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Background and parties
Constantine Enterprises Inc. v. Mizrahi (128 Hazelton) Inc., 2026 ONSC 2781, arises from a stalled luxury condominium development in Toronto’s Yorkville neighbourhood known as the Hazelton Project, located at 126 and 128 Hazelton Avenue. Hazelton (Mizrahi (128 Hazelton) Inc.) is a joint venture corporation owned 50/50 by Constantine Enterprises Inc. (CEI), whose principals are Robert Hiscox and Edward Rogers, and Mizrahi Developments Inc. (MDI), ultimately controlled by developer Sam Mizrahi. Hazelton’s known secured creditors included CEI, Aviva Insurance Company of Canada, and lien claimants, while unsecured creditors were owed approximately $4.2 million.
Hazelton defaulted on its obligations before completing the nine-storey condominium with ground-floor retail. On CEI’s application, KSV Restructuring Inc. was appointed as receiver and manager of Hazelton’s property, assets, and undertakings, including the Project. Within this receivership, the Receiver identified two main claims by Hazelton against Mizrahi Inc. (MI) and Mr. Mizrahi personally: (1) an overcharging claim under a Construction Management Agreement (CMA); and (2) a repayment claim under a Development Management Agreement (DMA). On this motion, the Receiver sought judgment for a total of $1,564,322 against MI and Mr. Mizrahi.
Project structure, roles, and agreements
Corporate governance of Hazelton was straightforward: each shareholder nominated one director—CEI nominated Mr. Hiscox, and MDI nominated Mr. Mizrahi, who also acted as Hazelton’s president until his resignation on May 13, 2024, shortly before the Receiver’s appointment.
Two core project agreements governed MI’s role: the Development Management Agreement (DMA) and the Construction Management Agreement (CMA).
Under the DMA, dated June 19, 2015, Hazelton, MI, and Mr. Mizrahi agreed that MI would “do all that is required to complete the Project through to the Project Completion Date,” defined as the final closing of all unit sales and completion of all other aspects of the Project. Hazelton paid MI $2 million in development fees, half up front, with that advance deemed earned only upon achieving specific milestones. If milestones were not met, MI was required to return any unearned portion, and Mr. Mizrahi personally guaranteed repayment obligations.
Under the CMA, dated March 13, 2017, MI undertook to manage construction, effectively acting as general contractor. MI was entitled to a 5% fee on “construction cost” and agreed monthly fees for specified MI employees, plus reimbursement of specified expenses supported by receipts or invoices, with a 15% administration charge—but no admin charge was permitted on amounts paid to one labour subcontractor, CLM General Enterprises Ltd. Section 5.1.3 required any change to MI’s compensation to be in writing, and no written amendment was ever made to MI’s compensation structure.
Evolution of construction management: CCM and CLM
In July 2017, MI engaged Clark Construction Management (CCM) to provide construction management and labour services, overlapping substantially with MI’s own CMA obligations. CCM was to be paid 2% of construction cost (out of MI’s 5% share) plus time-based labour rates. Although this delegation was not expressly contemplated by the CMA, CEI ultimately agreed after being told this was MI’s standard practice, would aid timelines and budget, and would be more efficient.
While CCM was involved, MI invoiced Hazelton for CCM’s charges strictly as reimbursable expenses without markup and provided full CCM invoices to support reimbursement. In August 2020, MI proposed terminating CCM and bringing construction management in-house to save approximately $1.1 million and accelerate work. CEI agreed, and CCM ceased in October 2020.
Afterwards, MI began contracting with CLM for general labour. CLM invoiced MI directly, attaching detailed timesheets. MI paid CLM but did not share CLM invoices with Hazelton. Instead, MI generated its own timesheets omitting any reference to CLM and substantially increased the hourly rates and added overtime that CLM itself had not charged. Specifically, CLM billed $35–$45 per hour, but MI charged $96.35 per hour to Hazelton, and MI introduced an “overtime” rate of $144.53 per hour for 826 overtime hours, even though CLM had billed zero overtime. MI also “estimated” hours in a way that resulted in 41 more hours being billed than CLM had actually worked. Overall, MI invoiced Hazelton $1,705,310 for labour for which CLM had invoiced MI only $640,989, yielding an alleged $1,064,322 uplift.
Procedural framework and the single-proceeding model
The Receiver pursued its claims within the receivership proceeding under the “single proceeding model,” which consolidates all litigation relating to an insolvent debtor into one proceeding, including claims that the debtor (here, Hazelton) has against non-stranger third parties. The court accepted that MI and Mr. Mizrahi were not strangers to the Hazelton insolvency and agreed that the Receiver’s claims could be adjudicated by motion within the receivership, rather than requiring a separate action.
MI and Mr. Mizrahi argued, however, that the claims—particularly the CMA overcharge claim—should only be determined after documentary production and oral discovery, or should be converted into a full action. The court accepted the receivership context but still applied ordinary procedural and limitation principles in determining whether the claims could proceed and on what evidentiary record.
