Kamlu Engineering Inc. v. 1492976 Ontario Limited o/a Cadorin Homes

COURT FILE NO.: CV-19-628350 DATE: 2023 05 15

SUPERIOR COURT OF JUSTICE - ONTARIO

IN THE MATTER OF the Construction Act, RSO 1990, c C.30, as amended

RE: KAMLU ENGINEERING INC., Plaintiff - and - 1492976 ONTARIO LIMITED o/a CADORIN HOMES, LYNN JOSEPHINE DA PRA and MICHAEL MAZARENO MONTAGNESE, Defendants

BEFORE: Associate Justice Todd Robinson

COUNSEL: M. Mednick, for the defendants (moving parties) A. Assuras, for the plaintiff (responding party) H. Mandel, for the lien claimant, Rivervalley Masonry Group Ltd.

HEARD: January 31, 2023 (by videoconference)

REASONS FOR DECISION (Motion to Discharge Lien and Dismiss Action)

[1] The defendants move for an order discharging the lien of Kamlu Engineering Inc. (“Kamlu”) and dismissing this proceeding on the basis that Kamlu has repeatedly breached my orders in this lien reference. Kamlu disputes some of the alleged breaches, but argues that any breaches have now been cured and it would be unfair and unjust to discharge its lien and dismiss its claim in the circumstances.

[2] After some consideration, I have decided to dismiss the defendants’ motion. There has been non-compliance and delay by Kamlu. However, in my view, Kamlu’s conduct does not rise to the level of warranting a discharge of its lien and dismissal of this action.

Denial of adjournment request

[3] Kamlu retained and appointed new counsel the day before the motion hearing. As a result, Kamlu’s newly-appointed counsel requested a short adjournment – as little as one week if I could accommodate a quick return – to permit responding materials to be delivered and proper preparation for motion argument. The defendants opposed any further adjournment. After hearing submissions, I denied the adjournment for reasons to follow.

[4] Kamlu’s lawyers were removed from the record on June 7, 2022. Kamlu’s principal, Lou Gabriele, was present at the removal motion and confirmed that Kamlu did not oppose it. By that time, Kamlu was already argued to have breached my timetable orders. Defendants’ counsel sought an order at that time dismissing this action, which I was not prepared to grant. Instead, I directed a further hearing for trial directions. At that hearing for trial directions, at which Mr. Gabriele was in attendance, this motion was booked for December 5, 2022.

[5] On December 5, 2022, Mr. Gabriele appeared to seek an adjournment. Despite having been served with the defendants’ motion materials, no responding materials had been served and Mr. Gabriele had not contacted defendants’ counsel. I ultimately granted the adjournment, but with a peremptory timetable. This return date was fixed peremptory against the plaintiff. I also ordered $3,500 in costs thrown away payable to the defendants within thirty days. Mr. Gabriele (and thereby Kamlu) was aware of the timetable, the costs award, and the date fixed for paying the costs. Kamlu did not comply.

[6] On January 4, 2023, a further hearing for trial directions took place before me. Prior to the hearing, I had declined the defendants’ request to vacate the hearing because Kamlu’s position on vacating it was unknown. Despite Mr. Gabriele being sent that communication by my Assistant Trial Coordinator, along with counsel, neither Mr. Gabriele nor anyone on Kamlu’s behalf appeared. Mr. Gabriele was present when the hearing for directions had been scheduled. If a motion adjournment was required, that hearing would have been a more appropriate time to make the request.

[7] By the time of the peremptory hearing, Kamlu remained in ongoing breach of my motion timetable order and had failed to provide any meaningful communication to the defendants about the motion. I do not fault newly-appointed counsel for seeking an adjournment to provide herself with an opportunity to prepare. However, I found it unfair to grant yet another indulgence to Kamlu. Kamlu has been aware that the defendants intended to seek dismissal of this action since June 2022. Kamlu did not retain counsel or put forward any evidence of what efforts were being made to find counsel in the nearly eight months following my order removing Kamlu’s lawyers from the record. Mr. Gabriele had been present when the peremptory timetable and return date were fixed. Nevertheless, Kamlu still waited until the eve of the discharge and dismissal motion to retain counsel.

[8] In these circumstances, I denied the adjournment request. I did stand the matter down until the afternoon to provide Kamlu’s counsel with an opportunity to prepare for argument. I then heard the parties’ submissions.

