Dr. Nishen Bhagaloo Appellant/Respondent by Cross-Appeal (Applicant/Defendant/Plaintiff) v. M2 Construction & Development, 2021 SKCA 168

Court of Appeal for Saskatchewan Docket: CACV3788 Citation: Bhagaloo v M2 Construction & Development Ltd. , 2021 SKCA 168 Date: 2021-12-22 Between: Dr. Nishen Bhagaloo Appellant/Respondent by Cross-Appeal (Applicant/Defendant/Plaintiff) And M2 Construction & Development Ltd., Ranbir Khaira and Amritpal Khaira Respondents/Appellants by Cross-Appeal (Defendants/Applicants/Defendants) Before: Ottenbreit, Schwann and Tholl JJ.A. Disposition: Appeal allowed, cross-appeal allowed in part Written reasons by: The Honourable Madam Justice Schwann In concurrence: The Honourable Mr. Justice Ottenbreit The Honourable Mr.

Justice Tholl On appeal from: QBG 2864 of 2019 (Sask), Regina Appeal heard: September 8, 2021 Counsel: Nicolas Brown for the Appellant/Respondent by cross-appeal Anthony Tibbs and Iqbal Brar for the Respondent/Appellant by cross-appeal Schwann J.A. I.

INTRODUCTION [ 1 ] The respondents, M2 Construction & Development Ltd. [M2 Construction], Ranbir Khaira and Amritpal Khaira, applied to the Court of Queens’ Bench for an order striking Nishen Bhagaloo’s statement of claim against the two individually named respondents and for an order under The Builders’ Lien Act , SS 1984-85-86, c B-7.1 [ BLA ], directing the payment of funds held in court to M2 Construction. The respondents also applied for directions with respect to “the statutory release of the holdback funds of $34,560, held in the trust account, to … M2 Construction …”. Dr.

Bhagaloo concurrently applied for leave to amend his statement of claim and to have the funds held in trust by his former legal counsel transferred to the trust account of his present counsel. [ 2 ] All three applications came before the same Chambers judge on the same day. In a short, 2.5 page, eight-paragraph decision, the Chambers judge struck the statement of claim against the individually named respondents, ordered the payment of an unspecified amount of funds that had been paid into court by Dr. Bhagaloo to M2 Construction, and directed that money held in trust by Dr.

Bhagaloo’s former legal counsel be paid to his current legal counsel, to be held in trust on his behalf. The Chambers judge did not, however, address Dr. Bhagaloo’s application to amend his pleadings: Bhagaloo v M2 Construction & Development Ltd. (18 February 2021) Regina, QBG 2864 of 2019 (Sask) [ Chambers Decision ]. [ 3 ] Dr. Bhagaloo appeals from the whole of the Chambers Decision , except the part of the order that directed that the funds held by his former legal counsel be transferred to his current legal counsel’s trust account. The respondents cross-appeal from that part of the Chambers Decision.

They seek to correct the holdback amount held by Dr. Bhagaloo’s former legal counsel and to have that amount paid to M2 Construction and not transferred to Dr. Bhagaloo’s current legal counsel. [ 4 ] Although sparse, I find the reasons proffered by the Chambers judge on the pleadings issue are sufficient to assess the correctness of that part of his decision. In that regard, I conclude the Chambers judge erred in striking Dr.

Bhagaloo’s claim against the individually named respondents framed in deceit, fraudulent misrepresentation and negligent misrepresentation and that his decision on these matters must be set aside. [ 5 ] The reasons are not, however, sufficient to allow for meaningful appellate review of the builders’ lien issues raised by Dr. Bhagaloo’s appeal and, as such, that part of the decision must be set aside and remitted to the Court of Queen’s Bench to be heard anew. The cross-appeal is allowed to the limited extent of correcting the amount held in trust by Dr.

Bhagaloo’s former legal counsel and setting aside the part of the Chambers Decision that directed the payment of those funds to Dr. Bhagaloo’s current legal counsel. The appropriate direction with respect to those funds is also remitted to the Court of Queen’s Bench. My reasons follow. II. BACKGROUND [ 6 ] M2 Construction is a Saskatchewan corporation involved in property development and home construction. Mr. Khaira and Mr. Khaira are directors and employees of M2 Construction. For ease of reference throughout this judgment, I will refer to Mr. Khaira and Mr.

Khaira as the “individually named respondents”, except where there is need to refer to them separately. [ 7 ] According to his pleadings, Dr. Bhagaloo had entered into a contract with M2 Construction on May 6, 2016, for the construction of a residential home. Dr. Bhagaloo claims that he gave M2 Construction a deposit of $126,000 to commence construction and that “[t]he Defendants represented to the Plaintiff at that time that they would use the money to construct the Home”. This alleged representation is said to give rise to a variety of causes of action.

[ 8 ] The construction contract was subsequently amended on August 13, 2017, and again on August 18, 2018. Pursuant to the terms of the August 13 amending agreement, M2 Construction agreed to supply labour and materials and to construct a residential dwelling for Dr. Bhagaloo in accordance with agreed plans and specifications for the price of $843,000 (tax included). Payment of that sum consisted of a $30,000 deposit upon signing the August 13 amending agreement, an additional deposit of $138,600, and the balance of $674,400 by mortgage financing.

M2 Construction agreed to commence construction on or before September 1, 2017. [ 9 ] Construction of Dr. Bhagaloo’s house did not proceed as planned. The delay prompted Dr. Bhagaloo to arrange a meeting between his father, Harold Bhagaloo, on his behalf, and the respondents to discuss his concerns. To that end, at some point in December of 2017, Dr. Bhagaloo’s father met with Mr. Khaira, Mr. Khaira’s agent, Gurpreet Bhatia, and Dr. Bhagaloo’s then legal counsel, Bhavandeep Jaggi. In the course of that meeting, Mr. Khaira is alleged to have acknowledged that Dr.

Bhagaloo’s deposit had not been applied toward the construction of his new home, but was, instead, used by M2 Construction for other, unrelated projects. Nonetheless, Mr. Khaira committed to immediately commence construction and, with a view to easing tensions, agreed to transfer title to the land into Dr.

Bhagaloo’s name while the house was under construction. [ 10 ] The parties entered into another amending agreement on January 18, 2018, pursuant to which various extras and changes were added, the start date was deferred to February 14, 2018, and the terms for the payment of progress advances were amended. [ 11 ] During the course of construction, Mr. Jaggi released construction draws to M2 Construction totalling $311,040, by way of installments of $141,390 and $169,650. At the time of the Queen’s Bench applications, Mr.

Jaggi retained $34,560 in his trust account, purportedly as a holdback on those advances. [ 12 ] As time progressed, Dr. Bhagaloo came to believe that M2 Construction had not constructed the home in accordance with the terms of their agreement or accepted industry standards. A local contractor, who had been retained by Dr. Bhagaloo, provided an opinion to the effect that the house was not built to industry standards, was not fit for its intended purpose, was not of good workmanship, was not fit for habitation, and that the contract had not been satisfied.

