Superior Court of Justice – Ontario Divisional Court

Citation: Sayers Foods Ltd. v. Gay Company Limited, 2024 ONSC 4832 Divisional Court File No.: 238/24 Date: 2024-09-03

Re: Sayers Foods Ltd., Applicant / Moving Party And: Gay Company Limited, Respondent / Responding Party

Before: D.L. Corbett J.

Counsel: Kevin Sherkin and Richard MacGregor, for the Applicant / Moving Party F. Bogach and Je DeMelo, for the Respondent / Responding Party

Heard: at Toronto by ZOOM, August 26, 2024

Endorsement

D.L. Corbett J.

[1] The Applicant moves for a stay of the decision of Adjudicator Huneault (ODACC Case No. 5629), ordering prompt payment of $685,574.91, plus interest, by the Applicant to the Respondent pending the hearing of an application for judicial review from the Adjudicator’s decision.

[2] At the commencement of the motion, I confirmed with counsel that the underlying application is scheduled for a full day on November 4, 2024, before a panel of three judges of the Divisional Court.

[3] In its factum, the Respondent consents to a stay on condition that the full amount of the impugned determination is paid into court.

[4] The Applicant takes the position that it satisfies a test for a stay. It argues that (a) when it obtained leave to commence this application, it satisfied the low threshold on the merits for obtaining a stay pending the hearing; (b) it will suffer irreparable harm if required to pay the determination, in that it may have no way in which to recover the funds if it prevails in the adjudication; and (c) the balance of convenience favours granting a stay in that (i) the hearing has been expedited and is scheduled for early November, (ii) it has a meritorious claim for delay against the Responding Party that exceeds the value of any amount it may owe the Responding Party; and (iii) the Responding Party’s claims are already fully secured by way of lien claims registered against title to the Moving Party’s property.

[5] In light of the circumstances of this case, it is not necessary to review and expound upon the principles involved in considering a stay request in the context of applications for judicial review of prompt payment adjudications under the Construction Act. Accepting, as I do, that there are arguable grounds for the application on the merits (which will usually be the case, given the stringent test for leave), I am not satisfied that the Moving Party has established irreparable harm (if the money is paid into court, as agreed by the Responding Party), and the balance of convenience weighs strongly in favour of requiring payment into court of the full amount in issue.

[6] As was confirmed during oral argument, the improvement has been completed and the contract price for the improvement was about $7.2 million. Basic holdback is thus about $720,000. Subcontractor claims, enforceable against basic holdback, are largely uncontested to a value of about $500,000, with additional subcontractor claims of about $150,000 not being contested by the Responding Party, but which the Moving Party submits are out of time.

[7] The amount of the Adjudicator’s determination is less than the amount of Basic Holdback.

[8] The Construction Act provides that any funds paid to the Responding Party pursuant to an Adjudicator’s determination are to be used to pay down amounts owed to subcontractors.

[9] The Moving Party is not entitled to assert set-off claims it has against the Responding Party against basic holdback available to satisfy subcontractor lien claims.

[10] On one theory of the facts, the Moving Party will be required to pay about $500,000 in basic holdback to subcontractors. On another, the Moving Party will be required to pay the entirety of the Adjudicator’s determination, and more, in basic holdback to subcontractors.

[11] I understand the Moving Party’s concern that, if it pays the determination to the Responding Party now, if those funds are not applied to subcontractor claims to reduce the claims against basic holdback, the Moving Party could be called upon to pay more later. I also understand the Moving Party’s concern that payment of the Adjudicator’s determination will leave the currently registered claims for lien on title. These are issues that may be raised before the application panel.

[12] In my view it is beyond dispute that the Moving Party will be required to pay most, perhaps all, of the Adjudicator’s determination to the Responding Party’s subcontractors. I see no reason why this payment should have to await the extended litigation that may be required to decide the lien claims between the Moving Party and the Responding Party. Any issue about the proper application of the funds, reduction in lien security upon payment of those funds, and related issues, may be addressed by the application panel or as that panel may direct.

[13] Finally, I note that this court has endorsed early payment of established subcontractor claims from minimum holdback, and consequent reduction in lien security: Homes by DeSantis (Lake) Inc. v. Sutton Forming Inc., 2023 ONSC 2628 (Div. Ct.), applying Urbacon Building Groups Corps. V. Guelph (City), 2009 ON SC 72065. This court has not addressed how the process of retiring subcontractor claims in lien proceedings may be affected by a prompt payment determination. However, the parties need not await a decision from this court on these issues to order their affairs appropriately: if the parties consent to payment out of some or all of the funds paid into court to retire subcontractor claims against basic holdback, they may request an appropriate consent order from the court.

[14] I do not have a precise calculation of the interest payable on the prompt payment order. I have rounded the amount of the order up to $700,000.00, to reflect accrued interest, and any issue about the precise interest calculation may be addressed by the parties before the panel, presumably on consent.

[15] The requested stay is granted on the condition that the Moving Party pay $700,000.00 into court to the credit of this application within ten days.

[16] The Responding Party has prevailed on the motion and is entitled to costs from the Moving Party, fixed in the agreed amount of $10,000.00, inclusive, payable within ten days.

"D.L. Corbett J."

Released: September 3, 2024