and this reference, and I imposed a schedule for same that concluded on June 14, 2024. I was away in June, 2024. When I returned, I noticed that there were not written submissions on costs, particularly from the successful parties, the Owners. On July 2, 2024 I circulated an email to counsel ordering in the circumstances that the costs outline that the Owners filed on January 29, 2024 (just prior to trial) would be their costs submissions and that Quality had until July 5, 2024 to make its written costs submissions. On July 5, 2024, Quality served and filed its written costs submission.

[3] On July 15, 2024 Mr. Sodagar emailed advising that Ms. Pichini had left the firm on April 30, 2024, that he had just discovered the Owners’ oversight in delivering written costs submissions in accordance with my Reasons, and that Mr. Marcovitch consented to having the Owners deliver late written costs submissions, which Mr. Sodagar undertook to do by July 22, 2024. As a result, on July 15, 2024 I had the court email a new timetable for written costs submissions, which timetable specified that the Owners had until July 22, 2024 to deliver written costs submissions and that Quality had until July 29, 2024 to deliver responding written costs submissions.

[4] The Owners delivered their written costs submissions on July 22, 2024. However, there were not reply written costs submissions from Quality. Finally, on August 15, 2024 I inquired of Mr. Marcovitch as to whether Quality was relying on its July 5, 2024 submissions or whether it would be making further submissions.

[5] On August 22, 2024, Mr. Marcovitch sent a puzzling email stating that he was not making further submissions on costs, but that the costs award should be confined to the lien issue only and that the reference should carry on in relation to the Quality claim for unjust enrichment. On August 26, 2024 I circulated an email advising that I had scheduled a trial management conference for September 17, 2024 at which time I required that Mr. Marcovitch show how Quality could sustain a claim of unjust enrichment against the Owners given the resolution of the contract and lien issues. At the trial management conference on September 17, 2024 Mr. Marcovitch confirmed that Quality was not pursuing its unjust enrichment claim and that I could issue a final report once I made this costs award.

Claims

[6] The Owners claim $59,798.63 in substantial indemnity costs. Quality’s written costs submission was somewhat confusing. It asserts that there should be no order as to costs. It then states that, if there is an order as to costs in favour of the defendants, it should be no more than $16,000 “paid from the holdback,” a holdback that Mr. Marcovitch said is in the $26,000 range. Then Mr. Marcovitch states that “the balance of the funds,” no doubt from the “holdback,” be paid to Quality. Since Quality lost its lien right, such discussion about holdback is irrelevant and I will ignore it.

Result

[7] The Owners were clearly the successful party in this trial and reference. They were successful on both issues that were the subject matter of the trial. Quality also conceded the transition rule point in closing argument. These three issues brought this reference to a conclusion thereby entitling the Owners to costs for the entire reference and action. That is what I find.

Offers to settle

[8] The Owners pointed out that they made two written offers to settle to Quality. The first one was an offer made on May 7, 2019, shortly after the statement of claim was served, whereby the Owners offered to pay Quality the holdback amount of $23,000 all-inclusive. This offer was open for acceptance for three days. The second one was made on April 7, 2021, almost two years later but still prior to this reference. In this offer, the Owners offered to pay Quality $26,000 all-inclusive. The offer was contained in a lawyer’s letter that outlined in some detail the lack of merit to Quality’s case, a description that was vindicated at trial. This offer was not withdrawn and remained open for acceptance throughout. The plaintiff made no offers to settle.

[9] Given the evidence that came out at the trial, it is truly astounding that Quality accepted neither of these offers and made no offers in return. Clearly, the defendants obtained a result that was much more favourable to them than either of their offers. The last one, the one dated April 7, 2021, remained open for acceptance at the commencement of the trial. I take both of these offers into consideration pursuant to Rule 49.13, a rule that is applicable as it is not inconsistent the court’s broad costs discretion under section 86 of the Construction Act, R.S.O. 1990, c. C.30 (“CA”); see Brian Stucco Construction Inc. v. Nili-Ardakani, 2021 ONSC 8541 at paragraph 46.

