Legal Blog:

Extras

Jessco Structural Ltd v. Gottardo Construction Ltd. , 2015 Ont SCJ

image c/o Anders Adermark and Creative Commons

Most subcontracts, and most prime contracts, have clauses stating that extras cannot be claimed unless they have been agreed upon in advance. The general performed work upon the oral instructions of the general’s site superintendent. Even though the work was an extra, the oral instructions were not sufficient to comply with the contract, the general had not waived the contractual provision, and there was no oral agreement to remove the condition. The general was not liable to pay the sub for the work.

Oppression

1007374 Alberta Ltd v. Ruggieri 2015 Alta C.A.

After trial, the creditor obtained judgment against a corporation. When it attempted to enforce the judgment, it learned that the corporation reverted to its numbered company designation 3 days before the trial, granted a GSA of $500,000 in favour of the sole owner immediately after the trial, and started providing services through another corporation owned by the same individual.

The trial judge held that the individual attempted to creditor proof the corporation to avoid payment of the judgment debt and that they were fraudulent conveyances, oppression, unjust enrichment, and an unlawful conspiracy. The Court of Appeal focused solely on oppression. It held that the corporation’s conduct was unfairly prejudicial to and unfairly disregarded the interests of the reasonable expectations of the creditor. These expectations were that the corporation would not convey away exigible assets for no consideration and the understandings and expectations that the corporation had created and encouraged in the creditor. The Court also agreed that punitive damages of $100,000 were reasonable.

Trust Fund & Bankruptcy

Royal Bank of Canada v. Atlas Block Co. 2014 Ont SCJ

Material supplier was attempting to trace its materials into products manufactured by bankrupt and sold to contractors. The tracing was tenuous at best. However, the motions judge was willing overlook this liability to allow the trust action to at least continue, subject to proof. What the motions judge was not willing to do was to overlook the Bankruptcy and Insolvency Act, which set out a regime that was paramount to Ontario legislation.

The motions judge held that only if there was a common law trust (i.e. containing certainty of intention, objects, and subject matter) could there be a trust for purposes of the BIA. The motions judge held that a statutory trust under the Construction Lien Act did not qualify. He dismissed the action.

Iona Contractors Ltd v. Guarantee Co. of North America 2015 Alta C.A.

The surety under a payment and material bond paid the subcontractors of a bankrupt contractor $1.8 million and claimed, as a subrogee, against $1 million that the owner was to pay the contractor in holdback.

At trial, the judge ordered the money to be paid to the contractor’s trustee and thence to the contractor’s secured creditors. The surety got nothing. This was the same issue as in RBC v. Atlas and at the trial level decided in the same manner.

The Court of Appeal in a 2-to-1 decision overturned and held that since the lien legislation and the trust provisions in it, were part of an overall scheme to ensure that contractors who provided work on a project were paid, the province was not attempting to bypass the federal scheme. The majority decided that, due to the legislation, there was certainty of intention to create a trust, there was certainty of object to benefit unpaid subcontractors, and there was certainty of subject matter i.e. a chose in action against the owner to pay the holdback). The majority referred to and rejected the approach in RBC v. Atlas.

Appeal – Discretion/reasons for decision/standards of review

Paul v. 1433295 Ontario Ltd, 2015 Div Court

Trial judge rejected expert’s valuation methodology and relied on her own independent analysis.

Instead of focusing on the expert’s approach and making adjustments she concluded were proper, she used a method that was not founded on the evidence. This was a mistake of law.

Guarantee

Global Food Traders Inc. v. Massalin 2015 Ont CA

The word “guarantee” was not used in the agreement; however section 1 of the agreement stated that individual would replace NSF cheques of corporation and, immediately below the individual’s signature on the agreement, it stated that he was executing the agreement “solely in connection with his obligations as set forth in section 1.” That was enough for the court to hold that the individual had guaranteed the corporation’s payment obligations.

Sheriff’s Sale

Canaccede International Acquisitions Ltd v. Abdullah 2015 SCJ

Execution creditor frustrated because it could not get mortgage statement due to privacy issues and, without a mortgage statement, could not get the sheriff to sell the debtor’s property.

Judge held that a sheriff’s sale was not a complete code and that a creditor could engage rule 54.02 (2) (b) to direct a reference to enquire into and determine all issues relating to the conduct of the sale of the property of the execution debtor. The execution creditor could then return with the referee’s report and move for an order for sale by private contract pursuant to subrule 55.06 (1).

Trust and Lien Actions

Stuart Olson Dominion Construction Ltd. v. Structal Heavy Steel 2015 SCC

Sub commenced a trust action and a lien action. The general discharged the lien by way of posting a lien bond. The sub then convinced the owner to hold off payment to the general because of the alleged breach of trust. The Court held that a trust action and a lien action were 2 separate remedies and that the vacating of a lien from title by way of a lien bond did not mean that there was no longer a cause of action for a trust claim. The judgment correctly noted that a simple vacating of the lien did not mean that the lien was acknowledged to be correct. It also correctly noted that it would not allow a situation in which the trust action was dismissed and then the lien action was dismissed for not being, say, preserved or perfected on a timely basis. Regardless, much of this decision does not apply to Ontario. The case emanated out of Manitoba, whose Builders Lien Act is very different from the Ontario CLA.

Offer to settle

Milanovic v. Le 2015 SCJ
Defendant made offer to settle in July 2012 for a specific sum plus costs to be assessed – plaintiff accepted offer in June 2013 – plaintiff entitled to costs up to July 2012

That’s It, That’s the Entire Agreement

Any standard agreement of purchase and sale (APS) almost invariably has an entire agreement clause. In essence it states “See this agreement; well, that’s it; do not rely on anything that took place between us unless you see it here.” What happens when the purchaser alleges that the vendor made a representation after the APS was signed? Such was the case in Soboczynski v. Beauchamp, (2015) 52 R.P.R. (5^th) 175 (Ont C.A.).

SPIS

A Seller Property Information Statement contains a raft of property information and representations. Why vendors in their right minds would willingly sign this form is beyond us. It is a lawsuit waiting to happen.

Normally, an SPIS is signed before the APS; perhaps as early as the listing agreement. Its effect depends on the APS terms. In this case, however, the vendors signed the SPIS after the APS. The vendors did not have to sign it, but, it seems, in a gesture of goodwill did so anyway. Big mistake.

The SPIS contained a representation that the property was not subject to flooding. In it, the vendors also represented that they would inform the purchasers if there were any “important” changes in the condition of the property.

Floods

Before closing, because of heavy rain and melting snow, water entered the basement through the window wells, soaking the carpet and underpad. The vendors dried the carpet and replaced the underpad at a cost of $1,650.00. They did not notify the purchasers of the occurrence. They believed the water seepage to be an isolated event, not sufficiently important to require them to give notice.

Setoff

Setoff is a wonderful concept. Simply put, it means that a defendant in an action may owe money to the plaintiff, but claim that, because the plaintiff owes it money, it can set off the two debts against each other and either reduce or eliminate the plaintiff’s claim. However, setoff is not always available. Usually, if it is unavailable, it is more of a timing problem because, sooner or later, the defendant will commence its own action or counterclaim against the plaintiff. However, in a bankruptcy context, the inability to set off can be devastating (i.e. no setoff availability means that a claim against a bankrupt gets lumped in with the claims of all other unsecured creditors, but the requirement to pay the bankrupt’s trustee remains for the full amount owing). This issue was front and centre in King Insurance Finance (Wines) Inc. v. 1557359 Ontario Inc., a 2012 Ontario Superior Court of Justice decision.