Court File No.: 632/08 and 29/09

Released: 20090624

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Re: Gryphon Building Solutions Inc. v. Danforth Estates Management Inc.

Before: Karakatsanis J.

Counsel: Michael Tamblyn, Richard Oliver for the Defendant/Appellant Lawrence Goldapple for the Respondent Gryphon Building Solutions Inc. John M. Clarke for Ontario Roofing & General Contracting Services Ltd.

Heard at Toronto: June 3, 2009

ENDORSEMENT

[1] The Defendant/Appellant, Danforth Estates Management Inc. (Danforth), appeals the decisions of Master Polika, dated December 12, 2008 (the First Decision) and January 15, 2009 (the Second Decision).

[2] Danforth submits that the Master erred in his interpretation of the rights and obligations flowing between the parties as a result of Minutes of Settlement in the First Decision, and as a result erred in adjusting the performance date and awarding costs to Gryphon and Ontario Roofing in the Second Decision.

[3] The Minutes of Settlement relate to a lien action brought by Gryphon Building Solutions Inc. (Gryphon), and its subcontractor Ontario Roofing & General Contracting Services Ltd. (Ontario Roofing) with respect to work done pursuant to an agreement to remove and replace the roofs, including at 1340 and 1350 Danforth Road, Toronto. Gryphon and Ontario Roofing partly performed the work on 1340 and 1350 under the contract before the work was halted.

[4] The parties, with the assistance of counsel, agreed upon Minutes of Settlement. A dispute later arose about whether Gryphon and the subcontractor Ontario Roofing were required under the Minutes of Settlement to perform work in relation to areas of the roof with entrapped moisture that were discovered subsequent to the agreement.

[5] The issue before Master Polika was the extent of the ‘Work’ to be conducted by the plaintiff and subcontractor pursuant to the Minutes of Settlement. Master Polika interpreted the terms of the settlement agreement and ordered specific performance of the ‘Work’ as found by him, subject to determination of a new performance date. He fixed a date to determine the date and costs, if necessary, and to settle his report. He concluded that confirmation of the report is governed by Rule 54.09 of the Rules of Civil Procedure.

[6] As a result of this pending appeal, the report has not been confirmed. The plaintiffs disputed the jurisdiction of the Divisional Court to hear this appeal and, as a result, the defendants have also brought a motion to oppose confirmation of the report scheduled for June 25, 2009.

The Jurisdiction of the Divisional Court

[7] The defendants submit that the decisions of Master Polika finally dispose of the rights of a party and constitute a judgement within the meaning of s. 71(1) of the Construction Lien Act, R.S.O. c. C.30. 27 (Act). The term “judgment” applies to any decision by a Master by which the rights of a party to a proceeding under the Act are finally disposed of. Whether a decision is final or not is governed by the substance of the decision, not by its terminology or name: Villa Verde L.M. Masonry Ltd. v. Pier One Masonry Inc., 54 O.R. (3d) 76 at para. 8 (Ont. C.A.).

[8] Danforth submits that because the First and Second Decision interpreted and specifically enforced the Minutes of Settlement, which fully and finally dealt with the parties’ dispute in this litigation, it is a final decision and is therefore the proper subject matter of an appeal to the Divisional Court pursuant to section 71(1) of the Construction Lien Act.

[9] Section 71 reads in part:

(1) Subject to subsection (3) an appeal lies to the Divisional Court from a judgment or an order on a motion to oppose confirmation of a report under this Act.

(2) A party wishing to appeal shall file and serve a notice of appeal within fifteen days of the date of the judgement or order….

(3) No appeal lies from,

(a) a judgment or an order on a motion to oppose confirmation of a report under the Act, where the amount claimed is $1.000 or less; or

(b) an interlocutory order made by the court.

[10] The plaintiff submits that an appeal to the Divisional Court lies only after the decisions are confirmed in a report or there is an order on a motion to oppose confirmation of a report.

[11] I conclude that the Divisional Court is without jurisdiction to hear this appeal from the First and Second Decisions at this stage in the proceedings.