Relevant legal framework

[9] The defendants seek relief dismissing the action under subrule 3.04(4) and rule 60.12 of the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”) and relief discharging the lien and dismissing the action under s. 47 of the Construction Act, RSO 1990, c C.30.

[10] With respect to relief under the Rules, subrule 3.04(4) provides that, if a party fails to comply with a timetable, a judge or associate judge may, on any other party’s motion, stay the party’s proceeding, dismiss the party’s proceeding or strike out the party’s defence, or make such other order as is just. Rule 60.12 is to similar effect in this case. It provides that, where a party fails to comply with an interlocutory order, the court may, in addition to any other sanction provided by the Rules, stay the party’s proceeding, dismiss the party’s proceeding or strike out the party’s defence, or make such other order as is just.

[11] In seeking relief under s. 47 of the Construction Act, the defendants have cited the current iteration of that provision. It is not the correct version. It is undisputed that the parties’ contract was entered into in 2017. Accordingly, pursuant to s. 87.3 of the Construction Act, the act and its regulations as it read on June 29, 2018 continue to apply to the subject improvement and Kamlu’s lien – i.e., the provisions of the former Construction Lien Act. That version of s. 47 provides that, upon motion, the court may discharge a lien or dismiss an action upon any proper ground and subject to any terms and conditions that the court considers appropriate in the circumstances.

[12] I have previously observed that s. 47 is a broadly drafted provision that is applicable in many situations, including matters that do not seek summary disposition of a lien action on its merits: GTA Restoration Group Inc. v. Baillie, 2020 ONSC 5190 (leave to appeal ref’d 2021 ONSC 1250 (Div Ct)), at para. 44. Although the structure of s. 47 was changed with the 2018 amendments, the only substantive difference in the current iteration was to add a new specific ground for discharging a lien on the basis that the lien is “frivolous, vexatious or an abuse of process”: GTA Restoration, supra at para. 32. Although the defendants made submissions about Kamlu abusing the court process, the “frivolous, vexatious or an abuse of process” ground was not specifically raised or argued, so the distinction between the two iterations of s. 47 has no particular bearing on this motion.

Analysis

[13] The defendants point to several breaches of my court orders and ongoing conduct by Kamlu as demonstrating an intentional disregard for the court process and, thereby, supporting discharge of the lien and dismissal of this action. They rely specifically on the following:

(a) Kamlu’s failure to serve an affidavit of documents that complied with my first timetable order;

(b) Kamlu’s failure to deliver a Scott Schedule that complied with my first timetable order;

(c) Kamlu’s ongoing and repeated failure to respond to the defendants’ requests to schedule examinations for discovery, meaning that examinations could not be completed in accordance with my second timetable order;

(d) Kamlu’s failure to comply with my order removing its lawyers from the record;

(e) Kamlu’s failure to attend hearings; and

(f) Kamlu’s failure to pay ordered costs thrown away.

[14] In Starland Contracting Inc. v. 1581518 Ontario Ltd., the Divisional Court commented on the discretion afforded to a case management judge or associate judge when assessing whether to dismiss a claim or strike a defence. The Divisional Court noted, at para. 26, that a case management judge or associate judge “has a continuous connection with an action, the parties and their counsel” and is “well-positioned to monitor the conduct of the participants throughout the proceedings, and to determine whether anyone is deliberately stalling, showing bad faith or abusing the process of the court when deadlines are missed and defaults occur under procedural orders.”

[15] The defendants point to Broniek-Harren v. Osborne, which is cited with approval by the Divisional Court in Starland. In Broniek-Harren, at paras. 31-32, Gray J. commented that non-compliance with procedural requirements should be taken more seriously when those requirements are set out in court orders and, further, that failure to comply with procedural orders does not simply affect the parties to the action, but also affects the administration of justice as a whole. I agree. Depending on the severity of the breaches and the conduct of the impugned party in a lien action, which is statutorily prescribed to be as far as possible of a summary character, it may well be that the just result is to discharge a lien and dismiss the action. However, viewing the totality of the circumstances in my position as the reference associate judge, I do not think this is such a case.

[16] I have considered Kamlu’s breaches and conduct in the context of the reference before me and the procedural background of this case. In my view, whether assessed individually or collectively, they do not amount to conduct warranting a discharge of Kamlu’s lien and dismissal of its claims. There has been non-compliance and delay, but it is not as egregious as the cases put before me and is justly and fairly compensable in costs.

