CITATION: Urbacon Building Groups Corp. v. Guelph (City), 2014 ONSC 3840

COURT FILE NO.: 866/08; DC-14-39

DATE: 20140624

SUPERIOR COURT OF JUSTICE - ONTARIO

DIVISIONAL COURT

IN THE MATTER OF THE CONSTRUCTION LIEN ACT, R.S.O. 1990 c. C30

RE: Urbacon Building Groups Corp., Plaintiff

AND:

The Corporation of the City of Guelph, Defendant

BEFORE: Ricchetti, J.

COUNSEL: D. Schmuck, Counsel for the Defendant, Moving Party

M. Drudi, Counsel for the Plaintiff, Responding Party

M. Ruberto, Counsel for the Lien Claimants

HEARD: June 20, 2014

ENDORSEMENT

Contents

BACKGROUND.. 2

REQUEST FOR AN ADJOURNMENT. 4

THE POSITION OF THE PARTIES. 4

ANALYSIS. 4

i) Rule 63.01 - Automatic Stay?. 4

ii) Jurisdiction. 5

The City's Position. 5

Urbacon and the Lien Claimants/Bond Claimants' Position. 6

Analysis. 6

Conclusion. 8

iii) Exercise of Discretion to Grant a Stay. 8

Serious Issue to be Tried. 8

Irreparable Harm.. 8

Balance of Convenience. 10

Conclusion. 10

CONCLUSION.. 11

COSTS. 11

BACKGROUND

[1] This is a Construction Lien action involving multiple parties and proceedings.

[2] The Corporation of the City of Guelph ("City") is the owner of certain lands in the City of Guelph. The City sought to construct a civic administration complex in the City of Guelph.

[3] In 2006, the City entered into a contract with Urbacon Buildings Groups Corp. ("Urbacon") for the construction of this complex.

[4] During the course of construction, disputes arose between the parties. In September 2008, the construction on the project ceased.

[5] The City took the position that Urbacon had breached its contract.

[6] Urbacon took the position that the City had breached its contract.

[7] Numerous Construction Liens were registered on title. Claims were made against bonds relating to work to be done on the project.

[8] Urbacon commenced a lien action seeking $15,000,000 in damages in October 2008. There are also 17 lien claimants and 5 bonding companies who have claims and issues tied up in this project and the termination of work. There are a number of related proceedings involving lien claimants and bond claimants relating to this construction project and who are parties to the trial through a supervision order of Justice Corbett. As a result, these parties are bound by the court's trial determination in these proceedings. (“Lien Claimants/Bond Claimants”)

[9] The City counterclaimed, seeking $5,000,000 in damages.

[10] Given the extensive evidence and costs associated with proving the claim and the counterclaim, counsel for the parties sought a bifurcation of the liability and damages phases of the trial. The essence of the perceived value in proceeding in this fashion was that, once the court determined liability, only one of the parties would have to prove damages. As Mr. Schmuck put it, bifurcation was necessary to know who would be claiming damages. The court agreed and made the bifurcation order.

[11] Counsel did not expressly consider whether the appeal rights on the liability determination would have to be exhausted before proceeding with the damages phase. As Mr. Schmuck put it, the City thought it would win. No doubt Urbacon felt the same way.

[12] There is nothing in the case management and supervision orders which touches upon the issue of appeal rights prior to proceeding with the damages phase of the trial.

[13] It is significant that the damages phase of the trial was expected to be heard shortly after the court made its determination on liability. At one point, during the liability phase of the trial in early 2013, a date of October 2013 had been scheduled for the damages phase of the trial. No one disagreed with the proposed date even though, clearly, there would not be sufficient time for an appeal to be heard between the two trial phases. However, given the length of the hearing on the liability phase of the trial, this date had to be vacated. This expectation and tentative scheduling to proceed with the damages phase of the trial shortly after the liability phase of the trial had been completed would belie a lengthy period of time between the trial phases to accommodate an appeal being heard.

