A recent ruling from Ontario’s Superior Court of Justice confirms using a lien action as a tool for reprisal is a poor strategy.
Bridlepath Inc. and Jia Development Inc. had co-owned land in northeast Toronto since 2018. Various approvals and permits were already in place for the construction of townhomes and underground parking on the property. However, the property had remained dormant. Only winterization, clean-up and testing had occurred.
In early 2020, Bridlepath was considering selling its half ownership to a Mr. Biao Liu (“Bill”). Bill was given 30 days to consider project feasibility and financing.
During that time, Andrew Sun, principal of Viceroy Homes, was introduced to Bill. A Letter of Intent (LOI) was signed, saying if the sale to Bill closed, Jia and Bill would hire Viceroy to undertake construction. The LOI also limited Viceroy to a maximum of $500,000 of work pre-close. Some preliminary work was done, invoiced and paid for.
However, three weeks later, Bill advised he could not close the sale. Sun then proposed he instead replace Bill as Jia’s partner in the project. Another few weeks passed, but Jia’s principle had not given Sun’s proposal further consideration. The court found, “this upset Mr. Sun.”
Viceroy immediately sent Jia 10 invoices for a total of $3.74 million of work allegedly performed over 39 days.
This included, “demolition of existing buildings, excavation, removal of debris, repair and completion of foundation, framing materials.”
The invoices were rejected. Next day, Viceroy commenced a lien, and registered a certificate of action purporting to perfect its lien on June 30.
In August, Bridlepath and Jia commenced cross examination of Sun concerning the invoices. However, the cross examination was not completed. At that point, Sun, through an interpreter, had already admitted Viceroy had not done $2.2 million of the work claimed, as confirmed by photographic evidence. Sun then gave 40 undertakings to substantiate Viceroy’s claim for liens. All remained unanswered.
When cross examination resumed on Jan. 4, 2023, Sun refused to answer questions. Bridlepath and Jia then served motions to order the discharge of the liens, stressing urgency due to an impending sale of the property.
Hearings to resolve the matter were frustrated from the outset.
Sun’s legal representation applied to withdraw as counsel, which the court allowed in mid-January. At one of two case conferences held in March, Sun did not appear at all. At the other, Sun indicated Viceroy could not afford a replacement lawyer.
More hearings were scheduled for early April. Associate Justice Wiebe wrote later in his decision, “I was satisfied that Mr. Sun was aware of the urgent need for Viceroy to retain a lawyer and respond to these motions.”
At the April motion hearings, no one appeared from Viceroy. Counsel from Ontario-based professional liability and title insurance provider LawPro told the court although Sun had been given names of Mandarin-speaking lawyers, he had not contacted any of them.
At this point, Wiebe granted the motions for dismissal made by Bridlepath and Jia and awarded costs incurred.
“This is certainly a case crying out for an award of the claimed substantial indemnity costs given my findings on the motions,” Wiebe wrote in his April 2023 ruling.
The liens claims were “for an improper purpose, namely either to force Jia and Bridlepath to agree with Mr. Sun’s joint venture proposal or as a reprisal for not doing so.”
Bridlepath was awarded $85,000. Jia was awarded $45,000, an amount that Viceroy and Sun were ruled jointly and severally liable.
Andrea Gorys of Cassels Brock & Blackwell LLP, counsel for Bridlepath, told the Daily Commercial News, “This is one of those rare cases where full indemnity costs were awarded based on the actions of the lien claimant. Lien claimants must be able to back up their liens with valid and supporting evidence. Otherwise, the liens can be challenged in a motion to discharge a lien.”
John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com.
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