Legal Blog

CPL

Kirubakaran v. Tiller 2020 Ont SCJ

A motion for a certificate of pending litigation (CPL) is often brought without notice – usually for the reason that, if notice is given, the landowner will do something with the land and frustrate the motion. It is a one-sided motion and the court has to rely on the moving party to set out all of the relevant facts. Accordingly, a CPL may be vacated if its issuance came about pursuant to material non-disclosure, which would be an abuse of the court’s process. In this case, the plaintiff alleged that property was being held in trust for him pursuant to an undocumented transaction. On the motion to set aside the CPL, it became apparent that there were documents and that these documents, on their face, contradicted the plaintiff’s assertion of a trust. The judge set aside the CPL for non-disclosure of material facts.

Exclusion or Exculpatory Clause

Ritchie v. Castlepoint Greybrook Sterling Inc. 2020 Ont SCJ

Disappointed purchasers were suing the developer for terminating their agreements and cancelling a condominium project. The developer had determined that costs increased significantly so that it was not worthwhile to continue with the development. It did not attempt to complete the process necessary to meet conditions and obtain financing necessary to continue with the project. For purposes of the summary judgment motion, the developer agreed that it had not terminated in accordance with the agreement. However, it relied on a section of the agreement that disallowed the purchasers’ right to damages regardless whether the agreements had been properly terminated or not. The judge agreed with the developer and dismissed the actions. He held that, as a matter of contract interpretation, the exculpatory clause excluded the claimed damages, was not unconscionable, and was not subject to an overriding public policy.

Unjust Enrichment & Trust

Tremblar Building Supplies Ltd. v. 1839563 Ontario Limited 2020 Ont SCJ (Div Ct)

A subcontractor, who had not liened the project, claimed against the owner for breach of trust and unjust enrichment. It alleged that the owner had not paid the bankrupt general contractor, who had therefore not paid the sub. The court dismissed the action. There is no trust claim against a payor two rungs up the construction ladder. Unjust enrichment does not apply because the comprehensive scheme of rights and obligations under the Construction Act is the juristic reason for precluding claims for unjust enrichment by subs against owners.

S. 39 Request for Information

Epoxy Flooring & Painting Inc. v. Gillam Group Inc. 2019 Ont SCJ (MC)

A subcontractor sent a section 39 request for information pursuant to the Construction Act and, notwithstanding follow-up letters, neither the contractor nor the owner complied with the request. The subcontractor brought an application and, only after it did so, did the respondents either deliver the information or agree to do so. The owner also had to deliver a statement showing the dates of payment to the general. The master ordered costs noting that there needed to be “a message that parties cannot treat s. 39 written request cavalierly.”

Misrepresentation of Square Footage

Issa v. Wilson 2020 Ont CA

The purchaser had been told by the real estate agent and the vendor that the property was 2000 ft.² or more. The purchaser had been ready to close the real estate transaction, but when obtaining financing was informed by the appraiser that the house was only 1450 ft.². Even though the purchaser had attended at the property, the court still allowed the purchaser to terminate the agreement and receive his deposit. As a general proposition, a purchaser who inspects a property cannot complain of reliance on a misrepresentation as to its size. However, this is not an absolute proposition depending upon the circumstances. A material, false statement inducing the plaintiff to enter into a contract can result in its termination. In this case, the purchaser had been told of the false square footage, the differential was significant, the purchaser was not using the difference in size simply to get out of a contract that he had no intention to complete, and the purchaser was young and inexperienced in homebuying.

Frustration & Specific Performance

FSC (Annex) LP v. Adi 64 Prince Arthur LP 2020 Ont SCJ

Applicant and respondent were partners in a joint venture to develop a property. The applicant held 80% of the joint venture and the respondent held 20% of the joint venture. The parties were unable to work together so that the applicant triggered a shotgun buy-sell provision (i.e. the applicant set the price of the development and the respondent had the option either to sell for its proportionate share of that price or buy the applicant’s proportionate share of that price). The respondent chose to purchase the applicant’s interest, but then refused to close because, it said, the pandemic frustrated its ability to obtain financing. The judge disagreed. Frustration is available only when the obligations change radically and a decline in the value of real estate is not a frustration of those obligations. The judge ordered specific performance of the agreement; damages would not have been a viable remedy. There would have been more litigation over the sale price and, more importantly, the applicant would not have been able to sell its interest without the respondent’s consent. The judge noted that a specific performance award meant that the respondent would be forced to make more meaningful efforts to obtain financing and afforded the court the opportunity to provide flexible and appropriate relief if the respondent were unable to do so.

Deficiencies

Deficiencies invariably arise during construction work. For the most part, they are caught and fixed as construction continues. Once substantial performance is achieved, the contractor rectifies the deficiencies on the punchlist, finishes the incomplete items, and completes the project. At least that is the way it ought to be and usually is. Sometimes, however, the contractor does not rectify all of the deficiencies and at other times, the owner does not give the contractor the opportunity to rectify all of the deficiencies and rectifies them itself. The court then has to determine whether the owner should be allowed to set off the cost of rectification against money otherwise owed to the contractor or to claim additional money from the contractor. Such was the case in Mastracci v. 1882877 Ontario Inc., a 2019 decision of the Ontario Superior Court of Justice.

Contract

The owner, a developer of a residential condominium project, contracted with the roofing contractor to install a roof for $108,700. The roofer had completed most of the project, left the site on December 18, and returned to work on January 6 and January 21. By that time, it had completed all but $2,000 of the contract work. On the same day, the owner informed the roofer that he would not be allowed back on site.

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Certificate of Pending Litigation

Khanna v. Singh 2020 Ont SCJ

Motion to vacate a certificate of pending litigation (CPL). Plaintiffs claimed that they had an interest in land because they had loaned $50,000 to the defendants for the purchase of that land. However, the statement of claim did not allege a trust and only requested repayment of the loan. The judge did not feel that there was an actual interest in the land being claimed, but vacated the CPL on other grounds: there was no claim that the land was unique, damages were very easy to calculate and would clearly be a satisfactory remedy, and a CPL would substantially interfere with the defendants’ ability to manage their interests in the property.

Construction Trust

University Plumbing v. Solstice Two Limited 2019 Ont SCJ

Owner breached its trust obligations by refusing to pay the contractor and instead paying management fees to its two directors. The judge held the directors personally liable both under section 13 of the Construction Act and by way of a breach of a common-law trust. The judge went so far as to declare that the directors’ liability would survive any bankruptcy. The directors sole defence was that the action was proscribed by the Limitations Act. The judge ruled against them on two grounds. First, one of them had acknowledge the debt in writing and that acknowledgement bound both of them. Second, they had represented that they would pay the amount due once they had collected a particular amount from a third party so that it was not “appropriate” to rush to litigation before giving the directors a chance to do so.