[14] Justice MacKenzie is the trial judge. There were 40 hearing days between January 22, 2013 and June 10, 2013. Written Closing Submissions were filed in November/December 2013.

[15] On March 19, 2014, Justice MacKenzie held a telephone conference with counsel. Justice MacKenzie dealt with a variety of issues including trial management issues and the scheduling of the damages phase of the trial for October 14, 2014 for three weeks. The first two weeks of the trial are to deal with the damages as between the City and Urbacon and the last week are to deal with claims of the trades (i.e. subcontractor lien claims) and the bond claimants. At that time there was no indication by counsel that the damages phase of the trial would or should be delayed if someone wanted to appeal Justice MacKenzie's liability determination.

[16] On March 31, 2014 Justice Mackenzie advised the parties that he had determined the issue of liability in favour of Urbacon. Justice MacKenzie's endorsement of this date states that his reasons would follow.

[17] On April 10, 2014 and prior to the issuance of Justice MacKenzie's reasons, the City issued a Notice of Appeal. As one would expect, there is no detail in the Notice of Appeal except pro forma allegations Justice MacKenzie committed an error or law or misapprehended the evidence.

[18] On May 15, 2014, the City brought this motion to stay these proceedings pending a determination of its appeal by the Divisional Court.

[19] On June 17, 2014 Justice MacKenzie released his Reasons for Judgment (“Reasons”). The Reasons describe the determination that the City was liable for damages to Urbacon and to the lien claimants. Costs were to “be determined”. The City’s action against Aviva (for payment under the performance bond issued) was dismissed with costs to be determined at a later date.

[20] Urbacon and the Lien Claimants/Bond Claimants wish to proceed to the damages phase of the trial in October 2014.

[21] No transcripts have been ordered of the liability phase of the trial for the appeal. Producing transcripts will take a considerable amount of time given the length of the first phase of the trial.

[22] There was no dispute that, if the proceedings were stayed, the October 2014 trial dates would have to be vacated for a considerable period of time, potentially until after Justice MacKenzie retires in June 2016.

REQUEST FOR AN ADJOURNMENT

[23] Initially, the City sought an adjournment on the basis that Justice MacKenzie's Reasons had just been released and the City wished to file additional materials and a fresh factum on the issue of "serious issue to be tried".

[24] Urbacon and the Lien Claimants/Bond Claimants opposed the adjournment as an adjournment could delay the damages phase of the trial in October 2014.

[25] In order to avoid an adjournment, Urbacon and the Lien Claimants/Bond Claimants conceded, solely for the purpose of this motion, that the City could establish there was a "serious issue to be tried".

[26] On this basis, full argument was heard on the remaining issues.

THE POSITION OF THE PARTIES

[27] The City seeks a stay of the various proceedings to permit it to have the appeal of the decision of Justice MacKenzie in the liability phase finally determined by the courts. The City submits this court has jurisdiction to stay the proceedings pending the final determination on the City's appeal and this court should exercise that discretion in these circumstances.

[28] Urbacon and the Lien Claimants/Bond Claimants submit that this court does not have jurisdiction given the provisions in the Construction Lien Act and the Rules of Civil Procedure. In any event, Urbacon and the Lien Claimants/Bond Claimants submit this court should not exercise its discretion to order a stay.

ANALYSIS

i) Rule 63.01 - Automatic Stay?

[29] The City submits that there is an automatic stay of Justice MacKenzie's Reasons in that Justice MacKenzie's Reasons constitute "an order for the payment of money". The City points to paragraph 162 of Justice MacKenzie's Reasons.

[30] I do not accept this submission.

[31] Justice MacKenzie's Reasons do not order any payment of monies by Guelph at this time. While it is true that damages are to be assessed and costs to be determined, no such amounts have yet been determined. It may be that damages are assessed at $0 or that no costs are ordered. It may be that the parties settle these issues.

