CITATION: Hamati Roofing Ltd. v. MTCC No. 581, 2026 ONSC 2348
COURT FILE NO.: CV-23-703045
DATE: 2026 04 21
SUPERIOR COURT OF JUSTICE - ONTARIO
IN THE MATTER OF the Construction Act, RSO 1990, c C.30, as amended
RE: HAMATI ROOFING LTD., Plaintiff
- and -
METROPOLITAN TORONTO CONDOMINIUM CORPORATION NO. 581, et al., Defendants
BEFORE: Associate Justice Todd Robinson
COUNSEL: K. Movat and C. Dirks, for the defendant, Metropolitan Toronto Condominium Corporation No. 581 (moving party)
J. Frustaglio, for the plaintiff
HEARD: November 24, 2025 (by videoconference)
REASONS FOR DECISION (Motion to Discharge Lien)
[1] Metropolitan Toronto Condominium Corporation No. 581 (“MTCC 581”) brings this motion seeking to discharge the lien of Hamati Roofing Ltd. (“Hamati”) and vacate the registrations of the various claims for lien through which it was preserved on the basis that Hamati has been paid in full on the principal of its lien. Hamati disagrees that its lien has been paid in full and opposes the motion, although acknowledged that the lien should be substantially reduced to account for payments made.
[2] The core dispute is over Hamati’s allocation of payments received from MTCC 581 and, specifically, whether Hamati was entitled to allocate those payments to accrued interest or whether Hamati was obliged to apply them first to the principal debt (and the subject matter of the lien). MTCC 581 relies on an alleged agreement reached with Hamati to pay the principal amount owing and defer the issues of interest and costs. MTCC 581’s position is that it provided a clear expression of intention to have payments allocated to the principal debt. Hamati disputes that the purported agreement was or is binding and takes the position that the various payments made by MTCC 581 were done without specifying how they were to be applied.
[3] Given a pending unit closing at the time of the hearing, I previously provided my disposition with reasons to follow. Specifically, I dismissed MTCC 581’s motion, but without prejudice to revisiting proper allocation of payments made to Hamati in the reference that is now before my colleague. I also ordered a reduction in Hamati’s lien to the sum of $93,004.03, representing a reduction by the conceded payments against principal.
[4] Due to various circumstances impacting my schedule over the past months, my reasons for decision have been delayed. I appreciate the patience of counsel and the parties. I now provide my reasons for disposition of MTCC 581’s motion.
Analysis
[5] MTCC 581 moves under s. 47 of the Construction Act, RSO 1990, c C.30, which affords the court with broad discretion to discharge a lien on the basis that the claim for the lien is frivolous, vexatious or an abuse of process or on “any proper ground”.
[6] Although case law commonly applies summary judgment principles to a motion under s. 47, a motion under s. 47 and a motion for summary judgment under the Rules of Civil Procedure are “procedurally different things”. Nevertheless, the Divisional Court has confirmed that underlying test – whether there is a triable issue with respect to any of the bases on which discharge of the lien is sought – is still the correct test to apply: Maplequest (Vaughan) Developments. Inc. v. 2603774 Ontario Inc., 2020 ONSC 4308 at para. 25. I must accordingly determine if there is any genuine issue requiring a trial on the bases upon which MTCC 581 asserts that Hamati’s lien should be discharged.
[7] Hamati was contracted by MTCC 581 to install a new roof on three five-storey condominium buildings, comprising a total of 152 residential units. At least for the purposes of this motion, there is no dispute that Hamati completed its work, albeit that it was delayed (in part due to the COVID-19 pandemic restrictions on construction). Hamati completed its work in April 2023, but remained unpaid by June 2023. At that point, Hamati liened.
[8] Hamati preserved its lien by registering four claims for lien: three against various units owned by current or former Board members of MTCC 581 and, subsequently, a fourth against all units in the condominium. After the lien was perfected and this lien action was defended, Hamati confirmed that the correct principal amount owing was $811,919,08, and not the higher amount for which it had liened.
[9] Between August 2023 and August 2025, various payments were made to Hamati. These were paid both directly by MTCC 581 and also by unit owners impacted by the lien, who paid their proportionate share to obtain a partial discharge of the lien against their units. On this motion, there is no dispute on the amounts paid to or held in trust for Hamati. Those amounts total $811,919.08, the same amount as Hamati’s lien.
