Atlantica Mechanical Contractors Inc., Davies Plumbing v. Heating Ltd., Duron Atlantic Limited, East Coast Sheet Mental Ltd.,, 2020 NSSC 76

SUPREME COURT OF Nova Scotia Citation: Atlantica Mechanical Contractors Inc. v. Steve Tsimiklis Holdings Ltd. and Steve Tsimiklis , 2020 NSSC 76 Date: 20200317 Docket: Hfx No. 292257 Registry: Halifax Between: Atlantica Mechanical Contractors Inc., Davies Plumbing and Heating Ltd., Duron Atlantic Limited, East Coast Sheet Mental Ltd., Kejofo Ltd., Diaden Masonry & Construction L.P., Lead Structural Formwork Limited, Marid Industries Limited, Pinaud Drywall & Acoustical Limited, Precision Concrete Services Limited, Rendan Fabricators Limited, Twin City Alarms Limited, Twin City Electric Plaintiffs v.

Steve Tsimiklis Holdings Ltd. and Steve Tsimiklis Defendants Judge: The Honourable Justice Ann E. Smith Heard: November 27, 28; December 2, 3, 4, 5, 2019, in Halifax, Nova Scotia P ost-trial Submissions: Plaintiffs, March 6, 2020; Defendants, March 10, 2020 Counsel: John Kulik, QC, Ian R. Dunbar, Robert Mroz, for the Plaintiffs Michael C.

Moore, for the Defendants By the Court: Introduction [ 1 ] This is an action under the trust provisions of the Nova Scotia Builders’ Lien Act , R.S.N.S. 1989, c. 277 , as amended (the “ Act ”). [ 2 ] The trial of this action came before the Court on November 27, 2019 nearly 12 years after it was started, and took place over approximately four days. [ 3 ] The action raises the question of when an individual, in this case the Defendant Steve Tsimiklis, should be held personally liable for breach of the trust provisions of the Act .

Amendments to the Act effective January 1, 2005, allow for the finding of personal liability of individuals who breach the trust provisions. This of course means that the Court must first determine whether the trust provisions were in fact breached, and if so, by whom. [ 4 ] There were originally eight Plaintiffs, Atlantica Mechanical Contractors Inc., Duron Atlantic Limited, East Coast Sheet Metal Ltd., Kejofo Ltd., as general partner in Diaden Masonry & Construction L.P., Lead Structural Formwork Limited, Pinaud Drywall & Acoustical Limited, Precision Concrete Services Limited and Rendan Fabricators Limited.

The Plaintiffs, Davies Plumbing and Heating Limited, Marid Industries Ltd and Twin City Alarms Limited c.o.b. as Twin City Electric, each discontinued its action against the Defendants before the start of the trial. [ 5 ] There are two defendants, Steve Tsimiklis and Steve Tsimiklis Holdings Limited (“STHL”). Steve Tsimiklis is the sole owner, director and officer of STHL. The action concerns only Mr. Steve Tsimiklis’ personal liability, if any, as STHL has been noted in default and judgment in the amount of $1,849,006.36 has been entered against it by the Plaintiffs. STHL ceased operations in November, 2007.

Background [ 6 ] In 2006 or 2007 each of the Plaintiffs provided labour and/or materials in accordance with construction contracts with STHL, as “owner” in connection with the construction of a 108-unit residential apartment building on property located at 5620 South Street, Halifax, Nova Scotia (the “Property” or the “Project”). [ 7 ] Starting in September and October 2007, when their invoices were not being paid, each Plaintiff filed a builders’ lien against the Property.

The Plaintiffs each claim that STHL was at all material times the owner of the Property and indeed admitted that it was owner in its defence to this action. They say that STHL borrowed funds from lenders to be used for the construction of the apartment

building, and that those lenders secured repayment of the funds advanced by registering mortgages against the Property. The Plaintiffs claim that in accordance with s. 44A of the Act , the funds borrowed by STHL, and any other funds obtained by STHL used to finance the Project, should be deemed to constitute a trust fund for their benefit. [ 8 ] The Plaintiffs say that STHL failed to pay all the amounts it owed each of them, pursuant to their contracts. The total global amount claimed by all of the Plaintiffs is in excess of 1.2 Million dollars.

The Plaintiffs claim that the failure on the part of Steve Tsimiklis to provide any proper accounting of the receipt of trust funds in and of itself constitutes a breach of the trust provisions of the Act . They seek judgment for the amounts owed to them, as well as an order for the tracing of trust funds to any non-beneficiary of the trust. [ 9 ] The Plaintiffs claim that Steve Tsimiklis is personally liable for any breach of trust by STHL. [ 10 ] Steve Tsimiklis denies that he was the owner of the Property at all material times.

His evidence was that, starting in 2003, Amalthea Holdings Limited (“AHL”), a company owned and controlled by him, acquired several parcels of land on which the apartment building was eventually built on the Property. By 2003 all of these parcels were acquired by and owned by AHL. Mr. Tsimiklis says that on October 22, 2004, AHL sold the Property to his parents, Dimitrios and Dimitra Tsimiklis. Steve Tsimiklis says that at that time his parents became the registered owner of the Property. His evidence was that on July 30, 2007 his parents sold the Property to STHL for 3.5 Million dollars. [ 11 ] Mr.

Steve Tsimiklis says that any failure to comply with the trust provisions of the Act during the time period when his parents were the registered owners of the Property (October 22, 2004 to July 30, 2007) was his parents’ fault, and not his, and that his parents should have been named defendants in this action, if the Plaintiffs wished to claim against them for breach of the Act ’ s trust provisions.

In this regard, he says that the Plaintiffs sued the wrong person. [ 12 ] Steve Tsimiklis denies that STHL entered into contracts with the Plaintiffs as “owner” and says that when he signed these construction contracts for STHL as “owner” he did so as agent for his parents and for their benefit since they were the registered owner of the Property at the time.

Steve Tsimiklis blames Aecon Atlantic Group (“Aecon”), the project manager hired by STHL for the Project, for any error in the drafting of these contracts and the fact that STHL is listed as the “owner.” Steve Tsimiklis admits that when he acquired the Property from his parents in late July, 2007, he became the registered owner of the Property and responsible for trust monies received from that date forward. ISSUES : [ 13 ] The issues this Court must determine are as follows:

(1) Has each Plaintiff established that it rendered construction services for STHL for the Project and that it has not been paid in full for those services?

(2) Have the Plaintiffs established that STHL received funds for the Project that were impressed with a trust in their favour pursuant to the trust provisions of the Act ?

(3) Has Steve Tsimiklis properly accounted for the use of the funds?

(4) Did STHL breach the trust provisions of the Act , and if so, is Steve Tsimiklis personally liable for any breach?

(5) If STHL breached the trust provisions of the Act , what remedy is each of the Plaintiff entitled? Decision in Brief [ 14 ] For the reasons which are detailed below, this Court finds that STHL breached the trust provisions of the Act , and that Steve Tsimiklis, as the sole officer, director and shareholder of STHL, is jointly and severally personally liable for those breaches. [ 15 ] As will be reviewed further in this decision, this is not a case where there has been a technical breach of the trust provisions.

Rather, this is a case where there have been flagrant and ongoing breaches of the trust provisions, through the diversion of trust monies which should have been used to pay the Plaintiff trade contractors, to the benefit of Steve Tsimiklis and other non-beneficiaries of the trust. Evidence before the Court The Plaintiffs’ Evidence Kevin Fougere – Kejofo Ltd., as general partner in Diaden Masonry & Construction [ 16 ] Kevin Fougere gave evidence that in 2006 and 2007 he was the owner of the Plaintiff Diaden Masonry & Construction L.P. (“Diaden”) of which Kejofo Ltd. (“Kejofo”) was the general partner.

Kevin Fougere said that Diaden was engaged to perform the masonry scope of work on the Project. Kevin Fougere said that Diaden had a contract with Tsimiklis Holdings to do this work. [ 17 ] The document Mr. Fougere pointed to as being Diaden’s contract with Tsimiklis Holdings to perform work for the Project was a contract dated January 24, 2007 between AHL and Diaden, with AHL noted as “owner” and Diaden as “Trade Contractor.” The contract is signed by Steve Tsimiklis as President and owner of AHL and by Kevin Fougere as President of Diaden.

The contract provides that Aecon is the Construction Manager. [ 18 ] Kevin Fougere testified that on March 23, 2007 he received correspondence from Johnathan Mullin, Senior Project Manager with Aecon that provided, in part, as follows:

Attached please find two subcontracts which replace the trade subcontracts issued to you by Amalthea Holdings Ltd. This contract reflects the name change to Steve Tsimiklis Holdings Limited; this change has been necessitated by the mortgage lender. The price, terms, and conditions of the new contracts are identical to your previous subcontracts. [emphasis added] [ 19 ] Kevin Fougere referred to a September 24, 2007 statement of invoices, paid and unpaid, prepared by Diaden for work on the Project.

