Seldom are opposing parties to an action in agreement on the factual background giving rise to litigation, much less on the quantum in issue. This rare occurrence arose in University Plumbing & Heating Ltd. v. Solstice Two Limited, 2019 ONSC 2242, a case which turned on the question of whether the action was statute-barred. University Plumbing & Heating Ltd., the plaintiff, was engaged by the defendant, Solstice Two Limited, for work issued by Solstice’s related company and other corporate defendant, Davies Smith Developments Inc. (“DSD”). The personal defendants, Graham Chalmers and Ian Smith, were directors and officers of Solstice and DSD. The plaintiff invoiced $6,996,027.21 for work performed, but was paid only $6,892.979.73, leaving $103,047.48 owing under a contract which set interest at bank prime rate plus 6 percent per year. The facts were admitted by the defendants in a request to admit. At the time of judgment, the interest that had accumulated on the invoice amounted to $345,175.83. Morgan J. explored the allegations, and noting that the defendants did not take issue with any of the material facts, came to the ultimate conclusion that the only real defence available to the defendants was the limitation argument, which ultimately failed.
Before delving into the limitation question, Morgan J. found that the plaintiff proved the existence of trusts under ss. 7 and 9 of the Construction Lien Act (“CLA”). Once that was proven, the onus shifted to the defendants to prove that they adhered to the terms the statutory trusts. Given that the defendants had not taken any issues with the facts presented by the plaintiffs and solely relied on the limitations defence, they had failed to meet that onus. The personal defendants, as directors and officers, and overall directing minds of the corporate defendants, were personally liable for the corporate breaches of trusts both under common law and under the CLA.
The defendants’ only “real defence” was that the plaintiff commenced its action some three years and two months after it issued its last invoice. Morgan J. held that the fact that the defendants made part payments after the last invoice and also acknowledged that amounts remained owing after that invoice, brought the debt well within two years of commencing the action. The written acknowledgements were in the form of email correspondence from the personal defendants to the plaintiff, on four separate occasions, confirming that a debt remained owing and reiterating an intent to pay. Pursuant to section 13(6) of the Limitations Act, the acknowledgments of the personal defendants were also acknowledgements of corporate defendants.
The personal defendants only advised the plaintiff of their inability to pay on June 26, 2015. It was then that it became appropriate for the plaintiff to commence its action. In line with several authorities, the plaintiff was not penalised for having held off commencing the action in return for the defendants agreeing to collect money. The court held that while creditors are under a duty to do due diligence and cannot rely on their own tardiness or inaction in forbearing from commencing an action, the defendants’ promise effectively induced the plaintiff to forbear from commencing the action and thereby prevented the running of the limitation period.
As a matter of fact, Morgan J. found that had the plaintiff commenced an action prior to the June 26, 2015 email, the plaintiff would have effectively “rushed to litigation” and the debt would not have formally crystallised under the Limitation Act.
CostsGiven his findings with respect to the limitation question, Morgan J. awarded substantial indemnity costs in the amount of $70,000 in respect of the motion, and another $70,000 in respect of the action. In a judgment entirely against the defendants, the plaintiff obtained an order for the principal debt, the full interest, and post-judgment interest at contract rate.