MGW Homes Design Inc. v. Pasqualino, 2023 ONSC 411

Court File and Parties

Court File No.: CV-21-2913 Date: 2023-01-16 Ontario Superior Court of Justice

Between: MGW Homes Design Inc., Plaintiff And: Domenic Pasqualino, Defendant

Counsel: Ian Literovich, for the Plaintiff Krista Chaytor and Carlo Pasqualino, for the Defendant

Heard: December 21, 2022

Before: Chozik J.

Ruling on Motion

1Domenic Pasqualino brings a motion to vacate a writ for enforcement issued on June 17, 2022, by MGW Homes Design Inc. (“MGW”) under the Construction Act, R.S.O. 1990, c. C.30. The writ was issued in connection to an Adjudicator’s determination under the Act dated January 21, 2022.

2The Act provides for an adjudication process in construction matters. The adjudication process is restricted to certain types of disputes: s. 13.5(1). It allows for quick but interim and summary determinations of disputes without, or before, going to court or arbitration. The adjudicators are not legally trained, but rather appointed by ODACC (Ontario Dispute Adjudication for Construction Contracts). Under the Act, an Adjudicator’s determination can be converted to a Court Order if it is filed with the court and notice of doing so is given to the other party within 10 days of doing so: s. 13.20(3).

3In this case, MGW failed to give notice within the required 10 days. The issue on this motion is whether the failure to give notice within the 10 days voids the writ.

Background

4The facts on this motion are not disputed. MGW is a contractor who performed work and supplied materials in relation to renovations to Mr. Pasqualino’s home. A dispute arose between the parties. On October 20, 2021, MGW registered a Claim for Lien in the amount of $169,184.94. A Statement of Claim was issued shortly after, under court file number CV-21-00002913-0000.

5On November 3, 2021, Coats J. made an Order vacating the lien upon payment into court of $211,481.18 as security. The security is the sum of the Claim for Lien of $169,184.94 plus $42,296.24 for security for costs. Mr. Pasqualino posted this security. A Statement of Defence and Counterclaim was delivered shortly thereafter.

6Subsequently, on December 15, 2021, MGW filed a Notice of Adjudication. No objection was raised by Mr. Pasqualino to the Adjudicator’s jurisdiction before or at the Adjudication. Both parties participated in the Adjudication. Materials were filed by both parties on January 4, 2022. Oral submissions were heard on January 7, 2022. On January 18, 2022, the Adjudicator decided that Mr. Pasqualino had to pay MGW $119,314, inclusive of HST.

7Mr. Pasqualino has not paid this amount.

8MGW took steps to enforce the Adjudicator’s Determination. On February 14, 2022, unbeknown to Mr. Pasqualino, it filed the Adjudicator’s Determination with the court. When that Adjudicator’s Determination was filed with the Court, it was given the same court file number as the lien action commenced earlier by MGW. MGW did not give Mr. Pasqualino notice of filing the Adjudicator’s Determination within the 10 days required in s. 13.20(3) of the Act.

9At the same time, on February 2, 2022, Mr. Pasqualino sought leave for judicial review of the Adjudicator’s Determination pursuant to s. 13.18 of the Act. Leave for judicial review was refused by R.S.J. Ricchetti in Pasqualino v. MGW-Homes Design Inc., 2022 ONSC 5632.

10On or about August 26, 2022, Mr. Pasqualino discovered that a Notice of Garnishment issued on June 30, 2022, had been served on his bank in respect of the writ.

Positions of the Parties

11Mr. Pasqualino takes the position that the failure to give notice under s. 13.20(3) of the Act that the Adjudicator’s Determination was filed with the Court is fatal to the writ. The only just remedy is that the writ be struck. It is also argued on his behalf that it was a mistake for the court staff to issue the same file number of the main lien action to the registering of the Adjudicator’s Determination with the Court.

12MGW argues that failure to give notice cannot be fatal: otherwise, it would effectively wipe out the Adjudicator’s Determination. It would have the effect of removing any advantage to the adjudication system, by ensuring that a party that loses in front of an adjudicator can go through the appeal process without paying the amounts ordered by the adjudicator.

13Additionally, MGW tried to argue that the funds currently held in court could satisfy the writ if those funds were ordered released. Mr. Pasqualino could still defend the broader lien action, but MGW would have the money. If Mr. Pasqualino was successful in the broader lien action, he would then be paid back the funds that would be transferred to MGW.

Analysis

14Section 13 of the Act creates an interim dispute resolution mechanism intended to be a quick and efficient way to resolve disputes in construction through an adjudication process. That adjudication process is intended to provide the parties with access to a summary process to quickly resolve disputes in construction cases without the need to go through, or wait for the outcome of, a court process or arbitration.