This statement of invoices shows that as of September 24, 2007 Diaden had several outstanding invoices in the total amount of $365,937.44. The document also shows a builders’ lien holdback of $181,600.65. Kevin Fougere’s evidence was that as of September 24, 2007 Diaden was owed $547,538.09 for work on the Project. [ 20 ] Mr. Fougere’s evidence was that in the late summer and early fall of 2007 payments on Diaden’s invoices were not being made. He said that Diaden stopped work on the Project, as did other contractors.

On September 24, 2007 Kejofo Ltd., as general partner in Diaden, filed a lien in the amount of $547,538.09 against the estates of Dimitrios Tsimiklis, Dimitra Tsimiklis, Steve Tsimiklis, AHL, Tsimiklis Holdings Ltd and STHL. The description of the property to be charged is the Property, with its registered owner noted to be STHL, Steve Tsimiklis, AHL, Tsimiklis Holdings Limited.

Dimitrios Tsimiklis and Dimitra Tsimiklis are identified as “beneficial owners or holding interest” in the Property. [ 21 ] Progress billings in support of the amounts owed to Diaden were in evidence and identified by Kevin Fougere. [ 22 ] Kevin Fougere testified that Diaden was never paid by STHL the $547,538.09 owed to it for work on the Project.

However, Kevin Fougere testified that Diaden was paid 25 cents on the dollar of what it was owed by a purchaser of the Property, who wanted the liens released. [ 23 ] Kevin Fougere pointed to an Agreement in evidence dated November 16, 2007 between a numbered company, STHL, Aecon Limited, Trade Contractors (of which Diaden was one) and Banc Properties Limited (“Banc Properties”), as guarantor. [ 24 ] Kevin Fougere testified that he signed this Agreement on behalf of Kejofo on November 15, 2007. A

Schedule to this Agreement lists Kejofo as owed, inclusive of HST, the total amount of $547,870.09. The

Schedule includes a calculation of 25 per cent of the total amount as $136,967.52. Kevin Fougere testified that Diaden was paid that amount by Banc Properties. The lien it filed against the Property was discharged on November 19, 2007 in exchange for receiving the payment of $136,967.52. [ 25 ] The difference between those two amounts is $410,902.56. Kevin Fougere’s evidence was that Diaden has not been paid any part of that amount. Diaden performed further work on the Project once it was owned by Banc Properties. Mr.

Fougere’s evidence was that Diaden went out of business because it could not survive the stress from the cash flow, resulting from its losses on the Project. [ 26 ] Kevin Fougere gave evidence that he had some direct dealings with Steve Tsimiklis with respect to Diaden’s work on the Project. He said that he called Steve Tsimiklis about unpaid invoices and he recalled that Mr. Tsimiklis had attended a couple of the monthly contractor meetings.

Kevin Fougere said that when Diaden was performing work on the Project he understood that Steve Tsimiklis was the owner of the building and was the person directing all of the decisions made on the Project. Gary Pinaud – The Plaintiff Pinaud Drywall & Acoustical Limited (“Pinaud Drywall”) [ 27 ] Gary Pinaud gave evidence that Pinaud Drywall was incorporated in 1983 and he has been the president of the company since that time.

Pinaud Drywall is a drywall contractor. [ 28 ] Gary Pinaud’s evidence was that Pinaud Drywall had a contract with the owner of the Project to do interior framing and drywall. [ 29 ] Gary Pinaud pointed to a construction contract dated December 19, 2006 between AHL and Pinaud Drywall. Aecon is noted as Construction Manager. The contract is signed by Steve Tsimiklis, as president of AHL, the “owner”, and by Gary Pinaud as president of Pinaud Drywall. [ 30 ] Gary Pinaud, as did Mr. Fougere, testified that the contract later changed in that STHL became the owner.

He pointed to a December 19, 2016 construction contract between Pinaud Drywall and STHL as “owner.” When asked if he knew why this change of ownership occurred, Gary Pinaud said that he thought it had something to do with financing for the Project. [ 31 ] Gary Pinaud pointed to what he called a Performance Bond and a Labour & Material Payment Bond dated March 19, 2007 between Pinaud Drywall and STHL and Industrial Alliance and Financial Services Inc. (“Industrial Alliance”).

He said that the purpose of the Bonds was to guarantee that Pinaud Drywall would perform the labour and materials that was required in its contract. [ 32 ] Gary Pinaud gave evidence about Pinaud Drywall’s Statement of Account for the Project, dated October 11, 2007. He described the document as a spreadsheet as to what was paid, and not paid on the Project. The document lists ten claims (invoices), with three of the claims being unpaid, or partially paid. Those claims total $544,720 plus HST which equals $620,980.80. The document shows that that amount includes a 10 per cent builder’s lien holdback.

The supporting documents underlying the outstanding amounts were confirmed by Gary Pinaud’s evidence in direct examination. [ 33 ] Gary Pinaud also gave evidence that in July 2007 Steve Tsimiklis gave his (Steve Tsimiklis’) lawyer, John Young, Q.C. of Boyne Clarke, a Direction to Pay Pinaud Drywall the amount of $300,140.00. The monies were to be paid once the law firm was in receipt of the first advance of mortgage funds from Industrial Alliance. [ 34 ] Pinaud Drywall later received a cheque dated August 2, 2007 from Boyne Clarke in the amount of $300,140.00 pursuant to the Direction to Pay from STHL.

STHL also gave Boyne Clarke a second Direction to Pay Pinaud Drywall the sum of $259,030.00 from the

net proceeds of the second advance of the Industrial Alliance mortgage. [ 35 ] Gary Pinaud’s evidence was that in the late summer or early fall of 2007, payments to Pinaud Drywall for its work on the Project stopped. [ 36 ] On September 25, 2007 Pinaud Drywall filed a lien against the Property in the amount of $621,000. The lien was filed against the estate of STHL. [ 37 ] Gary Pinaud’s evidence was that Pinaud Drywall was never paid the $621,000 owed to it for work on the project by STHL. However, Mr.

Pinaud testified that Pinaud Drywall was paid 25 cents on the dollar of what it was owed when Banc Properties took over the Project. [ 38 ] Mr. Pinaud referred to the November 16, 2007 Agreement between a numbered company, STHL, Aecon Limited, Trade Contractors (of which Pinaud Drywall was one) and Banc Properties. [ 39 ] Gary Pinaud signed this Agreement on behalf of Pinaud Drywall. A

Schedule to this Agreement notes that Pinaud Drywall was owed, inclusive of HST, the total amount of $620,980.80. The

Schedule includes a calculation of 25% of the total amount as $155,245.20 . Pinaud Drywall was paid that amount. The lien Pinaud Drywall filed against the Property was discharged on November 15, 2007. [ 40 ] The difference between those two amounts is $465,735.60. Gary Pinaud’s evidence was that Pinaud Drywall has not been paid any part of that amount. Pinaud Drywall performed no further work on the Project. [ 41 ] Gary Pinaud’s evidence was that on several occasions Steve Tsimiklis attended job meetings related to the Project when he was present.

Gary Pinaud viewed Steve Tsimiklis as the owner who made a lot of decisions on the Project. Donald Deveaux – The Plaintiff Rendan Fabricators Limited (“Rendan”) [ 42 ] Donald Deveaux testified that he has been the general manager of Rendan for the past twenty years. He said that in 2006 and 2007 Rendan was a contractor for the supply and installation of concrete reinforcing on the Project. Rendan had a contract to perform that work with AHL, as owner.

Donald Deveaux pointed to a contract dated April 24, 2006 signed by Donald Deveaux on behalf of Rendan and Steve Tsimiklis on behalf of the owner, AHL. [ 43 ] Like Kevin Fougere and Gary Pinaud, Donald Deveaux testified that the contract Rendan had with AHL, as owner, was later changed to show STHL as owner. The terms of the second contract, also dated April 24, 2006, were identical to the first. [ 44 ] Donald Deveaux testified that while Rendan was working on the Project, he had no personal dealings with Steve Tsimiklis. He understood at that time that Mr.

Tsimiklis was the building owner. [ 45 ] Donald Deveaux pointed to invoices rendered by Rendan for its work on the Project. A statement of account for Rendan’s work dated October 1, 2007 shows outstanding billings of $7,995.93 and an outstanding holdback of $55,518.21, for a total outstanding amount of $63,514.14. The various invoices rendered by Rendan for work on the Project, supporting the amounts owed, were confirmed by Donald Deveaux’s evidence. An invoice rendered by Rendan dated November 24, 2007 shows the total owing to it for work on the Project as $63,290.76 (the holdback plus HST). Mr.

Deveaux’s evidence was that the Project had reached substantial completion at the time of this November invoice. The unpaid billings of $7,995,93 remained outstanding. The total owed to Rendan for work on the Project was $71,286.69. [ 46 ] Donald Deveaux’s evidence was that in the late summer, or early fall of 2007 Rendan stopped work on the Project for non- payment. Rendan filed a lien against the Property on October 2, 2007.

