Exaggerated, False Claims (Construction Act)

Caselaw.Ninja, Riverview Group Publishing 2021 ©
Date Retrieved:	2024-11-24
CLNP Page ID:	2058
Page Categories:	Construction & Renovation
Citation:	Exaggerated, False Claims (Construction Act), CLNP 2058, <>, retrieved on 2024-11-24
Editor:	MKent
Last Updated:	2023/01/22

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Construction Act, R.S.O. 1990, c. C.30

Liability

35 (1) 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 in the following circumstances is liable to any person who suffers damages as a result:

1. The person knows or ought to know that the amount of the lien has been wilfully exaggerated.

2. The person knows or ought to know that he or she does not have a lien.

Reduction of lien amount

(2) In the circumstances described in paragraph 1 of subsection (1), the court may, on motion, order that the lien amount be reduced by the exaggerated portion, as determined in accordance with section 17, if it finds that the person has acted in good faith.

Crawford v. Standard Building Contractors Limited, 2021 ONSC 166 (CanLII)

[4] Brooke Crawford's husband is Philip Crawford. His sister, Christina, was, at the time, dating a man called Shane Ross. The Crawfords were told that Mr. Ross was an accomplished general contractor. They were quickly in touch with him. Mr. Ross took a look at their insurance policy and, on 27 July 2019, attended the property and spoke with the Crawfords about their insurance policy and the rebuild. They were impressed. He seemed to be knowledgeable about what needed to be done and how to go about it. He was likable. They trusted him. They wanted him to rebuild their house and hired him and his companies to do so.

(...)

[6] The Crawfords say that they hired Mr. Ross as a general contractor to rebuild their house. Despite receiving $137,690.50 from the Crawfords' insurers, the Crawfords allege that Mr. Ross has done nothing more than undertake excavation and grading work in preparation for the installation of new footings. According to an expert retained by the Crawfords, the value of the work that has been done, including an allowance for floating and picking up forms, is roughly $10,000.

(...)

[19] For the reasons that follow, I conclude as follows:

1. Mr. Ross was hired as a general contractor to rebuild the Crawfords’ house.

2. The defendants did little more than some excavation and related work to the value of $10,000.

3. The Crawfords validly terminated their agreement with Mr. Ross and his companies after they discovered that a forged engineer's stamp had been placed on documents that were prepared by or on behalf of the defendants for the purposes of obtaining a building permit.

4. $137,690.50 by way of insurance proceeds was advanced to Mr. Ross and/or his companies. The defendants are only entitled to keep $10,000 from those monies. A further $12,696.37 plus, potentially, contractual interest, is owed to Gemmill Sand and Gravel Limited (“Gemmill”) out of the advances made to the defendants by the plaintiffs’ insurer.

5. Mr. Ross engaged in deceptive and fraudulent conduct both personally and through his companies. He is personally liable not only for his own conduct but for what was done directly or indirectly by him through Standard Building and Standard Paving.

6. The Crawfords should have judgment against Mr. Ross and his companies, jointly and severally, in the amount of $127,690.50 (i.e., $137,690.50 less $10,000). This includes the amount of $12,696.37 owed to Gemmill. The defendants must, in addition, pay the plaintiffs an amount equivalent to contractual interest at 2% per month, as claimed on Gemmill’s invoices, up to the date of judgment.

7. In addition, the circumstances warrant an award of punitive damages against Mr. Ross and his companies in the amount of $50,000. There will be no award for aggravated damages.

8. The construction lien action by Standard Building is dismissed with costs and the certificate of action registered on title to the Crawfords' property should be vacated. The Crawfords are awarded $7,500 in damages pursuant to section 35 of the Construction Act, R.S.O. 1990, c C.30.

9. The order of MacLeod-Beliveau J. on 20 December 2019 (as subsequently varied) freezing the worldwide assets of the defendants is made permanent, but should be varied to limit the extent of the liquidatable assets covered by the freezing order to $500,000.

10. There have been multiple breaches of the freezing order made by MacLeod-Beliveau J. Mr. Ross is therefore in contempt of court. There will be an in-person hearing in Kingston on a date to be set by the court to receive submissions on what, if any, sanctions should be imposed on Mr. Ross as a result of his contempt.

11. Subject to the effect of any offers to settle that may have been made, the circumstances of these cases warrant an award of substantial indemnity costs in favour of the Crawfords.

(...)

[133] Section 35 of the Construction Act provides for a cause of action in damages where a person preserves a claim for lien or gives written notice of lien if damage results when the claimant knew or ought to have known that the amount of the lien had been wilfully exaggerated or where the person knew or ought to have known that he or she did not have a lien: Construction Act R.S.O. 1990, c. C.30.

RJ Concrete v. Eco Depot LTD., 2022 ONSC 1759 (CanLII)

[28] Eco argues that RJ should have known that a lien that included an amount for services and materials that were not provided would constitute an exaggerated lien and, as such, the lien was willfully exaggerated.