[10] These two offers show me that the defendants properly assessed this case from the beginning and made serious efforts to resolve it on very reasonable terms before significant costs were amassed, and that the plaintiff did none of this. This must be taken into consideration.

Conduct

[11] CA section 86(1) authorizes the court in a lien action to order substantial indemnity costs against a party where that party knowingly participates in the preservation or perfection of a lien that “is without foundation, is frivolous, vexatious or an abuse of process,” or that prejudices or delays the conduct of an action. That provision applies to this case.

[12] There was clear evidence of Quality’s abusive conduct. As indicated in my Reasons for Judgment, I found that Nick Carlucci, the principal of Quality, essentially fabricated the key Quality invoices and his own diary entries to create the false narrative that the defendants had entered into a contract of guarantee with Quality and that the Quality claim for lien was timely when the lien had in fact expired. I also found that he used Quality’s key witnesses, namely Ms. Diaz and Mr. Alejandro, as his mouthpieces. Critically, Mr. Carlucci also did not produce the key time sheets that his own employees said existed. These time sheets would probably have shown when the actual work was done.

[13] This is abusive conduct. It is the kind of conduct that is contemplated by CA section 86(1) as meriting an award of substantial indemnity costs. That is what I find.

Proportionality

[14] Mr. Marcovitch argued that the Owners’ claim for costs is disproportional to the Quality claim of $90,279.42. I do not agree. Proportionality is not only assessed on the basis of the amounts involved, but also on the basis of the complexity and importance of the case to the Owners; see Rules of Civil Procedure, Rule 1.04(1.1). Because of its conduct, Quality made the evidence more complicated than it had to be. Also, by insisting groundlessly on a collateral contract of guarantee with the Owners, the Owners were faced with the dire prospect of potential double liability for payment of the work done. That made their defence very important to the Owners and justified the work they did. I have also examined the Owners’ costs outline and do not find excessive charging for the work that was done.

Reasonable expectation of the unsuccessful party

[15] Mr. Marcovitch also argued that the Owners’ claim for costs is not what his client should reasonably expect to pay. He pointed to the Quality costs outline which shows $16,200 in partial indemnity costs and $26,200 in full indemnity costs.

[16] I am not persuaded by this argument. The Quality costs outline is not indicative of what Quality should reasonably expect to pay, given the obviously greater detail and work that went into the Owners’ affidavits and motion and trial preparation, and given Quality’s abusive conduct as described above.

Quantum

[17] There is one aspect of the Owners’ costs claim that troubled me. In their written costs submission, the defendants added a claim for the costs concerning the $11,022.97 the Owners apparently paid to their previous lawyers, KMB Law. These charges were not in the Owners’ cost outline that I ordered be filed at the end of the trial. Therefore, this additional claim is not made in accordance with my directions. Furthermore, while Mr. Sodagar filed the KMB Law invoices, the descriptions of the services and times for these services was redacted. Therefore, what this earlier firm did cannot be assessed.

[18] However, I do note that it was this earlier firm, KMB Law, that served the second offer to settle with a detailed and accurate case analysis, an offer that has now served the Owners well as noted above. I will, therefore, give some recovery for these charges.

Ruling

[19] Considering all of these factors, I find that a reasonable and fair award of costs in this case is $54,000 in substantial indemnity costs which Quality must pay to the Owners upon confirmation of my report. That is what I find.

Released: September 25, 2024

ASSOCIATE JUSTICE C. WIEBE

COURT FILE NO.: CV-19-618562 ONTARIO SUPERIOR COURT OF JUSTICE In the matter of the Construction Act, R.S.O. 1990, c. C.30 BETWEEN: Quality General Contractors Inc. Plaintiff

• and - Judy Wu, Ivan Zee Hin Chan, Ranna Homes and Renovations Inc., Anthony Ranallo and The Toronto-Dominion Bank Defendants COSTS DECISION Associate Justice C. Wiebe Released: September 25, 2024