[10] MTCC 581 points to s. 17(1) of the Construction Act, which provides that the lien of a person is limited to the amount owing in relation to the improvement. MTCC 581 argues that, since the amount of the lien has been paid in full, the lien should accordingly be discharged. Hamati’s position is that it was entitled to apply payments received from MTCC 581 first to interest and then to principal. Having done so, Hamati submits that the principal lien was only reduced to $93,004.03.
[11] There is no dispute that s. 14(2) of the Construction Act prohibits a lien for interest, but reserves the right of a party to recover interest: United Dominion Industries Ltd. v. Ellis-Don Ltd., [1993] OJ No 45 (Div Ct) at para. 10; M. Alzner Contractors Ltd. v. Roko Construction Ltd., 1995 7238, 26 OR (3d) 516 (ON SC). Costs also do not properly form part of a lien: United Dominion Industries Ltd. v. Ellis-Don Ltd. at paras. 10-12.
[12] In its factum, MTCC 581 argues that, having been paid in full on the principal amount of the lien, Hamati is now using its lien to improperly secure a claim for interest and costs. I disagree. There is a nuanced and important distinction between a lien having been paid in full and payments having been made that are equal the amount of that lien. They are not necessarily the same.
[13] At common law, both debtors and creditors have rights for how payments made by the debtor are allocated. Generally, when paying a debt, it is open to a debtor to specifically direct that the payment be allocated to principal or interest. When that is done, the creditor cannot apply the funds differently. For such an allocation to be effective, though, there must be a “plain and irrevocable expression of intention”: Colautti Construction Ltd. v. Ashcroft Development Inc., 2011 ONCA 359 at paras. 55-56.
[14] Where no allocation has been specified by the debtor, it is open to the creditor to allocate the payment as it sees fit: Waisman and Ross v. Crown Trust Company, 1970 158 (SCC), [1970] SCR 553 at p. 560. The long-standing common law rule is that, absent an agreement to the contrary, the creditor must apply payments first to interest and then apply any remaining surplus to the principal: Morin Bros. Building Supplies Inc. v. Bond Group Ottawa 2018 Inc., 2025 ONSC 5561 at paras. 78-81.
[15] No case law has been put before me supporting that, absent agreement (whether by a term in the parties’ contract or otherwise) or a specific direction from the debtor, a lien claimant is obliged to apply payments first to the lien principal before satisfying other components of the debt, such as interest. Indeed, MTCC 581 does not argue that these common law principles of debtor/creditor law are varied when the creditor is a lien claimant. During oral submissions, MTCC 581 acknowledged that a debtor must allocate a payment or specify how funds paid are to be allocated. MTCC 581 simply argues that it did that.
[16] In my view, it is important that there be clarity on application of the common law rights of debtors and creditors for allocating payments in the context of lien claims under the Construction Act. I find no genuine issue on that legal issue. They do apply. Moreover, in my view, those rights do not offend the prohibition against liening for interest in s. 14(2). The quantum of a lien clearly cannot include interest, but a payment received by a lien claimant does not necessarily have to be applied against the principal amount secured by the lien, in which case amounts properly secured by that lien could legitimately remain unpaid and owing.
[17] Pursuant to s. 64(1) of the Legislation Act, 2006, SO 2006, c 21, Sched F, all acts are to be interpreted as being remedial and shall be given such fair, large and liberal interpretation as best ensures the attainment of its objects. Consistent with that statutory directive, the Construction Act has routinely been viewed in case law as remedial legislation to protect the rights of those who supply services and materials to improvements.
[18] The Construction Act creates two unique statutory remedies that are available to persons supplying services and materials to an improvement, which are in addition to a claim in breach of contract: (i) the lien remedy and (ii) the breach of trust remedy. All three remedies are distinct, but related. They are each rooted in the contractual relationship between the payor and lien/trust claimant. With respect to liens, that interconnectedness is seen in s. 17(3) of the Construction Act, which limits the value of a lien by outstanding debts, claims or damages of the payor related to the improvement or, in the case of an insolvency of the lien claimant, all outstanding debts, claims or damages whether or not related to the improvement. Privity of contract is a thread running throughout the scheme of the Construction Act.