[17] At the first hearing for trial directions in this reference in September 2019, I fixed a timetable for the parties to exchange affidavits of documents, Schedule A productions, and primary Scott Schedules by January 15, 2021. The parties agreed to extend that deadline to January 25, 2021, as they were entitled to do under subrule 3.04(1) of the Rules and my directions.

[18] On January 24, 2021, Kamlu served its affidavit of documents and a Scott Schedule. It did not serve any Schedule A productions and the Scott Schedule did not include production references, as I had ordered be done. However, the record supports that a revised version of the Scott Schedule with document references was emailed that evening following an objection by defendants’ counsel. A further revised Scott Schedule was served in early February 2021.

[19] I agree with Kamlu that there does not appear to have been a breach of my order for a Scott Schedule or, if there was, the breach was remedied well before the consent varied timetable was made and long before this motion was brought. It does not support discharge of Kamlu’s lien.

[20] Kamlu’s explanation for not serving its productions was that they were voluminous and had not yet been scanned. Purportedly “key” documents were subsequently scanned and provided by Kamlu, but the balance of the productions were not served until much later. Part of the delay in converting the documents into an electronic format after the ordered deadline appears to have been COVID-19 infections and related quarantining. However, electronic production had always been contemplated in my original order, which stated, “Unless otherwise agreed by the parties, Schedule A productions shall be made available in an electronic format accessible to the receiving parties at the producing party’s expense and any party requesting paper copies of productions shall bear the reasonable costs of paper production.” Kamlu has provided no cogent explanation for why it was not ready for electronic production by the ordered deadline.

[21] Ultimately, the parties agreed to a consent order extending the deadline for Kamlu to serve outstanding Schedule A productions to May 31, 2021. Kamlu did serve its outstanding productions in late May 2021, but as a single pdf document containing all documents. In response, defendants’ counsel requested that the document be broken down into the individual Schedule A documents. It does not appear that was done.

[22] Kamlu is correct that its productions were served prior to the extended deadline, albeit as a single pdf document. In my view, that is characterized, at best, as compliance with the strict letter of my order. However, a single file production is not compliant with the intent or spirit of my order, or frankly with the reasonable expectations of parties in civil litigation. I ordered that productions be made available in an electronic format “accessible to the receiving parties”. “Accessible” did not simply mean in a format that could be opened. It meant meaningful accessible, which includes ensuring that productions are delineated and correlated to the affidavit of documents. In the current age of e-discovery, a single pdf of all productions is, in my view, essentially useless.

[23] Nevertheless, the extent of any non-compliance with the intent and spirit of my order in this case is a matter that may be addressed in costs. This is not a situation where a party has failed to comply entirely. There is nothing before me supporting that the parties agreed to an e-discovery protocol for how electronic documents would be coded and produced, which may have avoided the dispute. Kamlu’s Schedule A productions were provided and were accessible, albeit without the courtesy of being separated for ease of reference or use with common e-discovery software. Heightened time and expense resulting from the manner of production is a matter that may be addressed in costs. It does not, in this case, support discharge of Kamlu’s lien.

[24] The deadline for completing examinations for discovery was extended in the consent order to September 30, 2021. The record before me does support a failure by Kamlu’s former counsel to respond to requests to schedule examinations for discovery. The full extent of emails is evidently not before me, though. Kamlu correctly points out that there is no evidence of any request for examination dates prior to November 2021, which is well past the ordered deadline. Defendants’ counsel was requesting November dates in July 2021, with no reference to any availability in July, August, or September. There is no evidence of any discussion or agreement to vary the examination deadline by the time of the emails in July.

[25] Based on the record before me, the only express proposal to extend the deadline appears to have been made by Kamlu’s counsel, who wrote on September 30, 2021 (the deadline date) proposing an extension to October 31, 2021. That proposal was rejected with defendants’ counsel commenting as follows:

The timeline to extend the examinations (as you propose) makes no difference at this stage since you refused to respond to any of my previous emails trying to schedule examination dates.

[26] Put simply, the record supports that both Kamlu and the defendants were in breach of my order for completing discoveries. There is evidence of a willingness by Kamlu to proceed with examinations before the end of October. It is unclear from the record before me why my ordered deadline could not be complied with by either side. Also, since it seems that no one expected to complete examinations by September 30, 2021, it is unclear why October or November dates could not be agreed. Ultimately, if the defendants felt that Kamlu was not complying with my order, it was open to them to either arrange a case conference before me or propose specific examination dates, book an examination, and then serve a notice of examination. They did neither.