15An Adjudicator’s jurisdiction is limited to certain types of disputes. Section 13.5 of the Construction Act provides:

13.5 (1) Subject to subsection (3), a party to a contract may refer to adjudication a dispute with the other party to the contract respecting any of the following matters:

1. The valuation of services or materials provided under the contract.
2. Payment under the contract, including in respect of a change order, whether approved or not, or a proposed change order.
3. Disputes that are the subject of a notice of non-payment under Part I.1.
4. Amounts retained under section 12 (set-off by trustee) or under subsection 17 (3) (lien set-off).
5. Payment of a holdback under section 26.1 or 26.2.
6. Non-payment of holdback under section 27.1.
7. Any other matter that the parties to the adjudication agree to, or that may be prescribed.

16Adjudicators, as I have pointed out, are not legal professionals. Their decisions are intended to be interim until there is arbitration or a court process. Parties can opt out of an Adjudicator’s Determination by written agreement. Their decisions can also be turned into a court order if proper notice is given.

17To review an Adjudicator’s Determination, a party must first obtain leave of the court, pursuant to s. 13.18(1) of the Act:

13.18 (1) An application for judicial review of a determination of an adjudicator may only be made with leave of the Divisional Court in accordance with this section and the rules of court. 2017, c. 24, s. 11.

18On judicial review, an Adjudicator’s determination can only be set aside in limited circumstances stipulated under the Act:

13.18 (5) The determination of an adjudicator may only be set aside on an application for judicial review if the applicant establishes one or more of the following grounds:

1. The applicant participated in the adjudication while under a legal incapacity.
2. The contract or subcontract is invalid or has ceased to exist.
3. The determination was of a matter that may not be the subject of adjudication under this Part, or of a matter entirely unrelated to the subject of the adjudication.
4. The adjudication was conducted by someone other than an adjudicator.
5. The procedures followed in the adjudication did not accord with the procedures to which the adjudication was subject under this Part, and the failure to accord prejudiced the applicant’s right to a fair adjudication.
6. There is a reasonable apprehension of bias on the part of the adjudicator.
7. The determination was made as a result of fraud.

19As R.S.J. Ricchetti held at paras. 35-36 of Pasqualino v. MGW-Homes Design Inc., 2022 ONSC 5632, the adjudication process and the court or arbitration process are separate legal proceedings allowed under the Act. An adjudication is an interim determination on the way to a final determination or resolution. Different court file numbers ought to have been given these two proceedings.

20While different court file numbers ought to be given to these separate proceedings, I am of the view that this clerical error does not in and of itself void the writ. However, the failure to give notice of filing the Adjudicator’s Determination with the court within the timeframe prescribed by the Act is fatal.

21The ability to turn an Adjudicator’s Determination into a final Court Order and enforce it as a court order by simply filing it with the court is an extraordinary power. The Act provides that it requires notice. It requires notice within the timeframe prescribed by the Act.

22Similar to liens, the period for expiry of a time frame under the Act is mandated by statute and leaves no room for the exercise of judicial discretion: Glencoe Insulation Co. Limited v. 3170497 Canada Inc., [2003] O.J. No. 5834, at paras. 28-29. To enforce the Adjudicator’s Determination as if it were a Court Order rendered on the merits requires strict compliance with the terms of the Act. In the absence of compliance, the writ issued is void.

23This does not remove the intended advantage to the adjudication system. It simply means that the party seeking to avail itself of the extraordinary remedy of enforcing an Adjudicator’s Determination as a Court Order must comply with the notice requirement within the 10 days required by the Act. Nothing more. Nothing less.

24I also do not accept MGW’s argument that the issue can be simply resolved by ordering the funds currently held in court to be paid out to MGW to satisfy the writ. It is not lost on this court that who holds the money significantly impacts the positions of the parties in litigation. MGW, having failed to comply with the notice requirements under the Act, is not now entitled to hold the money pending the outcome of the main court action.

Conclusion

25Mr. Pasqualino’s motion is allowed. An Order is to issue as per draft signed.

Costs

26As the successful party, Mr. Pasqualino is presumptively entitled to costs. He seeks partial indemnity costs of $5,000, including the costs reserved by Mills J. to today for the attendance before her on a prior date. I am satisfied that this quantum is fair, reasonable, and proportionate in the circumstances. MGW shall pay costs of $5,000 inclusive of disbursements and HST to Mr. Pasqualino forthwith.

Chozik J.