[32] The purpose of this Rule is to prevent possible prejudice to an appellant having to pay money to a respondent while the appeal is outstanding and might succeed, leaving the appellant with success but be out of pocket faced with recovering monies paid. See Peel (Regional Municipality) v. Great Atlantic & Pacific Co. of Canada Ltd. (C.A.), 1990 74 OR (2d) 161; 40 OAC 117 (ON CA). That is not the circumstances in this case. The City has to pay nothing at this time. There is no order requiring the City to pay anything.

[33] This situation is more akin to a declaratory judgment, which is not stayed by the filing of an appeal but instead, requires the appellant to seek a stay. In Kiani v. Abdullah (1989), 70 O.R. (2d) 697, 7 R.P.R. (2d) 161 (C.A.), the court dismissed a motion for stay where a trial judgment under appeal had ordered rescission of an Agreement of Purchase and Sale. The court held that this was not an order for the payment of money, but an equitable remedy resulting in an imperative order, similar to an order for specific performance. As a result, there was no automatic stay of the order under appeal.

[34] As a result, I conclude there is no automatic stay of Justice MacKenzie's Reasons - more properly, the order that would arise from the Reasons.

ii) Jurisdiction

The City's Position

[35] The City points to sections 106 and 134 of the Courts of Justice Act as granting this court broad jurisdiction to grant a stay of these proceedings.

[36] The City acknowledges that there is no judicial authority dealing with a stay pending the damages phase in a bifurcated trial. However, the City points to Bourne v. Saunby (1993) 23 C.P.C. (3d) 333 (Ont. Gen. Div.) as followed by Air Canada v. WestJet Airlines Ltd. 2005 20 C.P.C. (6th) 141 (Ont. Sup. Ct.) where the court set out the factors to be considered on a bifurcation motion. One of the factors referred to is:

Will the overall timeframe of the proceeding be unduly lengthened by granting bifurcation? This would include a consideration not only of whether the liability and remedies trials taken separately would be longer in total court time than if done together, but also whether there is likely to be an inordinate delay in having both trials completed recognizing that appeals may be taken in the intervening period once the liability trial has been concluded.

(Air Canada, supra para. 21)

[37] The City submits this paragraph recognizes that appeals may be taken between the liability and the damages phases of the trial.

[38] The City also points to Noon et al v. City of Greater Sudbury et. al, 2010 ONSC 185 where this court discussed the issue of an appeal between the two bifurcated phases of the trial. However, as I pointed out to counsel, the proposed bifurcation order sought would have expressly permitted appeals to be dealt with between the two bifurcated phases of the trial. In the end, the possibility of an appeal was a critical factor in the court’s decision not to grant bifurcation. See para 19. Noon supra, underscores the importance of having the issue of whether the parties are permitted to pursue any appeal rights dealt with at the bifurcation motion. The failure to do so results in the situation now confronted by this court.

Urbacon and the Lien Claimants/Bond Claimants' Position

[39] Urbacon and the Lien Claimants/Bond Claimants submit that this court has no jurisdiction to grant a stay as this is not a "judgment". They point to the provisions of s. 71 of the Construction Lien Act:

71. (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 judgment or order, but the time for filing or serving the notice of appeal may be extended by the written consent of all parties, or by a single judge of the Divisional Court where an appropriate case is made out for doing so.

(3) No appeal lies from,

(a) a judgment or an order on a motion to oppose confirmation of a report under this Act, where the amount claimed is $1,000 or less; or

(b) an interlocutory order made by the court.

(emphasis added)

[40] Urbacon and the Lien Claimants/Bond Claimants submit that any order arising from Justice MacKenzie's Reasons is an interlocutory order which determines liability. They submit that any order arising from the "Reasons" does not constitute a "judgment" until after the court has completed the damages phase of the trial. At this stage, they submit that any order arising from Justice MacKenzie's "Reasons" does not finally dispose of the actions.