[19] I see nothing in the language of the Construction Act or its regulations that supports any limiting of the common law rights of creditors and debtors with respect to allocating payments. To view the legislative scheme otherwise would, in my view, restrict a lien claimant’s common law rights in a way that undercuts the remedial purpose of the Construction Act to provide additional (not reduced) protections to persons who supply services and materials to an improvement.
[20] Application of those common law principles is where the core dispute between Hamati and MTCC 581 arises. MTCC 581 argues that a payment plan was agreed that clearly set out how funds paid by MTCC 581 were to be allocated. On that matter, I do find genuine issues requiring a trial. The record before me is insufficient to fairly decide whether MTCC 581 and Hamati did agree to any allocation of payments or whether MTCC 581 is properly found to have provided a “plain and irrevocable expression of intention” to allocate all future payments to the principal debt. Even if there were a finding in the affirmative on either or both of those issues, I also find a genuine issue for trial on whether any expressed intention for allocation was binding on Hamati.
[21] In support of this motion, MTCC 581 initially tendered only an affidavit of a law clerk. That law clerk does not appear to have had any direct involvement in the dealings between Hamati and MTCC 581 on payments, including between their lawyers, until in August 2025. The law clerk discusses the payments made to Hamati by unit owners and MTCC 581 and various other facts, although does not state the source of her information and belief. Some is uncontentious, since the amounts paid to Hamati are not disputed on the motion.
[22] Following the initial return of this motion before me in October 2025, Hamati served its responding motion materials. Those materials included an affidavit from Hamati’s president, Ferdinand Hamati. In that responding affidavit, Mr. Hamati confirms that he had no dealings with the law clerk at any time during the project.
[23] With respect to payments, Mr. Hamati’s affidavit outlines that he was responsible for overseeing payments from MTCC 581 and that MTCC 581 did not make payments in accordance with the milestone schedule in the parties’ contract, but that Hamati still completed the work. Mr. Hamati explains his view of Hamati’s right to charge interest under the contract and confirms that payments received from MTCC 581 in June 2024 ($300,000) and October 2024 ($304,594.60) were applied first to interest and then to principal. A total of $93,004.03 was applied to interest.
[24] Mr. Hamati states that MTCC 581 did not provide any advice, direction, or instruction on how to apply to allocate the payments made, either prior to or after Hamati received them. He notes that the cheques similarly did not indicate any allocation. He further states that he never received any request from MTCC 581 to reduce Hamati’s lien or discharge it against certain units, which was not raised until August 2025.
[25] MTCC 581 served two reply affidavits: a further affidavit from the law clerk dealing with the timing of notice from Hamati that amounts were allocated to interest and an affidavit from Lina Poltinikov, Senior Regional Property Manager of Nadlan-Harris Property Management Inc., the property manager for the condominium. Ms. Poltinikov’s affidavit outlines the terms of a purported agreement reached in June 2024 at a meeting between Mr. Hamati, Ms. Poltinikov, and Liron Daniels, the president of Nadlan-Harris Property Management Inc., at which payment of the principal amount of $811,919.08 is said to have been discussed. The terms of the alleged agreement were as follows:
(a) MTCC 581 would make an initial payment of $300,000.00 towards the principal;
(b) MTCC 581 following payment of the initial payment, would make six (6) monthly installment payments starting in July of 2024 in the amount of $76,148.65 each; and
(c) the issue of Hamati’s claim for interest and legal costs was to be reserved to be discussed and dealt once the lien amount of $811,919.08 had been paid in full.
[26] Ms. Poltinikov appends an email from Erica Brown, Operations Manager for Hamati, sent in September 2024. That email generally confirms the foregoing terms, acknowledging receipt of the $300,000 initial payment, but noting that MTCC 581 had failed to make the payments for July, August, and September.
[27] Ms. Poltinikov further asserts that, on September 30, 2025, there was another meeting with Mr. Hamati in which he asked “when he was going to get final payment of the principal.” She further asserts, “At no time during this conversation, did Mr. Hamati advise that the terms of the agreed payment plan had been altered or that the payments [MTCC 581] had been sending directly to them were being applied to interest.”
