Court File and Parties

CITATION: H.I.R.A Limited v. Middlesex Standard Condominium Corporation No. 823, 2018 ONSC 3661

DIVISIONAL COURT FILE NO.: 256/18

DATE: 2018-06-15

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: h.i.r.a. lIMITED, Appellant

AND:

MIDDLESEX STANDARD CONDOMINIUM CORPORATION NO. 823 also known as MIDDLESEX CONDOMINIUM CORPORATION NO. 823, Respondent

BEFORE: JUSTICE G.B. MORAWETZ, RSJ.

COUNSEL: Denise Bambrough, for H.I.R.A. Limited

Jeremy Sacks, for MIDDLESEX STANDARD CONDOMINIUM CORPORATION NO. 823

HEARD at Toronto: June 1, 2018

ENDORSEMENT

[1] This is a motion brought by the Appellant, H.I.R.A. Limited (H.I.R.A.), for an order pursuant to Rule 63.02(b) of the Rules of Civil Procedure, staying the order of Grace J. (the “Motion Judge”) dated March 6, 2018 (the “Order”) pending the final determination of H.I.R.A’s appeal of the Order (the “Appeal”).

[2] The Order permits the Respondent to vacate from title to the subject project lands the claim for lien in the amount of $2,744,377.35, which H.I.R.A. registered in respect of the services, materials, and equipment which it supplied to the project lands, by posting security of $1,458,905.59, slightly more than half of the amount claimed.

[3] The hearing before the Motion Judge was in respect of a motion brought by the Respondent, Middlesex Standard Condominium Corporation No. 823 (“MSCC”), pursuant to section 44(2) of the Construction Lien Act (the “Act”), whereby MSCC sought an order that the claim for lien be vacated from title upon posting an amount of security into court that is “reasonable”.

[4] The Appeal of the Order has been scheduled before a full panel of the Divisional Court on October 3, 2018.

[5] A preliminary issue to be determined is whether the appeal can be brought, and/or whether leave should be granted to bring this motion.

[6] MSCC takes the position that section 67 of the Act requires that, prior to bringing this motion, leave of the court must be granted, as construction lien proceedings are intended to be summary in character, and this motion is an interlocutory step that is not specifically provided for in the Act.

[7] MSCC also references section 71(3) of the Act that provides that an interlocutory order under the Act cannot be appealed.

[8] H.I.R.A. takes the position that the decision of the Motion Judge only affects the quantum of security to be posted into court by MSCC to vacate the lien. MSCC submits that the order of the Motion Judge has a larger implication in that it dismisses a portion of H.I.R.A.’s claim, and in particular, dismisses a large majority of H.I.R.A.’s contract extension claim.

[9] MSCC submits that if H.I.R.A’s position were to be accepted, then the Order would be an interlocutory order, given it does not finally determine any issue in this proceeding.

[10] MSCC relies on Sprenger v. Paul Sadlon Motors Inc., 2006 CarswellOnt 6004 (C.A.) for the proposition that an order for the posting of security is an interlocutory order that does not finally determine any issue in the proceeding.

[11] In response, H.I.R.A. relies on HMI Construction Inc. v. Index Energy Mill Road Corp., 2017 ONSC 4075 a decision of a full panel of the Divisional Court.

[12] In HMI, there were two issues before the Divisional Court in a construction lien appeal. First, did the court have jurisdiction to hear the appeal, a question that turned on whether the underlying order was final or interlocutory? Second, did the motion judge err by reducing the security required to bond liens off title from the amount of the appellant’s claim for lien.

[13] Index had brought a motion for an order discharging HMI’s liens pursuant to s.47 of the Act, or alternatively, for an order reducing security pursuant to s.44(2), of the Act. Index argued that the order that was made did no more than reduce the security available for HMI’s claim, thus the order was interlocutory. Corbett J. agreed with the appellant (HMI) that the impugned order was final and subject to appeal to this court. However, he agreed with the respondent (Index) that the motion’s judge correctly stated and applied the law and made no palpable and overriding error of fact and therefore the appeal was dismissed.

[14] Justice Corbett stated as follows:

[6] Despite the fact that the CLA was enacted in 1983, and despite the fact that motions under s. 44 and appeals from decisions on those motions have been common for 35 years, there does not seem to be binding authority directly on point. Glaholt and Keeshan, in the 2017 Annotated CLA state as follows (but cite no authority):

If the full amount of the lien is posted [under s. 44], the result on a motion to vacate is interlocutory and unappealable. If the lien is vacated for less than its face value plus costs, the order is final and appealable (s. 71(2)).