The contractor estimated that it would cost $230,170.50 to remediate the various issues. As of the date of the court applications, Dr. Bhagaloo had spent in excess of $35,000 on repairs, as he put it, “to make the home habitable prior to moving in”. [ 13 ] According to the February 2, 2021, affidavit of Mr. Khaira, on July 9, 2019, Dr. Bhagaloo instructed M2 Construction to cease construction when less than $5,000 of the finishing work remained to be done on the home. M2 Construction demanded payment of the balance owing for services and supplies that had been provided up to the date of termination. When Dr.

Bhagaloo refused to pay, M2 Construction registered a builder’s lien against the title to his home in the amount of $300,000. [ 14 ] In October of 2019, Dr. Bhagaloo commenced an action for damages against M2 Construction and the individually named respondents grounded in breach of contract, negligent construction, and fraudulent and negligent misrepresentation. [ 15 ] Dr. Bhagaloo moved into the home but subsequently listed it for sale in the fall of 2020. To place himself in a position to convey clear title to a purchaser, Dr.

Bhagaloo applied for and was granted an order under s. 56(1) of the BLA vacating the M2 Construction lien on payment into court of the sum of $350,000, composed of the full amount of the lien claim, plus a security deposit of $50,000. [ 16 ] In January of 2021, the individually named respondents applied for an order striking the pleadings against them. By way of a second application, M2 Construction sought the following relief: Remedy claimed 1. An order pursuant to The Builders’ Lien Act , SS 1984-85-86, c B-7.1 , s 56(4)(

a) read with s 44(

a) for a reduction of the amount paid into court, and the payment of any part of the amount paid into Court to M2 Construction & Development Ltd; and 2. Directions from the Court pursuant to The Builders’ Lien Act , s 17 with regards to the statutory release of the holdback funds of $34,560.00, held in the trust account, to the Defendant, M2 Construction & Development Ltd under The Builders’ Lien Act , s 44(a); and 3. Such further or other relief as counsel may request and this Honourable Court may allow; and 4. Costs. [ 17 ] Dr.

Bhagaloo responded in kind with an application to amend his statement of claim and for an order directing that the money held in trust by the JBK Law Office (Regina), Mr. Jaggi’s law office, be paid to his new legal counsel’s office, Nychuk & Company, in trust. III. THE CHAMBERS JUDGE’S DECISION [ 18 ] The Chambers judge dealt with the pleadings issue first. He began with the observation that the construction contract was between Dr. Bhagaloo and M2 Construction.

Without citing any legal authority or providing any analysis whatsoever, the Chambers judge reached the following conclusion with respect to the adequacy of Dr.

Bhagaloo’s pleadings: [4] The plaintiff has not pled or showed how the individual defendants, purportedly as directors of the defendant corporation, were anything other than directors of the defendant, M2 Construction & Development Ltd., nor that they held any special relationship or duties other than as directors of M2 Construction & Development Ltd. to the plaintiff in this action. [5] The court does thereby order that the claims against the defendants, Ranbir Khaira and Amritpal Khaira, are dismissed.

The court does further grant leave to delete the defendants, Ranbir Khaira and Amritpal Khaira, from the action as the plaintiff has only advanced a cause of action against the corporate defendant, M2 Construction & Development Ltd., and not the individual defendants. Only M2 Construction

& Development Ltd. has raised a counterclaim against the plaintiff and therefore the draft order submitted February 12, 2021, may issue asfiled. [19] The Chambers judge did not comment nor did he rule on Dr. Bhagaloo’s application to amend his statement of claim to curethe alleged defects. [20] The Chambers judge next turned his attention to the builders’ lien issues.

Once again, without citing any case authority orconducting any analysis of the law or the evidence, he determined as follows: [6] The court does accept that there are two portion [sic] to the holdback paid into court – there is the $30,000 holdback and there is theremaining holdback of $35,560 with the Jaggi [JBK] Law Office. [7] The 40 days have elapsed since the house was constructed as per the agreement and the lien discharged by the court order. The courtdoes hereby order that the holdbacks paid into court and the holdback pursuant to s. 56(6)(

b) and s. 44(1) [sic] of The Builders’ Lien Act,SS 1985-85-86, c B-7.1, be paid to the defendant, M2 Construction & Development Ltd. [21] Finally, the Chambers judge dealt with the second part of Dr. Bhagaloo’s application, which concerned the remaining fundsheld in trust by the JBK Law Office. The Chambers judge ordered that those funds be paid to Nychuk & Company in trust forDr.

Bhagaloo, subject to the following direction: “This money shall be held in trust by the legal counsel for the plaintiff until finalreconciliation with respect to the shortfalls in holdback payments to the defendant” (at para 8). [22] Dr. Bhagaloo appeals from the whole of the Chambers Decision, except for the final paragraph: [8] As per the application of the plaintiff the funds held in trust by Jaggi [JBK] Law Office shall be paid to Nychuk & Company in trustfor the plaintiff.

This money shall be held in trust by the legal counsel for the plaintiff until final reconciliation with respect to theshortfalls in holdback payments to the defendant. M2 Construction cross-appeals, asking this Court to (

a) find that the holdback amount held by the JBK Law Office is $34,560, not thesum of $35,560, as so found by the Chambers judge, and (

b) overturn that part of the order that directs the transfer of funds to Nychuk &Company and, instead, direct payment of that sum to it. IV. GROUNDS OF APPEAL [23] In his amended notice of appeal, Dr. Bhagaloo advances numerous grounds of appeal, which were later compressed into fiveissues in his factum. I would reframe those grounds, along with the issues set out in the respondents’ cross-appeal, as follows: (

a) Did the Chambers judge err in striking Dr. Bhagaloo’s statement of claim against Ranbir Khaira and Amritpal Khaira? (

b) Did the Chambers judge err in ordering payment of the money held in court to M2 Construction pursuant to s. 56(6)(

b) ands. 44 of the BLA? (

c) Did the Chambers judge err in ordering payment of the funds held in trust by the JBK Law Office to Nychuk & Company intrust for Dr. Bhagaloo? V. ANALYSIS A. Did the Chambers judge err in striking Dr. Bhagaloo’s statement of claimagainst Ranbir Khaira and Amritpal Khaira? [24] Pursuant to Rule 7-9(2)(

a) of The Queen’s Bench Rules, a pleading may be struck if it “discloses no reasonable claim ordefense, as the case may be”. The governing principles applicable to an application of this nature are well known. Speaking for the Courtin Canada (Attorney General) v Merchant Law Group LLP, 2017 SKCA 62, [2017] 10 WWR 664, leave to appeal to SCC refused, [Merchant], Ryan-Froslie J.A. summarized the law in this way: [18] Chief Justice McLachlin, writing for the Supreme Court of Canada, in R v Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3SCR 45, set out the principles governing such applications: (

a) it is incumbent on a plaintiff to clearly plead the facts upon which it relies in making its claim (at para 22); (

b) such applications proceed on the basis that the facts pled are true, “unless they are manifestly incapable of being proven” (at paras 22and 23); (

c) a claim will only be struck if it is plain and obvious it discloses no reasonable cause of action, that is, it has no reasonable prospect ofsuccess (at para 17); and (d) “[t]he law is not static and unchanging”, thus, the approach taken in applications to strike “must be generous and err on the side ofpermitting a novel but arguable claim to proceed” (at para 21). See also Sagon v Royal Bank of Canada (1992), (SK CA), 105 Sask R 133 (CA) at para 16 [Sagon]; and Filson vCanada (Attorney General), 2015 SKCA 80 at para 19, 388 DLR (4th) 66 [Filson].