[28] There is a dispute over whether I should consider this reply evidence in deciding the motion. Hamati submits that it is not proper reply and should be held to be an impermissible attempt by MTCC 581 to supplement its evidence after the fact. I agree that it is not proper reply. In my view, it would be procedurally unfair to Hamati to consider it.
[29] Reply evidence is admissible on a motion when a responding party has raised a new matter that could not reasonably be anticipated by the moving party or where the reply evidence is in response to an issue enlarged by the opponent in a manner that could not have been reasonably foreseen. Those guardrails for permissible reply evidence derive from the rule against case-splitting. A responding party to a motion is entitled to know and respond to the case being made against that party. It is unfair to permit a moving party to add new evidence after the responding party has completed their own evidence: Johnson v. North American Palladium Ltd., 2018 ONSC 4496 at para. 13.
[30] At the time this motion was brought, MTCC 581 already knew that Hamati was taking the position that it had properly applied payments to satisfy accrued interest before paying down the principal debt. The law clerk’s affidavit specifically discusses it. There was no evidence tendered on the two purported meetings in June 2024 and September 2025 between Mr. Hamati and representatives of the property manager, despite them being directly relevant to disputing Hamati’s position.
[31] In my view, the reply affidavits do not genuinely reply to anything raised by Mr. Hamati that could not have been reasonably anticipated when the motion was brought. Both reply affidavits deal with known issues on this motion and factual circumstances supporting MTCC 581’s position on those issues. Specifically, Ms. Poltinikov’s evidence deals directly with meetings involving Mr. Hamati that are evidently germane to the issue of what had been objectively agreed, or at least expressed, regarding allocation of the payments to be made by MTCC 581. The two meetings are clearly relevant to deciding whether there was an objectively clear expression of intention for allocating payments and whether Hamati objectively agreed that all payments would be applied against principal, with interest and costs deferred to a later date.
[32] In my view, MTCC 581 tendered evidence in reply that ought to have been tendered in the first instance in circumstances where Mr. Hamati (who was present at the meetings) was denied the opportunity to respond with his own recollections of what was discussed. That is not properly admissible reply evidence on a motion.
[33] In any event, even if I were to consider the affidavits, all they serve to do is highlight triable issues over whether a binding and enforceable agreement was reached in June 2024, whether there was a “plain and irrevocable expression of intention” by MTCC 581 on allocation (regardless of whether there was a binding agreement), and the effect, if any, of MTCC 581’s acknowledged breach of the alleged payment agreement.
[34] Deciding whether MTCC 581 and Hamati reached an enforceable agreement on payment of the debt will require a first principles analysis. It is well-established that an enforceable agreement has five elements: offer, acceptance, consideration, certainty of essential terms, and an intention to create a legal relationship. A contract is formed where there is an offer by one party accepted by the other with the intention of creating a legal relationship, which is supported by consideration. That is assessed on an objective standard, with the court examining how each party’s conduct would appear to a reasonable person in the position of the other party: Ethiopian Orthodox Tewahedo Church of Canada St. Mary Cathedral v. Aga, 2021 SCC 22 at para. 35.
[35] In my view, there is insufficient evidence before me from MTCC 581 to find that there is no genuine issue requiring a trial on whether an enforceable agreement was reached between Hamati and MTCC 581 to pay the full $811,919,08 against principal.
[36] Moreover, even if I could find that there was an enforceable agreement, I find there is insufficient evidence to fairly assess the circumstances of MTCC 581’s undisputed breach of the payment terms and the legal effect of that breach, including whether Hamati was relieved from the agreement and entitled to allocate payments first to accrued contractual interest.
[37] Separately, even if there was no enforceable agreement (or the existence of one need not be decided), there is still a question about whether the dealings between the parties in June 2024 were sufficient to amount to “plain and irrevocable expression of intention” by MTCC 581 that all payments being made from that point were to be allocated to principal. Based on Ms. Poltinikov’s affidavit, the arrangements were made between Hamati and the property manager, not MTCC 581. No evidence or argument was put before me supporting a finding on agency or how that dovetails with the legal requirement for MTCC 581 to have made the expression of intention.
