Executive Summary: Key Legal and Evidentiary Issues

• Liability for unpaid invoices stemming from a commercial renovation contract was central to the dispute.

• The sufficiency of evidence regarding the existence and breach of trust funds under the Construction Lien Act was contested.

• Admissibility and weight of testimony from Vestacon’s project manager and Huszti Co.’s former CFO were evaluated.

• The effect of the defendants being noted in default and the resulting deemed admissions shaped the outcome.

• The court considered whether individual directors could be held personally liable for breach of trust.

• Assessment and reasonableness of costs claimed by the successful party were scrutinized.

Background and facts

Vestacon Limited entered into a contract with Huszti Investments (Canada) Ltd. to demolish and renovate three units of a commercial condominium. The agreement commenced in April 2017, with Vestacon delivering its first invoice, which Huszti Co. paid in full. However, between May and August 2017, Vestacon issued four additional invoices totaling $449,819.31, which Huszti Co. failed to pay. Substantial performance of the contract was certified in July 2017, and engineering sign-offs were completed by August 2017. Vestacon did not register a construction lien but instead initiated legal proceedings in 2018 to recover the unpaid amounts.

The original claim included additional defendants, but the action was discontinued against Nikhil Chhelavda and dismissed against 2603553 Ontario Inc. before trial. By June 2024, the remaining defendants, including Huszti Co. and its directors, were noted in default, and their counterclaim was dismissed. At trial, Vestacon presented testimony from its project manager and Huszti Co.’s former CFO. The defendants did not appear.

Key legal and evidentiary issues

The court examined whether Huszti Co. was liable for the unpaid invoices and whether there was sufficient evidence to support Vestacon’s claim that Huszti Co. and its directors breached the trust provisions of the Construction Lien Act. The court also considered the effect of the defendants’ default status, which resulted in deemed admissions of the facts alleged in the statement of claim. Additionally, the court reviewed the reasonableness of the costs claimed by Vestacon.

Court’s analysis and outcome

The court found that Huszti Co. breached its contract with Vestacon by failing to pay the outstanding invoices. There was no evidence that the work was incomplete or substandard. The court awarded Vestacon damages equal to the unpaid invoices, totaling $449,819.31, plus prejudgment interest from September 30, 2017, to the date of judgment.

Vestacon’s claim for breach of trust under section 7 of the Construction Lien Act was dismissed. The court determined that there was insufficient evidence to prove that Huszti Co. received or held trust funds for the benefit of contractors. As a result, the court also dismissed the claims against the individual directors for breach of trust and declined to make any declarations regarding bankruptcy discharge.

On the issue of costs, the court fixed Vestacon’s costs at $27,275.41, finding the amount reasonable and proportionate given the circumstances.

Conclusion

Vestacon Limited succeeded in its claim against Huszti Investments (Canada) Ltd. for breach of contract and was awarded $449,819.31 in damages plus prejudgment interest and $27,275.41 in costs. Claims for breach of trust and personal liability against the individual directors were dismissed, and no additional relief was granted against them.