[19] In deciding an application to strike a claim on the basis it discloses no reasonable cause of action, a judge is limited to consideringonly the statement of claim, any document referred to therein, and any response to a request for particulars (Sagon at para 16; Filson atpara 20). A judge is not permitted to consider affidavit or other extraneous evidence. See also Harpold v Saskatchewan (Corrections and Policing), 2020 SKCA 98 [Harpold], and Reisinger v J.C.

Akin Architects Ltd., 2017SKCA 11, 411 DLR (4th) 687 [Reisinger]. [25] The test for striking a pleading for disclosing no reasonable cause of action is not whether the claim might fail, or even if it ismore likely than not that it will fail. The Supreme Court affirmed the stringent nature of the test that had been previously expressed inHunt v Carey Canada Inc., (SCC), [1990] 2 SCR 959, in Odhavji Estate v Woodhouse, 2003 SCC 69, [2003] 3 SCR 263: [15] An excellent statement of the test for striking out a claim under such provisions is that set out by Wilson J. in Hunt v.

Carey CanadaInc., (SCC), [1990] 2 S.C.R. 959, at p. 980: [A]ssuming that the facts as stated in the statement of claim can be proved, is it “plain and obvious” that the plaintiff’s statement of claimdiscloses no reasonable cause of action? As in England, if there is a chance that the plaintiff might succeed, then the plaintiff should notbe “driven from the judgment seat”. Neither the length and complexity of the issues, the novelty of the cause of action, nor the potentialfor the defendant to present a strong defence should prevent the plaintiff from proceeding with his or her case.

Only if the action is certainto fail because it contains a radical defect … should the relevant portions of a plaintiff’s statement of claim be struck out … . (Emphasis added) [26] As this Court noted in Harpold, in addressing a Rule 7-9(2)(

a) application, a reviewing court must “determine whethersufficient facts have been pleaded to establish the legal elements of a cause of action by considering the whole of the statement of claim. Itis for the reviewing judge ‘to determine whether the combined effect of any technical pleading, together with other facts, properly pleadthe essential elements of the cause of action’ [Reisinger at para 20]” (at para 26). [27] It is accepted law that, in undertaking an analysis of a Rule 7-9(2)(

a) application, the court may only consider the statement ofclaim, any response furnished pursuant to a request for particulars, and any document referred to in the claim: R v Imperial TobaccoCanada Ltd., 2011 SCC 42 at paras 17–23, [2011] 3 SCR 45 [Imperial Tobacco]. [28] The question of whether a statement of claim discloses a reasonable cause of action is reviewable on the correctness standard ofreview: Harpold at para 21, Filson v Canada, 2015 SKCA 80 at para 22, 388 DLR (4th) 66 [Filson], and Merchant at para 17. [29] Dr. Bhagaloo asserts that the Chambers judge erred in several respects.

I will deal with each argument in turn. 1. The sufficiency of the reasons [30] Dr. Bhagaloo argues firstly that the reasons provided by the Chambers judge were inadequate because they failed to engage inthe facts or the submissions of the parties and did not assess the issue of whether any deficiency in the pleadings could be cured by hisproposed amendment. Dr. Bhagaloo says paragraphs 4 and 5 of the Chambers Decision simply replicate the respondents’ applicationmaterial and are little more than conclusory statements, void of any analysis or examination of the issues.

In short, he asserts that theChambers Decision does not reveal the why of the result, which means the reasons are inadequate for purposes of meaningful appellatereview. [31] It is trite law that in criminal matters, where an accused’s innocence is at stake, the trial judge has a duty to give reasons.Reasons serve a number of important functions, including (

a) justifying and explaining the result to satisfy the public that justice has beendone, (

b) explaining to the unsuccessful party why they did not prevail, (

c) providing an informed consideration of any potential groundsof appeal, and (

d) allowing for effective appellate review – R v R.E.M., 2008 SCC 51 at paras 11–12, [2008] 3 SCR 3 [R.E.M.]; R vSheppard, 2002 SCC 26, [2002] 1 SCR 869 [Sheppard]; and R v Walker, 2008 SCC 34, [2008] 2 SCR 245. An appellate court is not tointervene simply because it thinks “the trial judge did a poor job of expressing [themselves]” (F.H. v McDougall, 2008 SCC 53 at para 99,[2008] 3 SCR 41 [McDougall]).

Reasons must be responsive to the live issues at trial and the parties’ submissions. [32] In assessing the sufficiency of reasons, an appellate court is to undertake a functional, context-specific approach: Sheppard atpara 53, R.E.M. at paras 16 and 35(1), and Hill v Hamilton-Wentworth Regional Police Services Board, 2007 SCC 41 at para 101, [2007]3 SCR 129.

Speaking for this Court in Scobie v Thiessen, 2021 SKCA 47, 54 RFL (8th) 256 [Scobie], Ryan-Froslie J.A. said as follows: [33] … an appellate court must apply a functional test – one that takes into consideration the context giving rise to the decision, the recordand the purpose of providing reasons, which includes giving an explanation to the unsuccessful party, allowing for meaningful appellatereview and enabling the public to satisfy itself that justice has been done: R v Sheppard, 2002 SCC 26 at para 24, [2002] 1 SCR 869[Sheppard]. [33] The purpose of reasons is fulfilled if they show why the trial judge made the decision that was made, not how it was done: seeR.E.M. at para 17, and R v R.I.G., 2020 SKCA 26 at para 74.

A trial judge is not obligated to “refer to or resolve every inconsistencyraised by the defence in the course of his or her reasons” (R v R.A., 2017 ONCA 714 at para 45, 421 DLR (4th) 100, aff’d 2018 SCC 13,[2018] 1 SCR 307). Nor is a judge required to detail findings on each piece of evidence or controverted fact, “so long as the findingslinking the evidence to the verdict can be logically discerned” (R.E.M. at para 20).