[41] Urbacon and the Lien Claimants/Bond Claimants submit that what the City is essentially doing is varying the interlocutory order of Justice MacKenzie fixing the trial date for the damages phase of the trial. As this is an interlocutory order, no such appeal is permitted under the Construction Lien Act.

[42] Urbacon and the Lien Claimants/Bond Claimants submit that to permit this appeal would defeat the purpose of the Construction Lien Act for a determination in a summary character for lien disputes. See s. 67 of the Construction Lien Act.

Analysis

[43] The fact that the Reasons are titled “Reasons for Judgment” does not mean that Justice MacKenzie’s Reasons are a judgment. The Ontario Court of Appeal in Villa Verde L.M. Masonry Ltd. V. Pier One Masonry Inc., 2001 54 OR (3d) 76; 144 OAC 136 (ON CA) dealt with what constitutes a judgment under the Construction Lien Act:

[8] The court went on to hold that the reasons of Arnup J.A. in Durall Construction Ltd. v. W.A. McDougall Ltd. (1979), 25 O.R. (2d) 371 at pp. 373-74 (C.A.), interpreting the word "judgment" in the former Mechanics' Lien Act, R.S.O. 1970, c. 267, s. 43, could apply to the Construction Lien Act. Arnup J.A. held as follows:

In our view the word "judgment" in s. 43(1) of the Mechanics' Lien Act applies to any decision by the appropriate Judge or Master by which the rights of a party to the mechanics' lien proceedings are finally disposed of, and that the matter is not to be tested by the name which is given to that disposition nor by the terminology within it. . . . the substance of the disposition sought to be appealed is what governs.

(Emphasis added)

[44] Similarly, Rule 1.03(1) defines "judgment" as a "decision that finally disposes of an application or action on its merits...."

[45] In 2156384 Ontario Inc. v. C & K Property Management Inc., 2012 ONSC 6759 (Div. Ct.), the Divisional Court determined that an order for the payment of costs and directing a trial on the issue of damages was an interlocutory order. Those facts are similar to the circumstances of this case at the present time.

[46] An interlocutory order may not be appealed under the Construction Lien Act. If the stay is granted, the delay could be several years before the appeal is heard and the matter could return for the damages phase of the trial (if the appeal is dismissed). In a Construction Lien proceeding, the Construction Lien Act is to be interpreted in a manner to promote a speedy and summary disposition of the issues. The Construction Lien Act recognizes the need to deal expeditiously because there are encumbrances on title (or monies posted into court) and to expedite payment to contractors and subcontractors who are found to have added value to a project but not paid or owners who have suffered damages in the construction project. Simply put, it is in everyone’s interest that the issues are resolved or decided expeditiously. To permit an appeal to proceed in these circumstances would cause, in my view, unnecessary expense and excessive delay to the parties involved for the final disposition of the issues in these proceedings

[47] Permitting appeals in between phases of the trial is the antithesis to securing "the just, most expeditious and least expensive determination " of the proceeding (See Rule 1.04(1)). It also is contrary to the avoidance of multiplicity of proceedings (See s. 138 of the Courts of Justice Act). Where there is a stated intention or possibility of an appeal part way through a bifurcated trial, was a sufficient reason not to grant a bifurcation order (See Noon et al v. City of Greater Sudbury et. al, 2010 ONSC 185 at para 19). Also see Donino et al v. Robinson et al, 2006 ONSC 42658 at paras. 27-29. In this case, I suspect there would have been a similar reaction by this court had it been suggested that appeals on liability would have to be determined prior to the damages phase of the trial. Such a potential for an inordinate delay in the final determination of the parties' rights, particularly in a summary proceeding such as a Construction Lien matter, would have likely put an end to bifurcation in this case, regardless of counsel’s agreement.

[48] The City’s right to appeal the liability issues it now seeks to appeal will not be prejudiced. The damages phase of the trial is only four months away. The time to appeal any issue they wish to appeal is after a final judgment has been ordered by Justice MacKenzie upon completion of the damages phase of the trial. All issues for appeal, both on liability and on damages can be dealt with at the same appeal resulting in greater efficiency and reduced expense.

