CITATION: Pryers Construction Ltd. v. MVMB Holdings Inc. 2019 ONSC 6135
DIVISIONAL COURT FILE NO. 19-2453
DATE: 20191029
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Aston, S.T. Bale and Favreau JJ.
BETWEEN:
Pryers Construction Ltd.
Plaintiff (Respondent)
- and -
MVMB Holdings Inc., Scott Birnie and Riverside Ford Sales Limited
Defendants (Appellants)
Clinton Culic, for the respondent
Brett Hodgins and Alexander Bissonnette, for the appellants
HEARD: September 9, 2019 at Ottawa
On appeal from the judgment of Justice Pedlar of the Superior Court of Justice, dated December 18, 2018, with reasons reported at 2018 ONSC 7605.
S.T. Bale J.
Introduction
[1] Riverside Ford Sales Limited and MVMB Holdings Inc. appeal from a judgment in favour of Pryers Construction Ltd. given in a construction lien action.
[2] Riverside argues that the applicable limitation period or periods had expired prior to it being added as a party defendant. MVMB argues that the trial judge erred in finding it to be an “owner” within the meaning of s. 1 of the Construction Lien Act (“CLA”).
Background facts
[3] The land upon which the dealership operated was owned by the defendant MVMB. The defendant Riverside was a tenant of MVMB. Scott Birnie was the principal of both defendant corporations. Steve Pryer was the principal of Pryers.
[4] Between October 2015 and April 2016, Pryers performed renovation work for Riverside, pursuant to an oral agreement reached between Scott Birnie and Steve Pryer. Invoices for that work were rendered to Riverside, and paid by RBC on Riverside’s behalf. However, a number of invoices eventually went unpaid, and Pryers registered a claim for lien on the title of the property. In the claim for lien, the person to whom the lien claimant supplied services or materials was said to be Scott Birnie, and the “owner” was said to be MVMB Holdings Inc. Pryers had become aware of the existence of MVMB when searching the title of the property, for the purpose of registering the claim for lien. Pryers did not register a claim for lien against the leasehold interest of Riverside.
[5] Pryers subsequently commenced an action for the purpose of perfecting the lien claimed against the interest of MVMB, in accordance with s. 36(3) of the CLA. The named defendants in the action were MVMB and Scott Birnie.
[6] In their statement of defence, MVMB and Birnie pleaded that the construction contract had been with Riverside, and that Riverside, and not MVMB, should have been named as “owner”. However, until the commencement of trial, Pryers chose not to advance a claim against Riverside in contract, or as an “owner” under the CLA.
[7] At the commencement of trial, Pryers moved for an order amending the statement of claim to add Riverside as a party defendant. Riverside opposed the motion on the ground that the two-year limitation period under the Limitations Act, 2002 (“LA2002) for commencing an action against Riverside had expired.
[8] In granting leave for the amendment, the trial judge relied upon Gracey v. Thomson Newspapers Corp. (1991), 4 O.R. (3d) 180 (Gen. Div.), a case in which the court extended the three months’ limitation period under the Libel and Slander Act, based upon the doctrine of “special circumstances”. Following the making of the order adding Riverside, the defendants requested, and were granted, leave to plead the LA2002 as a defence. The trial then proceeded without the amendments being made “on the face of the record”, as contemplated by rule 26.06 of the Rules of Civil Procedure. This would help explain why, on the hearing of the appeal, it was unclear as to whether Riverside was added to enforce a claim in contract, or alternatively, to enforce a lien against the interest of Riverside as an “owner” within the meaning of s. 1 of the CLA.
Result at trial
[9] The trial judge found both Riverside and MVMB to be “owners” within the meaning of s. 1 of the CLA and granted judgment to the plaintiff enforcing its claim for lien against the interest of MVMB in the property. [^1]
[10] In granting judgment against Riverside, the trial judge held that the ninety-day period after which a lien will expire, if not perfected by the commencement of an action to realize on the lien, replaces the two-year limitation period under s. 4 of the LA2002. He held that although Pryers had not commenced an action against Riverside within that ninety-day period, the doctrine of “special circumstances” operated to extend the time, and he rejected Riverside’s limitation defence.
Analysis
Appeal from judgment against Riverside Ford Sales Ltd.
[11] The issue on this part of the appeal is whether the “special circumstances” doctrine applies in actions under the CLA to enforce a lien.
[12] Under s. 31 of the CLA, where, as in this case, there is no certification or declaration of substantial performance, the lien of a contractor expires at the conclusion of the forty-five-day period following the date the contract is completed or abandoned. The lien may be preserved by registering a claim for lien on the title of the premises.
[13] Section 36(1) of the CLA provides that a lien may not be perfected unless it is preserved. Section 36(2) of the Act provides that a lien that has been preserved expires unless it is perfected prior to the end of the forty-five-day period following the last day on which it could have been preserved. A lien is perfected by commencing an action to enforce the lien, and registering a certificate of action on the title of the premises.