Sufficiency of reasons focusses on whether the reasonsdisclose what essential facts were found by the judge and why they arrived at the result they did. [34] Although Sheppard was decided in a criminal law context, it remains instructive in civil matters: see, for example, Scobie;Gebert v Wilson, 2015 SKCA 139, [2016] 5 WWR 656; Robertson v Dhillon, 2015 BCCA 469, 379 BCAC 200 [Robertson]; Dovbush vMouzitchka, 2016 ONCA 381, 399 DLR (4th) 69; McDougall; and Sawatsky v Isfeld, 2021 SKCA 141. [35] Relying on cases such as Sinclair v Neisz, (SK CA), [1944] 3 WWR 731 (Sask CA), and Canadian Pacific

Transport Company Limited v Highway Traffic Board, (SK CA), [1976] 5 WWR 541 (Sask CA) [CPTransport], M2 Construction submits there is a presumption of sufficiency of reasons and that the Court should approach the ChambersDecision from that perspective. With respect, this

interpretation of Sinclair and CP Transport goes much further than what those casesstand for. The presumption is not that the reasons of a judge are sufficient; it is that “when a trial judge does not give reasons for hisjudgment, the appellate court should assume that he found every fact open to him to find under the evidence which was necessary tosupport the conclusion which he reached” (CP Transport at para 24).

In any event, as the Supreme Court pointed out in Sheppard, whilejudges are presumed to know the law, and are presumed to deal competently with issues of fact, “the presumption is of limited relevance”(at para 55(9)).

This is because judges may still err despite these presumptions; and it is, therefore, the correctness of a decision thatparties may have reviewed by an appellate court. [36] To summarize, while insufficient reasons do not amount to a reversible error on their own, and judges are presumed to knowthe law and to have found the facts necessary to support their conclusions, those presumptions can only go so far when a reviewing courtis unable to discern the logical connection between what was decided and why that decision was made.

Returning to the direction offeredin Sheppard, the guiding principle on appeal is this: “The simple underlying rule is that if, in the opinion of the appeal court, thedeficiencies in the reasons prevent meaningful appellate review of the correctness of the decision, then an error of law has beencommitted” (emphasis added, at para 28). [37] The respondents argue that inadequacy of reasons is not a stand-alone ground of appeal. I agree.

The failure to give adequatereasons does not constitute a free-standing ground of appeal, so long as an appellate court “can discern the ‘why’ of a decision from therecord …” (Robertson at para 63): also see Sheppard at para 46. [38] The respondents go on to argue that, since judges are presumed to know the law and understand the evidence, a conclusorydecision bereft of analysis is sufficient: neither a certain length nor quality of a decision is required.

In determining whether reasons aresufficient, they say, an appellate court must consider the sufficiency in the context of the record, as the record may support the decisiondespite the lack of reasons. I do not take issue with this argument as a statement of general principle; however, as I will discuss in thecontext of the builders’ lien issue, that proposition is not an unvarnished invitation for an appellate court to decide the matter afresh forpurposes of comparing its view to that of the lower court in order to determine if there was a reversible error. [39] As Dr.

Bhagaloo correctly points out, the Chambers judge failed to orient himself to the applicable law with respect to thestriking of pleadings and failed to grapple with the elements of the four separate causes of action.

Neither, he says, did the Chambers judgediscuss the law pertaining to the personal liability of directors, officers and employees of a corporation, which, as I discuss below, wasdirectly relevant to the claim against the individually named respondents. [40] All of that said, I find the reasons, sparing though they may be, are sufficient to permit appellate review as to the correctness ofthe decision on the strike application. With that, I now turn to Dr. Bhagaloo’s substantive arguments with respect to the pleadings issue. 2. The pleadings issue [41] Without separating Dr.

Bhagaloo’s multiple causes of action and their elements, the Chambers judge simply swept them asideby stating as follows (repeated here for reference): [4] The plaintiff has not pled or showed how the individual defendants, purportedly as directors of the defendant corporation, wereanything other than directors of the defendant, M2 Construction & Development Ltd., nor that they held any special relationship or dutiesother than as directors of M2 Construction & Development Ltd. to the plaintiff in this action. [42] Although the reasoning is sparse, I understand the Chambers judge to have struck Dr.

Bhagaloo’s claim against the individuallynamed respondents for two reasons. First, in stating that Dr. Bhagaloo failed to plead that they “were anything other than directors of M2Construction”, I take him to have held that, as a matter of general principle, corporate officers and directors cannot be found liable, unlessDr. Bhagaloo had pleaded that they held a special relationship or were something “other than as directors of M2 Construction …” (atpara 4).

The second reason, embedded in the preceding paragraph, is the Chambers judge’s implicit conclusion that, as only M2Construction was a party to the contract with Dr. Bhagaloo, there was no privity of contract between him and the individually namedrespondents; hence, no claim could be advanced against them. [43] With respect, to properly analyze the respondents’ application, the Chambers judge had to examine the elements of each causeof action pleaded by Dr. Bhagaloo. Since the underlying thread to his decision appears to be his understanding that Dr.

Bhagaloo could notclaim directly against corporate officers, it was incumbent on the Chambers judge to have examined that issue. a. Liability of directors and employees [44] The liability of directors and officers has generated a great deal of jurisprudence because of the seeming complexity of theissue, differences in judicial approach concerning the appropriate test and the ongoing tension between holding individuals responsible fortortious actions and the separate legal nature of a corporation.

In ScotiaMcLeod v Peoples Jewellers Inc. (1995), (ONCA), 87 OAC 129 (CA) [ScotiaMcLeod], the Ontario Court of Appeal attempted to reconcile that tension by formulating a suitableanalytical framework. The court held that where specific tortious conduct against an individual director or employee of a corporation hasbeen properly pleaded, the action can be maintained against those individuals in their personal capacities.

This conclusion is embedded inthe following, oft-cited passage from that decision: [25] The decided cases in which employees and officers of companies have been found personally liable for actions ostensibly carried outunder a corporate name are fact- specific. In the absence of findings of fraud, deceit, dishonesty or want of authority on the part ofemployees or officers, they are also rare. Those cases in which the corporate veil has been pierced usually involve transactions where theuse of the corporate structure was a sham from the outset or was an afterthought to a deal which had gone sour.

There is also aconsiderable body of case-law wherein injured parties to actions for breach of contract have attempted to extend liability to the principalsof the company by pleading that the principals were privy to the tort of inducing breach of contract between the company and the plaintiff

… . Additionally there have been attempts by injured parties to attach liability to the principals of failed businesses through insolvencylitigation. In every case, however, the facts giving rise to personal liability were specifically pleaded.

Absent allegations which fit withinthe categories described above, officers or employees of limited companies are protected from personal liability unless it can be shownthat their actions are themselves tortious or exhibit a separate identity or interest from that of the company so as to make the act orconduct complained of their own. (Emphasis added) [45] The Ontario Court of Appeal returned to this issue in ADGA Systems International Ltd. v Valcom Ltd. (1999), (ON CA), 117 OAC 39 (CA), leave to appeal to SCC refused, [2000] 1 SCR xv [Valcom].

The main question in that case waswhether, on the assumption that the corporate defendant had committed a tort against the plaintiff, the director and employees of thecorporate defendant could be made “accountable for the same tort as a consequence of their personal involvement directed to the perceivedbest interests of the corporation” (at para 8).

After thoroughly canvassing the history of liability against directors, officers and employeesof corporations in Canada, the Court stated, “The consistent line of authority in Canada holds simply that, in all events, officers, directorsand employees of corporations are responsible for their tortious conduct even though that conduct was directed in a bona fide manner tothe best interests of the company …” (at para 18).

