2017 ONSC 5741, 2017 ONSC 5741

CITATION : MGL Construction Inc. v. IBuild Corporation et al., 2017 ONSC 5741 DIVISIONAL COURT FILE NO.: 572/16 DATE: 20171002 SUPERIOR COURT OF JUSTICE – ONTARIO DIVISIONAL COURT RE: MGL CONSTRUCTION INC. , Plaintiff/Appellant AND: IBUILD CORPORATION, ROBERT WEXLER C.O.B. AS IBUILD CUSTOM HOMES, and robert wexler , Defendant/Respondents BEFORE: LEDERMAN J.

COUNSEL: Robby Sohi , for the Plaintiff/Appellant David Strashin , for the Defendant/Respondent HEARD at Toronto: September 26, 2017 ENDORSEMENT [ 1 ] The plaintiff, MGL Construction Inc. (“MGL”), appeals from the Order of the Small Claims Court judge striking out certain causes of action as being outside the limitation period and statute barred. BACKGROUND FACTS [ 2 ] On April 28, 2015, this action was commenced by MGL to recover outstanding monies for the provision of labour and supplies as a subcontractor for work performed on two sites, namely the Kirkton project and the Bannockburn project.

The defendants performed general contracting services on the projects. [ 3 ] MGL’s claim was based on three invoices that were rendered as follows: (

a) June 8, 2012 - invoice for $2,452.10 for the Kirkton project; (

b) January 4, 2013 - invoice for $14,916 for the Bannockburn project; (

c) May 1, 2013 - invoice for $12,438 for the Bannockburn project. [ 4 ] The defendants moved for

summary judgment to strike the claims in respect of the first two invoices on the basis that the action that was brought on April 28, 2015 was more than two years from the dates when the invoices were rendered. [ 5 ] The Small Claims Court judge granted the motion as she found as follows at para. 13: “As there is no extension agreement proven, or even pleaded, I find that the limitation period for the first two invoices …expired prior to the commencement of the action.

The contract claim and unjust enrichment claim and quantum meruit claim for the amounts claimed in those two invoices are statute barred and that portion of the claim is struck out on that basis.” [ 6 ] MGL in its pleading also sought a declaration that the defendants are in breach of the trust provisions of the Construction Lien Act and are liable to MGL for damages.

MGL alleged that the defendants received progress advance funds on these projects from the owner, which funds were held in trust under the provisions of s. 8 of the Construction Lien Act and that MGL is the beneficiary of such trust funds. [ 7 ] The Small Claims Court judge held that the breach of trust claim in respect of the Kirkton project was statute barred, whereas she allowed the breach of trust claim in respect of the Bannockburn project to stand, explaining it this way at paras. 17-18 as follows: On at least the Kirkton project, where the non-payment of the invoice claim [is] said to be the breach of trust, the alleged act or omission is more than two years before the action was commenced and I do not see the presumption being rebutted.

The trust claim on Kirkland [ sic ] is statute barred. I do not see the same conclusion as warranted on Bannockburn which still has unpaid invoices within the two year period outstanding and therefore capable of being the subject of

an act or omission in trust terms within that period. [ 8 ] There had been two motions before the Small Claims Court judge. MGL sought a production order for financial information

as to the state of accounts between the owner and contractor. The defendants brought a cross motion seeking dismissal of the plaintiff’s claims as being statute barred. MGL’s motion settled but the defendants’ motion for

summary judgment proceeded without MGL having received the documents that it sought. STANDARD OF REVIEW [ 9 ] The Small Claims Court judge was proceeding under Rule 12.02 of the Rules of the Small Claims Court allowing a court to strike out or amend all or a part of any document that discloses no reasonable cause of action or defence. The issue before her was whether the claim had no meaningful chance of success and its dismissal at trial was effectively a foregone conclusion: see O’Brien v.

Ottawa Hospital 2011 Carswell Ont. 88 at para. 13 . [ 10 ] The Small Claims Court judge made findings of fact or mixed fact and law and an appellate court should not intervene unless there has been palpable and overriding error. CLAIMS FOR BREACH OF CONTRACT, UNJUST ENRICHMENT AND QUANTUM MERUIT [ 11 ] The Small Claims Court judge indicated that there was no extension agreement and that the limitation period ran from the dates of the first two invoices. However, in the affidavit of John Martelli, it is stated “that the defendants are not coming to court with clean hands.

The defendants made promises to pay the outstanding amounts to me and my staff, thereby delaying me, yet failed to do so.” No responding affidavit took issue with that comment. [ 12 ] The defendants and MGL had an ongoing working relationship on several projects which pre and post-dated the unpaid invoices. [ 13 ] On the state of the evidence and in particular, the uncontradicted affidavit of Mr.

Martelli to the effect that there were promises to pay which delayed the commencement of the claim it would be open to a trial judge to find that the promises amounted to an extension of the limitation period as MGL continued to perform services in accordance with the forbearance. Accordingly, although there may not have been any formal extension agreement, there is a triable issue that the limitation period was extended by reason of the promises and forbearance. Therefore, I conclude that the Small Claims Court judge did make a palpable and overriding error in ignoring this evidence and dismissing these claims.

TRUST CLAIMS [ 14 ] Until all the relevant information is obtained pursuant to the production order, it cannot be stated conclusively that MGL does not have a meaningful chance at trial to establish its trust claims. It is premature to rule out these claims as the productions may demonstrate that the contractor did receive funds from the owner within the limitation period. A trust does not exist until the monies have been received by the contractor.

Until it can be ascertained as to when funds flowed to the defendants, the commencement of the limitation period itself cannot be determined. [ 15 ] In fact, the Small Claims Court judge seemed to be of this view when she said at para. 21: “On the chance that the documents ordered to be disclosed on both projects reveals some breach of trust on Kirkton that is something other than non-payment of the statute barred invoices, I will allow the production order to stand for both projects …” [ 16 ] By stating as much, the Small Claims Court judge appears to be leaving open the possibility of a breach of trust claim depending on what the documents that are sought to be produced reveal.

That being so, it was not reasonable for her to conclude that the breach of trust claim with respect to the Kirkton project should be statute barred but not the breach of trust claim with respect to the Bannockburn project.

CONCLUSION [ 17 ] For these reasons, I find that the Small Claims Court judge made a palpable and overriding error in striking out at this stage, the breach of trust claim with respect to the Kirkton project and striking out the other claims relating to both the Kirkton and Bannockburn projects. [ 18 ] The appeal is allowed, the order of the Small Claims Court judge is set aside and the matter is to proceed to trial. [ 19 ] Counsel have agreed that the costs of the appeal be fixed at $2,000, all inclusive.

Accordingly, having been successful, MGL will have its costs in that amount payable by the defendants within 30 days. _______________________________ Lederman J.

Date: October 2, 2017