[12] This was a reference to the Master without a required report back. The Construction Lien Act is silent with respect to the process relating to reports, or to a motion to oppose confirmation of a report, except as set out in s. 62(1) and (4):

Judgment or report

62. (1) The results of the trial shall be embodied,

(a) in a judgment in the prescribed form, where the trial is conducted by a judge of the court; or

(b) in a report in the prescribed form, where the trial is conducted on a reference by a master, by a case management master, or by a person agreed on by the parties.

Issue of execution

(4) The judgment or report may direct any party found liable to make a payment, to make such payment forthwith, and execution may be issued,

(a) immediately, in the case of a judgment; or

(b) after confirmation, in the case of a report.

[13] Section 67(1) of the Construction Lien Act provides that the procedure in an action shall be as far as possible of a summary nature having regard to the amount and nature of the liens in question. Section 67(2) provides that interlocutory steps not provided for in the Act require the consent of the court. Section 67(3) provides that “except where inconsistent with this Act and subject to subsection (2) the Courts of Justice Act and the rules of court apply to pleading and proceedings under this Act.”

[14] Rule 54.06 provides that a referee shall make a report that contains his or her findings and conclusions. Rule 54.07(1) provides that “a report has no effect until it has been confirmed.” Rule 54.09 sets out the process for confirmation of a report, or to oppose confirmation of a report, where the referee is not required to report back:

(1) Where the order directing a reference does not require the referee to report back, the report or an interim report on the reference is confirmed,

(a) immediately on the filing of the consent of every party who appeared on the reference; or

(b) on the expiration of fifteen days after a copy, with proof of service on every party who appeared on the reference, has been filed in the office in which the proceeding was commenced, unless a notice of motion to oppose confirmation of a report is served with that time.

(2) A motion to oppose confirmation of a report shall be made to a judge other than the one who conducted the reference.

(4) A party who seeks confirmation before the expiration of the fifteen day period prescribed in subrule (1) may make a motion to a judge for confirmation.

(5) A judge hearing a motion under subrule (2) or (4) may require the referee to give reason for his or her findings and conclusions and may confirm the reporting whole or in part or make such other order as is just.

[15] There is nothing in the Construction Lien Act, including the s. 71 right of appeal to the Divisional Court, inconsistent with these Rules and the process relating to confirmation of a report of the master. Indeed a process to confirm a report is contemplated in s. 62(4) (b) and an order following a motion to oppose confirmation of the report is specifically referred to in s.71 (1) of the Act.

[16] Master Polika’s decision on the reference has not yet been confirmed. A motion to oppose confirmation has been brought but not yet heard. The report cannot finally determine the rights of the parties if it has no effect until it has been confirmed. Thus the unconfirmed report of master is not a “judgment” within the meaning of s.71 (1) of the Act and an appeal does not lie to the Divisional Court.

The Merits

[17] I reserved my decision on the jurisdictional issue and heard the parties on the merits. I will deal with the merits, in the event I am wrong on the jurisdictional issue. (As well, counsel for Danforth agreed that if I found there was no jurisdiction to hear the appeal, I should determine the matter on the merits - in effect, sitting as a judge of the Superior Court of Justice. They advised that the issues and arguments were the same in a motion to oppose confirmation of the report. Counsel for Gryphon and Ontario Roofing did not indicate their consent.).

[18] An appeal may be granted where it is shown that the Master “erred in law, or exercised discretion based on wrong principles, or misapprehended the evidence such that there is a palpable and overriding error”: Zeitoun v. Economical Insurance Group, (2008), 91 O.R. (3d) 131 at para. 40 (Div. Ct.).

[19] The general principles of standard of review of trial and motion court judges decisions is outlined in the Supreme Court of Canada decision in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. On a pure question of law, the appellate court is free to replace the opinion of the trial judge with its own; the standard of review is correctness. Factual findings should not be reversed unless it can be established that the trial judge made a palpable and overriding error. Questions of mixed fact and law are reviewed on a standard of correctness when the error of law is extricable from the facts; otherwise, a palpable and overriding error is required to interfere (paras. 36-37).