[7] In the commercial law context, fixing or varying security is generally an interlocutory order, whether the amount in issue is counted in the thousands or the tens of millions of dollars.

[8] It is different under the CLA, not because the word “final” and “interlocutory” have a different meaning under the Act than in other commercial contexts, but because the lien is not just security.

[12] Motions under s.44(2) apply equally to lien claims of contractors and those of subcontractors. The meaning of the Act does not shift, depending on whether the claim is that of contractor or subcontractor. The construction lien is, itself, a substantive claim and not just security for a claim. An order under s.44(2) reducing the amount of the security to be posted for a lien is a final order in that it determines, on a final basis, the maximum amount of the lien claim.

[13] I conclude that an order reducing the security required to discharge a lien from title pursuant to s.44(2) of the Act is final and may be appealable to this court.

[15] I agree with the analysis of Corbett J. In my view, any reduction in the quantum of security required to bond liens off title has the effect of altering the legal rights and remedies of a lien claimant, as the lien claimant loses a certain amount of security for its claim. As noted by Corbett J., such an order is a final order in that it determines, on a final basis, the maximum amount of the lien claim. The reduction in the security, which in effect converts a portion of the claim from being secured to unsecured, is sufficient to distinguish this case from Sprenger. In addition, Sprenger was not a construction lien case.

[16] I have also taken into account the decision of Turnbull J. in Stubbes Precast Commercial Ltd. v. King & Columbia Inc., 2018 ONSC 3062 (Div. Ct.).

[17] Stubbes concerned a motion brought by the Plaintiff/Respondent (Stubbes) for an order quashing the appeal to the Divisional Court brought by the Defendant/Appellant (King & Columbia).

[18] Stubbes brought a motion to quash the appeal on the basis that s.71(3) of the CLA prohibits any appeal from an interlocutory order. Turnbull J. referenced Houle v. St. Jude Medical Inc., 2018 ONCA 88, where Nordheimer J.A., writing for the court, noted that the motion in that case “represents yet another salvo in the seemingly never ending battle over what orders are final and what orders are interlocutory”.

[19] Justice Turnbull noted that, in trying to reconcile the various cases, Nordheimer J.A. in Houle, wrote at para. 18:

… in order to be a final order, the order “must deal with the substantive merits as opposed to mere procedural rights, no matter how important the procedural rights may be”.

[20] Justice Turnbull stated: “A final order must be characterized by its substance; i.e., what is its legal effect? Where a defendant is precluded from relying on a defence, that defendant is deprived, in my view, of a substantive right.

[21] Reference was also made to Stolantsis v. Spirou, 2008 ONCA 553, where Epstein J.A. wrote at para. 21:

Ball extends the reasoning in Hendrickson and establishes that even where an order does not finally dispose of the rights of the parties to the litigation, it will be final for the purposes of appeal if it disposes of an issue raised by way of defence and “thereby deprives the defendant of a substantive right which could be determinative of the entire action”.

(See: Ball v. Donais, (1993) O.R. (3d) 322 (C.A.) and Hendrickson v. Kallio, [1932] O.R. 675 (Ont. C.A.)).

[22] In my view, an order which reduces a portion of the claim from being secured to unsecured determines a substantive issue and deprives the lien claimant of certain legal rights. Such an order is a final order and can be appealed.

[23] I am also of the view that the motion is clearly necessary and, to the extent required, consent of the court to bring this appeal is granted pursuant to s.67(2) of the Act.

[24] Having addressed the preliminary issue, it remains to be determined as to whether H.I.R.A. has satisfied the test on a motion for a stay.

[25] There is agreement that the test for staying an order pending an appeal is the same as the test for an interlocutory injunction. For a stay to be ordered, the moving party must show, on a balance of probabilities that:

(a) There is a serious question to be determined on the appeal;

(b) The moving party will suffer irreparable harm if the stay is not granted; and

(c) The balance of convenience favours the granting of a stay

(RJR-MacDonald Inc. v. Canada (Attorney-General), 1 S.C.R. 311).