[14] In the present case, Riverside was an “owner” within the meaning of s. 1 of the CLA. As a result, Pryers was entitled to a lien on Riverside’s interest in the premises. As that interest was leasehold, Pryers’ ultimate remedy under the Act would have been a sale of the remaining term of the lease, if any. However, Pryers failed to preserve its lien against Riverside’s interest, and as a result, it expired in July 2016.
[15] The trial judge held, and Pryers argues, that the “special circumstances” doctrine was available, that such circumstances existed, and that as a result, Pryers was entitled to enforce its lien against Riverside as an “owner” of the property. This was an error of law.
[16] Where the “special circumstances” doctrine is available, the court has discretion to add new parties or new causes of action, following the expiry of a limitation period. With respect to actions governed by the LA2002, this doctrine was abolished by s. 21 of that statute: Joseph v. Paramount Canada’s Wonderland (2008), 90 O.R. (3d) 301 (C.A.), at paras. 16 and 25. However, with respect to actions where the applicable limitation period is prescribed by a statute other than the LA2002, the “special circumstances” doctrine may remain available: Bikur Cholim Jewish Volunteer Services v. Langston (2009), 2009 ONCA 196, 94 O.R. (3d) 401 (C.A.), at para. 51.
[17] Relying upon Bikur Cholim, Pryers argues that the “special circumstances” doctrine is available to a plaintiff in a construction lien action, and that the trial judge was therefore correct in allowing Riverside to be added as a party defendant, for the purpose of enforcing a lien against it as an “owner”, notwithstanding that the lien was neither preserved nor perfected. I disagree for the following reasons.
[18] It does not follow from the decision in Bikur Cholim that all limitation or other time periods, contained in statutes other than the LA2002, may be extended based upon the “special circumstances” doctrine. In that case, the court referred to its decision in Swain Estate v. Lake of the Woods District Hospital (1992), 9 O.R. (3d) 74 (C.A.) where the doctrine was held to apply to an action governed by s. 38(3) of the Trustee Act, R.S.O. 1990, c. T.23, and went on to say that the doctrine survived in relation to such actions, despite the fact that it had been abolished for cases governed by the LA2002. However, the doctrine has never been held to apply in an action to enforce a construction lien.
[19] In Delview Construction Ltd. v. Meringolo (2004), 71 O.R. (3d) 1 (C.A.), at para. 11, the court said the following:
[T]he courts have noted that unlike limitation periods where there is a discretion to extend under the Basarsky v. Quinlan, [1972] S.C.R. 380 line of cases, the time limits set out in the CLA are prescribed by statute and “[leave] no room for judicial discretion”.
Basarsky is one of the sources of the “special circumstances” doctrine.
[20] In K.H. Custom Homes Ltd. v. Smiley, 2015 ONSC 6037 (Div. Ct.), at paras. 4f, this court said the following about the statutory deadlines in the CLA:
These requirements are statutory. They are mandatory. The court has no discretion to relieve from them. The language of the CLA is clear on this point, as is consistent appellate authority.
This conclusion is consistent with the scheme of the CLA. The first two requirements [time limits for preservation and perfection of liens] are essential to the timely flow of funds on construction sites: persons advancing money to pay for construction may rely upon the state of title before making an advance. This reliance would be compromised if late liens could be placed on title as a result of the court’s exercise of discretion after-the-fact. [Footnotes omitted.]
[21] The CLA does not contain a limitation period applicable to claims for breach of contract joined with actions to enforce claims for lien, and there is no conflict between the provisions of the CLA and the LA2002 in relation to such claims. Accordingly, the two-year limitation period under the LA2002 applies to contractual claims joined with lien claims: see LA2002, s. 19. In the present case, that limitation period had expired in March of 2018, approximately eight months before the motion to add Riverside was made.
Appeal from judgment against MVMB Holdings Inc.
[22] On this part of the appeal, the issue is whether Pryers was entitled to a lien on the interest of MVMB in the land. Under s. 14 of the CLA, Pryers would be entitled to such a lien, if MVMB was an “owner” within the definition of that term in s. 1(1) of the Act:
“owner” means any person, including the Crown, having an interest in a premises at whose request and,
(a) upon whose credit, or
(b) on whose behalf, or
(c) with whose privity or consent, or
(d) for whose direct benefit,
an improvement is made to the premises but does not include a home buyer.
[23] There are therefore three requisites for a person to fit within the definition of “owner”: (i) the person must have an “interest in the premises”; (ii) the person must have requested an improvement to the premises; and (iii) the improvement must have been made upon the credit of, on behalf of, with the privity or consent of, or for the direct benefit of, the person said to be an “owner”.
[24] The trial judge held that MVMB was an owner. He reasoned as follows:
I find that, because of the unique circumstances here that Birnie is the controlling person behind both Riverside and MVMB, that it is only common sense that Birnie, without the knowledge of Pryer, on behalf of Pryers Ltd., created a situation where, unknown to the plaintiff, Birnie acting on behalf of MVMB was both requesting the improvements, and upon whose credit the improvements were on the property. On behalf of MVMB, he also had privity and consented to the improvements made to the property by the plaintiff.