[20] Master Polika found that the required ‘Work’ to be performed by Gryphon and Ontario Roofing, as defined in paragraph 3 of the Minutes of Settlement did not include additional areas of roof with entrapped moisture as determined by the defendant’s consultant Halsall after the Minutes of Settlement.

[21] Danforth submits that the Master erred in his interpretation of the terms of the Minutes of Settlement and made palpable and overriding errors of fact.

The Minutes of Settlement

[22] “Work” was a defined term in paragraph 3(a) of the Minutes of Settlement in reference to the expert reports attached as schedules to the Minutes of Settlement. Those reports identified the area with entrapped moisture as 1200 square feet of the roof at one address and 100 square metres at the other.

[23] Paragraph 3(a) provides that “Gryphon and Ontario Roofing return to repair and complete the work required on the roof of 1340 and 1350 Danforth, Toronto on or before June 30, 2008 as reflected in the ...[reports] (as amended and attached hereto as Schedules A”…,[ B, and C] with reference to:… [the reports attached as Schedules D through G] (the “Work”)”. The schedules included three reports of Danforth’s expert Halsall dated August 2005, May 2006 and June 2007.

[24] Paragraph 3 (b) defined “Additional Work” to be performed by Gryphon and Ontario Roofing.

[25] Paragraph 5 provides the anticipated timing and provision for the release of the funds as the Work was completed:

5. The parties anticipate that the Work will commence on or about April 15, 2008, upon one week’s prior notice from Gryphon or Ontario Roofing, and will take approximately three or four weeks to complete, with funds anticipated to be drawn down as follows:

(a) within one week of commencement of the Work, all areas on the roof of 1350 Danforth Rd., Toronto, with entrapped moisture, will be removed and replaced, as determined by Halsall, whereupon the sum of $25,000 will be released from escrow by Clark/Freeman/Miller & Ryan to Ontario Roofing; and

(b) within approximately four weeks of commencement, the Work will be completed as determined by Halsall, whereupon the balance of the Settlement Amount will be released from escrow by Schwartz & Schwartz to Gryphon and Ontario Roofing, as they may direct in writing;

6. In the event that the Work is not completed by June 30, 2008, as determined by Halsall, acting reasonably, the balance of the Settlement Amount shall be returned to Macleod Dixon LLP, forthwith;

[26] Master Polika found that the required “Work” as defined in paragraph 3(a) did not include additional areas of roof with entrapped moisture as subsequently determined by the defendant’s consultant Halsall on June 23, 2008. He found that the references in paragraph 5(a) and (b) regarding the release of funds on completion of the repair and replacement of “all areas on the roof with entrapped moisture,” “as determined by Halsall,” was in relation to the “Work” as specifically defined in paragraph 3(a).

[27] In considering what the parties contemplated when drafting the above provisions in the Minutes of Settlement, Master Polika found at paragraph 40 “that the parties were also aware that no work had been done since 2005. It was with that knowledge in hand that the parties on April 10, 2008 entered into the Minutes of Settlement.” He found that if Danforth wanted to include subsequent water encapsulation within the definition of the remedial work, then it ought to have expressly done so.

[28] Danforth submits that Master Polika erred in law in his interpretation of the Minutes of Settlement given the clear language in paragraphs 5(a) and (b). The appellant submits that paragraphs 5 (a) and (b) clearly required that the respondents would “remove all areas of the roof with entrapped moisture,” that the scope of the work would be “as determined by Halsall,” and that as a result paragraph 3 must be read together with paragraph 5.

[29] Danforth also submits that the Master made over-riding and palpable errors of fact in:

(a) finding that Halsall instructed Ontario Roofing to cease the Remedial Work;

(b) finding that Gryphon and Ontario Roofing were not permitted to inspect and conduct the Remedial Work until the Settlement Funds were provided to the solicitors for Gryphon and Ontario Roofing to be held in trust;

(c) failing to find Gryphon and Ontario Roofing in breach of the Minutes of Settlement, despite the fact that they failed to complete the Remedial Work by the agreed upon deadline of June 30, 2008.

