COURT FILE NO.: DC-08-0066-00
DATE: 20090429
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Landmark II Inc. v. 1535709 Ontario Limited
BEFORE: Ricchetti, J.
COUNSEL: A. Conte, for the Plaintiff/Respondent
R. Belsito, for the Defendant/Applicant
E N D O R S E M E N T
[1] The Defendant (“Owner”) seeks an order;
a) Requiring the Plaintiff (“Lien Claimant”) to:
I. Post, as security into court, the costs awarded at the trial in favour of the Owner, and
II. Post, as security into court, the sum of $22,500 as security for the costs of the appeal,
b) Returning the monies posted by the Owner to vacate the lien.
[2] The trial in this action was heard by Madame Justice van Rensburg in December 2007 and February 2008. Reasons were released on August 11, 2008. A costs endorsement was released on January 6, 2009.
[3] The Lien Claimant has appealed the Judgment and the award of costs.
[4] There were two issues before me today. The first is whether the Owner requires leave under S.67 (2) of the Construction Lien Act (“Act”) to bring this motion and, if leave is required, whether leave should be granted. The second is whether the Lien Claimant should be required to post the security as set out above and the return of the monies posted in court to vacate the lien.
S.67(2) of the Construction Lien Act
[5] The Owner argues that S.67 of the Act was intended to cover interlocutory motions leading to trial only and not interlocutory matters involving appeals which are governed by the Rules of Civil Procedure. This claim has been tried.
[6] The Lien Claimant argues that S.67 covers all steps in a lien action including appellate steps. In order for the Owner to succeed, it must show that the motion is necessary or that the motion would expedite the resolution of the issues in dispute.
[7] S. 67(2) specifically refers to the need for the court’s consent for “interlocutory” motions. According to Black’s Law dictionary “Interlocutory” means:
“(Of an order, judgment, appeal, etc.) interim or temporary, not constituting a final resolution of the whole controversy.”
[8] The final resolution in this lien action was the judgment rendered by Justice van Rensburg. This motion is not interlocutory to the final resolution of the whole controversy. This motion relates to the appeal. There is no guidance in the Act regarding the procedures to be used in lien claim appeals.
[9] S.67 (3) of the Act would therefore apply making the provisions of the Rules of Civil Procedure applicable to any appeals of lien actions. The Rules of Civil Procedure specifically provides that a motion for security may be brought by a respondent.
[10] The only cases I have been referred to relate to motions for security for costs prior to trial. No doubt in those circumstances S. 67(2) of the Act is applicable. However, these cases do not assist this court in determining whether an interlocutory motion on the appeal is subject to S. 67(2) of the Act.
[11] The purpose of the Act is to ensure a summary resolution of disputes. S.67(2) of the Act was intended to ensure that actions do not get delayed through extensive interlocutory motions unless the interlocutory motions meet the threshold test. In other words, get the action to trial as quickly and without the expense of unnecessary interlocutory motions as possible so that the claimants can get paid the monies they are owed, if any, or that owners, who have their lands encumbered or security in court have the defences dealt with quickly.
[12] The same policy considerations do not apply to the appeal. The parties may appeal as of right. There are very few interlocutory motions available to either party pending an appeal. In virtually all cases, appellate interlocutory motions, such as this one, does not actually delay the hearing of the appeal. The appeal date has already been set as it is here. The only negative to permitting such interlocutory appellate motions is that such motions add to the expense of the appeal, but this can be dealt with by a cost award by the motions judge.
[13] I conclude s.67 (2) of the Act does not apply to this motion and no leave is required to bring this motion under Rule 61.06 of the Rules of Civil Procedure.
Should the Monies in court paid to vacate the lien be returned to the Owner?
[14] There are different considerations to this relief sought than the relief regarding the security for costs.
[15] The Owner argues that this would allow a levelling of the playing field. The Owner has been paying interest on the monies borrowed to post this security and having been successful at trial; it is unfair to require the Owner to continue to fund this security.
[16] The Owner also points to a number of very strong findings of fact in the Reasons for Judgment to suggest that the appeal is without merit. I will get into these issues in more detail when dealing with the Security for Costs portion of the motion.
[17] There are several problems I have with the relief sought in connection with the monies in court:
[18] There is no section of the Act or Rule which gives the court jurisdiction to make this award. Rule 63.01(1) specifically stays the Judgment upon the filing of the Notice of Appeal. This is what prevents the Owner from getting back its monies from court until the appeal is disposed of. The effect of the order sought by the Owner would be to lift the stay with respect to this portion of the Judgment. If the Owner had wanted to lift this stay and permit the return of the monies in court pursuant to the Judgment, the Owner would have had to move under Rule 63.01(5) for an order lifting the stay from a judge of the court to which the appeal is taken (i.e. Divisional Court) and not a motions judge.
