



COURT OF APPEAL FOR ONTARIO

CITATION: Airex Inc. v. Ben Air System Inc., 2017 ONCA 390

DATE: 20170516

DOCKET: C60178

Simmons, Rouleau, and Roberts JJ.A.

BETWEEN

Airex Inc.

Plaintiff (Respondent)

and

Ben Air System Inc. also known as Ben-Air Systems
    Inc.,
Beny Quattrociocchi and Juan Cumming

Defendants (Appellants)

Colin Holland, for the appellants

John Lo Faso and David Morawetz, for the respondent

Heard: May 1, 2017

On appeal from the judgment of Justice Edward P. Belobaba
    of the Superior Court of Justice, dated February 20, 2015.

By the Court:

[1]

The appellants appeal from a summary judgment
    declaring them in breach of the trust provisions of the
Construction
    Lien Act
, R.S.O. 1990, c. C.30 (the Act) and ordering
    them to jointly and severally pay $216,662.84 to the respondent, Airex Inc.
    (Airex).

[2]

The corporate appellant, Ben Air System Inc.
    (Ben Air) entered into a subcontract with Omico Mechanical Ltd. (Omico) to
    do a portion of Omicos HVAC work on a TTC facility (the project). Ben Air
    subsequently ordered certain HVAC equipment for the project from Airex.

[3]

The appellant, Beny Quattrociocchi, is the
    president of Ben Air; the appellant, Juan Cumming, is the project manager of
    Ben Air. There was no dispute on the motion that Mr. Quattrociocchi signed a
    guarantee in favour of Airex, guaranteeing Ben Airs present and future
    indebtedness to Airex.

[4]

Further, subject to one issue regarding a
    claimed set-off and an argument concerning mitigation, there was no issue on
    the motion that Ben Air owes Airex monies on account of HVAC equipment for the
    project. There was also no issue that Omico paid $387,228.32 plus HST to Ben
    Air on account of Ben Airs subcontract and that those funds are trust funds in
    relation to the project under s. 8 of the Act.

[5]

The main issue on appeal is whether the motion
    judge erred in failing to find a genuine issue requiring a trial concerning
    whether Ben Air breached s. 8 of the Act.

[6]

Section 8 of the Act provides that monies
    received on account of a contract for an improvement constitute a trust fund
    for the benefit of subcontractors and other persons who supply services or
    material for the improvement (collectively subcontractors) and prohibits use
    of any such funds for a purpose inconsistent with the trust until all such
    persons have been paid in full. (All sections of the Act referred to in these
    reasons are reproduced in full in Appendix A.)

[7]

Section 10 of the Act discharges the recipient
    of trust funds from its trust obligations to the extent of payments to
    subcontractors. Section 11 of the Act permits the recipient of trust funds to
    reimburse itself from the trust funds for payments to subcontractors from
    monies not subject to the trust.

[8]

Section 13 of the Act makes directors, officers
    and persons in effective control of a corporation personally liable for a
    breach of s. 8 where they assent to or acquiesce in conduct they know, or ought
    reasonably to know amounts to a breach of trust by the corporation.

[9]

On appeal, the appellants argue that they filed
    evidence on the motion, which, at a minimum, raises an issue that Ben Air paid
    out more money on account of equipment purchases, payments to sub-contractors
    and wages and salaries for the project than it received from Omico, including
    payments made to itself from trust funds to reimburse itself for payments made
    in relation to the project. Relying on ss. 10 and 11 of the Act, the appellants
    submit that the motion judge erred in failing to find a genuine issue requiring
    a trial concerning whether Ben Air breached s. 8 and whether the personal appellants
    are liable for that breach.

[10]

We do not accept this submission. Simply put,
    Ben Air failed to file evidence on the motion that carried sufficient weight to
    support its position.