With particular reliance on the dicta in ScotiaMcLeod, the Court went on to say, “whereproperly pleaded, officers or employees can be liable for tortious conduct even when acting in the course of duty” (at para 39). [46] The respondents point to an exception to this line of authority carved out in Said v Butt, [1920] 3 KB 497, where the purportedmisconduct is connected with an alleged breach of contract by a defendant corporation. There, the plaintiff had brought an action againstthe sole director of a theatre company for procuring a breach of contract between the plaintiff and the theatre company.

That Courtconcluded as follows (at 506–507): I hold that if a servant acting bona fide within the scope of his authority procures or causes the breach of a contract between his employerand a third person, he does not thereby become liable to an action of tort at the suit of the person whose contract has thereby been broken.… Nothing that I have said to-day is, I hope, inconsistent with the rule that a director or a servant who actually takes

part in or actuallyauthorizes such torts as assault, trespass to property, nuisance, or the like may be liable in damages as a joint participant in one of suchrecognized heads of tortious wrong. [47] However, as the court in Valcom observed, the Said v Butt exception is not an application of Salomon v Salomon and Company,[1897] AC 22 (HL) [Salomon] (the case setting out the bedrock principle of separate corporate personality), but a policy-based exceptionto the general rule that people are responsible for their own tortious conduct.

The Said v Butt exception applies because “it assures thatpersons who deal with a limited company and accept the imposition of limited liability will not have available to them both a claim forbreach of contract against a company and a claim for tortious conduct against the director with damages assessed on a different basis”(Valcom at para 15).

In the end result, Valcom held the Said v Butt exception did not change the general rule that a person is liable fortheir personal conduct in relation to tortious activity not related to inducing a breach of contract. [48] After a review of the many and sometimes conflicting decisions concerning corporate directors’ and officers’ liability, AnthonyJ. VanDuzer, The Law of Partnerships and Corporations, 4th ed (Toronto: Irwin Law, 2018) at 437, summarized the law in this area asfollows: Directors and officers can be held liable for torts, even when acting in the course of carrying out their duties in good faith.

While suchliability arguably imperils the separate existence of the corporation, it is consistent with the tort principle that each person should be heldliable for their own torts. In general, whether a person will be liable in tort will depend on the degree and nature of their personalinvolvement in the tort. [49] With those principles in mind, I return to the matter at hand. Dr. Bhagaloo argues that he pleaded all of the requisite facts todisclose a cause of action against the individually named respondents in tort.

He says the respondents’ lengthy and detailed statement ofdefence demonstrates that they were not taken by surprise or confused by his pleadings. [50] The respondents counter by asserting that the inviolability of M2 Construction’s separate corporate personality, as per Salomon,should apply and be respected.

They maintain that the proper question facing the Chambers judge was whether the corporate veil shouldbe pierced. [51] Although there have been cases where a plaintiff has sought to lift the corporate veil to make a principal liable for thetransgressions of the corporation, that does not appear to be the case put forth by Dr. Bhagaloo in his pleadings.

As the Court aptly pointedout in Valcom, “where, as here, the plaintiff relies upon establishing an independent cause of action against the principals of the company,the corporate veil is not threatened and the Salomon principle remains intact” (emphasis added, at para 10). [52] The point of my discussion about the personal liability of directors and officers is not to definitively rule on the state of the lawin this province, determine whether the circumstances as pleaded give rise to the Said v Butt exception, or to apply the law to the facts ofthis case.

That is not the function of a court on a motion to strike pleadings. Rather, these authorities are highlighted only to make thepoint that, as I see it, the law does not prohibit a claim from being brought in tort against corporate directors and officers. [53] Of course, none of this prevents the respondents from advancing defences to Dr. Bhagaloo’s claim aimed at restricting orabrogating the scope of director and officer liability.

But, as this Court reminds us in Harsch v Saskatchewan Government Insurance, 2021SKCA 159, a plaintiff does not have to plead facts to negate defences that a defendant may have to a cause of action: [39] … Where a defendant applies to strike a plaintiff’s claim under Rule 7-9(2)(a), the question for determination is whether thestatement of claim discloses a reasonable cause of action. The analysis of that question must remain rooted in a consideration of thesufficiency of the plaintiff’s pleadings, and not in the defences that may exist to the plaintiff’s claim.

To state that another way, the factthat a defence has been pleaded does not determine whether the statement of claim discloses a reasonable cause of action. [54] When this body of case law is considered in light of this Court’s decision in Harpold, I am persuaded that the Chambers judgeerred when he struck parts of Dr. Bhagaloo’s claim for disclosing no reasonable cause of action against the individually named

respondents simply because they “were [not shown to be] anything other than directors of the defendant, M2 Construction …”. To refresh,for a claim to be struck, it must be plain and obvious that the pleadings disclose no reasonable cause of action. As noted in ImperialTobacco, “The approach must be generous and err on the side of permitting a novel but arguable claim to proceed to trial” (at para 21).Applying those principles to Dr.

Bhagaloo’s statement of claim leads me to conclude the mere fact that the individually namedrespondents were officers and directors of M2 Construction did not deprive him of the right to bring suit against them in deceit, fraudulentmisrepresentation or negligent misrepresentation. Their status in the corporation does not make it plain and obvious that such claims willfail.

To the extent that the Chambers judge struck the pleadings solely because of their status as directors and officers of M2 Construction,I conclude he erred in doing so. [55] As mentioned, the second reason given by the Chambers judge for striking Dr. Bhagaloo’s claim against the individuallynamed respondents was because there was no privity of contract between them. That principle of law, of course, only applies to claims incontract. As Dr.

Bhagaloo grounded his claim against the individually named respondents in tort, the Chambers judge was required toassess the strike application in the context of those causes of action; and, to do so, he had to examine each cause of action that waspleaded. It is to that issue that I now address. b. The specific claims [56] Dr. Bhagaloo’s statement of claim contains four causes of action. I will deal with each in turn. [57] Dr. Bhagaloo’s statement of claim is primarily grounded in breach of contract and negligent construction.

In paragraph 16, healleges the “Defendant company has breached the Contract” (emphasis added), with paragraph 17, thereof, setting out the specifics of thealleged breach committed by it. Nowhere in the statement of claim does Dr. Bhagaloo assert that the individually named respondents weresomehow liable in contract, had breached the contract or had induced M2 Construction to breach the contract. [58] Dr. Bhagaloo’s statement of claim goes on to plead that the defendants (i.e., plural) were negligent in the way in which theybuilt his house (paragraphs 31 and 32).

This pleading contains no further allegations or particulars, nor does Dr. Bhagaloo plead that theindividually named respondents owed a separate duty of care to him with respect to the construction, that they breached that dutypersonally or that he suffered damages as a result. [59] Given these deficiencies, I find that his claim for negligent construction against the individually named respondents wasproperly struck by the Chambers judge. As pleaded, the negligence claim appears to refer entirely to the duty of care owed by thecorporate defendant to Dr. Bhagaloo.