[19] My function is not to judge the appeal. While the Owner may be right that a successful appeal is the exception rather than the rule, appeals do succeed. If I were to permit the return of the monies in court and the Lien Claimant was successful in this appeal, the Lien Claimant would be deprived of the benefits a lien claimant has under the Act, that is, security on the land or on the monies paid into court.
[20] Accordingly, this part of the Owner’s motion is dismissed.
Security for Costs
[21] The Owner relies on Rule 61.06(1) (a) or (c). This Rule provides that:
61.06 (1) In an appeal where it appears that,
(a) there is good reason to believe that the appeal is frivolous and vexatious and that the appellant has insufficient assets in Ontario to pay the costs of the appeal;
……………………………………..or
(c) for other good reason, security for costs should be ordered, a judge of the appellate court, on motion by the respondent, may make such order for security for costs of the proceeding and of the appeal as is just.
Rule 61.06(1)(a)
[22] The Owner must satisfy the Court of the following:
a) There is good reason to believe the appeal is frivolous and vexatious, and
b) The appellant has insufficient assets in Ontario to pay the costs of the appeal.
[23] It is not my function to determine whether the appeal will be successful.
[24] It is not my function to determine whether the appeal is frivolous and vexatious or devoid of merit. The test to be applied is something less than that. It is only necessary for me to conclude there is good reason to believe the appeal is frivolous and vexatious. This requires a review of the facts, the decision of Justice van Rensburg and the arguments on the appeal.
The Facts
[25] The facts are set out in Justice van Rensburg’s reasons. However, let me set out some of the more significant facts relevant to this motion.
[26] The Owner wanted to convert an area of its property for use as a parking area for trucks.
[27] The Lien Claimant is an excavation/grading company which had performed a previous contract for the Owner and was then hired for a second contract at the same site. The second contract was in writing and provided for payment by the Owner at certain specified times.
[28] Performance by the Lien Claimant under the second contract stalled at the end of September 2004. Thereafter, the Owner was required to complete the work specified under the second contract.
[29] Justice van Rensburg found that the Owner was in breach of the second contract in having failed to pay amounts when due. Justice van Rensburg then proceeded to go on to determine the damages the Lien Claimant was entitled to.
[30] In order to determine the quantum of damages, Justice van Rensburg determined the value of the work done by the Lien Claimant under the second contract and the amount which had been paid to the Lien Claimant under the second contract.
[31] The primary argument relied on by the Owner is that Justice van Rensburg made findings of fact which strongly support the Owner’s position and that an appellate court would not overturn the judgment because it will not revisit the findings of fact. The Owner argues that the appellate court will not find a palpable and overriding error in Justice van Rensburg’s decision.
[32] The Owner also argues that the Lien Claimant’s conduct was improper in the manner in which the lien was registered. For example, the Owner points to the fact that the Lien Claimant registered a lien for the entire amount of the contract less the amount paid (25%) even though the Lien Claimant knew that it had not finished the job. The Lien Claimant argued at trial that it had completed 75% of the work under the second contract.
[33] The Lien Claimant arguments on appeal include:
a) that Justice van Rensburg incorrectly determined the value of the work performed under the second contract by using a third party cost to complete the unfinished work rather than using the Lien Claimant’s proportion of work completed for the second contract. The Lien Claimant argues this would result in a greater value of the work the Lien Claimant performed and therefore greater damages it suffered. For example, Justice van Rensburg deducted from the second contract price a third party’s cost of materials needed to complete the work to arrive at the value of work performed by the Lien Claimant. In fact the Lien Claimant’s cost of the same materials was significantly lower. Using the Lien Claimant’s actual costs to complete would have resulted in a much higher value of work completed by the Lien Claimant for which it should be paid.
b) That Justice van Rensburg in dealing with the issue of extras incorrectly relied on the fact the claim for lien didn’t refer to “extras” and no such amount was included for “extras” in the amount of the claim for lien. The Lien Claimant argues that this was the wrong enquiry by the trail judge. The proper enquiry should have been whether the Lien Claimant was entitled to the extras on the basis of quantum merit /unjust enrichment. The Lien Claimant argues that in a construction lien action, the lien claimant is not restricted to recovery under the claim for lien but all claims by the Lien Claimant at law.
c) That Justice van Rensburg erred in determining the lien had expired 45 days after the September 30 date. The Lien Claimant argues the court should have used the November date when the Lien Claimant removed its equipment from the site. Simply put, the Lien Claimant argues that the date of last work used by Justice van Rensburg is irrelevant because the Lien Claimant is a general contractor and the time for registering a lien under the Act is 45 days from date of substantial completion or abandonment. The date of last work is only relevant to subcontractors. The Lien Claimant argues abandonment occurred in November.
d) That Justice van Rensburg granted the Owner damages for registering the lien out of time and for an excessive amount, being the interest cost of monies on the funds posted in court at the rate of 4%. The Lien Claimant argues that Justice van Rensburg failed to deduct the amount of interest the Owner earns on those same monies from the Accountant of the Superior Court of Justice.
