





CITATION: Landmark II
          Inc. v. 1535709 Ontario Limited, 2011 ONCA 567



DATE: 20110831



DOCKET: C52425



COURT OF APPEAL FOR ONTARIO



Laskin, Lang and LaForme JJ.A.



BETWEEN



Landmark II Inc.



Plaintiff (Appellant)



and



1535709 Ontario Limited



Defendant (Respondent)



Antonio Conte, for the appellant



Richard
Belsito
, Q.C., for the
          respondent



Heard: January 19, 2011



On appeal from the order of the
          Divisional Court (P.T. Matlow, J.D. McCombs and G.W. Tranmer JJ.) dated March
          23, 2010, affirming the judgment of Justice Katherine M. van
Rensburg
of the Superior Court of Justice dated August
          11, 2008, with reasons reported at
2008
CanLII
41171 (ON SC)
and
2009
CanLII
78
          (ON SC)
.



Laskin J.A.:



A.

INTRODUCTION

[1]

The issues on this appeal arise out of a construction lien
    action.

[2]

The appellant, Landmark II Inc., has been in the
    landscaping and excavation business for many years.  The respondent, 1535709 Ontario Limited, is
    in the trucking business and owns a truck terminal in Bolton, Ontario.  In July 2004, the parties entered into a
    written contract under which Landmark was to expand a truck parking lot on
    1535709s property.  The price of the
    contract was $58,850 to be paid in four equal instalments.

[3]

1535709 refused to pay the second instalment when it
    was due.  Landmark then abandoned the
    job, filed a lien for the unpaid balance of the contract, and brought this
    action for the same amount.  1535709
    counterclaimed for damages for Landmarks failure to complete the contract.

[4]

After a six-day trial, the trial judge found that
    1535709 had breached the contract, and that Landmark was not obligated to do
    any further work.  She found that the
    value of the work already done by Landmark was $16,000.  After deducting the amount of the first
    instalment, she held that 1535709 owed Landmark $1,287.50.  She dismissed 1535709s counterclaim.

[5]

However, the trial judge also found that Landmark was
    liable under s. 35 of the
Construction
    Lien Act
for filing a grossly excessive lien.  She fixed 1535709s damages at $5,146.39,
    which was its borrowing cost to vacate the lien.  After adding prejudgment interest and setting
    off the two amounts, Landmark owed 1535709 $3,793.61.  The trial judge then awarded 1535709 its
    costs of the action, which she fixed at $55,000.

[6]

Landmarks appeal to the Divisional Court was dismissed
    with very brief reasons, simply holding that the trial judge had not made any
    palpable and overriding error.  Landmark
    obtained leave to appeal to this court.  It
    submits that the trial judge made four errors:

(1)

The trial judge erred by failing to award Landmark
    damages for breach of contract;

(2)

The trial judge erred by relying on the lay opinion of
    another contractor to assess the value of the work Landmark had performed;

(3)

The trial judge erred in finding Landmark liable under
    s. 35 of the Act; and

(4)

The trial judge erred by awarding 1535709 its costs of
    the action.

B.

ANALYSIS

First
    Issue: Did the trial judge err by failing to award Landmark damages for breach
    of contract?

[7]

To put this
    issue in context, I will briefly review the terms of the contract and the trial
    judges finding of a breach.

[8]

Landmark agreed to expand 1535709s parking lot for
    trucks by stripping and piling topsoil, filling with brick rubble, and
    finishing a four-acre area with three inches of asphalt grindings.  1535709 agreed to pay the contract price in
    four equal instalments. The contract set out the following payment terms:

25% down $14,712.50

25% after stripping
    $14,712.50

25% 2 acre complete
    $14,712.50

25% after complete 2
    acre $14,712.50

Not later than 1 month
    after finish job.

[9]

Landmark began work in late July 2004 even though the
    first instalment had not been paid.  Eventually 1535709 paid it.  By
    September 30, 2004, Landmark had finished the stripping and asked for payment
    of the second instalment.  1535709
    refused to pay.  Its president claimed
    that he was not obliged to pay the second instalment until two acres were
    completed.  When he maintained his
    refusal, Landmark walked off the job, removed its equipment, filed its lien,
    and started this action.

[10]

The trial judge found that 1535709s interpretation of
    the contract was inconsistent with its plain meaning, and that 1535709 was in
    breach by failing to pay the second instalment once stripping was complete.  Until the second instalment was paid  and it
    never was  Landmark had no obligation to continue to do the work.  The trial judge set out her findings at
    paras. 29-30 of her reasons:

While the plaintiff was
    prepared to begin work without receiving a
downpayment
,
    after completing the stripping of the four acres, it had no obligation to
    continue the work without having received the second payment.  The plaintiff was entitled to insist upon the
    balance of the payment terms as the work progressed.  Under the contract, two payments were due at
    the time the stripping was completed.  The defendant defaulted on the payment that was due and therefore was in
    breach of contract.  While the defendant
    may have considered the plaintiffs refusal to perform any additional work to
    be unreasonable, and while it may have appeared that the plaintiff had in fact
    abandoned the work, the defendant had no right to insist on continued
    performance by the plaintiff until the second payment had been made.