Serious Question to be Determined

[26] H.I.R.A. takes the position that there are serious reasons to doubt the correctness of the order and that several palpable and overriding errors were made by the Motion Judge, all of which they contend give rise to a serious question to be determined.

[27] H.I.R.A. sets out what it considers to be a number of palpable and overriding errors of the Motion Judge (see Notice of Appeal). Importantly, H.I.R.A. submits that if there is an error on the face of the Order, the serious issue part of the RJR test is met. H.I.R.A. contends that the Motion Judge erroneously found that H.I.R.A. did not take into account the payment of the sum of $301,559.15 which was made by MSCC on April 7, 2017. As a result, H.I.R.A. contends that the Motion Judge deducted in excess of $100,000 from the Claim for Lien; however, the evidence in the record clearly establishes that H.I.R.A. had accounted for this payment.

[28] In my view, it appears that there has been an error made on the face of the Order, which resulted in a reduction in the Claim for Lien and a consequent alteration of the status of the secured claim of H.I.R.A. Thus, it cannot be said that the appeal has no merit and that it is neither frivolous nor vexatious.

[29] There is a low threshold for the first part of the test and I am satisfied that it has been met.

The Appellant will Suffer Irreparable Harm if the Stay is not Granted

[30] MSCC submits H.I.R.A. will not suffer any financial harm if the stay is not granted and, in any event, submits that speculation of “potential” financial harm is not considered “irreparable harm”.

[31] MSCC contends that, in the event that H.I.RA.’s appeal is successful and H.I.R.A. is also successful at trial in proving its claim in the sum of $2,744,377.35, the potential judgment could be partially paid from security already posted and the remainder of the judgment will be unsecured.

[32] MSCC submits that a condominium corporation is a unique type of judgment debtor and that a judgment creditor of a condominium corporation does not require a lien (or other security) to ensure that the unsecured judgment is collectable. An unsecured judgment against the condominium corporation is generally collectable because the Condominium Act provides that a judgment against a condominium corporation is enforced proportionately against unit owners. In this case, there are 332 units that encompass the condominium corporation. MSCC submits that H.I.R.A.’s submissions about its potential ability to collect an unsecured judgment are only speculative, and fail to satisfy its onus on this motion.

[33] H.I.R.A’s position is that it would potentially cause irreparable harm if it was unable to collect the remaining unsecured portion of its potential judgment.

[34] I do not find the argument of MSCC to be persuasive. The Act provides a full and comprehensive code for lien claimants to obtain security for improvements that they have made to the land. The effect of the decision of the Motion Judge is to reduce the amount of security and altering the legal rights and remedies afforded to H.I.R.A.

[35] In my view, at issue is a loss of security. In these circumstances, this amounts to a harm which the appellant will suffer and which can be considered to be irreparable. The second part of the test has been met.

The Balance of Convenience Favours a Stay

[36] As noted, the appeal has been scheduled before a full panel in Divisional Court on October 3, 2018. Accordingly, any inconvenience or delay to MSCC in refinancing, as referenced in the MSCC factum, will be relatively short-lived.

[37] H.I.R.A. points out any individual owners who may require the Claim for Lien to be vacated from their units in order to permit their units to be sold or refinanced, can post their proportionate shares of the amount of the Claim for Lien, plus security for costs, while the appeal is pending. H.I.R.A. points out that it has consented to each of the six vacating Orders, which MSCC has requested to date and there is no reason to believe that the individual unit owners have been or will be significantly inconvenienced by the Claim for Lien remaining on title pending the full and final determination of the appeal. I agree. In my view, the potential hardship to H.I.R.A. outweighs any hardship to MSCC resulting from delay. The balance of convenience favours H.I.R.A.

Disposition

[38] In the result, I have determined that the test for staying the Order pending appeal has been met. An order shall issue staying the Order of the Motion Judge pending the final determination of the appeal.

[39] With respect to the issue of costs, Costs Outlines have been provided. On a partial indemnity basis, counsel for H.I.R.A. submitted a Costs Outline requesting $19,690.95. By contrast, MSCC’s Costs Outline referenced a partial indemnity amount of $8,241.43.

[40] In view of the fact that much of the work that has gone into the motion for stay will be referenced on the appeal before the full panel, it is appropriate to reserve the issue of costs of this motion to the panel hearing the full appeal.

G. B. Morawetz RSJ.

Date: June 15, 2018