[29] RJ denies the lien was willfully exaggerated. RJ says the amount of the lien was based on the total contract price, rather than the price of the work it had completed, and that it was not significantly in excess of the amount it now acknowledges was appropriate. RJ also says that in May 2021, when Eco took issue with the amount of the lien, RJ offered to reduce the lien to $47,796.83, but Eco refused. RJ made its offer after it received Eco’s notice of motion but before Eco completed its motion record. (Counsel for both parties agreed to waive any privilege associated with RJ’s offer and Eco’s response.)

[30] Although RJ’s counsel argues that, at the time the lien was registered, RJ genuinely believed it had calculated the amount of the lien correctly by basing it on the total value of the contract, there is no reference to RJ’s genuine belief in the Matson affidavit. It is, however, evident both from the amount of the lien and a letter dated February 5, 2020 from RJ’s counsel to Eco (Exhibit G to the Matson affidavit) that the lien was indeed based on the full contract amount, plus the cost of the extra trucking, less the amount paid by Eco.

[31] Eco argued that RJ’s lien was more than twice the value of its work and that Eco had in fact overpaid RJ by more than $27,000. I have rejected Eco’s argument about how the lien should have been calculated. I have concluded that the proper amount of RJ’s lien is $47,230.42, about 67 per cent of the amount of the $70,282.42 lien RJ registered. RJ has explained how it calculated the lien, acknowledged that it was in error and offered to reduce the lien to an amount within $600 of the amount I have found is proper. In these circumstances, Eco has not satisfied me that the amount of the lien, although too high, can properly be characterized as having been “wilfully exaggerated.”

[32] Even if I should have found that the lien was wilfully exaggerated, I would not be prepared to find that RJ’s claim for lien was an abuse of process. As such, there is no basis for discharging the lien under s. 47.

(...)

[35] Accordingly, in accordance with the alternative relief requested by Eco, RJ’s position on the motion and my conclusion with respect to the proper amount of the lien, RJ’s lien shall be reduced to $47,230.42.

Southbridge Construction Group Inc. v. 667293 Ontario Ltd., 1992 CanLII 7633 (ON SC)

I should add that, in my view, the proper procedure that the plaintiff ought to have followed, once the error in amount was discovered, and because the plaintiff was still in time to register another claim for lien, was to register a second claim for lien claiming the additional amount that had been omitted, in error, from the first claim for lien, and then start an action to enforce both liens. A second, acceptable alternative would have been to register a second lien for the correct full amount of the plaintiff's claim, again assuming it could be done in time, and then move, under s. 47(1)( b), on notice, for an order vacating the registration of the first lien, so as to avoid any liability under s. 35 of the Act for "exaggerated claims". Of course, if the error in amount is discovered after the time limited for registering a lien has expired, then the only thing the lien claimant can do, is seek to amend the statement of claim in any action commenced to enforce the lien, within the limits set down in Favot Construction Ltd. v. Maplecrest Inc. (1990), 42 C.L.R. 34 (Ont. Gen. Div.), and my own recent judgment in AFG Glass Inc. v. Glaxo Ltd. , Ont. Gen. Div., Master (unreported), February 27, 1992, 14 pages [summarized 31 A.C.W.S. (3d) 867].

MHA Contracting Inc. v. Christie Mechanical Contractors Ltd., 2005 CanLII 4579 (ON SC)

I do not accept the evidence of Khaled Rostom that his time sheets accurately describe the work done by him. There is a real likelihood that these were reconstructed late in 2000 or in January 2001 when he became unhappy. My reasons for this conclusion include the following: Bob Christie was never provided with a copy of the time records.

(...)

The hours are excessive. In the 43-day period from January 1, 2001 to February 9, 2001 he claimed to have worked 386 hours, or 9 hours daily, 7 days per week, in addition to unrecorded time on unsuccessful bids.

(...)

On a few occasions he signed to accept delivery of parts, or delivered a small part. He also attended the job site once to take measurements with Bob Christie and once to help unload pipes and once walked through a site with a site supervisor. He often dropped off cheques to a site supervisor on his way home. These latter services represented less than 1% of his time. He prepared some drawings to help him assess requirements for labour and materials, but there is no evidence that the drawings were used on the job site.

Khaled Rostom spent most of his time at the computer and on the telephone. The work he did was very similar to that referred to in 697470 Ontario Ltd. v. Presidential Developments Ltd., (1989) 1989 CanLII 4336 (ON SC), 69 O.R. (2d) 334, wherein Rosenberg J.A. noted:

The work performed by the appellant was not so directly related to the construction of the improvement to entitle the appellant to a lien under the Act…

On this basis I conclude that the work done by the plaintiff was not lienable. The plaintiff ought to have known that its services were not lienable. The above authority of the Court of Appeal was decided more than ten years earlier.

The claims for lien totalled $257,404.55 but the plaintiff’s claims have been entirely dismissed. The plaintiff and Khaled Rostom must have known that the lien claims grossly exceeded any amount owed to the plaintiff, particularly in relation to Moore Creek, for which MHA had done little or no work.