Conclusion

[49] An order arising from Justice MacKenzie's Reasons does not, in my view, constitute a “judgment” as the Reasons do not finally dispose of the actions in this case. The Reasons only make a finding of liability. In my view, until the issue of damages and costs are determined by Justice MacKenzie, the actions are not finally disposed of on their merits.

[50] As a result, an order arising from Justice MacKenzie's Reasons, being his determination on the liability phase of the trial, is an interlocutory order which may not be appealed until after Justice MacKenzie has completed the damages phase of the trial as no appeal lies from such an interlocutory order under the Construction Lien Act.

[51] On this basis alone, I would dismiss the City’s motion.

iii) Exercise of Discretion to Grant a Stay

[52] Even if I am wrong about the City’s jurisdiction to appeal an order arising from Justice MacKenzie’s Reasons, I would not have exercised my discretion to stay the proceedings.

[53] The test for granting a stay pending an appeal was set out in Ogden Entertainment Services v. Retail, Wholesale Canada, Canadian Service Sector, U.S.W.A. Local 440 (1998), 38 O. R. (3d) 448:

In determining whether a stay should be granted pending appeal, the appropriate test to be applied is that set out in RJR-MacDonald Inc. v. Canada, [1994] 1 S.C.R. 311, 111 D.L.R. (4th) 385. This test is the same as the test for an interlocutory injunction. Generally, the court must decide whether the interests of justice call for a stay.

[54] Essentially, the factors to be considered are:

a) Is there a serious issue to be tried;

b) Would the compliance with the order under appeal cause irreparable harm; and

c) What is the balance of convenience?

Serious Issue to be Tried

[55] As stated above, Urbacon and the Lien Claimants/Bond Claimants conceded, solely for the purpose of this motion, that there is a serious issue to be tried.

Irreparable Harm

[56] Let me deal with irreparable harm.

[57] Irreparable harm refers to the nature of the harm suffered rather than its magnitude.

[58] The primary argument by the City is that, if it is successful on its appeal, the costs associated with the damages phase of the trial would be wasted. See paras. 20 and 22 of the City’s factum. This submission has little merit. The “flip” side is that, if the appeal is unsuccessful, the determination of damages (and any payment obligations flowing therefrom) would be delayed for an extended period of time. The City’s response is that Urbacon and the Lien Claimants/ Bond Claimants will receive pre-judgment interest. I am not persuaded by this submission. If there are damages, Urbacon and the Lien Claimants/Bond Claimants have waited for 6 years for payment and should not be forced to wait several additional years if the appeal is not successful and potentially to be delayed again should there be any appeal on the determination in the damages phase of the trial.

[59] The City’s submission, in essence, suggests the “potential” for irreparable harm, but none are specifically identified in the City’s written or oral materials. The City submits it only need show “potential” irreparable harm. The City relies on Ottawa (City) v. Ottawa (City) Chief Building Official, 2003, 67 O.R. (3d) 490 at para. 16. There is no doubt that in some cases, where real potential for irreparable harm (as opposed to mere speculation of irreparable harm) may be sufficient for the court to conclude the applicant has established irreparable harm could or would befall it unless the stay was granted. In Ottawa, supra, the court considered this given the prospective environmental nature of the harm as well as the public safety issues. See paras. 24 and 25. In this case, aside from the potential financial harm, no irreparable harm or even potential irreparable harm is identifiable.

[60] Urbacon and the Lien Claimants/Bond Claimants submit that they cannot and will not enforce any order arising from Justice MacKenzie’s Reasons. In this situation, these parties submit that there cannot possibly be irreparable harm to the City.

[61] This leaves only the question of financial consequences to the City if the stay is not granted. The financial consequences being the anticipated two weeks of the damages portion of the trial that the City is expected to participate in October 2014.