There is not a sufficient personal nexus between the individually named respondents andDr. Bhagaloo to maintain an action in negligent construction against them. [60] This brings me to Dr. Bhagaloo’s claim against Mr. Khaira and Mr. Khaira, the individually named respondents, in deceit andfraudulent misrepresentation. He claims they induced him to execute the contract through the numerous representations they had made tohim, including that the deposit money would be used to build the house and that the house would be built in a reasonable time.

Hemaintains that the individually named respondents knew those representations were untrue, deceitful, false and misleading (paragraph 19and 20). [61] According to the Supreme Court in Bruno Appliance and Furniture, Inc. v Hryniak, 2014 SCC 8, [2014] 1 SCR 12, a plaintiffmust plead the following four elements when advancing the tort of civil fraud: [21] From this jurisprudential history, I summarize the following four elements of the tort of civil fraud: (1) a false representation made bythe defendant; (2) some level of knowledge of the falsehood of the representation on the part of the defendant (whether throughknowledge or recklessness); (3) the false representation caused the plaintiff to act; and (4) the plaintiff’s actions resulted in a loss. [62] The Chambers judge failed to consider or explore the nature of this cause of action or its elements.

Instead, as discussed above,his focus was on Dr. Bhagaloo’s failure to plead facts to establish that the individually named respondents were “anything other thandirectors of the defendant, M2 Construction” (at para 4) or that they had a special relationship or exercised duties other than as directors. [63] As I see it, the Chambers judge erred with respect to this issue for two reasons. First, the existence of a special relationship,although relevant to the tort of negligent misrepresentation, is not, per se, an element of fraud and deceit.

Second, as discussed above, thelaw does not bar a plaintiff from bringing a claim in tort against corporate officers and directors. Reasoning in the way that he did causedthe Chambers judge to be more concerned with who the parties were, and their roles within the corporate structure, as opposed to thenature of the allegations made against them in the statement of claim and the cause of action pleaded. [64] While this part of Dr.

Bhagaloo’s statement of claim leaves much to be desired, I am satisfied that he pleaded sufficient facts toground a claim against the individually named respondents in deceit and fraudulent misrepresentation; or, at least, I find that it not plainand obvious that his claim would fail. I am also satisfied that, although not without some reservation, Dr. Bhagaloo’s pleadings fulfill theobligation to plead particulars of fraud imposed by Rule 13-9 of The Queen’s Bench Rules.

His statement of claim specifies the generalnature of the impugned representations, who reputedly made them to him, all of which, he says, induced him to pay the deposit. Whilethese allegations might have included more specificity as to who said what and when it was said, Dr. Bhagaloo could provide particulars.Whether Dr. Bhagaloo can prove those allegations is, of course, another matter, but it is not one for consideration at the application tostrike stage. [65] This brings me to Dr.

Bhagaloo’s claim for negligent misrepresentation set out in paragraph 26 of his statement of claim: “ThePlaintiff claims that during their negotiations and discussions before executing the Contract and paying the deposit that the Defendantsand/or their agents negligently made representations referred to above for the purpose of inducing the Plaintiffs to enter into the Contractand pay the deposit”. [66] A claim grounded in negligent misrepresentation must set out facts touching on the following elements of that tort (Queen vCognos Inc., (SCC), [1993] 1 SCR 87 at 110 [Cognos]):

The decisions of this Court cited above suggest five general requirements: (1) there must be a duty of care based on a “specialrelationship” between the representor and the representee; (2) the representation in question must be untrue, inaccurate, or misleading; (3)the representor must have acted negligently in making said misrepresentation; (4) the representee must have relied, in a reasonablemanner, on said negligent misrepresentation; and (5) the reliance must have been detrimental to the representee in the sense that damagesresulted. [67] I am satisfied that paragraph 26, read together with paragraphs 27–30 of Dr.

Bhagaloo’s statement of claim, captures theessence of this tort. Based on his pleadings, I accept that Dr. Bhagaloo pleaded the last three elements of this tort, even though he lumpedthe individually named respondents together with M2 Construction by levelling his allegations broadly against the defendants. [68] The only issue of concern is whether Dr. Bhagaloo satisfactorily dealt with the duty of care component.

In this regard,paragraph 27 states, “The Defendants owed the Plaintiff a duty of care to exercise all reasonable care and skill in making therepresentations that induced the Plaintiff to enter into the Contract and pay the deposit” (emphasis added). As discussed above, theChambers judge struck this cause of action because Dr. Bhagaloo had not pleaded that the individually named respondents “held anyspecial relationship or duties other than as directors of M2 Construction” (at para 4). The question on appeal is whether Dr.

Bhagaloo’sfailure to plead the existence of a special relationship, or state how the individually named respondents acted outside of their corporateduties, was fatal to his claim against them. What I take the Chambers judge to have said here is that the statement of claim did not containsufficient particulars otherwise. [69] It is recognized at law that the existence of a duty of care in connection with the tort of negligent misrepresentation is notconfined to advice received from a professional.

While professional status may be an indicator of whether a special relationship existsbetween the parties, Cognos affirms that it is not a “threshold requirement” and that “[t]here may be situations where the surroundingcircumstances provide sufficient indicia of a duty of care, notwithstanding the representor’s profession” (at 117–118). [70] The special relationship aspect was clarified by the Supreme Court in Hercules Management Ltd. v Ernst & Young, (SCC), [1997] 2 SCR 165 [Hercules], where it was held that the two-part Anns–Kamloops framework (i.e., Anns v MertonLondon Borough Council, [1978] AC 728 (HL), and Kamloops v Nielsen, (SCC), [1984] 2 SCR 2), modified for thespecific features of negligent misrepresentation, should be used to determine if a duty of care is owed by a defendant to a plaintiff.

Thequestion to be asked is “whether there is a sufficiently close relationship between the plaintiff and the defendant that in the reasonablecontemplation of the latter, carelessness on its part may cause damage to the former” (Hercules at para 22). A special relationship ariseswhere “(

a) the defendant ought reasonably to foresee that the plaintiff will rely on his or her representation; and (

b) reliance by theplaintiff would, in the particular circumstances of the case, be reasonable” (at para 24). [71] Returning to the matter at hand, to the extent the Chambers judge can be taken to have held that the pleadings were deficientsimply because Dr. Bhagaloo had failed to describe his connection with the individually named respondents as a special relationship, heerred. Applying Hercules, the question is, given the circumstances as a whole, did a special relationship exist between the parties.

This isnot a question of improper or incomplete labelling, but whether the essence of the two-part analysis from Hercules is captured in thestatement of claim. [72] While Dr. Bhagaloo did not submit the most convincing and well-drafted pleadings in connection with the tort of negligentmisrepresentation, I am satisfied that he sufficiently captured the essential elements of this tort to allow the pleadings to stand.Dr. Bhagaloo identified the specific representations made by the individually named respondents, which he said induced him to provide adeposit for the construction of the house.