[25] This reasoning involves a finding of fact – that Mr. Birnie was the controlling mind of both corporations – and an inference from that fact – that he was therefore requesting the improvements upon behalf of MVMB, and upon the credit of, or with the privity or consent of, MVMB. Earlier in his reasons, the trial judge had found as a fact that Birnie acted as Riverside’s agent in his dealings with Pryers.
[26] This issue therefore involves a question of mixed fact and law. The finding of fact is not in dispute: Mr. Birnie was the sole officer, director and shareholder of both corporations. The question of law is whether it follows, from the mere fact of common governance and ownership, that in requesting the improvement upon behalf of Riverside, and upon the credit of, or with the privity or consent of, Riverside, Mr. Birnie was also requesting the improvement upon behalf of MVMB, and upon the credit of, or with the privity or consent of, MVMB.
[27] In effect, in coming to the conclusion that he did, the trial judge pierced the corporate veil of MVMB. Despite the fact that the two corporations were distinct legal entities, he held that the acts of Riverside were acts of MVMB, because Birnie was the sole officer, director and shareholder of both. In my view, in doing so, he erred in law.
[28] In Parkland Plumbing and Heating Ltd. v. Minaki Lodge Resort 2002 Inc., 2009 ONCA 256, at para. 49f, the court said the following about the court’s jurisdiction to lift the corporate veil:
While a corporation is a legal entity distinct from its shareholders, this principle may be disregarded by 'lifting the corporate veil' and regarding the company as the agent or vehicle of its controlling shareholder or parent corporation where enforcing the 'separate entities' principle would yield a result "too flagrantly opposed to justice": Kosmopoulos v. Constitution Ins. Co. of Canada, [1987] 1 S.C.R. 2, at para. 12, citing L.C.B. Gower, Modern Company Law 4th ed. (London: Stevens, 1979), at p. 112.
But this does not mean that the courts enjoy 'carte blanche' to lift the corporate veil absent fraudulent or improper conduct whenever it appears 'just and equitable' to do so. In Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 28 O.R. (3d) 423 (Ont. Gen. Div.), aff'd, [1997] O.J. No. 3754 (C.A.), Sharpe J. (as he then was) indicated at pp. 433-34:
[T]he courts will disregard the separate legal personality of a corporate entity where it is completely dominated and controlled and being used as a shield for fraudulent or improper conduct. The first element"complete control", requires more than ownership. It must be shown that there is complete domination and that the subsidiary company does not, in fact, function independently ....
The second element relates to the nature of the conduct: is there "conduct akin to fraud that would otherwise unjustly deprive claimants of their rights"? [Citations omitted.]
[29] In the present case, while Scott Birnie may have dominated and controlled both corporations, the trial judge did not find that there was conduct akin to fraud that unjustly deprived Pryers of its rights. In fact, in coming to the conclusion that Scott Birnie could not be held personally liable for the amount owed, the trial judge said the following (at para. 43):
Under all the circumstances of this case, I find that Scott Birnie should not be held liable for any successful claims by the plaintiff for the improvements done and unpaid for. I do not find that there has been significant evidence of bad faith and certainly no evidence of fraudulent activity on his part or with respect to either corporation that he controls. There are a number of legitimate reasons to incorporate businesses, including a legitimate concern to protect personal liabilities, but also tax considerations, ability to retain earnings, etc. The equitable grounds for piercing a corporate veil have been rejected by Canadian courts and the principles referred to above are the governing principles. It is established law that supports the incorporation of businesses in the manner done so by the defendant, Birnie. There is no evidence being provided at this trial to justify establishing his personal liability. The plaintiff sent their invoices to Riverside quite properly. They were not aware of the existence of MVMB Holdings and I dealt with that in my ruling, as set out above.
[30] In the result, the fact that Pryers may end up without a remedy has nothing to do with any improper conduct on the part of Mr. Birnie or the two corporations. Rather, it will be because Pryers allowed its lien against Riverside’s interest in the property to expire, and because it missed the limitation period for commencing an action to enforce its claim against Riverside for breach of contract.
Disposition
[31] For the reasons given, I would allow the appeal. As agreed by the parties, the appellants will have their costs of the appeal fixed in the sum of $13,000, and their costs of the action fixed in the sum of $35,000.
Bale J.
I agree
Aston J.
I agree
Favreau J.
Date of Reasons for Decision: October 22, 2019
Date of Release: October 29, 2019
CITATION: Pryers Construction Ltd. v. MVMB Holdings Inc. 2019 ONSC 6135
DIVISIONAL COURT FILE NO. 19-2453
DATE: 20191029
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Aston, S.T. Bale and Favreau JJ.
BETWEEN:
Pryers Construction Ltd.
Plaintiff (Respondent)
-and-
MVMB Holdings Inc., Scott Birnie and Riverside Ford Sales Limited
Defendants (Appellants)
REASONS FOR JUDGMENT
Date of Reasons for Decision: October 22, 2019
Date of Release: October 29, 2019
[^1]: In the formal judgment, the trial judge failed to distinguish between Riverside’s leasehold interest in the property, and MVMB’s freehold interest.