The lien is against the estate of STHL. [ 47 ] Donald Deveaux’s evidence was that Rendan was subsequently paid 25 cents on the dollar of what it was owed when Banc Properties took over the Project. Rendan released its lien against the Property on November 15, 2007. Rendan was paid $17,821.67 of the total amount of $71,286.69, leaving outstanding the sum of $53,465.02. [ 48 ] Donald Deveaux’s evidence confirmed that on August 17, 2017 STHL gave John Young, Q.C. of Boyne Clarke a Direction to Pay Rendan the amount of $7,995.82 from the net proceeds of the second advance from the Industrial Alliance mortgage. Mr.

Deveaux’s evidence was that Rendan did not receive those funds from Boyne Clarke. Allan MacQuarrie – the Plaintiff Precision Concrete Services Limited (“Precision”) [ 49 ] Allan MacQuarrie testified that he is a manager with Precision and that Precision contracted with STHL to perform work on the Project. In 2006 and 2007 Precision placed and finished concrete in the apartment building. [ 50 ] Precision entered into a contract with STHL dated December 19, 2006.

The contract provides for STHL, as “owner”, and Precision as “Trade Contractor.” The contract was signed by Steve Tsimiklis as president of STHL and by Allan MacQuarrie on behalf of Precision. [ 51 ] A letter dated March 26, 2007 addressed to Precision from Jonathan Mullin, senior project manager with Aecon, advised that two subcontracts were attached which replaced the trade subcontracts issued to Precision by AHL.

This is the same or similar letter that Kevin Fougere of Diaden received from Aecon dated March 23, 2007. [ 52 ] Allan MacQuarrie testified that he did not have any personal dealings with Steve Tsimiklis or anyone on his behalf. He understood that Steve Tsimiklis was the owner of the building Project. [ 53 ] Allan MacQuarrie testified that as of October 4, 2007 Precision was owed a holdback of $10,009.20. At that point, Precision

had completed its work on the Project, but the holdback owing to it had not been released. By the fall of 2007, Mr. MacQuarrie said that the Project had come to a standstill because the contractors were not being paid. Precision filed a lien against the Property dated October 4, 2007. The lien is against the estate of STHL. [ 54 ] Allan MacQuarrie testified that when Banc Properties took over the Project, Precision settled for 25 cents on the dollar and on November 15, 2007 discharged its lien. Precision was paid $2,502.30 of the total amount of $10,009.20. The amount outstanding is $7,506.90.

Tom Vincent – The Plaintiff Atlantica Mechanical Contractors Inc. (“Atlantica”) [ 55 ] Tom Vincent gave evidence as the president of Atlantica. Life Safety Systems (“Life Safety”) is a division of Atlantica which does fire protection. In 2007 Tom Vincent was president of both Atlantica and Life Safety. [ 56 ] Tom Vincent’s evidence was that in 2006 and 2007 Atlantica had a contract with the owner of the Project to provide fire protection and install sprinkler systems to the apartment building. He pointed to a contract dated February 1, 2006 between AHL, as owner, and Life Safety, as trade contractor.

Aecon is noted as the Construction Manager. Tom Vincent’s evidence was that as the Project progressed, Life Safety’s contract with AHL was changed from AHL, as owner, to STHL as owner.

His evidence was that all other aspects of the original contract remained unchanged. [ 57 ] Tom Vincent pointed to a letter from John Young, Q.C. of Boyne Clarke to Life Safety dated July 18, 2007 which letter confirmed receipt by Boyne Clarke of a Direction to Pay Life Safety for its work on the Project by STHL in the amount of $100,530.04 from the net proceeds of the first advance of a STHL’s mortgage with Industrial Alliance. [ 58 ] Tom Vincent testified that Atlantic was not paid for all of the work it did on the Project.

In that regard, Tom Vincent pointed to three invoices totalling $42,632.03 issued by Atlantica for work on the Project which were not paid. Tom Vincent’s evidence was that in the late summer and early fall of 2007 Life Safety stopped work on the Project because its invoices were not being paid. On October 2, 2007 it filed a lien upon the estate of STHL, i.e., the Property, in the amount of $42,632.03. [ 59 ] Tom Vincent testified that STHL did not pay the amount owing.

In November, 2017 Atlantica was paid 25 cents on the dollar when Banc Properties took over the Project in exchange for Atlantica releasing its lien. Atlantica was paid $10,655.76 of the $42,623.03 owing, leaving an outstanding balance of $31,967.27. Atlantica discharged its lien on November 15, 2017. [ 60 ] Tom Vincent said that he did not have personal dealings with Steve Tsimiklis while Atlantica was working on the Project.

David Pottier – The Plaintiff Lead Structural Formwork Limited (“Lead Structural”) [ 61 ] David Pottier gave evidence that he is the president of Lead Structural and that Lead Structural was involved in the Project in 2006 and 2007. He was the president of Lead Structural at that time. Mr. Pottier testified that Lead Structural contracted with the owner of the Project to do the concrete formwork and the placement of the concrete. [ 62 ] David Pottier’s evidence was that Lead Structural had a contract directly with the owner of the Project.

He pointed to a contract dated May 10, 2006 between STHL and Lead Structural. STHL is noted as the “owner” and Lead Structural as the “trade contractor.” The contract is signed by David Pottier as president of Lead Structural and by Steve Tsimiklis as president of the owner, STHL. [ 63 ] David Pottier testified that when he signed this contract, he had no reason to doubt that STHL was the owner. His evidence was that by the fall of 2007 Lead Structural had just completed its work on the Project but was owed money from progress billings it had issued.

On September 26, 2007 when Lead Structural had not been paid, it filed a lien against the Property in the amount of $199,908.68 plus interest of $7,693.54 for a total of $207,602.22. The lien is against STHL as owner of the Property. [ 64 ] David Pottier testified that in November 2007 Lead Structural was paid 25 cents on the dollar when Banc Properties took over the Project. Lead Structural was paid $49,977.17 of the total owing of $199,908.68, leaving a balance owing of $149,931.51.

Lead Structural discharged its lien against the Project on November 21, 2007. [ 65 ] David Pottier’s evidence was that Steve Tsimiklis attended job meetings every week or so. He understood Steve Tsimiklis’ role to be as owner. David Pottier’s evidence was that Mr. Tsimiklis worked with the architects and engineers to build the building. Roger Bourque – The Plaintiff East Coast Sheet Metal Ltd. (“East Coast”) [ 66 ] Roger Bourque gave evidence that he has been the president of East Coast for 31 years. He said that East Coast was involved with the Project as the H-VAC contractor.

His evidence was that Aecon was the Construction Manager and that East Coast had a contract to do the work with the owner. [ 67 ] Roger Bourque pointed to a contract between AHL and East Coast dated July 5, 2006. AHL is noted as “owner” and East Coast as “trade contractor.” Aecon is noted as Construction Manager. The contract is signed by Steve Tsimiklis as president of AHL and by Roger Bourque as president of East Coast. [ 68 ] Mr. Bourque’s evidence was that the contract later changed from AHL, as owner, to be with STHL as owner, but all other terms of the contract remained the same.

The second contract with STHL as owner and East Coast as trade contractor is also dated July 5, 2006. Roger Bourque said that he did not know why there was a second contract. [ 69 ] Roger Bourque’s evidence was that bonding was required on the Project. He pointed to a Labour & Material Payment Bond dated March 28, 2007 between East Coast, STHL and Industrial Alliance in the amount of $118,500.00. [ 70 ] Roger Bourque also pointed to various progress billings East Coast issued for work on the Project which he said were not paid.

In the late summer/early fall of 2007 when East Coast had not been paid, it filed a lien against the Property. The lien is dated September 28, 2007 and is upon the estates of STHL, Tsimiklis Holdings Limited, Dimitrios Tsimiklis, Dimitra Tsimiklis and AHL for work done by East Coast on the Project. [ 71 ] Roger Bourque’s evidence was that in November 2007, Banc Properties took over the Project and paid East Coast 25 cents on the dollar to release its lien. East Coast was paid $19,267.84 of the total amount owed to it of $77,071.36, leaving a balance owing of $57,803.52.

East Coast discharged its lien against the Project on November 15, 2017. [ 72 ] Roger Bourque said that he had no direct dealings with Mr. Steve Tsimiklis in relation to East Coast’s work on the Project. Alvin MacDonald – The Plaintiff Duron Atlantic Limited (“Duron”) [ 73 ] Alvin MacDonald testified that he has been a vice-president with Duron since approximately 2000.

His evidence was that in 2006 and 2007 Duron was involved with the Project, providing the foundation, water proofing and insulation for the Project. [ 74 ] Alvin MacDonald’s evidence was that Duron had a contract to perform this work with the Project owner. He pointed to a contract dated December 19, 2006 between AHL as “owner” and Duron as “trade contractor.” The contract is signed by Steve Tsimiklis as president of AHL and by Alvin MacDonald as vice-president of Duron. Alvin MacDonald’s evidence was that the contract was later changed to be between STHL, as owner and Duron.

Alvin MacDonald did not produce a copy of that second contract at the trial. He said that the contract could not be located. [ 75 ] Alvin MacDonald pointed to four invoices in evidence which Duron had issued to Aecon for payment by the owner. His evidence was that only the first two of these invoices were paid by STHL. The two unpaid invoices total $32,975.64 plus HST. [ 76 ] Alvin MacDonald testified that at some point in the fall of 2007, when Duron had not been paid for the two outstanding invoices, it stopped work on the Project.

