Superior Court of Justice - Ontario

RE: United Brotherhood of Carpenters and Joiners of America, Local 1946, Creditor – and – 13129446 Canada Inc. and Maralix Inc., Debtors – and – Southside Construction (London) Limited, Garnishee

BEFORE: HOOD J.

COUNSEL: Daniel Wright and Jordan Routliff, for the Creditor No one appearing for the Debtors Ciara Pittam for the Garnishee

HEARD: August 28, 2024

Endorsement

[1] On January 26, 2024 the United Brotherhood of Carpenters and Joiners of America, Local 1946 (the creditor) obtained a decision from the OLRB ordering 13129446 Canada Inc. and Maralix Inc. (the debtors) to pay the union $179,231.

[2] On February 21, 2024 the decision was converted into a court judgment.

[3] Southside Construction (London) Limited (Southside) is a construction management company, who retained the debtors to provide services on two projects. On April 3, 2024 Southside (the garnishee) received the Notice of Garnishment by email. It was received by mail on April 8, 2024. This is the effective date of service pursuant to R. 60.08(8).

[4] On April 4, 2024 the garnishee paid the creditor $14,276 making the outstanding judgment $164,955.

[5] The garnishee did not file a garnishee’s statement under R. 60.08(15), within 10 days of April 8, 2024 nor pay the outstanding judgment.

Position of the Parties

[6] The creditor argues that R. 60.08(17) now applies, since the garnishee failed to make full payment and did not file a garnishee’s statement. The creditor argues that there is no discretion in R. 60.08(17) and that the rule is one of strict liability requiring the court to order the garnishee to pay $166,955. (The notice of motion asks for payment of $166,244 and in its factum the creditor asks for payment of $166,955. Both amounts are presumably in error.)

[7] The garnishee acknowledges that it failed to comply with R. 60.08(15) by not serving a garnishee’s statement but argues that that is of no consequence. It argues that R. 60.08(17) is still discretionary and that the court still has to determine the amount that is payable to the debtor by the garnishee.

[8] The garnishee argues that it is not seeking to avoid payment, that it has voluntarily provided more than what is required in a garnishee’s statement to the creditor, although late, and that it does not owe anything to the debtors. It argues that it is entitled to set-off its losses on one project against any amount that might be owing by it, to the debtor and thus the creditor, on another project.

Decision

[9] The garnishee is ordered to pay the creditor $35,006 from the funds currently being held in trust by the garnishees’ lawyers.

[10] The payment of the balance of the judgment amount of $131,949 is suspended until a determination is made as to what amount, if any, is owed by the garnishee to the debtors in the construction lien proceeding CV-24-2558.

Reasons

[11] In my view R. 60.08(17) is still discretionary. It provides that the creditor is entitled to an order against the garnishee for payment of the amount that the court finds is payable to the debtor by the garnishee, or the amount set out in the notice, whichever is less. A determination by the court of the amount owing, or the amount owing to the debtor by the garnishee, is still required even where there is no statement. The motion is still on notice to the garnishee. If there was to be no discretion and the amount to be paid was to be the amount as set out on the notice of garnishment, the rule could have said so.

[12] The caselaw relied upon by the creditor clearly does not apply. S&S Glass dealt with R. 60.08(16) and a highly technical argument as to the name of the debtor which was being used by the garnishee in order to pay the debtor and avoid paying the creditor. If anything, this case assists the within garnishee as the court stated that on a garnishment hearing, which this motion was not, the court was to look at the realities of the situation, rather than a technical argument. Benzacar was a case where the debtor was clearly using whatever means possible to avoid paying a debt to his former spouse, including providing false garnishee statements on behalf of the garnishee that he was associated with. Zittell was a case where the garnishee completely ignored the garnishment process and failed to file any material in response to the creditor’s motion. That is not the case here. While the garnishee did not provide a garnishee statement, it did not ignore the process and filed substantial material setting out its position that it did not owe anything to the debtor and thus did not owe anything to the creditor.