The CMA overcharge claim and the limitations analysis
The Receiver’s first claim alleged that MI wrongfully inflated CLM’s labour costs when billing Hazelton under the CMA, seeking repayment of the $1,064,322 differential on multiple alternative bases: breach of contract, unjust enrichment, and negligent or fraudulent misrepresentation, with personal liability for Mr. Mizrahi based on an alleged fiduciary duty to Hazelton.
MI’s threshold defence was that this claim was statute-barred under Ontario’s Limitations Act, 2002. The court recited the basic limitation rule: a proceeding shall not be commenced in respect of a claim after the second anniversary of the day the claim was discovered. It then applied the statutory discovery test and Supreme Court authority in Grant Thornton LLP v. New Brunswick, which holds that a claim is discovered when a plaintiff has knowledge, actual or constructive, of material facts supporting a plausible inference of liability—not mere suspicion, but not certainty or full quantification either.
MI relied heavily on the evidence of CEI’s principal, Mr. Hiscox, and an email from CEI’s CFO, Mr. Donland, dated May 6, 2022. In his affidavit, Mr. Hiscox acknowledged that MI and CEI agreed to replace CCM in late 2020 but stated that MI did not disclose that it was marking up labour rates until May 2022, in the context of urgent outstanding MI invoices for which he demanded backup. He also admitted that the scale of the embedded mark-up was only revealed in March 2023 when MI finally provided a CLM invoice, and that upon receiving that invoice they went back to the office to investigate and determine the actual markup.
The May 6, 2022 email from CEI’s CFO to MI was even more pointed: it explicitly complained that MI was “making a profit” on labour “on the back of a project with epic losses” and highlighted a conflict of interest, indicating that CEI understood MI was charging higher labour rates than third-party alternatives and benefiting from that spread. On cross-examination, Mr. Hiscox accepted that, as of that email, CEI knew MI was charging a markup on labour costs.
The Receiver argued that in May 2022 Hazelton only had a vague sense of some markup, with no appreciation of magnitude, and that any potential harm then appeared trivial. It relied on Gillham v. Lake of Bays to say limitation periods do not run on trivial damages and invoked fraudulent concealment (as explained in Pioneer Corp. v. Godfrey) on the basis that MI had not disclosed the CLM invoices and had thereby concealed the true scale of the overcharging.
The court rejected these submissions. It held that by May 6, 2022 Hazelton knew MI was marking up CLM’s labour and that this knowledge went beyond mere suspicion. The inability to quantify the exact overcharge or fully assess commercial viability of litigation did not postpone the running of time. Alternatively, if that date were wrong, the court found that by March 22, 2023, when a CLM invoice was provided, Hazelton had all material facts necessary to draw a plausible inference of liability: it could simply compare CLM’s billed amounts with MI’s invoices and do the arithmetic.
The Receiver also argued that it had commenced the CMA claim within two years by virtue of a December 16, 2024 email from its counsel to MI’s counsel attaching a draft notice of motion that included the CMA overcharge claim and the $1,064,322 figure. The court disagreed. It analogized to pleadings amendments: in an action, the relevant date is issuance or service of the formal pleading, not the earlier sending of a draft. Applying that logic, the proceeding in respect of the CMA claim was only commenced when the Receiver’s notice of motion was dated and served—July 18, 2025—more than two years after May 6, 2022 and also more than two years after any March 2023 discovery date.
As a result, the court held that the Receiver’s CMA claim against MI and Mr. Mizrahi was statute-barred and dismissed the Receiver’s motion for judgment in the amount of $1,064,322.
Development Management Agreement: key terms and repayment issue
The second branch of the Receiver’s case centered on the DMA, which involved both MI and Mr. Mizrahi personally. Under the DMA, MI was paid $2,000,000 in development fees “in advance.” Critically, the DMA provided that if it was terminated “for any reason” prior to the Project Completion Date—defined as final closing of all unit sales and completion of all other aspects of the Project—MI would be required to repay $500,000, the unearned portion of the development fees, and Mr. Mizrahi guaranteed this obligation in section 16.
The DMA also contained several performance-related provisions invoked by the Receiver. Section 6 imposed a broad obligation on MI, as manager, to “do all that is required to complete the project through to the Project Completion Date.” Section 7(a) required MI to exercise its duties in a reasonable commercial manner and in the best interests of the owner (Hazelton). Section 7(b) required MI to manage the Project such that all costs and expenses remained within the approved budget. Section 9 required MI to perform its duties in an efficient manner consistent with an experienced and competent development manager on a comparable project. Termination rights were set out in section 13, allowing Hazelton, acting reasonably, to declare the DMA at an end if the manager failed to observe or perform its obligations and did not cure any curable default within specified timeframes.
The initial Project budget was $62.8 million but had climbed to $80.8 million by July 31, 2021. On cross-examination, Mr. Mizrahi admitted that after March 22, 2023 MI’s invoices for site labour were not being paid due to lack of funding, and that the Project was not within budget. He also deposed that MI became incapable of meeting its DMA obligations, which he attributed to CEI’s conduct, including refusal to close financing.
