



COURT OF APPEAL FOR ONTARIO

CITATION: Ravenda Homes Ltd. v. 1372708, 2017 ONCA 834

DATE: 20171101

DOCKET: C61630 and C63353

Hourigan, Brown and Roberts JJ.A.

BETWEEN

Ravenda Homes Ltd.

Plaintiff (Appellant)

and

1372708 Ontario Inc. and Vaughn Gibbons

Defendants (Respondents)

AND BETWEEN:

1372708 Ontario Inc.

Plaintiff by Counterclaim
(Appellant/Respondent by way of cross-appeal)

and

Ravenda Homes Ltd. and John Ravenda

Defendants to the Counterclaim
(Respondent
/Appellant
by way of cross-appeal)

Peter H. Griffin, Constanza Pauchulo and Ryan Breedon,
    for the appellant

Robert C. Harason, for the respondents

Heard: September 25, 2017

On appeal from the order of Justice James R.H. Turnbull of
    the Superior Court of Justice, dated June 17, 2016.

REASONS FOR DECISION

[1]

This appeal and cross-appeal arise out of a failed development project
    for a residential subdivision in Fort Erie, Ontario. The parties had
    successfully collaborated on another subdivision project which they brought to
    completion. Unfortunately, they did not achieve the same outcome on the Fort
    Erie project.

[2]

At issue on the motion for summary judgment and on appeal are the
    questions of whether the parties had entered into an enforceable agreement,
    whether there was a breach or repudiation of any such agreement, and the
    validity of the construction lien filed on the title to the property by the
    appellant, Ravenda Homes Ltd.

Brief Factual Overview

[3]

Only a brief summary of the relevant facts is required.

[4]

Ravenda Homes and the respondent, 1372708, worked together to develop a
    residential subdivision in Fort Erie. Their working arrangement generated two
    written agreements. There is no dispute about the validity of the first written
    agreement, a November 28, 2005 Model Homes Agreement amongst Ravenda Homes, 1372708
    and the Town of Fort Erie. This Model Homes Agreement permitted, but did not
    require, Ravenda Homes to build three model homes on property which was owned
    by 1372708.

[5]

There is a dispute about the validity of the second written agreement,
    dated December 13, 2005 (the Disputed Agreement), the terms of which provided
    Ravenda Homes had the option to purchase from 1372708 developed lots without a
    deposit, and 1372708 anticipated obtaining municipal approvals and building
    permits by June 1, 2006.

[6]

On December 13, 2005, Ravenda Homess lawyer sent by facsimile
    transmission a copy of the Disputed Agreement, signed by Ravenda Homes, to the
    principal of 1372708, Vaughn Gibbons. The Disputed Agreement provided that it
    would be of no force and effect unless it was fully executed by the parties and
    returned, with the deposit set out in section 1(a) of the agreement, to Ravenda
    Homes, on or before 5:00 p.m. on that same day. The Disputed Agreement was
    signed and returned by 1372708 after the prescribed deadline.

[7]

Ravenda Homes built the three model homes and renovated the house into a
    sales office, marketed lots, and entered into 32 agreements of purchase and sale
    with potential homebuyers. Meanwhile, 1372708 pursued municipal approvals for
    the proposed plan of subdivision, so that services could be installed to
    support the homes to be built and the requisite building permits could be
    obtained.

[8]

Towards the end of the summer 2006, Ravenda Homes took the position that
    1372708 had failed to act in good faith to take the necessary steps to obtain
    municipal approvals, which made it impossible for Ravenda Homes to meet its
    construction deadlines under the 32 agreements of purchase and sale. In
    September 2006, Ravenda Homes withdrew from the project on the basis that 1372708
    had repudiated their agreement.

[9]

Ravenda Homes commenced an action for breach of contract against the
    respondents (the Contract Action), registered a certificate of pending
    litigation, and commenced a construction lien action (the Lien Action). 1372708
    counterclaimed for damages caused by Ravenda Homess withdrawal from the
    project and the registration of the certificate and lien.