[62] Harm that is financial and is quantifiable is not irreparable harm. See RJR MacDonald Inc. v. Canada, [1994] S.C.R. 311 at para. 64. In this case, the harm is entirely financial and is easily quantifiable. The costs of the damages phase of the trial to the City can easily be determined by the court if the City is successful on its appeal. There is no evidence that Urbacon and the Lien Claimants/Bond Claimants would not be able to pay any costs order, including costs of the liability and damages phases of the trial, should the City be successful in its appeal. Urbacon is a large corporation. Some of the other parties are bonding companies.

[63] As stated by the Supreme Court at para. 88:

The applicants allege that if they are not granted interlocutory relief they will be forced to spend very large sums of money immediately in order to comply with the regulations. In the event that their appeals are allowed by this Court, the applicants contend that they will not be able either to recover their costs from the government or to revert to their current packaging practices without again incurring the same expense.

Monetary loss of this nature will not usually amount to irreparable harm in private law cases…..

(emphasis added)

Balance of Convenience

[64] Let me turn to the balance of convenience.

[65] The City submits it is a municipality and there is little risk that the City cannot pay any judgment, including interest or costs, as may be awarded. The City submits that Urbacon’s claim is secured by a lien and therefore, there is no prejudice to Urbacon.

[66] The suggestion that it is unfair for the City to proceed with the damages phase of the trial before Justice MacKenzie while it is appealing the order arising from his Reasons has no merit. Motion judges are appealed and are not prevented from hearing the trial. Trial judges are appealed and not prevented from hearing another case involving the same party. This does not create a reasonable apprehension of bias and not actual bias is alleged or shown in the material before me.

[67] The current timetable for the damages portion of the trial was agreed to by all counsel. Urbacon and the Lien Claimants/Bond Claimants are ready to proceed to the damages portion of the trial in accordance with the timetable set by Justice MacKenzie. The City’s counsel submits this was agreed to before Justice MacKenzie released his decision. I do not see that Justice MacKenzie’s decision has made any difference to the agreement to proceed to the damages phase of the trial in October 2014.

[68] Urbacon and the Lien Claimants/Bond Claimants submit that they will suffer harm if the stay is granted. These parties point to the fact that Justice MacKenzie is a supernumerary judge who will retire in June 2016 and, in all likelihood, given the delay in preparation of transcripts, scheduling the appeal, the potential for further appeals and rescheduling the continuation of the trial before Justice MacKenzie, there is a real possibility, if not probability, that Justice MacKenzie would not be the trial judge in the damages phase of the trial. These parties suggest that, should this happen, they will be prejudiced since any new judge will have to learn what the project was about and make his or her own findings of credibility leading to a substantially longer damages phase of the trial and the possibility of inconsistent findings. The City responds that it is not necessary for Justice MacKenzie to be the trial judge at the damages phase of the trial. No authority was provided by the City where different judges have heard the liability and damages phase of the trial. It is hard to imagine that such a situation would be judicially efficient or would advance the administration of justice in this matter. It would be fraught with concerns, some of which were described by Urbacon’s counsel.

[69] There is no question that some of the damages portion of the trial will be useful, regardless of whether the City’s appeal is successful. The last week is scheduled to deal with damage claims involving Urbacon and the Lien Claimants/Bond Claimants. There is value to this portion of the damage phase of the trial proceeding as presently scheduled.

Conclusion

[70] Considering the above factors, if necessary, I would not have exercised my discretion to order a stay of the proceedings pending the City’s appeal.

CONCLUSION

[71] The City’s motion is dismissed.

COSTS

[72] Any party seeking costs shall serve and file written submission on entitlement and quantum within three weeks of the release of these reasons. Written submissions shall be limited to 3 pages, with attached Costs Outline and any authorities.

[73] Any responding party shall have two weeks thereafter to serve and file responding submissions. Written submissions shall be limited to 3 pages with any authorities relied on attached.

[74] There shall be no reply submissions without leave.

Ricchetti, J.

Date: June 24, 2014