When the Receiver was appointed on June 4, 2024, the DMA remained in place and the Project had not reached the Project Completion Date. On June 21, 2024, the Receiver sent a termination letter expressly invoking section 13 and terminating the DMA on the basis that MI had failed to perform several key covenants that were not capable of cure: failure to perform efficiently under section 9, failure to act reasonably and in Hazelton’s best interests under section 7(a), and failure to keep costs within the budget under section 7(b). Because termination occurred before Project Completion, the Receiver claimed the contractual $500,000 repayment of unearned development fees, enforceable as against both MI and Mr. Mizrahi under his guarantee.
Set-off defences and interaction with the Mizrahi civil action
In response to the DMA repayment claim, MI and Mr. Mizrahi advanced legal and equitable set-off defences and sought to resist summary adjudication on a motion record. They argued that the DMA was terminated and the Project left incomplete because CEI blocked reasonable financing solutions, allegedly acting in bad faith and preventing MI from completing the Project. They relied in part on allegations from a separate civil action (the “Mizrahi civil action”) brought by MI-related parties against CEI and its principals.
MI and Mr. Mizrahi submitted that if the Mizrahi civil action succeeded, it would undermine or defeat the Receiver’s DMA claim, and argued that the DMA dispute should be converted into an action and tried with or after that civil action. The court rejected this approach. MI was not a party to the Mizrahi civil action and Hazelton was not a party either, and the claims in that separate proceeding did not generate a proper defence of legal or equitable set-off in this receivership. The court declined to tether the DMA claim to the civil action or to treat allegations in that separate case as a substantive defence here.
Unpaid labour invoices and evidentiary gaps on set-off
Separately, MI asserted that it had its own direct claim against Hazelton for unpaid invoices for site labour that formed the basis for MI’s termination of the CMA. In his affidavit, Mr. Mizrahi attached copies of MI’s invoices and asserted that Hazelton owed $453,847.56. MI argued that, at a minimum, any DMA repayment obligation should be reduced or neutralized by set-off of whatever amount might be determined as owing under these invoices.
The Receiver responded that the evidentiary record was inadequate to establish a valid set-off. It pointed out, among other things, that there was no detailed evidence about what work had actually been performed under the invoices, whether it was properly done, or whether the charges complied with the CMA’s compensation regime (including prohibitions on administrative markups on CLM amounts and the written-amendment requirement for compensation changes). The Receiver also continued to contest the accuracy and legitimacy of MI’s invoicing practices, particularly in light of the CLM markup issue.
The court agreed that the record was too sparse to adjudicate MI’s set-off claims definitively at this stage. It noted that MI and Mr. Mizrahi themselves did not seek a final ruling on the validity of set-off on this motion, acknowledging that material factual disputes—such as what Hazelton knew about markups, whether CLM labour was unionized or non-unionized, and what MI knew about CLM’s status—would require documentary production and oral discovery.
Outcome and implications
In its disposition, the court granted leave for the Receiver to pursue judgment for Hazelton’s claims within the receivership. It then resolved the two key substantive branches as follows. First, it dismissed the Receiver’s motion for judgment on the $1,064,322 overcharge claim under the CMA as statute-barred, concluding that Hazelton discovered its claim by May 6, 2022 at the latest (or, at the very latest, March 22, 2023), and that the proceeding in respect of that claim was not commenced until July 18, 2025, more than two years later. Second, with respect to the $500,000 DMA repayment claim, the court refused to grant immediate judgment to the Receiver because the set-off defence based on MI’s allegedly unpaid labour invoices could not be fairly determined on the existing record. Instead, the court directed that the issue of whether, and in what amount, MI is entitled to legal or equitable set-off against the DMA repayment be determined later in this proceeding, at a trial or on a motion for summary judgment, after full documentary production and examinations. The court invited counsel to agree on procedural steps and a form of order to operationalize this direction and reserved the issue of costs, to be addressed by written submissions if not agreed.
In practical terms, the party that succeeded on the only fully adjudicated monetary issue in this endorsement was Mizrahi Inc. and Sam Mizrahi, who defeated the Receiver’s $1,064,322 CMA overcharge claim on limitation grounds. However, no monetary award, damages, or costs were ordered in their favour, and the Receiver’s $500,000 DMA repayment claim remains live, subject to the unresolved set-off dispute. As a result, the total amount granted or ordered in favour of any party in this decision cannot be determined, because the court dismissed the CMA claim without ordering payment, left the DMA repayment and any set-off to future adjudication, and did not fix costs.
Applicant
Respondent
Other
Court
Superior Court of Justice - OntarioCase Number
CV-24-00715321-00CLPractice Area
Corporate & commercial lawAmount
Not specified/UnspecifiedWinner
OtherTrial Start Date
23 February 2024