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Non-Payment of Invoices and Limitations - Thermal Exchange Service Inc. v. Metropolitan Toronto Condominium Corporation No. 1289

The Ontario Court of Appeal has released yet another decision on when a contractor who is not paid for its invoices should know that a proceeding is an appropriate means to seek to remedy the non-payment.

In Thermal Exchange Service Inc. v. Metropolitan Toronto Condominium Corporation No. 1289, 2022 ONCA 186, Thermal serviced the HVAC units in the Condo Corp.’s building for 13 years, from 2002 until 2015. It did so on the understanding that it had a contract with the Condo Corp. rather than the individual unit owners.

As it turned out, however, the Condo Corp.’s property manager was under the mistaken impression that the Condo Corp. was not ultimately liable for paying the invoices and was only obligated to pay if and when it was able to collect payment from the unit owners on whose behalf the work was done.

Thermal received work orders from the property manager, performed the work she requested, and invoiced the Condo Corp. While the invoices stated that payment was due within 30 days from the date of the invoice, the Condo Corp. typically made payment much later, in some instances up to 300 days later. Thermal continued to provide services on request and tender fresh invoices, but from 2008 forward, Thermal stopped sending individual invoices and began sending a single, semi-annual “batch invoice”.

Thermal had several conversations with the property manager about the non-payment of invoices, and she would invariably tell them that she was terribly busy and unable to attend to the matter immediately, but was working on the invoices.

In October 2015, Thermal thought a demand letter from its lawyer might encourage the property manager to process the invoices. On November 4, 2015, she unexpectedly informed Thermal that the Condo Corp. was not responsible for payment.

On August 17, 2017, Thermal filed its statement of claim, seeking damages for services supplied, breach of agreement, and unjust enrichment.

The trial judge held that the claim was first discoverable as of the date of the demand letter in October 2015. She found that the nature of the commercial relationship between the parties was that there was a single running account, and whenever Thermal received funds from the Condo Corp, it was credited to that account. The trial judge accepted the evidence of Thermal’s president that he sincerely believed the Condo Corp. had been dealing with him in good faith and that the property manager’s statements that she was “working on it”, meant that his invoices would eventually be paid. He did not realize until her email of November 4, 2015 that she was, on behalf of the Condo Corp., taking the position that payment by Condo Corp. would be contingent on payment by the unit owner.

That trial judge’s conclusion was based on the Court of Appeal decision in Presley v. Van Dusen, 2019 ONCA 66.

The Condo Corp. appealed.

The principal argument was that the trial judge erred in relying on Presley v. Van Dusen, in which a plaintiff owner postponed bringing an action against a contractor because of assurances by the contractor, who had a superior understanding of the problem, that it could fix the mechanical problem at issue in that case.  The Condo Corp. argued that this case was nothing like Van Dusen, given that Thermal was not relying on the Condo Corp. to fix a mechanical problem beyond the expertise of Thermal; the Condo Corp. never promised unequivocally to pay the invoices, but was simply stringing a creditor along; and Thermal waited substantially longer to begin a proceeding than the plaintiff in Van Dusen did. The Court of Appeal disagreed:

There is nothing in the reasoning in Van Dusen that would restrict its application to comparative expertise over mechanical problems. The salient aspect is that the defendant created a problem, the remedy for which was beyond the reach of the plaintiff’s understanding, and led the plaintiff to rely on it for the remedy. Analogous to the situation in Van Dusen, the Condo Corp. created a barrier to Thermal Exchange receiving payment (it would not pay unless it first received payment from the unit owners, and was not taking any steps to getting the unit owners to pay), prevented Thermal Exchange from understanding the nature of the problem, and led Thermal Exchange to believe that it would take care of the problem.

While the Court of Appeal agreed with the appellant that the trial judge was wrong in finding that the limitation period was triggered on the date Thermal sent the demand letter, that did not help the appellant, because the Court of Appeal found that the period commenced later than that, i.e. on the date the property manager advised Thermal that the unit owners rather than the Condo Corp. were liable for the invoices.

The principle in Van Dusen has therefore been extended to any situation in which a defendant created a problem, the remedy for which was beyond the reach of the plaintiff’s understanding, and assures the plaintiff that it will take care of the problem.