On September 28, 2007 it filed a lien against the Property in the amount of $32,975.64 plus HST for a total of $43,016.76. The lien is against the estates of STHL and Aecon. [ 77 ] Alvin MacDonald testified that Duron was later paid 25 cents on the dollar by Banc Properties, when it took over the Project, in exchange for Duron releasing its lien. Duron was paid $10,754.19 of the total balance owing of $43,016.76, leaving an outstanding balance of $32,262.57. Duron discharged its lien against the Property on November 19, 2007. The Expert’s Report Prepared for the Plaintiffs by James A.

Pomeroy, CPA, CA, CFE of Price Waterhouse Cooper dated February 23, 2017 [ 78 ] This expert’s report was filed with the Court and provided to the Defendants’ counsel on May 10, 2017. A statement of Mr. Pomeroy’s qualifications was filed with the Court on September 13, 2019, the Finish Date. [ 79 ] For the first time, during the trial, counsel for the Defendants indicated that he wished to cross-examine Mr. Pomeroy. Up until that point in time, the Defendants had raised no objection, nor made a motion to contest Mr. Pomeroy’s qualifications.

Given that the Defendants had ample opportunity to object to the contents of the report and to challenge Mr. Pomeroy’s qualifications, this Court did not permit cross-examination on the report. It is true that the Defendants’ counsel had no access to his office on September 13, 2019 and for ten or so days thereafter as a result of a mandatory evacuation of counsel’s office building arising from the falling of a crane in the building’s vicinity on September 7, 2019.

However, at that point the Defendants’ counsel had had the Pomeroy Report for over two years without ever indicating that he wished to cross-examine Mr. Pomeroy. Counsel obviously knew that the trial was scheduled to begin on November 27, 2019. [ 80 ] Counsel for the Defendants did not raise the issue of wanting to cross-examine Mr. Pomeroy during a November 20, 2019 pre- trial conference this Court had with counsel in advance of the trial. Nor did defence counsel raise at the start of the trial that he wished to cross-examine Mr. Pomeroy.

He also did not communicate to the Plaintiffs’ counsel in advance of trial that he wished Mr. Pomeroy present for cross-examination. The Court notes that the Plaintiffs’ counsel, in a letter to the Defendants’ counsel dated November 12, 2019, advised that he would not be calling Mr. Pomeroy as a witness, since counsel had received no notice under Civil Procedure Rule 55.13 with regard to Mr. Pomeroy or his report.

The Defendants’ counsel did not respond to this letter, but says that he does not recall seeing it, given that he was dealing with the disruption of being out of his office, in temporary office space, until November 8, 2019, with his own office not being fully functional until November 12, 2019. [ 81 ] As a practical matter, the Court was advised that Mr.

Pomeroy is no longer resident in Nova Scotia, but rather resides in the Virgin Islands, and accordingly would obviously not be available for cross-examination at the trial without adjourning this action that had taken 12 years to get before the Court. [ 82 ] In any event, counsel for the Defendants was able through his direct examination of Mr. Tsimiklis, to bring to the Court’s attention Mr. Tsimiklis’ objections to certain of the findings in the Pomeroy report. [ 83 ] This Court will return to the findings in the Pomeroy Report later in this decision.

The Evidence of Steve Tsimiklis The Tsimiklis “Master Account” [ 84 ] Steve Tsimiklis’ evidence was that he, his parents, his brother George Tsimiklis and companies owned or controlled by him and his brothers and parents had, for many years, all used a single bank account, in his name, for the deposit and payment of all business- related and personal expenses for each of the individuals noted above. They dealt with this account in this manner for many years prior to 2006 and 2007.

[ 85 ] Steve Tsimiklis testified that he had sole signing authority on this account which was a personal account in his name. Into this account went all rent monies from apartments owned by his brother or parents, or companies owned or controlled by them, as well as mortgage proceeds for the Project and for projects unrelated to the Project.

Steve Tsimiklis referred to this account as the “master account.” Out of this master account came payments for personal and business expenses of each of the persons and entities noted, as well as payments to the Plaintiff trade contractors. [ 86 ] Steve Tsimiklis had no separate bank account for STHL. Nor, after July 30, 2007 when he became the registered owner of the Property, did he have any process or system in place to separate trust fund monies from other monies in the master account.

His counsel admitted that he co-mingled trust fund monies with other monies after he became the registered owner of the Property.

His counsel also conceded in closing argument that in August 2007, STHL breached the trust provisions of the Act , when Steve Tsimiklis personally received $85,300.87 from mortgage funds advanced for work on the Project by a lender at a time when the Plaintiffs had not been fully paid under their construction contracts. [ 87 ] Steve Tsimiklis gave evidence as to how AHL acquired various parcels of land, and from whom, and how he obtained development agreements and permits from HRM, the process of which culminated in AHL owning the Property by 2003.

AHL’s Sale of the Property to Dimitrios and Dimitra Tsimiklis [ 88 ] Mr. Tsimiklis testified that AHL sold the Property to his parents on October 22, 2004 for 3.5 Million dollars, referring to a warranty deed from AHL to his parents dated October 22, 2004. [ 89 ] Mr. Tsimiklis’ evidence was that in October 2004 his parents had experience in real estate acquisition and development. He testified that together they personally owned several hundred multi-use properties in the Halifax Regional Municipality. Mr.

Tsimiklis’ evidence was that his father started acquiring property in 1969, and that over more than thirty (30) years he acquired several hundred properties which he operated by himself with the help of his children. [ 90 ] Mr. Tsimiklis testified that the 3.5 Million purchase price was established through an independent appraisal. The appraisal was not in evidence before the Court. He said that this was a non-arms length transaction, with his parents obtaining a 2.1 Million dollar loan from Assumption Mutual Life Insurance Company (“Assumption”) to finance the purchase.

The mortgage between Steve Tsimiklis’ parents and Assumption is signed by Steve Tsimiklis, as attorney for each of his parents. A Power of Attorney dated July 15, 1998 between Dimitrios Tsimiklis and Dimitra Tsimiklis appointing their son, Steve Tsimiklis as their attorney, was entered into evidence at the trial. [ 91 ] Steve Tsimiklis pointed to a statement of receipt and disbursement of funds arising out of the sale of the Property to his parents on October 22, 2004.

This document shows $2,099,700 received in mortgage funds from Assumption Life, payout of existing mortgages and various disbursements, with a balance to the clients (Dimitrios Tsimiklis and Dimitra Tsimiklis) of $830,585. The documents also show that deed transfer tax on the transaction was paid in the amount of $52,500. The Court notes that there was no cheque in the amount of $830,585 payable to any party in evidence. Steve Tsimiklis’ evidence was that he did not know to whom the cheque was paid.

However, he referred in his evidence to a copy of a Royal Bank funds transfer receipt dated October 10, 2004 showing that the sum of $830,000 was transferred to AHL. That money then went into Steve Tsimiklis’ bank account (the “master account”). He described the $830,000 as the profit that AHL had made from the sale of the land. His evidence was that after he acquired the land, he and then AHL increased the value of the Property by securing developments agreements and permits. [ 92 ] Mr.

Tsimiklis’ trial evidence was that the reason the Property was transferred from AHL to his parents by deed dated October 22, 2004 was because he had been having family difficulties and was trying to keep his family (wife and children) together. He said he could not continue and wanted to sell the Property.

His evidence was that his parents said that they would like to purchase the Property and keep the Project going. [ 93 ] Steve Tsimiklis’ trial evidence as to why he sold the Project to his parents on October 22, 2004, is to be contrasted with his discovery evidence in December 2012, seven years previously, when he did not know why the Project was sold to his parents. His discovery evidence was as follows: Q. Okay. Octo – Exhibit 7 is a deed dated October 22, 2004 from Amalthea Holdings to your parents, correct? A. That’s correct. Q. Okay. A. That’s what it says, yeah. Q.

And this transfers that YST, which we saw on Exhibit 6… A. Um-hum. Q. …is the land assembled for the project, to you[r] parents’ name? A. That’s correct. Well, that’s what it says. Q. Why was this done ? A. I don’t know . Q. Okay. You did it ? A. That’s correct .

Q. Okay. Do you know why you did it ? A. No. Can’t recall . Q. Okay. Anybody you could, you know, you could talk to figure out why you did it ? A. Why I did it? No, I don’t know . [emphasis added] [ 94 ] At no time during the seven years after he gave this evidence, did Steve Tsimiklis provide counsel for the Plaintiffs with any correction to his evidence. [ 95 ] This is but on example when Steve Tsimiklis’ trial evidence (in cross-examination) was highly contrived, and not credible. [ 96 ] When this discovery evidence was put to Mr.

Tsimiklis in cross-examination he said that that was what he recalled in 2012 and that he answered questions to the best of his recollection at that time. He said that his trial evidence was a further elaboration which did not take away from what he said actually happened. [ 97 ] Mr. Tsimiklis also gave a discovery undertaken at his December 2012 discovery as to the purpose of the surplus funds from the Assumption Life mortgage.