[13] The garnishee retained the debtors as drywall contractors on two specific projects, the X-Ray project and the Southdale project.

[14] The X-Ray project was substantially complete on January 26, 2024. On March 27, 2024 the holdback amount of $49,282 was due and owing to the debtor. But for the Southdale project and the garnishee’s belief that it was entitled to set off amounts owing to it by the debtors against what it owed the debtors on the X-Ray project, the debtors should have received the holdback funds on March 27, 2024.

[15] The garnishee did not pay the holdback of $49,282 and on April 3, 2024 was made aware of the Notice of Garnishment, although not served within the meaning of the Rules until April 8, 2024.

[16] On April 4, 2024 the garnishee paid $14,276 to the creditor leaving the balance of the holdback funds in the amount of $35,006 unpaid. The amount of $14,276 was allegedly arrived at as representing the unpaid wages and remittances with respect to the X-Ray project. Mr. Frijia, on behalf of the garnishee stated in his affidavit that the garnishee “wanted to ensure that all workers who provided services on the Project were compensated for work completed.”

[17] The garnishee is opposing the payment of the balance of the holdback claiming an entitlement to a set off under s. 12 of the Construction Act, due to overpayment to the debtors and the debtors insolvency. While the garnishee owes the debtors and thus the creditors $35,006 on the X-Ray project it argues that it has overpaid the debtors on the Southdale project and that the overpayment greatly exceeds this owed amount.

[18] There has been no determination of any over payment or any determination of the debtors insolvency. This is only the baldest of statements by Mr. Frijia. The debtor has in turn filed a claim for lien in the amount of $688,954 on the Southdale project, which the garnishee has vacated, by paying $861,193 into court to the credit of the lien action. The debtor denies that it is insolvent and claims to have a sizeable ongoing construction project valued at approximately $3,000,000. This too is the baldest of statements by the debtor.

[19] On March 27, 2024 the garnishee was to have paid the debtors $49,282. It chose not to do so because they had allegedly abandoned another project a few days before. On April 4, 2024 it paid $14,276 to the creditor despite not being served with the Notice of Garnishment. In my view if the garnishee was prepared to pay a portion of the holdback that was then due, the total of $49,282 should have been paid. The garnishee having decided that it would pay something could not then pick and choose and decide to continue to hold back funds. In making any payment the garnishee acknowledged, at that time, that the debtor was owed money, and that the creditor was entitled to be paid from this fund. There was then no set off owing to an alleged insolvency. No claim was in existence for the alleged abandonment of another project.

[20] In my view the insolvency claims by the garnishee is an ex post facto attempt to justify its non-payment of the holdback funds which were due and owing earlier to the debtors and thereafter to the garnishee by reason of Notice of Garnishment. The garnishee is now attempting to take advantage of the situation it created through its non-payment of the holdback funds.

[21] Whether the garnishee has a valid set off due to the insolvency of the debtors, will be determined elsewhere. Whether the garnishee owes the debtors monies on the Southdale project and thus owes the creditor, will be determined elsewhere. But the creditor should not be deprived of the monies that the garnishee acknowledged were owing to the debtor before deciding that it was now entitled to a set off due to the debtors alleged insolvency.

[22] The funds in the amount of $35,006 being held by Brown Beattie O’Donovan LLP, in trust, are to be released to the creditor. The payment of the balance of the judgment amount of $131,949 is suspended until a determination is made as to what amount, if any, is owed by the garnishee to the debtors in the construction lien proceeding CV-24-2558.

Costs

[23] Following argument of the motion, the parties agreed that the successful party was entitled to costs of $5,000 inclusive of HST and disbursements. While not entirely successful the creditor was partially successful and certainly more successful that the garnishee, who asked that the motion be dismissed. Costs in the all-inclusive amount of $5,000 are to be paid by the garnishee to the creditor within 30 days of today’s date.

Justice K. Hood Date: November 07, 2024