[10]

Following
    the respondents motion for summary judgment, the motion judge dismissed Ravenda
    Homess action for breach of contract, vacated its certificate of pending
    litigation, allowed Ravenda Homess lien action, allowed 1372708s counterclaim
    in part, and referred to trial the issue of the parties respective damages.

Contract Action Appeal and Lien Action Cross-Appeal

[11]

Ravenda
    Homes raises numerous grounds of appeal, and advances a cross-appeal with
    respect to the model homes lien. To dispose of these matters, it is necessary
    to deal with only the following submissions made by Ravenda Homes:

(i)

The motion judge erred in failing
    to find that the parties had entered into an enforceable written agreement
    dated December 13, 2005, which governed their duties and obligations in
    relation to the Fort Erie project, and which the respondents repudiated; and

(ii)

The motion judge erred in awarding
    damages to 1372708 under s. 35 of the
Construction
    Lien Act,
R.S.O. 1990, c. C.30
    (CLA).

(i)

Contract Action Appeal: December 13, 2005 Agreement

[12]

Ravenda
    Homes submits that the motion judge erred in failing to find that the Disputed
    Agreement was enforceable, and that it was repudiated by the failure of the
    respondents to confirm that they were bound by it. We do not accede to this
    ground of appeal.

[13]

We
    need only deal with the alternative conclusion of the motion judge on this
    issue, which was based on his express assumption that the Disputed  Agreement or
    any other agreement was valid and enforceable. Proceeding on that assumption,
    the motion judge considered whether the respondents had breached any such
    agreement with Ravenda Homes. The motion judge concluded that the respondents
    had not. Rather, he found that they had acted throughout in good faith to
    secure the requisite municipal approvals for the subdivision project, and that
    the respondents did not cause the delays and difficulties encountered in the
    course of this process. As the motion judge observed, while Ravenda Homes could
    withdraw from the project, there was no breach by the respondents. These
    findings were open to the motion judge on the voluminous motion record, are
    free of error, and do not justify appellate intervention.

[14]

We
    also reject the characterization of the respondents lack of reply to Ravenda
    Homess demand as a repudiation of their agreement. As evidence of repudiation,
    Ravenda Homes relies on the lack of the respondents response to its counsels
    September 19, 2006 email demanding confirmation by September 22, 2006, of the
    respondents commitment to abide by the Disputed Agreement. By the time that email
    was sent, litigation was a strong possibility and the parties had already engaged
    in dispute resolution discussions. This email was the last in a series of
    correspondence in which litigation was threatened, and which ensued a few days
    later on September 26, 2006 with the issuance of Ravenda Homess statement of
    claim. In these circumstances, it was not necessary for the respondents to
    reply to this particular email. Their failure to do so does not amount to a
    repudiation of the agreement.

(ii)

Lien Action Cross-Appeal: Section 35 of the CLA

[15]

Ravenda
    Homes submits that the motion judge failed to apply the correct test under s.
    35 of the CLA and therefore erred in awarding 1372708 damages for overpayment
    of annual fees and legal fees for the letter of credit that 1372708 posted to
    vacate Ravenda Homess construction lien.

[16]

We
    agree.

[17]

1372708
    claimed damages under s. 35 of the CLA for the additional amounts it incurred
    to maintain a letter of credit to vacate Ravenda Homess construction lien
    because the appropriate amount had not been calculated and claimed by Ravenda
    Homes in its lien action. After having obtained expert evidence, Ravenda Homes revised
    the value of its lien from $456,200 (as pleaded in the statement of claim) to
    $326,293.

[18]

The
    motion judge awarded 1372708 its overpayment of the fees for the letter of
    credit for the following reasons, at para. 165:

A party claiming an interest in the lands of another by
    registering a lien or CPL knows or should know that if such an instrument must
    be vacated from title by posting security with the court, that party may be
    responsible for the costs incurred by the landowner if the claims are not
    substantiated or the damages claimed are proven to be
excessive
.
    [Emphasis added.]