The answer provided was, “The purpose of the surplus funds from the Assumption Mutual Mortgage was to facilitate the construction of the multi-unit residential building at 5620 South Street, Halifax, Nova Scotia.” Yet, Mr. Tsimiklis testified that he viewed the surplus funds, i.e., the $830,000 as his money, or his profit earned by him and AHL as a result of increasing the value of the Property. When it was put to Mr. Tsimiklis in cross-examination that the reason for the transfer from AHL (a company which at the time owned nothing but the Project land) to Mr.

Tsimiklis’ parents was to try to secure better terms from Assumption Mutual for its mortgage loan, his answer was “no.” When the same question, in essence, was put to Mr. Tsimiklis seven years earlier in December 2012 his answer was that he did not know. [ 98 ] Mr. Tsimiklis testified that after his parents purchased the Project on October 22, 2004, he acted as their agent and Power of Attorney.

When asked in cross-examination whether his parents were communicating with him and telling him what to do on the Project, his answer was “one hundred per cent.” Yet there was no documentation in evidence before the Court of any such directions to Mr. Tsimiklis. Mr. Tsimiklis maintained that he talked to his father several times a day and there was no documentation of such conversations because “none was required.” He said that his father died in 2011 and his mother did not have as much input into decision-making as his father. The Construction Contracts between AHL and subsequently STHL [ 99 ] Mr.

Tsimiklis testified that when he signed the construction contracts with the Plaintiffs in 2006, he did so as his parents’ agent. When it was put to Mr. Tsimiklis in cross-examination that none of the construction contracts with the Plaintiffs refer to him as “agent” for his parents, he blamed Aecon for drawing the contracts up in this manner. This is despite the fact that Mr. Tsimiklis personally signed the contracts as owner of AHL, with AHL a party to the contract.

His evidence was that he signed the contracts as owner of AHL, and not as owner of the Project or Property. [ 100 ] In the Defence filed in March 2008 by Steve Tsimiklis and STHL to the within action, nowhere is it plead that STHL did not have contracts with the Plaintiffs, but rather signed the construction contracts with the Plaintiffs as the undisclosed principal of Mr. Tsimiklis’ parents. Mr. Tsimiklis said that he was not disavowing the contracts because his parents had not signed.

He pointed to the fact that the Plaintiffs were paid for work they had performed until there was no more money to pay them. [ 101 ] When asked in cross-examination why some of the contracts were between the Plaintiffs and STHL and some with AHL, Steve Tsimiklis’ immediate reply was “Aecon Atlantic. You ask them. They drew up the contracts.” [ 102 ] The evidence before the Court established that prior to signing these construction contracts with STHL, the Plaintiffs had previously executed identical contracts with AHL. [ 103 ] The evidence disclosed: (

a) A contract between AHL, as owner and Atlantica (Life Safety Systems) dated February 1, 2006 ; Mr. Vincent’s evidence, as president of Atlantica, was that the contract was later changed to show STHL as owner. Neither AHL or STHL was the registered owner of the Property on February 1, 2006. (

b) A contract between AHL, as owner, and Rendan dated April 24, 2006; a second contract between STHL, as owner, and Rendan dated April 24, 2006. Neither STHL or AHL was the registered owner of the Property on April 24, 2006. (

c) A contract between STHL, as owner and Lead Structural dated May 10, 2006 ; STHL was not the registered owner of the Property on May 10, 2006. (

d) A contract between AHL, as owner and East Coast dated July 5, 2006 and a second contract between STHL and East Coast of the same date. Neither STHL or AHL was the registered owner of the Property on July 5, 2006

(

e) A contract between AHL, as owner, and Duron dated December 19, 2006 . Alvin MacDonald, the vice-president of Duron testified that there was a later contract between STHL, as owner, and Duron (identical to the first) but it could not be located. AHL was not the registered owner of the Property on December 19, 2006. (

f) A contract between AHL, as owner, and Pinaud Drywall dated December 19, 2006; a second contract of the same date, with identical terms, between STHL, as owner, and Pinaud Drywall. Neither AHL or STHL was the registered owner of the Property on December 19, 2006. (

g) A contract between AHL, as owner, and Precision, replaced in late March, 2007 by a contract between STHL, as owner, and dated December 19, 2006 (the date of the first contract ). Neither AHL or STHL was the registered owner of the Property on December 19, 2006 or in March, 2007. (

h) A contract between AHL, as owner, and Kejoko/Diaden dated January 24, 2007 and a contract delivered to Kejoko/Diaden on March 23, 2007 between STHL, as owner and Kejoko/Diaden, with identical terms . Neither AHL or STHL was the registered owner of the Property on March 23, 2007. [ 104 ] When it was put to Mr. Tsimiklis in cross-examination that he signed each of these contracts representing initially that AHL was “owner” and later that STHL was “owner”, Mr. Tsimiklis replied, “I signed the contracts that were provided to me from Aecon.

I don’t know why they did them like that.” His evidence was that AHL was agent of the owners of the Property. When asked whether the change from AHL to STHL was required by Industrial Alliance as mortgage funder, Mr. Tsimiklis testified that on October 22, 2004 none of the construction contracts were signed. His evidence was that as of that date the Property was “clear and free from AHL, clean and severed.” He said that his parents did not inherit any of these contracts from him. When the same question was again put to Mr.

Tsimiklis in cross-examination, i.e., whether the change in the contracts from AHL to STHL was due to the involvement of Industrial Alliance and its requirements, Mr. Tsimiklis replied, “I have no clue. I don’t know the answer to that. [ 105 ] The letter from Aecon to Diaden (testified to by Kevin Fougere) dated March 23, 2007 was put to Mr. Tsimiklis in cross- examination. That letter states, in part: Attached please find two subcontracts which replace the trade subcontracts issued to you by Amalthea Holdings Ltd.

This contract reflects the name change to Steve Tsimiklis Holdings Limited; this change has been necessitated by the mortgage lender. The price, terms, and conditions of the new contracts are identical to your previous subcontracts. [emphasis added] [ 106 ] Mr. Tsimiklis’ evidence was that this letter does not refer to the name of the mortgage lender and that it could have been Besim (Besim Halef of Banc Properties) or possibly Industrial Alliance.

The November 29, 2006 Banc Properties Mortgage [ 107 ] On November 29, 2006, Banc Properties registered a mortgage against the Property for $3,300,000 in favour of Dimitrios and Dimitra Tsimiklis, with AHL as guarantor. Mr. Tsimiklis testified that he negotiated the loan and mortgage on behalf of his parents. He agreed that the money that was loaned by Banc Properties was for the Project. [ 108 ] Mr. Tsimiklis testified that Banc Properties does not operate as a typical or traditional bank when it lends funds. He said that Banc Properties charges a kind of “placement fee” of about ten per cent.

In that regard, Mr. Tsimiklis pointed to a statement of adjustments prepared by Boyne Clarke dated December 4, 2006 which shows funds received from Banc Properties as $2,897,150 and a separate amount of $361,699.66 for a total of $3,258,849.66. The statement of adjustments shows that the Assumption mortgage and other disbursements were paid out. STHL received a total of $3,196,618.46. Mr. Tsimiklis maintained in cross-examination that the $361,699.66 was a placement fee paid by STHL to Banc Properties.

The actual cheque to Boyne Clarke was in the amount of $300,000 with the words “top up of second mortgage” written on the cheque. Mr. Tsimiklis’ evidence was that Mr. Pomeroy in his report incorrectly concluded that the purpose of these monies was unclear and should not have been deducted as a placement fee. [ 109 ] Proceeds from the Banc Properties mortgage (2.7 Million) were deposited into Mr. Tsimiklis’ personal bank account on December 4, 2006.

Immediately prior to that deposit, the account was overdrawn by approximately $100,000. [ 110 ] The evidence disclosed that Rendan was paid $113,239.63 from the Banc Property mortgage funds. The cheque is written on the personal account of Steve Tsimiklis and signed by him. There is nothing on the cheque to indicate that Mr. Tsimiklis was paying as agent for his parents who he said owned the Property at that time. There was also a payment to Rendan on the same date in the amount of $56,619.81.

It is to be remembered that Rendan’s contract at the time was with AHL as “owner.” There was also a cheque written to Lead Structural in the amount of $211,939.87 and a cheque written to Precision Concrete in the amount of $20,314.80 as well as a cheque in the amount of $12,174.24 payable to East Coast. A number of other non-Plaintiff contractors also received payments. [ 111 ] On December 15, 2006, the day after the Banc Properties mortgage funds were deposited, a cheque was written by Steve Tsimiklis to his brother George Tsimiklis’ company “Tsimiklis Holdings Limited” in the amount of $15,000. Mr.