Accordingly, the
    defendant was in breach of contract in failing to make the second instalment
    payment that was due under the Second Contract when the stripping had been
    completed.

[11]

In the light of these findings, Landmark submits that
    the trial judge erred by failing to award it damages for breach of contract, in
    other words, its lost profits.  It says
    that, at a minimum, its lost profits amounted to approximately $24,500.  I do not accept Landmarks submission because
    of the way it pursued its claim.

[12]

By its actions of removing its equipment and abandoning
    the job, if not by its words, Landmark undoubtedly accepted 1535709s breach as
    a repudiation of the contract.  Landmark
    then potentially had two claims and two corresponding remedies available to it.  One was a claim for the value of the work it
    had performed and the materials it had supplied up to that point.  This claim, a quantum meruit claim, could be
    secured by registering a lien against 1535709s property.  The other claim was a claim for damages for
    breach of contract.  This is an unsecured
    claim, but is expressly preserved in construction lien actions by s. 63 of the
    Act. See
GNC Realty Products Ltd. v.
Welglen
Ltd.
, [1979] O.J. No. 3456 (H.C.J.), with
    additional reasons at [1979] O.J. No. 3457 (H.C.J.).

[13]

Landmark, thus had a right to alternative remedies: a
    right to quantum meruit and a right to damages.  However, and this is the important point, Landmark was required to elect
    between these alternative remedies, at the latest by the time of judgment: see
GNC Realty Products Ltd. v.
Welglen
Ltd.
at paras. 52-61.

[14]

The problem for Landmark is that it never elected
    damages for breach of contract. Indeed, it never indicated that it was pursuing
    alternative remedies with the intention of making an election at some later
    point before judgment.  Instead, the only
    claim that it maintained and the only remedy that it sought  in its pleading,
    in the way it presented its case, and in its evidence  was quantum meruit for
    the value of the work it performed.

[15]

Landmark submits that the trial judge ought to have
    provided for an election herself, but that is not right. If Landmark was
    seeking damages for breach of contract, it was required to so elect.  It did not do so.  Its claim for damages must therefore
    fail.  I would not give effect to this
    ground of appeal.

Second
    Issue: Did the trial judge err by relying on the lay opinion of another
    contractor to assess the value of the work Landmark had performed?

[16]

To determine Landmarks quantum meruit claim  the
    value of the work it had performed  the trial judge relied on the opinion
    evidence of Sam Di Gregorio, the contractor 1535709 hired to complete the
    job.  Mr. Di Gregorio testified that, in
    his opinion, the value of Landmarks work was $16,000.  The trial judge accepted this figure to
    calculate the amount Landmark was owed.

[17]

Landmark submits that the trial judge erred in relying
    on Mr. Di Gregorios opinion evidence.  According
    to Landmark, the trial judge was required to calculate the value of the work it
    had performed by deducting from the contract price its own cost to complete the
    contract.  I do not accept this
    submission for either of two reasons.

[18]

First, this issue is not properly before this
    court.  Although Landmark was granted
    leave to appeal under s. 6(1)(a) of the
Courts
    of Justice Act
, R.S.O. 1990, c. C-43, this court may only hear an appeal
    on a question that is not a question of fact alone.  The issue raised by this ground of appeal is
    purely factual.  Therefore no appeal lies
    on this issue.

[19]

Second, even if this issue were appealable, there would
    be no basis to interfere with the trial judges assessment.  The trial judge found that she could not rely
    on Landmarks records to calculate its quantum meruit claim because those
    records were unreliable.  For example,
    Landmarks time records were prepared after-the-fact and were inaccurate.  Therefore, the trial judge turned to the only
    reliable evidence available, the testimony of Mr. Di Gregorio.  Without his testimony, she would have had no
    evidence from which to assess Landmarks claim.  Moreover, in construction lien actions, lay opinion evidence from an
    experienced contractor is commonplace.  See Duncan W.
Glaholt
,
Conduct of a Lien Action 2011
(Toronto: Thomson Reuters Canada
    Limited, 2010) at 411-412.

[20]

The trial judges rejection of Landmarks evidence on
    the value of the work it performed, and her acceptance of Mr. Di Gregorios
    evidence was entirely reasonable.  I
    would not give effect to this ground of appeal.

Third
    Issue: Did the trial judge err in finding Landmark liable under s. 35 of the
Construction Lien Act
?