He also referenced the ensuing contact he had with them that led him to believe that theimpugned representations were false, particularly the matter of the deposit. Finally, he alleged that the false representations made by theindividually named respondents caused him to suffer damages. [73] In sum, Dr. Bhagaloo’s claim appears to contain the necessary elements of the tort of negligent misrepresentation against theindividually named respondents. At least, it is not plain and obvious from the pleadings that this part of his claim will fail. 3.

Conclusion on the pleadings issue [74] The portion of the Chambers Decision striking Dr. Bhagaloo’s claim against the individually named respondents grounded indeceit, fraudulent misrepresentation and negligent misrepresentation is set aside. To the extent the Chambers judge determined thatDr. Bhagaloo’s claim in contract and negligent construction should be struck against the individually named respondents and continueonly against M2 Construction, he did not err. The order striking that part of Dr. Bhagaloo’s claim is sustained. [75] Dr.

Bhagaloo’s application to amend his pleadings, should he wish to pursue it, is remitted to the Court of Queen’s Bench fordetermination. B. Did the Chambers judge err in ordering payment of the money held incourt to M2 Construction pursuant to s. 56(6)(

b) and s. 44 of the BLA? C. Did the Chambers judge err in ordering payment of the funds held in trustby the JBK Law Office to Nychuk & Company in trust for Dr. Bhagaloo? [76] The issues of the holdbacks and trust funds are factually and legally linked and, therefore, most appropriately dealt withtogether. [77] The Chambers judge made these findings of fact concerning the money that was paid into court by Dr. Bhagaloo: “there aretwo portions to the holdback paid into court – there is the $30,000 holdback and there is the remaining holdback of $35,560 with the[JBK] Law Office” (at para 6).

These findings give rise to a degree of confusion and, to some extent, a discrepancy with the record. Let me

explain. [78] With regard to the first holdback, there is uncertainty as to precisely what the Chambers judge meant and what he determined.The fiat included in the appeal book, and found in the lower court record, identifies the holdback to be the sum of $30,000, yet that sameparagraph in the lower court decision that was filed with this Court (on 4 March 2021), shows it to be to $311,040. Contrary to Rule 10.1of The Court of Appeal Rules, no judgment or order taken out in the Court of Queen’s Bench was filed with the notice of appeal. Only adifferent version of the Chambers Decision was filed.

Since a formal order was never taken out, this Court cannot confidently rely oneither finding and, as such, cannot assess whether the Chambers judge’s finding amounts to an error of fact or law. Regardless, it gives riseto confusion and uncertainty. [79] Second, out of the funds paid into court by Dr. Bhagaloo, $300,000 represents the full value of M2 Construction’s lien and notthe notional amount of any holdback.

Furthermore, since this money was paid into court pursuant to s. 56(6) of the BLA for purposes ofvacating the lien, the lien ceased to attach to the holdback and became, instead, a charge on the amount paid into court. [80] The third point of confusion concerns the money held by the JBK Law Office. Those funds were neither paid into court – as theChambers judge appeared to find – nor was the $35,560 figure correct.

The record would suggest the sum of $34,560 remained in the JBKLaw Office’s trust account at the time of application. [81] In spite of this apparent state of confusion, it is from those findings that the Chambers judge made the following ruling(repeated here for reference): [7] The 40 days have elapsed since the house was constructed as per the agreement and the lien discharged by the court order. The courtdoes hereby order that the holdbacks paid into court and the holdback pursuant to s. 56(6)(

b) and s. 44(1) [sic] of The Builders’ Lien Act,SS 1985-85-86, c B-7.1 be paid to the defendant, M2 Construction & Development Ltd. [82] As can be seen, the Chambers judge ordered the holdbacks (plural) that were paid into court be paid to the defendant, M2Construction, pursuant to s. 56(6)(

b) and s. 44 of the BLA. Arguably, this paragraph contemplates (at least) three separate holdbacks, all ofwhich were to be paid to M2 Construction. However, and as mentioned above, the amount held in trust by JBK Law Office was never paidinto court. [83] The final direction given by the Chambers judge pertains to the money held by the JBK Law Office: [8] As per the application of the plaintiff the funds held in trust by Jaggi [JBK] Law Office shall be paid to Nychuk & Company in trustfor the plaintiff.

This money shall be held in trust by the legal counsel for the plaintiff until final reconciliation with respect to theshortfalls in holdback payments to the defendant. [84] In accordance with paragraph 8, the Chambers judge ordered that the funds held by JBK Law Office be paid to Dr. Bhagaloo’scurrent legal counsel to be held in trust for him, pending a final reconciliation of the shortfalls of the holdback payments. What theChambers judge meant by the term shortfall was not explained. It is possible he meant for these funds to be set aside to cover anydeficiency Dr. Bhagaloo may be able to prove; however, that

interpretation is simply speculation on my part. Regardless, the respondentscontend the Chambers judge erred by ordering that the funds held by JBK Law Office be transferred to Dr. Bhagaloo’s new legal counsel,when M2 Construction was entitled to receipt of the holdback pursuant to s. 28 of the BLA. [85] To say the least, the conclusory reasons of the Chambers judge are inscrutable for purposes of appeal. They are inadequate andinexplicable with respect to the evidence. Apart from a passing reference to s. 56(6)(

b) and s. 44 of the BLA, no legal analysis of the lawwas undertaken by the Chambers judge, even though this was a strongly contested application. The Chambers judge was dealing with acomplex area of law that engages a web of intricate statutory provisions and jurisprudence. For example, while the BLA empowers a courtto order the reduction of the amount paid into court “to the person entitled” (s. 56(4)(a)), the jurisprudence holds that money paid intocourt pursuant to s. 56(6) is not the property of the contractor, nor is it a final adjudication of the rights of the parties.

Neither, for thatmatter, is the posting of security considered to be an acknowledgment of the validity of the lien: “the effect of the order is that the lien isnot discharged, it merely causes it to cease to attach to the land, holdback and contract amount and attaches instead to the money paid intocourt” (Hastings Enterprises Ltd. v 7-Eleven Canada Inc., 2021 SKCA 70 at para 23, [2021] 8 WWR 51 [Hastings], quoting D & KHorizontal Drilling

(1998) Ltd v Alliance Pipeline Ltd., 2002 SKQB 86 at para 24, [2002] 6 WWR 497). Importantly, it remains open tothe owner to contest the existence of the lien, the amount claimed and its validity: see, for example, Wellington Insurance Company vSaskferco Products Inc. (1999), (SK CA), 172 Sask R 268 (CA) at paras 34–35. [86] Dr. Bhagaloo’s statement of claim adds a further layer of complexity to the analysis that was demanded by the parties’applications. He claims damages for defective work on his home “in an amount to be proven at trial”.

Since no other lien claims werefiled against his property, there was a live issue at the time of the application as to whether Dr. Bhagaloo could set-off his deficiencyclaim – if legitimate and whatever amount it might be – against the money held in court. [87] In this regard, the Chambers judge should have directed his mind to the dicta in Westridge Construction Ltd. v Henderson(1995), (SK KB), 136 Sask R 268 (QB) [Westridge]. There, the contract was completed and a certificate of substantialperformance was issued.

