CITATION: Dircam Electric v. Am-Stat Corp., 2017 ONSC 3421
COURT FILE NO.: 029/17
DATE: 20170602
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
IN THE MATTER OF THE CONSTRUCTION LIEN ACT,
R.S.O. 1990, c. C.30, as amended
D.L. CORBETT, SPIES and REID JJ.
B E T W E E N:
Dircam Electric Ltd. and Procan Inc.
Kevin Sherkin and Jeremy Sacks, for the
Respondent
Lien Claimants/Appellants
Adam V. Grossi for Lien Claimants Imperial
Trim Supply Ltd. and Frendel Kitchens Ltd.
- and -
Am-Stat Corporation
Ronald B. Moldaver, Q.C. for the Respondent
Mortgagee/Respondent
Heard at Toronto: May 29, 2017
DECISION
D.L. Corbett J.:
[1] The lien claimants/appellants appeal the decision of Wilton-Siegel J. declaring that the mortgage of the respondent/mortgagee has priority over their construction liens.
[2] There are two issues on this appeal.
[3] The first issue is whether this court has jurisdiction to hear this appeal. The respondent argues that the decision of Wilton-Siegel J. is not a “judgment” within the meaning of the Construction Lien Act, and that therefore the decision of Wilton-Siegel J. may not be appealed. I would not give effect to this ground of appeal. The decision of Wilton-Siegel J. finally decides the question of priorities and has the effect of deciding that the remaining equity in the property will not be available to satisfy the claims of the lien claimants. This is a final order, not an interlocutory order, and may be appealed to this court under the Construction Lien Act.
[4] The second issue is whether the money advanced by the respondent, Am-Stat, was an “advance made in respect of the mortgage” given by Jade-Kennedy. The appellants say that Am-Stat bears the onus on this issue, failed to discharge it, and that it has not shown on the record before the court that Jade-Kennedy did anything more than provide collateral security for an advance to Milliken.
[5] The respondent argues that the experienced commercial judge considered the evidence and concluded that the loan was joint and was advanced to Jade-Kennedy, and thus that the loan has priority over the lien claims. The respondent argues that the motions judge made no palpable and overriding error in his findings of fact and that this court must defer to his factual findings.
[6] Despite Mr Sherkin’s able arguments, I agree with the respondent on this issue. The motions judge recognized the equities favouring the lien claimants’ position, but was satisfied, on the evidence before him, that the mortgage loan was advanced to Jade-Kennedy, and was not merely collateral security from Jade-Kennedy in support of a loan to Milliken. This is a finding of fact and the motions judge had a basis on which to reach this conclusion.
Discussion
Issue #1: Jurisdiction
[7] The Construction Lien Act provides:
- (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.
(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.
[8] The word “judgment” is used in s.62 of the Act as follows:
- (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.
[9] The respondent argues that unless the order of Wilton-Siegel J. is a “judgment” within the meaning of s.62, it is not a “judgment” within the meaning of s.71, and thus is not subject to appeal. I do not agree. Section 62 does not define “judgment” for all purposes of the Construction Lien Act. General definitions for the Act are set out in s.1 of the Act. “Judgments” described in s.62 are included in, but are not the entirety of, the concept of “judgment” in s.71.
[10] Consistent practice has been to understand “judgment” to include final orders and to exclude interlocutory orders. For example, it is clear that an order terminating lien proceedings on motion under s.47 of the Act is a final order and may be appealed. Such an order is made on motion, not at trial, and thus would not fit within s.62 of the Act.
[11] The order of the motions judge finally determines the relative priority of the lien claims and the Am-Stat mortgage. That determination has the effect of terminating the subsisting lien claims (since there will be no proceeds left to pay lien claims after the Am-Stat mortgage is paid).
[12] The respondent argued that the order would not have been final if the lien claimants had prevailed in the priority dispute. Assuming without deciding that this may be so, it is beside the point. The question on this appeal is: what is the nature of the order that is appealed. It is final, and thus an appeal lies to this court pursuant to s.71 of the Act.