Tsimiklis said that his brother’s company was paid that amount for personal and business expenses. There was a cheque written to a Tsimiklis family member (ex-wife) on December 6, 2006 in the amount of $13,995.00. There was a $5,000 deposit to the account but there was no evidence where that money came from. [ 112 ] On December 7, 2006 the balance of the account was approximately 1.6 Million dollars. That amount included the second

installment of the Banc Mortgage in the amount of $496,219.84. All of that money was proceeds of the Banc Properties mortgage except for approximately $5,100. There was a deposit to the account of $22,072.60 on December 15 th . On December 19 th there were four branch-to-branch transfers made from the account to unknown parties in the total amount of approximately 1.2 Million dollars. On December 21, 2006 there was a $500,000 cash withdrawal from the account. The only money that had come into the account since the 2.7 Million Banc mortgage funds was $5,500.

By the end of December, 2006 the account was back into overdraft. All of the 3.2 Million dollars advanced by Banc Properties was spent in that one-month period. As noted above, some of the funds were used to pay trade contractors. [ 113 ] Mr. Tsimiklis reiterated that his parents owned the Property when these payments were made and it was their obligation, not his, to place the 2.7 Million in trust. His evidence was that there was no requirement for him to separate the trust funds in the master account.

He agreed that the Banc Mortgage proceeds were co-mingled with all other funds going in and out of that account, including for personal and business expenses for his family members. He emphasized that what he did on receipt of the Banc Properties mortgage funds was the same in terms of paying business and personal expenses, as he had done for the 20-year history of the account. Everything went in and out of one pot of money. What he did with the trust fund monies was not out of the norm, but rather how he operated the account for 20 or more years.

The Industrial Alliance Mortgage and the Change in the Construction Contracts from AHL as “Owner” to STHL as “Owner” [ 114 ] In cross-examination, Mr. Tsimiklis was then taken to a commitment letter dated February 9, 2007 from Industrial Alliance, addressed to him and to STHL, which sets out the term of a “first-ranking registered mortgage and charge on” the Property, “with the usual securities”, such as “assignment of all major sub trade contracts.” STHL is noted as borrower, and Steve Tsimiklis as guarantor. The loan amount is $14,492,687.50. The mortgage funds were not paid out until July 30, 2007. Mr.

Tsimiklis described the commitment letter as pre-approving a mortgage and locking in a favourable interest rate should STHL wish to purchase the Property at a later date. Mr. Tsimiklis said that the contracts with the Plaintiffs may have been done early, before STHL owned the Property, but that his parents were then the owners of the Property, and he was not the owner until July 30, 2007.

He maintained, even after reviewing the February 9, 2007 commitment letter, that he had “no clue why and still to this day why they (Aecon) put in front of me two contracts with two different…they if anything did a disservice to the contractors for them to put STHL on one and AHL on the other, and they consciously made me sign both in front of them, why would they do that to me?” [ 115 ] When counsel for the Plaintiffs suggested to Mr.

Tsimiklis in cross examination that it was necessary to “back-date” the contracts so that the contractors’ claims for the holdbacks could be preserved and would not lie against AHL, Mr. Tsimiklis responded, “never.” [ 116 ] In late April, STHL obtained the loan from Industrial Alliance secured by a mortgage on the terms set forth in the February 9, 2007 commitment letter. The face value of the loan was $14,492,687.50, but only $12,075,000 of the loaned amount was advanced for construction related to the Project.

The April 2007 Banc Properties Mortgage [ 117 ] A new mortgage with Banc Properties was registered against the Property on April 16, 2007 for $6,650,000 in favour of Dimitrios and Dimitra Tsimiklis, with AHL as guarantor. At the same time, the old $3,300,000 Banc mortgage was discharged. Steve Tsimiklis signed the mortgage documents as his parents’ Power of Attorney. [ 118 ] On April 13, 2007, John Young, Q.C., counsel for AHL, wrote to Mr. Tsimiklis advising that pursuant to the agreement with Banc Properties, he was enclosing his firm cheque in the amount of $3,000,000. Mr.

Young stated: These funds are to be used to pay contractors, sub-contractors, suppliers and others providing services and materials to facilitate the construction and development of the multi-unit residential building now under construction at 5620 South Street, Halifax. [emphasis added] [ 119 ] The 3 Million dollars went into the Tsimiklis master account on April 13, 2007. At that time, there was approximately $16,700 in the account.

Several of the Plaintiff contractors received payment cheques at that time: • Diaden - $203,862.10 • Rendan - $169,859.43 • Pinaud - $164,140.00 • Pinaud - $133,380.00 • Diaden - $107,507.97 • Life Safety - $55,619.46 • Rendan - $52,042.62 • Rendan - $28,309.91 • East Coast - $73,045.42 • Lead Structural - $71,820.00 • East Coast - $24,348.47

• Lead Structural - $5,351.15 • Precision Concrete - $3,078.00 [ 120 ] Other non-Plaintiff contractors also received payments. [ 121 ] A few days later, on April 18, 2007, approximately $58,000 comprising several payments were made from the Banc Properties mortgage trust funds to non-fund beneficiaries: • James Tsimiklis (Steve Tsimiklis’ father) - $25,000 • Tsimiklis Holdings Limited (George Tsimiklis’ company) - $15,000 • George Tsimiklis - $15,000 • George Tsimiklis - $3000 [ 122 ] Those payments, totalling $58,000, exceed the amount in the account ($16,700) when the 3 Million dollars Banc Properties funds went into the account.

Mr. Tsimiklis did not track the use of the Banc Properties monies. When he made payments to various individuals or companies, he did not track the source of the funds, i.e., whether they were trust fund monies or not. [ 123 ] Also on April 18, 2007, Mr. Tsimiklis made a $75,000 payment from the master account to pay his personal VISA account. He said that he was entitled to use this money because his parents still owed him 1.4 Million from his parents’ purchase of the Property from AHL in October 2004. [ 124 ] Mr.

Tsimiklis’ evidence was that it was his parents’ responsibility, and not his, to ensure that the Banc Properties mortgage funds were used to pay contractors working on the Project (as he had been advised by Mr. Young in his April 13, 2007 letter). [ 125 ] On June 20, 2007, Boyne Clarke, Mr. Tsimiklis’ law firm, issued a cheque in the amount of $600,000 to Tsimiklis Holdings Limited (George Tsimiklis’ company). These funds were deposited to the master account, according to Mr. Tsimiklis, to advance the Project.

Steve Tsimiklis said that a second cheque written by Boyne Clarke to Tsimiklis Holdings Limited on June 20, 2007 in the amount of $300,000, also deposited to the master account, was an advance by George Tsimiklis for the Project. A third Boyne Clarke cheque dated June 29, 2007 written to George Tsimiklis in the amount of $500,000, was also deposited to the master account. Mr. Tsimiklis said that this was also an advance by George Tsimiklis for the Project. A further Boyne Clarke cheque in the amount of $129,500, payable to George Tsimiklis, was also deposited to the master account.

Those cheque amounts total slightly over 1.5 Million. [ 126 ] It is not contested that the money contributed by George Tsimiklis, or the vast majority of it, was used to pay the invoices of trade contractors, including some of the Plaintiffs. Mr. Tsimiklis said that he went to his brother George and implored him to contribute money to the Project for the benefit of his parents, because if he did not get money, the Project would stop. Mr. Tsimiklis testified that George would only contribute money on condition that he was one hundred per cent secured.

Steve Tsimiklis said that the money was contributed to help his parents who owned the Property. The Conveyance of the Property by Dimitrios and Dimitra Tsimiklis to STHL on July 30, 2007 [ 127 ] Steve Tsimiklis testified that on July 30, 2007 the Property was conveyed to STHL by Dimitrios and Dimitra Tsimiklis for the purchase price of 2.4 Million. [ 128 ] The evidence before the Court showed that by the time STHL became the registered owner of the Property on July 30, 2007, each Plaintiff had a contract with STHL dated the same date as the original contracts the Plaintiffs had with AHL. Mr.

Tsimiklis maintained that these contracts were with his parents as the owner of the Property, and not with STHL. However, there was no assumption document in evidence which showed STHL assuming these contracts from his parents when he purchased the Property. [ 129 ] Mr. Tsimiklis said that his parents’ decision to sell the Property was because the day-to-day operations of the building construction were weighing on his father. He said that there were cost overruns and more money was required.

He testified that he had a general conversation with his parents and said that he would try to get them further financing so that he could get them out of the Project, and he would take it on. [ 130 ] This evidence is to be contrasted with Mr. Tsimiklis’ discovery evidence in December 2012 when his testimony was that he did not know why the Property was conveyed to him by his parents on July 30, 2007. In that regard, the following exchange took place between counsel for the Plaintiffs and Mr. Tsimiklis: Q: Okay. And Exhibit 23 is the aff- transfer of the property… A: Um-hmm. Q: …from your parents to yourself.

A: To the company. Q: To the – exactly, sorry A: Steve Tsimiklis Holdings. Q: Yes. Steve – why was this done?

A: I don’t know. Q: Is there any way you can determine why this was done? A: I don’t know. Q: At this time? A: What’s that? Q: Is there any way you can determine why this was done? A: No. Q: Can you check the records and see if there was a purpose for this transfer and why it was made at this time? Okay. A: I don’t think, no. [emphasis added] [ 131 ] Mr. Tsimiklis related this difference in his sworn evidence by referring to the tragedy of his father dying on July 14, 2011.