(d) determining that the Remedial Work to be completed by the Gryphon and Ontario Roofing did not include remediation of all areas of entrapped moisture, as determined by Halsall; and

(e) determining that the definition of "Work" in the Minutes of Settlement did not include all areas of entrapped moisture as determined by Halsall.

[30] I conclude that Master Polika was correct in his interpretation of the Minutes of Settlement for the reasons he gave in paragraphs 37-42. The “Work” to be done in relation to the roof, including the areas with entrapped moisture, was specifically defined in paragraph 3 and incorporated the references to the reports attached as schedules. Those reports, including the Halsall reports (pp. 133, 175 and 183 of the Appeal Record), specifically identified the areas on the two roofs with entrapped moisture as 1200 square feet and 100 square metres. I agree with the Master that there is no ambiguity about the definition of the “Work” in the Minutes of Settlement. The wording relied upon by the defendants in paragraphs 5 (a) and (b) of the Minutes of Settlement clearly permits Halsall to determine when “all areas on the roof with entrapped moisture” within the defined “Work” has been completed in order to release funds. The release of funds in paragraph 5 relates to the “Work” as specifically defined in paragraph 3. Although Master Polika referred to the area of entrapped moisture as 100 square feet, it is clear from the reports that the area was 100 square meters and the reference to square feet does not affect the reasoning or the decision.

[31] Nor did the Master err in his interpretation of the Minutes of Settlement in light of Ms. Galati’s acknowledgement on cross-examination that it was Halsall who would determine if the remedial Work was performed and completed properly pursuant to the Minutes of Settlement. This is consistent with the Master’s interpretation that paragraph 5 permitted Halsall to determine whether “Work” as defined in paragraph 3, was completed for the purpose of releasing funds. In any event, he found that the terms were not ambiguous. The language of the agreement in context, and the references to the reports that were amended and attached, are clear.

[32] Furthermore, I am not persuaded that the Master erred in failing to find that Gryphon and Ontario Roofing had breached their obligation to complete the Work by June 30th. Given his findings on the meaning of “Work”, Gryphon and Ontario Roofing were not obliged to complete the repairs to the additional area found on June 23, 2008. The Master found that the commencement of work had been delayed as a result of Danforth’s delay in delivering the settlement funds in trust after they had been ordered paid out on May 8, 2008. The fact that the settlement money was delivered (on June 4, 2008) before an extended timeframe and the fact that Ontario Roofing may have attended on the roofs to view the remedial Work, prior to delivery of the Settlement Funds, are not determinative of the issue before him. The Master also found that Halsall had effectively instructed that work stop pending reporting further instructions from Danforth relating to the additional area of moisture entrapped area found on the roof on June 23rd. There was evidence, including the correspondence, the terms of the Minutes of Settlement and the affidavits and transcripts, upon which he could make such findings of fact. These findings were consistent with the conclusion drawn by Ms. Galati that she had drawn the inference that Halsall had halted the work. The transcript of her cross-examination does not preclude such a finding. In any event, Danforth was not entitled to insist that Gryphon and Ontario Roofing had to complete the work relating to the additional areas of the roof.

[33] As a result, I do not conclude that the Master made palpable and overriding errors of fact material to his determination. In my view his interpretation of the Minutes of Settlement was correct in these circumstances. He made no errors in principle.

[34] I conclude that the Divisional Court has no jurisdiction to hear an appeal under s.71(1) of the Construction Lien Act from the decisions of the Master as his report has not been confirmed. If the Divisional Court has jurisdiction to hear this as an appeal under s.71, I would dismiss the appeal for the above reasons.

[35] If the parties cannot agree on costs, they may submit brief written submissions. Gryphon and Ontario Roofing must serve any such submissions within two weeks; reply from Danforth within a week following.

Karakatsanis J.

Released: June , 2009