[19]

Section
    35 of the CLA provides as follows:

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. [Emphasis
    added.]

[20]

We
    agree that the motion judge erred. The correct test under s. 35 of the CLA required
    the motion judge to consider whether Ravenda Homess lien claim was grossly in
    excess of what was ultimately proven to be owed under the lien, not merely excessive.

[21]

Moreover,
    we accept Ravenda Homess further submission that the motion judge erred in
    making any such determination under s. 35 of the CLA, given that the amount of Ravenda
    Homess lien had not been determined but was one of the issues that the motion
    judge referred to trial.

[22]

As
    a result, we set aside the provisions of para. 4 of the motion judges order which
    relate to the granting of 1372708s costs incurred to post the letter of credit
    for the construction lien, in action having Court File No. 5326/06, and refer
    this issue to trial, along with the other issues that the motion judge referred
    to trial.

Contract Action Cross-Appeal and Lien Action Appeal

[23]

1372708
    submits that the motion judge made the following reversible errors:

(i)

The motion judge erred in
    dismissing 1372708s counterclaim for damages for the payment of the property
    taxes on the model homes in the amount of $59,167.71; and

(ii)

The motion judge erred in finding
    that Ravenda Homes had a valid construction lien.

Counterclaim for property taxes

[24]

1372708
    submits on its cross-appeal to the Contract Action that the motion judge erred
    in failing to award the property taxes that it paid on the model homes until
    they were sold, because he incorrectly determined that the parties agreed that Ravenda
    Homes would not be responsible for them.

[25]

We
    disagree. The motion judges determination was a factual one based on his
    assessment of the evidence of the parties course of conduct, which was open to
    him to make on the record before him. We see no error or basis to interfere.

Validity of the Construction Lien

[26]

1372708
    submits the motion judge erred in finding Ravenda Homes had a valid claim for
    lien. The main focus of its argument before us challenged the motion judges
    findings of owner. First, 1372708 argues that Ravenda Homes falls within the
    definition of owner under s. 1 of the CLA in that the construction of the
    model homes was found to be for its benefit, and therefore Ravenda Homes could
    not lien its own improvement:
Cohen v. Brin
, 2013 ONSC 1302, 12 B.L.R.
    (5th) 277 (Ont. Master). In any event, 1372708 argues that Ravenda Homes cannot
    satisfy the criterion in s. 1 that it built the model homes at the request of
    1372708, as owner.

[27]

As
    the basis for its claim for lien, Ravenda Homes asserts that its construction
    of the model homes and sales office constituted an improvement for the benefit
    of 1372708 as an owner of the premises on which the improvement was carried out.
    As a result, Ravenda Homess claim for lien depends on the determination that 1372708
    (and not Ravenda Homes) meets the following definition of owner under s. 1(1)
    of the CLA:

owner means any person, including the Crown, having an
    interest in a premises
at whose request
and,

(a) upon whose credit, or

(b) on whose behalf, or

(c) with whose privity or consent,
    or

(d)
for whose direct
    benefit
,

an improvement is made to the premises but does not include a
    home buyer. [Emphasis added.]

[28]

Turning
    first to the question of whether Ravenda Homes is an owner under the CLA, 1372708
    argues that the motion judges finding the improvement was for the benefit of
    both parties results in Ravenda Homes being an owner as defined under the CLA,
    and precludes the lien.

[29]

The
    difficulty with 1372708s argument is that the definition of owner under s. 1(1)
    of the CLA requires that an owner have an interest in a premises to which the
    improvement is made, not just an interest in the improvement. An interest in
    personalty or an interest in an improvement by itself, without an attached
    interest in land, cannot constitute a lienable interest:
Graham Mining Ltd.
    v. Rapid-Eau Technologies Inc.
(2001), 7 C.L.R. (3d) 291 (Ont. S.C.), at
    para. 27, affd [2001] O.J. 4183 (Div. Ct.), at paras. 1 to 3. While Ravenda
    Homes had an interest in the improvement, it had no interest in 1372708s land,
    which was owned solely by 1372708. As a result, the motion judge did not err in
    finding that Ravenda Homes was not an owner for the purposes of the CLA.