[38] MTCC 581 argues that the discussions in June 2024 support a clear expression of intention by MTCC 581 that payments, as they came, whether they were made on time or were late, were to be earmarked for the principal debt. However, I am asked to draw that inference based on assumed agency of the property manager and relying on what, in my view, is sparse evidence on the underlying alleged agreement and dealings between the parties. Other than Ms. Brown’s email in September 2024, which reflects a contingent agreement that was breached by MTCC 581, I have been provided with no contemporaneous documents supporting a clearly expressed intention on allocation by MTCC 581. Conversely, there is undisputed evidence before me that payments were made by MTCC 581 without any notations on the cheques about allocation.
[39] Whether and when Hamati was bound to allocate the payments against principal also bears directly on how the initial payment of $300,000 should be characterized. That sum was paid before the payment plan default by MTCC 581 and a portion of those funds was applied against interest. That raises a question about whether the initial $300,000 payment should be viewed differently than the subsequent payments and, if so, whether that practically changes anything if Hamati was entitled to apply subsequent payments first to interest.
[40] In my view, exploring the factual matrix between the parties will be material to a fair disposition. Hamati’s position is that it was not bound by any agreement or allocation given MTCC 581’s default under the payment agreement. That position is supported by Ms. Brown’s email note that deferring interest and costs was contingent on the payments being made. Although the amounts were ultimately paid, the payment plan was evidently not adhered to by MTCC 581. Ms. Poltinikov’s affidavit explains why the payments were delayed, but there is incomplete evidence on what was communicated to Hamati about the payment delay. There is also incomplete information on the intentions of MTCC 581 as debtor, the property manager’s authority to bind MTCC 581, and Hamati’s understanding of the property manager’s authority.
[41] These are all issues that require further and better evidence to fairly decide. Direct evidence from witnesses on both sides is needed, specifically from those involved in the discussions addressing what they spoke about, what was agreed, and their intentions. None of that is before me on this motion.
[42] For these reasons, I find a genuine issue for trial on whether there was any agreement or direction on allocating the payments and, accordingly, whether Hamati’s lien has been fully satisfied by those payments. I further find a genuine issue for trial on whether Hamati was bound by any direction on allocation and, if so, whether Hamati was relieved from any such direction by MTCC 581’s breach of the payment plan.
[43] Although not advanced in oral argument, MTCC 581 has put forward an argument in its factum that I wish to briefly address. Specifically, MTCC 581 asserts that Hamati registered its first three claims for lien to apply pressure to the Board members of MTCC 581 and not for a proper reason. That allegation is unsubstantiated by any evidence before me. However, even if true that Hamati initially liened only Board members’ units to get the attention of MTCC 581 or to apply pressure, it is undisputed that there were amounts owing under Hamati’s contract that, for whatever reason, had not been paid by MTCC 581. Hamati had completed its contract work in April 2023. The deadline to preserve a lien would thereby have been in June 2023. That is when Hamati liened.
[44] In my view, Hamati’s strategic decision about what portions of the premises to initially lien does not support discharging the lien in circumstances where Hamati had a legitimate basis for its lien. I am unaware of any case law requiring that a lien claimant preserve its lien against all parcels comprising an improvement from the outset. None was cited to me.
Disposition
[45] For the foregoing reasons, I dismissed MTCC 581’s motion without prejudice to revisiting proper allocation of payments made to Hamati and further ordered that Hamati’s lien be reduced by the sum of $718,915.05 to $93,004.03.
Costs
[46] Hamati was successful in opposing the motion and is entitled to its costs. It seeks $7,252.25 on a partial indemnity basis, including HST and disbursements. MTCC 581 conceded that the amount claimed was reasonable. Given MTCC 581’s own costs outline, it is clearly a figure within reasonable expectations. If unsuccessful, Hamati urged me to make any costs payable in the eventual outcome of action. In making that submission, Hamati acknowledged that it would have no concern with the same principle applying to any costs awarded in its favour. It submitted that doing otherwise would be a double standard. I agree.
[47] MTCC 581 shall accordingly pay to Hamati its costs of this motion fixed in the amount of $7,252.25, but payable at the conclusion of litigation in any event of the cause. Order accordingly.
ASSOCIATE JUSTICE TODD ROBINSON
DATE: April 21, 2026