He maintained that he answered truthfully at his discovery examination, but that his trial evidence was also true in that the “fog lifted” and he remembered having this “general conversation” with his father which led to the transfer of the Property to STHL. [ 132 ] At his second discovery examination in May 2014, Steve Tsimiklis gave a discovery undertaking to check his records to see if any money was paid between STHL and Dimitrios and Dimitra Tsimiklis on July 30, 2007.

The answer to the undertaking was as follows: No money was paid on July 30, 2007 but a Promissory Note dated July 30, 2007 for the balance of the $2,400,000.00 purchase price i.e., $224,330.83 subject to interest at 6% per annum payable on July 30, 2008 was provided by Steve Tsimiklis Holdings Ltd. to Dimitrios Tsimiklis and Dimitra Tsimiklis. [ 133 ] The Promissory Note was not in evidence before the Court. Mr. Tsimiklis valued the Property at 2.4 Million at that time.

The August 2, 2007 Proceeds from the Industrial Alliance Mortgage [ 134 ] In late April 2007, STHL obtained a loan from Industrial Alliance secured by a mortgage. At this point in time, STHL was the registered owner of the Property. Steve Tsimiklis guaranteed the mortgage. The face value of the Industrial Alliance Loan was $14,492,687.50, but only $12,075,000 of the loaned amount was advanced for construction. [ 135 ] On August 2, 2007, the sum of $10,064,000 was received by STHL pursuant to the Industrial Loan. That sum was paid into the trust account of Boyne Clarke, solicitors for STHL.

The trust listing for the STHL account shows that the Industrial Alliance Loan funds were used, inter alia as follows: • The Assumption Mortgage was paid out in the amount of $2,175,669.17; • Banc Properties was paid $4,472,645.15 for its mortgage.

The remaining $2,400,000 owed to Banc Properties was secured by a second mortgage on the Property, second to the Industrial Alliance mortgage; • George Tsimiklis was paid $1,529,000; • Boyne Clarke was paid $80,000; • Steve Tsimiklis was personally paid $85,300.87; • Landry McGillivray, counsel to Banc Properties, was paid $6,840.00; • The remainder of approximately $1,714,780 was paid to contractors or to the Halifax Regional Municipality.

This included $300,140.00 to Pinaud (pursuant to a Direction to Pay) given to Boyne Clarke by STHL dated July 18, 2007; $416,476.94 to the Plaintiff Diaden; $100,530.04 to the Plaintiff Life Safety and $170,608.52 to the Plaintiff East Coast. [ 136 ] In cross-examination, it was put to Mr. Tsimiklis that when George Tsimiklis was paid $1,529,500 from the Industrial Loan, he did not owe any money to STHL.

Rather, according to Steve Tsimiklis’ own evidence, George Tsimiklis owed money to his parents, who he maintained owned the Property in June 2007 when George loaned them $1,529,500 to facilitate the Project. [ 137 ] Mr. Tsimiklis testified that he would have to see the Irrevocable Letters of Direction given to Boyne Clarke to pay George Tsimiklis before he could answer the question. Counsel for Mr. Tsimiklis agreed that there were no Irrevocable Letters of Direction to George Tsimiklis in the Plaintiffs’ 12 volumes of exhibits, nor in Mr. Tsimiklis’ single Book of Exhibits. [ 138 ] After Mr.

Tsimiklis’ cross-examination was concluded, the Court took a lunch break. Mr. Tsimiklis returned to Court with a document which he said was the Irrevocable Letter of Direction given by STHL to Boyne Clarke, about which he had earlier testified. The introduction of this document into evidence was opposed by the Plaintiffs’ counsel, in part because Steve Tsimiklis had never produced an Affidavit Disclosing Documents in this proceeding. Mr. Tsimiklis took the position, including in evidence before this Court, that all documents in his possession with respect to the Project had been given, by him, to Mr.

Halef, at Mr. Halef’s insistence when Banc Properties took over the Project. This Court ruled that the interests of justice favoured allowing the document to be entered, and allowed counsel for the Plaintiffs to cross-examine Mr. Tsimiklis on the document.

[ 139 ] As noted above, Steve Tsimiklis was personally paid $85,300.87. The sum of $87,117.87 was deposited to Steve Tsimiklis’ account on August 10, 2007. Mr. Tsimiklis did not account for these trust funds monies. There was a cheque written on the account to pay Steve Tsimiklis’ credit card account in the amount of $1,288.82. There were a number of branch-to-branch transfers, but the reason for these transfers were not identified in evidence. By August 16, 2007, all of the $85,300.87 was gone from the account. Mr.

Tsimiklis admitted that the $85,300.87 was trust fund money. [ 140 ] As noted earlier in this decision, by this point in time, STHL was falling behind in paying the Plaintiff contractors. As a result, they put liens against the Property in relation to the amounts owed to them. [ 141 ] On October 5, 2007, Banc Properties obtained an Order of Foreclosure against STHL on the Project. By November 20, 2007, Steve Tsimiklis resigned or was replaced as the sole director and officer of STHL.

Banc Properties effectively took control of STHL at that time. [ 142 ] On November 16, 2007, the Plaintiffs entered into the agreements with Banc Properties, STHL and other entities so that they would be paid 25 per cent of what was owing on their outstanding accounts. The Plaintiffs’ evidence in this regard was reviewed earlier in this decision. The agreement was without prejudice to the Plaintiffs’ right to pursue STHL and Mr. Tsimiklis personally, for the shortfall in the payments to each of them. [ 143 ] With that review of the relevant evidence before the Court, I return to the issues the Court must decide.

Issue 1: Have the Plaintiffs established that they rendered construction services for STHL for the Project and that they were not paid in full for those services? [ 144 ] In order to determine this issue, it is necessary to review the relevant provisions of the Builders’ Lien Act . The Relevant Provisions of the Builders’ Lien Act [ 145 ] The relevant provisions of the Act are ss. 44A and 44 G.

Section 44A(1) creates the trust fund and provides: Owner trustee of trust fund for contractor 44A(1) All amounts received by an owner that are to be used in the financing of any of the purposes enumerated in

Section 6 [e.g. construction], including any amount that is to be used in the payment of the purchase price of the land and the payment of prior encumbrances, constitute, subject to the payment of the purchase price of the land and prior encumbrances, a trust fund for the benefit of the contractor .

(2) Where amounts become payable under a contract to a contractor by the owner, an amount that is equal to an amount that is in the owner’s hands or received by the owner, at any time thereafter constitutes a trust fund for the benefit of the contractor. … [emphasis added] [ 146 ]

Section 44A(4) is the liability provision and provides:

(4) The owner is a trustee of the trust fund created by subsection (1), (2) or (3), and the owner shall not appropriate or convert any part of a fund to the owner’s own use or to any use inconsistent with the trust until the contractor is paid all amounts related to any of the purposes enumerated in

Section 6 owed to the contractor by the owner . [emphasis added] [ 147 ] By virtue of s-s. 44A (1), it is clear that funds received by an owner to be used in the financing of a construction project and monies used to pay for the land, as well as the payment of prior encumbrances and subject to those funds being used to buy land and pay out prior encumbrances, constitute trust fund monies – any monies left over constitute a trust fund for the benefit of the contractors. [ 148 ] As of January 1, 2005, the Act was amended to provide for personal liability of the directors and officers of a corporate trustee, for any breaches of trust by the corporation.

Sections 44G(1) and (2) of the Act provide: Persons liable for breach of trust 44G

(1) In addition to the persons who are otherwise liable in an action for breach of trust under this Act , (

a) Every director or officer of a corporation; and (

b) Any person, including an employee or agent of the corporation, who has effective control of its relevant activities , who assents to, or acquiesces in, conduct that the person knows or reasonably ought to know amounts to breach of trust by the corporation is liable for the breach of trust.

(2) The question of whether a person has effective control of a corporation or its relevant activities is one of fact and in determining this the court may disregard the form of any transaction and the separate corporate existence of any participant. [emphasis added]

[ 149 ] What this provision means on the facts before this Court, is that if STHL breached the trust provisions of the Act , Steve Tsimiklis, as STHL’s sole director and officer, will be personally liable for such breach if he knew, or reasonably ought to have known that the conduct of STHL amounts to breach of trust. Steve Tsimiklis was the only officer, director or employee of STHL. All acts of STLH were personally carried out and directed by Mr. Tsimiklis. [ 150 ] Further, during the time when Steve Tsimiklis’ parents were the owners of the Property, Mr.