[11]

For example, in an affidavit filed on the
    motion, Mr. Cumming asserted that Ben Air used a cheque received from Omico in
    the amount of $158,000 to pay invoices from other project subcontractors
    (Servocraft Limited and Engineered Air), which had been outstanding longer than
    Airexs invoices. However, Mr. Cumming did not provide any invoices or banking
    records to support this assertion. Moreover, we note that, in a letter confirming
    payment of the $158,000, Omico stated it had agreed to forward the cheque in
    part payment of an amount allocated to goods supplied by Airex.

[12]

Mr. Quattrociocchi also filed an affidavit on
    the motion to which he attached Ben Airs Profit and Loss sheet for the project
    and various supporting documents. In his affidavit, he asserted that the Profit
    and Loss sheet demonstrated that Ben Air received $387,228.32 plus HST from
    Omico in relation to the project and that Ben Air expended $399,823.53 plus HST
    to cover equipment purchases, wages and salaries, and payments to
    subcontractors, leaving Ben Air with a deficit on the project.

[13]

In contrast to Mr. Cummings evidence, the
    Profit and Loss statement appended to Mr. Quattrociocchis affidavit suggested
    Servocraft Limited and Engineered Air had been paid prior to the receipt of the
    $158,000 cheque from Omico. And the supporting documents attached to Mr.
    Quattrociocchis affidavit were rife with shortcomings: in relation to several
    payments alleged to have been made in relation to the project, there were no
    supporting invoices and no other evidence to support the claim that the
    payments were made in relation to the project; in other instances there were no
    documents to support the assertion that monies claimed to have been billed in
    relation to the project had in fact been paid; in one instance, a cheque for $305,100
    payable to Engineered Air, there was an unexplained stamp on the back of the cheque
    that included the words dishonoured items returned to Bank of Montreal.

[14]

It is also noteworthy that neither Mr. Cummings
    affidavit nor Mr. Quattrociocchis affidavit was delivered in compliance with
    the timetable established for the motion. Mr. Cummings affidavit was one day
    late. Mr. Quattrociocchis affidavit was seven weeks late and was delivered
    only ten days prior to the motion hearing date. In these circumstances, the
    appellants are not entitled to rely on any adverse inferences that might
    otherwise be drawn from a failure to cross-examine.

[15]

We acknowledge that it was Airexs role to
    demonstrate no genuine issue requiring a trial.

[16]

However, once Airex demonstrated the following
    matters (which were never really in dispute), Airex had established that it was
    the beneficiary of trust monies under s. 8(1) of the Act:

·

it was a sub-contractor on the project;

·

it supplied materials to Ben Air, a contractor
    on the project, for which it (Airex) had not been paid; and

·

Ben Air had received payments on account of the
    project from Omico, another contractor on the project.

[17]

It was then for Ben Air to show that the trust monies
    had been properly applied:
St. Marys Cement Corp. v. Construc Ltd.
(1997), 32 O.R. (3d) 595 (Gen. Div.) at pp. 600-601;
Sunview
    Doors Ltd. v. Academy Doors & Windows Ltd
.
, 2010 ONCA 198, 101 O.R. 3d 285, at paras. 83-84. Moreover, the
    appellants were required to put their best foot forward on the summary judgment
    motion:
Canada (Attorney General) v. Lameman
,
    2008 SCC 14, [2008] 1 S.C.R. 372, at para. 11, citing
Transamerica
    Life Insurance Co. of Canada v. Canada Life Assurance Co
.
(1996), 28
    O.R. (3d) 423 (Gen. Div.), at p. 434, affd [1997] O.J. No. 3754 (C.A.);
Goudie
    v. Ottawa (City)
,

2003 SCC 14,
[2003] 1 S.C.R. 141, at para. 32;
Chernet v.
    RBC General Insurance Company
2017 ONCA 337, at para. 12
. Viewed
    as a whole, the evidence the appellants filed was contradictory and lacked
    documentary support. It certainly did not carry sufficient weight to support
    their assertions that they had paid out more money than they received in
    relation to the contract  or even that payments they had made on the contract
    left them without sufficient trust funds to pay Airex.