Rule 61.06(1)(a)
[34] I cannot conclude there are good grounds for believing that the appeal is frivolous and vexatious.
[35] The above are legitimate grounds of appeal which may or may not be successful. I cannot conclude that I have good reason to believe all of these grounds of appeal are frivolous and vexatious. These grounds of appeal do not rely entirely on an attempt by the Lien Claimant to set aside findings of fact as the Owner argues but rather legal principles used by the court to determine the Lien Claimant’s damages, claim for extras etc.
[36] To use the example from above, whether the trial judge should have used the third party costs to determine the value of work completed by the Lien Claimant is not a frivolous or vexatious ground of appeal and I do not conclude I have good reason to believe it is a frivolous and vexatious ground of appeal. It may very well be that the trial judge did not have any better evidence before her to determine the value of the work completed by the Lien Claimant and therefore, was entitled to use that evidence. But that is an issue for the appellate court to decide.
[37] Accordingly, the Owner has failed to meet the onus of the first part of Rule 61.06 (1) (a).
[38] The only evidence the Owner relies on to meet the second part of Rule 61.06 (1) (a) is a letter dated February 2, 2009 which defence counsel wrote to Lien Claimant’s counsel asking him to provide a statement of the Lien Claimant’s exigible assets. No response was received from the Owner’s counsel.
[39] In my view, this was an attempt to shift the onus to the Lien Claimant on this motion to require the Lien Claimant to prove it has exigible assets. The onus on this motion is on the Owner to satisfy the court that the Lien Claimant lacks substance to the point where it would be unjust to permit the appeal to continue without protecting the respondent with respect to costs. Horton v. Joyce (1994), 20 O.R. (3d) 59 (C.A.).
[40] The Lien Claimant was under no obligation to respond to this letter. The Owner could have examined the Lien Claimant to get this information and have it before this court but chose not to do so. This evidence is simply insufficient.
[41] Accordingly, the Owner fails to meet the requirements of Rule 61.06 (1) (a).
Rule 61.06 (1) (c)
[42] This rule does not provide the court with a specific basis when the court could order security for costs under this section. It provides the court with an equitable discretion in special circumstances. This does not mean that the court is free to do as it wishes. There must be very good cogent reasons for the court to exercise its discretion. This provision must not be so broadly interpreted so as to render subsections (a) and (b) redundant. Instead, subsections (a) and (b) make it clear that there are serious hurdles for a moving party to overcome before security for costs are awarded pending an appeal being heard and disposed of.
[43] Subsection (c) is a residual power to this court to utilize in special circumstances which make it manifestly unjust for the appeal to proceed without the respondent having the benefit of security for costs. For example, where the court has found that the appellant had committed fraud may be sufficient. Another example is where the appellant’s conduct in the action has been such that (for example deliberate delay and causing excessive and unnecessary costs to be incurred to attempt to make the respondent capitulate) the court would find it unjust that the appeal proceed without some protection for the respondent. No doubt there are many other situations where subsections (a) and (b) cannot be met but where it would simply be inequitable for the respondent not to have security for costs pending the appeal.
[44] In this case, the Owner argues that, in the interest of fairness or to level the playing field, the court should order security for costs. The Owner also relies heavily on the findings of fact that Justice van Rensburg found at trial.
[45] In my view, these arguments could be made in virtually all appeals. In most cases the successful party feels aggrieved that after winning at trial it must now wait until after the appeal is dealt with. As for the findings of fact, I agree with the Owner that the Divisional Court would likely be reluctant to overturn a trial judge’s findings of fact. However, I am satisfied that the grounds of appeal do not entirely depend upon the trial judge’s findings of fact but rather whether she failed to apply the proper law as to the calculation of damages.
[46] There is no finding of fraud, facts in this case or conduct of the appellant throughout which amounts to special circumstances which would justify this court exercising its discretion to order security for costs.
Costs
[47] If the parties are unable to agree on costs of this motion, they may make submissions on entitlement and quantum within 14 days, limited to 3 pages double spaced, with attached outline of costs and any case law attached. These submissions may be in the form of a letter addressed to me, filed with the court office.
Ricchetti, J.
DATE: April 27, 2009
COURT FILE NO.: DC-08-0066-00
DATE: 20090429
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Landmark II Inc.
v.
1535709 Ontario Limited
BEFORE: Ricchetti
COUNSEL: A. Conte, for the Plaintiff/Respondent
R. Belsito, for the Defendant/Applicant
ENDORSEMENT
Ricchetti J.
DATE: April 29, 2009