Tsimiklis would also be liable as their agent if he engaged in conduct on behalf of his parents which he knew, or ought to have known, breached the trust provisions. Mr. Tsimiklis’ evidence at trial was that he was acting as his parents’ agent throughout the time period when they owned the Property, including when STHL signed construction projects with the Plaintiffs as “owner.” [ 151 ] The Act also contains a lengthy definition of “lien” in

section 6 : s. 6(1) Unless he signs an express agreement to the contrary and in that case subject to

Section 4, any person who performs any work or service upon or in respect of, or places or furnishes any material to be used in the making, constructing, erecting, fitting, altering, improving, or repairing of any erection, building …..shall by virtue thereof have a lien for the price of such work, service or materials upon the erection, building…and the land occupied thereby or enjoyed therewith or upon or in respect of which such work or service is performed , or upon which such materials are placed or furnished to be used, limited, however, in amount to the sum justly due to the person entitled to the lien and to the sum justly owing, except as herein provided, by the owner . [Emphasis added] [ 152 ] Steve Tsimiklis does not dispute the quantum of the amounts claimed by any of the Plaintiffs.

He does dispute that he is personally liable to pay those amounts. Nor did Steve Tsimiklis dispute the validity of the liens themselves. Who was the “Owner” of the Project at 5620 South Street? [ 153 ] It is not disputed that as of July 30, 2007 STHL was the registered owner of the Property. The Plaintiffs contend that STHL was also the owner of the Property prior to acquiring it by deed from Steve Tsimiklis’ parents, i.e., during the time period when Dimitrios and Dimitra Tsimiklis were the registered owners of the Property (October 22, 2004 to July 30, 2007).

The Plaintiffs base this contention on the following:

(1) The Pleadings [ 154 ] Paragraphs 12 and 14 of the Statement of Claim provide: 12. The Defendant Steve Tsimiklis Holding Limited (“Tsimiklis Holdings”) is a body corporate, incorporated pursuant to the laws of Nova Scotia, and at all material times was the registered owner of property known as PID No. 41030727 also known as 5620 South Street, Halifax, Halifax County, Nova Scotia upon which a 108 unit residential apartment building was constructed (the “Project”). 14. Tsimiklis Holdings entered into a series of construction contracts with the Plaintiffs, amongst others, to construct the Project.

In particular, the Plaintiffs supplied labour and/or materials in accordance with their contracts with Tsimiklis Holdings which improved the lands of Tsimiklis Holdings in accordance with

section 6 of the Builders’ Lien Act , R.SN.N.S. 1989, c. 277, as amended, all of which ultimately resulted in the construction of the Project. [emphasis added] [ 155 ] Paragraphs 2 and 3 of the Statement of Defence of Steve Tsimiklis provide: 2. Tsimiklis admits paragraphs 1-12 and 14 of the Statement of Claim. Tsimiklis denies the facts and allegations contained in paragraphs 15 through 21 of the Statement of Claim. 3. Tsimiklis ceased to be a director or officer or a person “who has effective control” of Steve Tsimiklis Holdings Limited ("Tsimiklis Holdings”) in September 2007.

Tsimiklis specifically denies the allegations in paragraph 13 of the Statement of Claim. [emphasis added] [ 156 ] This Court finds that the “material times” (as per paragraph 12 of the Statement of Claim and paragraph 2 of the Defence) in this action are the times when trust funds were received. In this case, the evidence shows that trust funds were received at various times throughout the Project to finance the construction. [ 157 ] The Statement of Defence was not amended and no amendment was ever sought.

Accordingly, the Plaintiffs’ counsel says that Steve Tsimiklis has admitted that STHL was the registered owner of the Property when the Banc Properties money was received. [ 158 ] However, the evidence before the Court clearly shows that Steve Tsimiklis’ parents were the registered owner of the Property during the period October 22, 2004 to July 30, 2007. [ 159 ] Although Steve Tsimiklis admitted in his defence the he was the “registered” owner of the Property, the fact remains that he was not .

I find that the Plaintiffs’ argument that he is estopped from asserting that he is not the registered owner is not made out.

(2) The Extended Definition of “Owner” in the Act [ 160 ] The definition of “owner” found in the Act is set out in s. 2 (

d) of the Act as follows:

2(d) “owner” extends to any person, body corporate or politic, including a municipal corporation and a railway company, having anyestate or interest in the land upon or in respect of which the work or service is done, or materials are placed or furnished, at whoserequest and upon whose credit, on whose behalf, with whose privity and consent, or for whose direct benefit, work, or service isperformed or materials are placed or furnished, and all persons claiming under him or them whose rights are acquired after the work orservice in respect of which the lien is claimed is commenced or the materials furnished have been commenced to be furnished. [161] An owner includes a person or corporation who has “any estate or interest” in the land upon which services are provided ormaterials are placed. “Owner” also includes, as per the statutory definition, any person or corporation “on whose behalf work or servicesor materials are placed” and “all persons claiming under him (the owner)” whose “rights are acquired after the work or service. . . . iscommenced or the materials furnished.” [162] Counsel for the Plaintiffs says that the legislative reference to a person having an estate or interest means that the definition of“owner” includes not just registered owners, but also beneficial owners.

Counsel says that STHL’s rights were acquired after the work orservices were commenced and therefore STHL is deemed to be the owner with respect to that work or those services. [163] This Court agrees. The evidence clearly established that STHL’s rights were acquired after the Plaintiff contractors providedwork and services and accordingly STHL is deemed to be the owner with respect to those work or services.

(3) The Construction Contracts Executed by STHL [164] As is evident by this Court’s review of the evidence of the Plaintiffs, or their representatives, in 2006 and 2007 STHL executed aseries of construction contracts with the Plaintiffs stating that STHL was the owner.

These contracts with the Plaintiffs are each madebetween STHL as “owner” and each Plaintiff as “Trade Contractor” and are each signed by Steve Tsimiklis as president of STHL, theowner. [165] The evidence established that in February 2007, Steve Tsimiklis started the process of obtaining a construction mortgage on theProperty between STHL and Industrial Alliance.

One of the terms of the financing required by Industrial Alliance was that all majorsub-trade contracts had to be assigned from STHL to Industrial Alliance. [166] The evidence established that Aecon, the construction manager for AHL and STHL, prepared the new contracts with STHLindicated as owner.

Clearly, Aecon was agent for AHL initially and later on, for STHL. [167] Steve Tsimiklis’ evidence was that at the time the Plaintiffs’ construction contracts were signed with AHL and later with STHL,he was acting as the agent of his parents. [168] However, the contracts indicate that AHL, and then STHL, was owner and record nothing to the effect that Steve Tsimiklis wasthe agent of Dimitrios and Dimitra Tsimiklis. Mr. Tsimiklis faulted Aecon for not showing that he was acting as agent for his parentswhen he signed these contracts.

However, there was no evidence before the Court that prior to this trial, Steve Tsimiklis ever disavowedthe acts of Aecon or said that his parents should be signing these contracts, and not him. [169] This Court is satisfied that as of April 2007 all of the Plaintiffs’ construction contracts were changed from AHL as owner toSTHL as owner, with the identical terms, and even the identical date. From that point forward, each Plaintiff had a contract with STHL. When STHL became registered owner of the Property on July 30, 2007, those contracts simply continued.

The Court is also satisfiedthat Aecon was acting as agent for AHL and STHL and those companies are bound as disclosed principals to Aecon’s actions. [170] I find that Steve Tsimiklis is estopped from arguing that STHL was not the “owner” of the Project within the definition of“owner” in the Act, during the time period October 22, 2004 to July 30, 2007. [171] In cross-examination each of the representatives of the Plaintiff contractors was asked by the Defendants’ counsel if he instructedhis counsel to conduct a search to ascertain the registered owner of the Property prior to entering into a construction contract with thatowner. [172] Each Plaintiff representative said that he did not so instruct counsel. [173] There was no obligation on the part of the Plaintiffs to do a search to determine who was the registered owner of the Property.

Each of the Plaintiff contractors received a representation through their construction contracts with STHL (or AHL) that STHL (or AHL)was the owner. The Plaintiff contractors were entitled to rely upon those representations. As such, the Plaintiff contractors had no legalduty to seek to determine if some other entity was the owner. [174] In Freedman v. D. Thompson Limited, (SCC), [1968] S.C.R. 276 (S.C.C.) Martland J. stated: 15. I am of the opinion that this was a representation by the appellant that the respondent's work was being done for him.

Therespondent agreed not to file a lien on the basis of the representations made in that document. That is the way the document itself reads. 16. In short, the respondent contracted with an agent to do the work for the owner. The appellant represented that he was the owner,and the respondent acted on that representation, to its own detriment. The appellant is estopped from denying that he was the owner. [emphasis added] [175] The Plaintiff contractors were entitled to rely upon the representation (in the form of their contract) that STHL was the owner ofthe Property.

STHL is estopped from denying that he was the owner, within the meaning of the Act, at least from April 2007 when thenew construction contracts showing STHL as owner were signed. [176] Further, there was no evidence before this Court, that Mr. Tsimiklis’ parents had anything to do with the Project, apart from being

the registered owners of the Property. There was not a single document in evidence before the Court that showed that Dimitrios orDimitra Tsimiklis were involved in retaining contractors, retaining Aecon, directing Aecon’s work on the Project or had any rolewhatsoever in the Project. [177] This Court finds that STHL (or AHL) was the true beneficial or equitable owner of the Property throughout the October 22, 2004to July 30,

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