Court deemed appellant in default to have admitted to allegations in breach of trust claim
The Ontario Court of Appeal has affirmed a motion judge’s decision finding the appellant jointly and severally liable with his co-defendants for $180,372.49, representing the amount of unpaid invoices provided by a construction services company.
In B.L.T. Construction Services Inc. v. Una Pizza Napoletana Inc., 2025 ONCA 849, Una Pizza Napoletana Inc. and Pizza Couture Inc. retained the respondent B.L.T. Construction Services Inc. to perform construction management services for two new pizza restaurants.
The respondent submitted invoices for its work, which the corporations returned for insufficient funds and failed to pay. Thus, the respondent brought a claim against the corporations for breach of trust under s. 7 of Ontario’s Construction Act, 1990, and unjust enrichment.
The respondent alleged that the corporations accepted leasehold improvement advances from third-party landlords to fund the construction projects, yet failed to advance the funds they had received to the respondent.
The respondent added that the appellant, an officer and director of Una, and other individual defendants were liable because they effectively controlled the corporations and assented to or acquiesced in the misuse of trust funds.
The appellant, who had been noted in default and had taken no steps to defend the action for years after the striking of his defence, filed a cross-motion to set aside the order deeming him in default and striking his defence.
On Nov. 5, 2024, Justice Colin P. Stevenson of the Ontario Superior Court of Justice refused to set aside the order striking the appellant’s defence. The motion judge determined that the appellant and his co-defendants were jointly and severally liable for the amount of $180,372.49, representing the unpaid invoices, and for costs of $8750.92.
No error found
The Court of Appeal for Ontario dismissed the appeal and ordered the appellant to pay $6,543.84 in all-inclusive costs, in line with the parties’ agreement.
First, the appeal court found no error in the motion judge’s refusal to set aside the orders finding the appellant in default and striking his defence. The appeal court noted that the litigation was lengthy, lasting several years.
According to the appeal court, apart from initially filing a statement of defence, the appellant only acted to defend himself against the claim on the proverbial 11th hour, following years of inaction, and failed to participate in the proceedings despite receiving multiple opportunities to do so.
Second, the appeal court saw no error in the judge’s decision granting judgment against the appellant and finding him jointly and severally liable for $180,372.49.
The appeal court explained that the facts alleged in the respondent’s claim sufficiently stated the elements of breach of trust, the liability for such breach, and the quantum of the funds to be held in trust.
Regarding breach of trust, the appeal court noted that the respondent’s claim alleged that:
- The two corporations received money to finance the respondent’s improvements
- The Construction Act required that the funds go to the respondent
- The corporations used the money for a purpose inconsistent with the trust
The appeal court acknowledged that the lower court deemed the appellant to have admitted to these allegations and to his effective control over the corporations that had breached the trust.
Regarding the quantum, the appeal court noted that the lower court deemed the appellant to have admitted that the corporations received funds for all the services and materials supplied by the respondent, as stated in the invoices it had delivered.
As the lower court had found the appellant in default and stricken his defence, the appeal court saw no basis for him to challenge the allegation that the landlords had advanced an amount equal to all the work and services furnished by the respondent, as identified in its invoices.
The appeal court found the judge entitled to conclude that the unpaid invoices accurately reflected the amount that the landlords had advanced for leasehold improvements and thus reflected the quantum of the breach of trust.