[18]

As for the claimed set-off, the respondent produced
    documents indicating it complied with the contract at issue. The appellants did
    not produce documents to demonstrate otherwise.  We see no basis on which to
    interfere with the motion judges decision that there was no genuine issue
    requiring a trial concerning the set-off.

[19]

The appellants submitted no authority to
    support their argument that Airex was under a duty to mitigate by filing a
    lien. We agree with the motion judges conclusion that its failure to do so is
    not in any way a failure to mitigate its losses.

[20]

We would not grant leave to appeal costs.

[21]

The appeal is therefore dismissed with costs to
    Airex fixed in the agreed upon amount of $13,500 inclusive of disbursements and
    HST.

Released:

MAY 15 2017                                    Janet
    Simmons J.A.

PR                                                     Paul
    Rouleau J.A.

L.B.
    Roberts J.A.


Appendix A

Construction Lien Act
, R.S.O. 1990, c. C.30

Contractors
    and subcontractors trust

Amounts
    received a trust

8.
(1)  All amounts,

(a) owing to a contractor or subcontractor, whether or not
    due or payable; or

(b) received by a contractor or subcontractor,

on
    account of the contract or subcontract price of an improvement constitute a
    trust fund for the benefit of the subcontractors and other persons who have
    supplied services or materials to the improvement who are owed amounts by the
    contractor or subcontractor. R.S.O. 1990, c. C.30, s. 8 (1).

Obligations
    as trustee

(2) 
    The contractor or subcontractor is the trustee of the trust fund created by
    subsection (1) and the contractor or subcontractor shall not appropriate or
    convert any part of the fund to the contractors or subcontractors own use or
    to any use inconsistent with the trust until all subcontractors and other
    persons who supply services or materials to the improvement are paid all
    amounts related to the improvement owed to them by the contractor or
    subcontractor. R.S.O. 1990, c. C.30, s. 8 (2).

Payment
    discharging trust

10.
Subject to Part IV (holdbacks), every payment by a trustee to a person the
    trustee is liable to pay for services or materials supplied to the improvement
    discharges the trust of the trustee making the payment and the trustees
    obligations and liability as trustee to all beneficiaries of the trust to the
    extent of the payment made by the trustee. R.S.O. 1990, c. C.30, s. 10.

Where
    trust funds may be reduced

11.
(1)  Subject to Part IV, a trustee who pays in whole or in part for the
    supply of services or materials to an improvement out of money that is not
    subject to a trust under this Part may retain from trust funds an amount equal
    to that paid by the trustee without being in breach of the trust. R.S.O. 1990,
    c. C.30, s. 11 (1).

Liability
    for breach of trust

By
    corporation

13.
(1)  In addition to the persons who are otherwise liable in an action for
    breach of trust under this Part,

(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 a corporation or its relevant
    activities,

who
    assents to, or acquiesces in, conduct that he or she knows or reasonably ought
    to know amounts to breach of trust by the corporation is liable for the breach
    of trust. R.S.O. 1990, c. C.30, s. 13 (1).

Effective
    control of corporation

(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. R.S.O. 1990, c. C.30, s. 13 (2).

Joint
    and several liability

(3) 
    Where more than one person is found liable or has admitted liability for a
    particular breach of trust under this Part, those persons are jointly and
    severally liable. R.S.O. 1990, c. C.30, s. 13 (3).

Contribution

(4) 
    A person who is found liable, or who has admitted liability, for a particular
    breach of a trust under this Part is entitled to recover contribution from any
    other person also liable for the breach in such amount as will result in equal
    contribution by all parties liable for the breach unless the court considers
    such apportionment would not be fair and, in that case, the court may direct
    such contribution or indemnity as the court considers appropriate in the
    circumstances. R.S.O. 1990, c. C.30, s. 13 (4).


