



COURT OF APPEAL FOR ONTARIO

CITATION: Architectural Millwork & Door Installations
    Inc. v.

Provincial Store Fixtures Ltd., 2016 ONCA 320

DATE: 20160502

DOCKET: C60951

LaForme, Pardu and Roberts JJ.A.

BETWEEN

Architectural Millwork & Door Installations
    Inc.

Plaintiff (Respondent)

and

Provincial Store
    Fixtures Ltd.

Defendant (Appellant)

Marco Drudi and Lisa Lutwak, for the appellant

Wade Sarasin, for the respondent

Heard: March 11, 2016

On appeal
    from the judgment of Justice A.D. Grace of the Superior Court of Justice dated
    August 5, 2015, with reasons reported at 2015 ONSC 4913.

ENDORSEMENT

[1]

The appellant appeals the partial summary judgment granted to the
    respondent.

[2]

The respondent sued the appellant claiming damages for breach of
    contract, unjust enrichment and in
quantum meruit
because of the
    appellants failure to pay the respondents invoices. The respondent had
    subcontracted with the appellant to install millwork manufactured by the appellant
    at the OLG Casino construction project in Brantford.

[3]

The appellant raised no deficiencies with the respondents work on the
    OLG Casino Project and admitted that the monies claimed were owed. However, the
    appellant claimed no payment was required because of the application of the
    credit memo issued by the respondent and the appellants assertion of the right
    to set-off monies related to alleged deficiencies in the respondents work on
    other unrelated construction projects.

[4]

The motion judge partially allowed the respondents motion for summary
    judgment in the amount of $61,696.31 and rejected the appellants claim for
    set-off. The sole issue deferred for trial, from which no appeal has been
    taken, is whether the credit memo continues to be operative.

[5]

The only issue on appeal is whether the motion judge erred in rejecting
    the appellants claim for set-off under s. 12 of the
Construction Lien Act
,
    R.S.O. 1990, c. C.30 (
CLA
), or by way of equitable set-off. The
    appellant did not pursue the issue of legal set-off raised in its notice of
    appeal.

[6]

We see no basis to interfere with the motion judges decision.

[7]

First, s. 12 of the
CLA
does not apply in the circumstances of
    this case.  This section provides as follows:

Subject to Part IV, a trustee may, without being in breach of
    trust, retain from trust funds an amount that, as between the trustee and the
    person the trustee is liable to pay under a contract or subcontract related to
    the improvement, is equal to the balance in the trustees favour of all outstanding
    debts, claims or damages, whether or not related to the improvement.

[8]

The motion judge disposed of the appellants claim for set-off under s.
    12 of the
CLA
, as follows:

In
C & A Steel
,
supra
, it was appropriate
    to apply the statutory right of set-off the
CLA
created. Sharpe J. (as
    he then was) explained why:

the plaintiff has claimed the benefit of the construction
    lien statute and has obtained security for its claim. Having availed itself of
    the benefits of the Act, I fail to see how the plaintiff can claim to deprive
    the defendant of the benefits of the statute, including the broad set-off
    provision of s. 17(3).

This case is a different one. AMDI has not claimed the benefit
    of the
CLA
.

AMDI does not assert a lien. It does not allege the existence,
    let alone breach, of that statues trust provisions. Section 12 of the
CLA
is not engaged.

[9]

The appellant argues that the motion judge erred in determining that s.
    12 of the
CLA
did not arise because the respondent framed its pleading
    in breach of contract, and did not claim a lien or invoke the trust or other
    provisions of the
CLA
, and that s. 12 of the
CLA
would only
    apply in cases where a plaintiff explicitly refers to or relies upon the
CLA
in its pleading.

[10]

We
    agree that, as a general rule, a plaintiffs framing of its claim does not
    dictate the defendants response. To hold otherwise would be contrary to rule
    25.07(4) of the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194, which
    requires a defendant to plead any matter on which the party intends to rely to
    defeat the claim of the opposite party and which, if not specifically pleaded,
    might take the opposite party by surprise or raise an issue that has not been
    raised in the opposite partys pleading. We do not take the motion judge to
    have held otherwise.

[11]

Rather,
    we read the motion judges comment, quoted above, as effectively holding that
    an ordinary breach of contract claim cannot be met with a claim for set-off of
    trust funds under s. 12 of the
CLA
where the plaintiff has not
    asserted a claim to trust funds in the first place. In other words, in such
    circumstances the defendants purported defence is not responsive to, and
    cannot defeat, the plaintiffs claim.

[12]

We
    need not decide whether the motion judge was correct on this point, because we
    agree that, in any event, s. 12 has no application to this case.

[13]

Provided
    the criteria of s.12 of the
CLA
are met, a trustee of the trust funds
    may, without breaching the trust, retain but not spend any of the monies set
    off against the trust funds on account of outstanding debts, claims or damages.
    This section does not give a trustee the right to put some or all of the trust
    funds retained to general use:
Datasphere Sales Ltd. v. Universal Light
    & Power Corp.
, 1991 CarswellOnt 804, at para. 13;
Arborform
    Countertops Inc. v. Stellato
, 29 O.R. (3d) 129, [1996] O.J. No. 1275, at
    para. 43.

[14]

The
    availability of the right of set-off under s. 12 of the
CLA
requires
    the party seeking to exercise it to prove the existence of specific
    circumstances and particular considerations, including the existence of trust
    funds against which set-off can be applied. If no trust funds are retained or
    all the monies are spent, the purpose of the trust provisions is defeated and
    any right of set-off is extinguished:
Arborform Countertops Inc.
, at
    paras. 39 and 43.

[15]

In
    the present case, neither party pleaded the existence or breach of a trust
    fund. The respondent did not assert any claim to trust funds. The appellant did
    not allege there was a trust fund under the
CLA
or at all. Rather, the
    appellant pleaded that it had not been paid by the owner for the work performed
    by the respondent and therefore had no obligation to pay the respondents
    invoices, negating the existence of a trust fund.

[16]

While
    there was evidence from the appellants representative, Regina Dee, that the
    appellant had received monies from the owner, there was no evidence that those
    monies were held in trust or retained at all. In a subsequent answer to
    undertakings, the appellant admitted that it did not maintain a separate bank
    account for the OLG Brantford Casino Project.

[17]

As
    a result, the appellant has no right under s. 12 of the
CLA
to set-off
    against the monies that it admits are owed to the respondent.

[18]

Second,
    we also find no error in the motion judges determination that equitable
    set-off is not available to the appellant. The motion judges finding that the
    OLG Casino Project and Imara Project were unrelated and entirely separate
    because, among other things, payment on one project was not tied to the other,
    funds were segregated, and the projects were undertaken at different times, in
    different cities and for different owners, was amply supported by the evidence.

[19]

Accordingly,
    the appeal is dismissed.

[20]

Costs
    of the appeal are to the respondent in the agreed amount of $6,000.00.

H.S. LaForme J.A.

G. Pardu J.A.

L.B. Roberts J.A.