[27] Kamlu’s failure to comply with my removal order is clearer. The order was made on June 7, 2022. It provided Kamlu with 30 days to appoint a new lawyer or bring a motion to be represented by a non-lawyer. Kamlu did neither. At the hearing before me on August 12, 2022, Mr. Gabriele advised that he was finalizing a retainer agreement with a new lawyer. I also provided directions, if necessary, on a motion for leave to be represented by a non-lawyer. Kamlu did not appoint counsel or bring a leave motion.

[28] It took Kamlu nearly eight months to appoint new counsel. It only did so on the eve of this motion hearing. However, I am also mindful that Mr. Gabriele appear on behalf of Kamlu at several hearings between the removal motion and this motion hearing. Kamlu has also now appointed counsel who is formally on the record and has expressed Kamlu’s willingness and intention to move this action forward. The ongoing breach of my removal order was accordingly cured prior to the motion hearing.

[29] In these circumstances, it is difficult to view the now-cured breach of the order to appoint new counsel or obtain leave to be represented by a non-lawyer as warranting discharge of Kamlu’s lien and dismissal of the action. Notably, the defendants do not argue any non-compensable prejudice from the delay in this action. Although demonstrating prejudice is not a requirement for a motion such as this one, its absence is still a factor.

[30] Kamlu’s failure to attend hearings is not, in my view, sufficient to find that Kamlu has demonstrated intentional disregard for the court process. The defendants point to three hearings: the hearings for trial directions on August 12, 2022, October 31, 2022, and January 4, 2023. Mr. Gabriele did ultimately attend the first of those hearings, albeit after I had defendants’ counsel contact him. No one attended the other two hearings for trial directions on Kamlu’s behalf. No explanation for Kamlu failing to attend them has been provided. However, Mr. Gabriele did attend the interceding motion hearing on December 5, 2021.

[31] Despite the lack of explanation for not attending two hearings and failing to attend the first hearing without prompting, I am not convinced that it would be just to discharge Kamlu’s lien.

[32] I am concerned with Kamlu’s failure to pay the costs award made at the December hearing of this motion. Kamlu was clearly aware that the costs award had been made, since Mr. Gabriele was in attendance. Kamlu’s counsel submitted that she had directed Kamlu to make payment upon her retainer, but no explanation for Kamlu’s non-payment was given. Again, though, I am not convinced that non-payment of a fairly recent costs award rises to the level of conduct warranting discharge of Kamlu’s lien in the particular circumstances of this case.

Disposition

[33] For the foregoing reasons, I am dismissing the defendants’ motion. However, in doing so, I am not condoning the delays in this action caused by Kamlu or its breaches of court orders. Kamlu should expect little latitude on future non-compliance with court orders or delays in this action. Also, notwithstanding that Kamlu has been successful in opposing this motion, I am still inclined to award the defendants their costs of the motion.

[34] A further hearing for trial directions will need to be arranged through my Assistant Trial Coordinator. At that hearing, if the parties have not already agreed (if not completed) next steps to a trial scheduling hearing, I will address whether Kamlu will be compelled to revise its productions, whether Scott Schedules need to be updated, whether leave for examinations for discovery should be revoked (and, if not, what extension to complete discoveries is appropriate), and any whether Kamlu should bear the defendants’ costs of any of these steps.

Costs

[35] Costs outlines have been exchanged and submitted. I encourage the parties to settle costs. If they cannot, then costs submissions shall be in writing.

[36] As noted above, despite the result, I am inclined to award the defendants their costs of this motion. Accordingly, although formally the unsuccessful parties, the defendants shall serve their costs submissions first by May 29, 2023. Kamlu shall serve its responding costs submissions by June 7, 2023. If Kamlu seeks its costs of the motion, then the defendants shall be entitled to serve reply submissions by June 14, 2023, but there shall otherwise be no reply. Each costs submission shall not exceed three (3) pages, excluding any offers to settle and case law, and shall be submitted by email directly to my Assistant Trial Coordinator, Christine Meditskos, with proof of service.

[37] Unless costs submissions are exchanged and filed in accordance with the above, the parties shall be deemed to have agreed on costs.

ASSOCIATE JUSTICE TODD ROBINSON DATE: May 15, 2023