[21]

Under s. 35 of the
Construction
    Lien Act
, R.S.O. 1990, c. C-30, a contractor may be liable for filing an
    exaggerated lien claim:

In addition to any other ground on which the person may be
    liable, any person who preserves a claim for lien or who gives written notice
    of a lien,

(a) for an amount which the person knows or
    ought to know is grossly in excess of the amount which the person is owed; or

(b) where the person knows or ought to know
    that the person does not have a lien,

is liable to any person who suffers damages as a
    result.

[22]

The trial judge found Landmark liable under s. 35(a)
    for filing a lien for the unpaid balance of the contract, $44,137.50.  In her view, Landmark knew or ought to have
    known that amount was grossly excessive.  She awarded 1535709 damages equivalent to its cost of borrowing  its
    interest payments  to discharge the lien and pay the amount claimed into court.
     1535709 had been required to discharge
    the lien to facilitate the conveyance of a strip of its land to the Town of
    Caledon in order to widen the road.

[23]

Landmark submits that the trial judge erred in finding
    it liable under s. 35.  It contends that
    it cannot be held liable for filing a lien for the unpaid balance of the
    contract.  I do not agree.

[24]

Registering a lien for the entire amount of the
    contract before construction is completed is not necessarily improper.  The claimant will be secured only for the
    actual value of the work done, which is typically determined at trial.  However, the trial judges finding that
    Landmark was liable under s. 35 for registering a lien for the three remaining
    instalment payments is supportable because of two circumstances.

[25]

First, Landmark registered the lien two and a half
    months after it had abandoned the job, and when it had no intention of
    completing the contract.  A claimant can
    register a lien for the unpaid balance if it stays on the job and intends to
    finish the contract.  It cannot do so
    when it has left the job and does not intend to finish it.

[26]

Second, the affidavit in support of the lien was signed
    by the sister of one of the principals of Landmark.  She had no knowledge of how much of the job
    had been completed, and took no steps to find out.  She simply followed instructions from her
    brother to claim the unpaid balance, even though he, too, did not know how much
    work had been done.

[27]

In these unusual circumstances, I would not interfere
    with the trial judges finding of liability under s. 35 or with her award of
    damages.

Fourth Issue: Did the trial judge err
    in awarding 1535709 its costs of the action?

[28]

The trial judge was initially inclined to order no
    costs.  That would have been a sensible
    result.  However, she changed her mind
    after receiving the parties written submissions on costs, and learning that
    1535709 had made an offer to settle on terms that both the claim and
    counterclaim be dismissed without costs.

[29]

The trial judge was of the view that 1535709s offer
    was a fair evaluation of the financial merits of the proceedings, and that
    Landmark ought to have accepted it.  She
    ordered that Landmark pay 1535709 its costs of the action, which she fixed at
    $55,000.  Landmark submits that this
    costs award ought not to stand.  I agree
    with this submission.

[30]

A trial judge has broad discretion in fixing the costs
    of an action.  This court rarely
    intervenes with the exercise of that discretion.  However, this is one of those rare cases
    where intervention is warranted.  The
    costs award of $55,000 in favour of 1535709 is not fair and reasonable, and it
    is not proportional to what was at stake in this litigation.

[31]

Intervention is justified because of the following
    considerations:

·

Landmark succeeded in what the trial judge
    termed the central dispute in the action: which party was in breach of
    contract.  Because it succeeded on this
    issue it also succeeded in having 1535709s counterclaim dismissed.  It also succeeded on another disputed issue:
    the timeliness of its lien.  1535709
    succeeded only on its claim under s. 35 of the Act, and in the dismissal of Landmarks
    claim for extras.

·

The amount of 1535709s judgment was de
minimis
, less than $3,800.

·

1535709s offer to settle came late in the
    day.  It was made only four days before trial.

·

This litigation occurred only because 1535709
    stubbornly and unreasonably adhered to its interpretation of the contract.  Although it may have believed its
    interpretation was correct, that interpretation had no air of reality in the
    light of the plain wording of the contract.

[32]

The trial judges initial view of costs was
    correct.  I would grant Landmark leave to
    appeal costs, set aside the trial judges costs order, and order that there be
    no costs of the trial.

C.

CONCLUSION

[33]

I would allow the appeal of the trial judges costs
    award and order there be no costs of the action.  I would otherwise dismiss Landmarks appeal.

[34]

That leaves to be determined the costs of the appeal in
    the Divisional Court, the leave motion and the appeal to this court.  The Divisional Court awarded costs of $10,000
    to 1535709.  In my view, justice would be
    done by giving no costs throughout  that is no costs at trial, in the
    Divisional Court, or in this court.  I
    would so order.

RELEASED:  Aug. 31,
    2011                                               John
Laskin
J.A.

JL                                                                                        I
    agree S.E. Lang J.A.

I
    agree H.S. LaForme J.A.