The plaintiff contractor then claimed payment under the construction contract and for the holdback funds inparticular. The owner responded by arguing that he was entitled to set-off against the holdback because of deficiencies in the work. Thecontractor resisted the owner’s position by pointing to s. 35 of the BLA, which prohibits the holdback from being applied toward thecompletion of the contract. [88] Justice Klebuc (as he then was), held that s. 35 of the BLA did not apply to the facts before him, finding the

interpretation ofs. 35 advanced by the plaintiff would result “in a contractor being entitled to recover up to 10 percent of the value of its contract from theowner regardless of the quality of its work” (Westridge at para 14). Justice Klebuc concluded by stating as follows: [16] … Where privity of contract exists between an owner and contractor, the owner is entitled to set-off against the contractor in anamount equal to the outstanding debts, claims and damages that relate to the improvement affected by the contractor’s work. In suchcircumstances the provisions of s. 35 cannot be relied on by a contractor for its sole benefit even though the contractor has not performed

its contractual obligations. [ 89 ] On the basis of the record, it was arguable that the same or a similar factual scenario exists in Dr. Bhagaloo’s case. There is privity of contract between Dr. Bhagaloo and M2 Construction. While the construction of the house is complete, Dr. Bhagaloo claims the right to set-off amounts that might be payable to M2 Construction because of the costs incurred to cover the deficiencies. There are no unpaid subcontractors who require the benefit of the holdback. However, the Chambers Decision contains no mention of Westridge , let alone Dr.

Bhagaloo’s competing deficiency claim, and how, if at all, it factored into his analysis. M2 Construction points to s. 35 of the BLA , which, as noted, makes the holdback inviolable and prevents it from being used to complete the contract. However, Westridge appears to hold that where there is privity of contract, a contractor cannot rely on s. 35 , and an owner may set-off for deficiencies.

In short, on the facts before the Chambers judge, there was an argument to be made concerning the application of Westridge , assuming it remains good law. [ 90 ] M2 Construction relies on this Court’s decision in Hastings in support of the order made by the Chambers judge directing payment of the holdback from the funds held in court. While that case establishes, at paragraph 12, four preconditions that must be met before holdback funds can be released under the BLA , Hastings must be read alongside Westridge .

When Hastings and Westridge are read in conjunction with one another, it becomes clear that, but for Dr. Bhagaloo’s claim to set-off against M2 Construction’s lien, there was an argument to be made that Dr. Bhagaloo was obliged to pay the holdback funds to M2 Construction.

In making this observation, I hasten to add that the Chambers judge failed to make any findings of fact with respect to entitlement to the holdback, the classification of the funds that were paid into court and those held by the JBK Law Office, and M2 Construction’s entitlement to claim against the funds held by JBK Law Office when the full amount of its claim is otherwise secured by the funds in court. None of these issues were addressed by the Chambers judge.

In light of these deficiencies, it is hard to understand the road map employed by the Chambers judge that might provide this Court with assurance that the full range of issues was considered and resolved. [ 91 ] In the face of the brevity of the reasons, Dr. Bhagaloo repeats his arguments about insufficient reasons. Like the pleadings issue, he asserts that the Chambers Decision is simply a recitation of the respondents’ material, void of an independent analysis of the evidence or the application of s. 56(6) (

b) and s. 44 of the BLA . I agree with Dr. Bhagaloo. [ 92 ] M2 Construction strenuously maintains that the reasons provided by the Chambers judge are sufficient for purposes of appellate review. It says this is so because the result is “obviously correct”, and this Court can assure itself of the correctness of the decision by undertaking its own, independent analysis of the evidence and the law and then by comparing its result to that achieved by the Chambers judge.

This is circular reasoning that must be rejected. [ 93 ] The respondents’ position fundamentally misrepresents the role of an appellate court, as stated in Sheppard : [28] … The mandate of the appellate court is to determine the correctness of the trial decision, and a functional test requires that the trial judge’s reasons be sufficient for that purpose. The appeal court itself is in the best position to make that determination. The threshold is clearly reached, as here, where the appeal court considers itself unable to determine whether the decision is vitiated by error. Relevant factors in this case are that (

i) there are significant inconsistencies or conflicts in the evidence which are not addressed in the reasons for judgment, (ii) the confused and contradictory evidence relates to a key issue on the appeal, and (iii) the record does not otherwise explain the trial judge’s decision in a satisfactory manner. Other cases, of course, will present different factors.

The simple underlying rule is that if, in the opinion of the appeal court, the deficiencies in the reasons prevent meaningful appellate review of the correctness of the decision, then an error of law has been committed. [ 94 ] Said another way, the issue on appeal is not whether an appellate court can undertake the necessary analysis of fact and law to come up with a result, as if it were a first-instance decision-maker. Nor is it the role of an appellate court to re-engineer the application afresh to flesh out and provide the reasons and explanation that should have been furnished by the Chambers judge.

Rather, on appeal, the issue is whether deficiencies in the reasons prevent meaningful appellate review as to the correctness of the lower court decision. [ 95 ] In this case, when the reasons are examined, I find myself facing confusing and contradictory fact-finding and being unable to discern the reasoning path taken by the Chambers judge. In other words, the sparsity of the reasons makes it impossible for this Court to assess if the Chambers Decision is vitiated by an error of fact or law. The Chambers judge had an obligation to provide reasons to explain his result.

I find that he erred in law in failing to do so. [ 96 ] In terms of remedy, this Court may either quash the decision as it relates to the builders’ lien issues and remit the matter to the Court of Queen’s Bench to be heard afresh or substitute its own view of the issues. Given the need to make findings of fact, and my inability to determine if there was an error of fact made, I find the appropriate remedy in this case is to allow Dr. Bhagaloo’s appeal on the builders’ lien issues and remit both the respondents’ and Dr.

Bhagaloo’s respective builders’ lien applications to the Court of Queen’s Bench for a rehearing. The cross-appeal is allowed to the extent of setting aside the quantum of funds held by JBK Law Office. The correct sum should be $34,560. Paragraph 8 of the Chambers Decision is also set aside and remitted to the Court of Queen’s Bench to be dealt with afresh. VI. CONCLUSION [ 97 ] Dr. Bhagaloo’s appeal from the decision striking the portions of his claim grounded in deceit or fraudulent misrepresentation (or both) and negligent misrepresentation against the individually named respondents is allowed.

His appeal from the decision on the builders’ lien applications is also allowed. The respondents’ cross-appeal is allowed to the limited extent set out in this judgment. The builders’ lien applications are remitted to the Court of Queen’s Bench for a rehearing, along with Dr. Bhagaloo’s application to amend his pleadings. [ 98 ] Given the unusual circumstances at hand, notably problems created by the extreme brevity of the Chambers Decision , I decline to make an order for costs . “Schwann J.A.”

Schwann J.A. I concur. “Ottenbreit J.A.” Ottenbreit J.A. I concur. “Tholl J.A.” Tholl J.A.