Issue #2: Priority of the Am-Stat Mortgage
[13] The priority of “subsequent mortgages” is governed by s.78(6) of the Construction Lien Act which provides:
(6) Subject to subsections (2) and (5), a conveyance, mortgage or other agreement affecting the owner’s interest in the premises that is registered after the time when the first lien arose in respect to the improvement, has priority over the liens arising from the improvement to the extent of any advance made in respect of that conveyance, mortgage or other agreement, unless,
(a) at the time when the advance was made, there was a preserved or perfected lien against the premises; or
(b) prior to the time when the advance was made, the person making the advance had received written notice of a lien.
[14] The Am-Stat mortgage was registered on September 4, 2013 in the face amount of $10 million. Am-Stat advanced $10 million on September 5, 2013. There were no liens registered on title to the property at the time of the advance, and no written notice of lien had been received by Am-Stat at the time of the advance. The sole issue for the motions judge, thus, was whether the $10 million Am-Stat advance was an “advance made in respect of the mortgage” over which the lien claimants claim priority.
[15] The law is clear that s.78(6) refers to amounts “advanced” not amounts “secured”. Thus a purely collateral mortgage under which no advance has been made will not have priority over construction liens: XDG Ltd. v. 1099606 Ontario Ltd., 2002 CarswellOnt 4535, para. 94.
[16] This distinction – between a collateral charge and some other kind of charge – is conceptually easy to make but can be difficult to apply. The motions judge recognized these difficulties and put his mind to the question of whether the Am-Stat mortgage was “advanced” to Jade-Kennedy. He concluded that, as a matter of fact, the mortgage was advanced to both Jade-Kennedy and its co-borrower, Milliken, jointly, and that this joint loan was supported by parallel mortgages from each borrower, both in the amount of $10 million.
[17] It would be possible to imagine a situation where such an arrangement could be implemented to defeat the scheme of the Construction Lien Act: if the money was borrowed for the benefit of the other borrower, and repayment was made entirely from the security provided by the owner of a liened project, to the detriment of lien claimants. But those are not the facts in this case. Milliken’s mortgage was second in priority to another mortgage, and no proceeds were realized under the Milliken mortgage after the security was sold and the first mortgage paid down.
[18] The motions judge was well-versed in the entire background of the Jade-Kennedy insolvency. While the motions judge’s reasons disclose that the evidence before him on the motion was not overwhelming, it was for the motions judge to weigh the evidence before him to decide whether the evidence was sufficient to establish that the Am-Stat mortgage was advanced to Jade-Kennedy as a joint borrower. I do not agree that the weakness of the evidence leads to a conclusion that the motions judge reversed the onus on the mortgagee “to persuade the court that [its claim] somehow clearly falls within a specified exception to the generalized priority of the liens” (see Boehmers v. 794561 Ontario Inc. (1993), 1993 8486 (ON SC), 14 OR (3d) 781 (Gen. Div.). There was some evidence to support the motions judge’s factual finding. The two mortgages were granted at the same time and in respect to the same loan. The portions of documents produced described Jade-Kennedy and Milliken as co-borrowers. On the evidence before the motions judge, the money flowed through Jade-Kennedy’s and Milliken’s solicitors’ trust account and was disbursed thereafter on the basis of a direction provided jointly by Milliken and Jade-Kennedy. We cannot see any palpable and overriding error in the motions judge’s factual conclusion that the advance was to Jade-Kennedy which would justify intervention by this court.
Disposition
[19] The appeal is dismissed with costs payable by the appellants to the respondent fixed at $7,500 plus HST payable within 30 days. There shall be no costs for or against the lien claimants Imperial Trim and Frendel Kitchens.
D.L. Corbett J.
I agree:
Spies J.
I agree:
Reid J.
COURT FILE NO.: 029/17
DATE: 20170602
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
D.L. CORBETT, SPIES and
REID JJ.
BETWEEN:
DIRCAM ELECTRIC LTD.
Appellant
- and -
AM-STAT CORPORATION
Respondent
DECISION
D.L. Corbett J.
Released: June 2, 2017