[30]

As
    1372708 clearly had an interest in a premises as the sole owner of the land,
    the question of whether it can be considered an owner turns on the meaning of
    at the request of. The request that work be done or services be supplied may
    be express or implied from the circumstances of the case:
Markborough Properties
    Inc. v. 841202 Ontario Inc.
(1996), 28 C.L.R. (2d) 77 (Ont. Gen. Div.);
Phoenix
    Assurance v. Bird Construction
, [1984] 2 S.C.R. 199, at pp. 215-217, S.C.J.
    No. 39;
Parkland Plumbing & Heating Ltd. v. Minaki Lodge Resort 2002
    Inc
., 2009 ONCA 256, at para. 67, 305 DLR (4th) 577. The request could be
    implied from the nature of the arrangements or dealings between the parties; as
    a result, the court must look not only to the contract but also to the
    substance of the transaction between the parties:
Titan Const. Services
    Ltd. v. Wasson
(1987), 31 C.L.R. 145 (N.S.C.A.). Whether there has been a
    request in any given case is a question of fact:
Royal Trust Corp. of Can.
    v. Bengert Const. Ltd.
, [1988] 4 W.W.R. 308 (Alta. C.A.).

[31]

The
    motion judge was alert to the criteria of owner under the CLA, and in
    particular, the meaning of request. He referenced in para. 153 of his reasons
    the articulation of these criteria from
JDM Developments Inc. v. J. Stollar
    Construction Ltd.
(2005), 48 C.L.R. (3d) 296 (Ont. S.C.) that 
[i]n order to have a valid and enforceable lien, a
    lien claimant must show that the person sought to be charged as
    "owner" requested directly or impliedly, the work, service or
    material to be supplied, so as to enhance his estate or interest in the
    property.


[32]

The
    motion judges findings at para. 155 of his reasons satisfy the criteria for a
    valid lien. While the motion judge did not expressly state that 1372708
    impliedly requested that Ravenda Homes build the model homes, this can be
    inferred from his finding that 1372708 was an active participant who impliedly
    encouraged the building of the model homes in furtherance of the parties
    agreement to develop the subdivision. As the motion judge stated:

The houses were built to benefit both 137 and Ravenda Homes. The
    sooner the lots were sold to Ravenda Homes, the quicker 137 would get its
    profit out of the project. Both parties recognized that the presence of model
    homes would improve the ability of Ravenda Homes to sell the lots. In fact,
    prior to the ultimate falling out between them, both parties approached the
    Town to seek permission to build additional model homes. Simply put, the
    improvements made on the three lots were made with the acquiescence of and for
    the benefit of 137.

[33]

Again,
    the motion judges factual findings were available to him and contain no error.
    Appellate intervention is therefore unwarranted.

[34]

For
    these reasons, we dismiss the cross-appeal.

DISPOSITION

[35]

Accordingly,
    we dispose of the appeals and cross-appeals as follows:

(i)

We dismiss the Contract Action appeal and
    cross-appeal.

(ii)

We dismiss the Lien Action appeal,
    but allow the cross-appeal insofar as we set aside the provisions of para. 4 of
    the motion judges order which relate to the granting of 1372708s costs
    incurred to post the letter of credit in action having court File No. 5326/06. We
    refer this issue to trial, along with the other issues that the motion judge
    referred to trial.

[36]

With
    respect to costs, the success of the parties was mixed. 1372708 largely
    prevailed on the appeal of the Contract Action, although Ravenda Homes achieved
    modest success on the discrete issue of property taxes in the cross-appeal. Ravenda
    Homes was entirely successful on the appeal and cross-appeal of the Lien Action.
    As a result, we make no order as to costs.

C.W. Hourigan
    J.A.

David Brown J.A.

L.B. Roberts
    J.A.


