CITATION: Kennedy Electric Limited v. Dana Canada Corporation, 2007 ONCA 664
DATE: 20070927
DOCKET: C45909, C45915
COURT OF APPEAL FOR ONTARIO
IN THE MATTER OF the Construction Lien Act, R.S.O. 1990, c. C.30
O’CONNOR A.C.J.O., ARMSTRONG and JURIANSZ JJ.A.
BETWEEN:
KENNEDY ELECTRIC LIMITED, R & A INDUSTRIAL CONTRACTORS LTD., EMPIRE TRANSPORTATION LIMITED, HYDRAMEN FLUID POWER LTD., CASSIDY INDUSTRIAL CONTRACTORS LTD., 1480253 ONTARIO INC., c.o.b. as DYNAMIC SYSTEMS, FASTENING HOUSE INC.
Plaintiffs (Appellants)
and
DANA CANADA CORPORATION and RUMBLE AUTOMATION INC.
Defendants (Respondents)
Alfred J. Esterbauer for Kennedy Electric Limited
Irwin A. Duncan and Michael A. van Bodegom for Cassidy Industrial Contractors Ltd.
Christopher A. Chekan for Dana Canada
HEARD: April 25, 2007
On appeal from the judgment of the Divisional Court (Justice John O’Driscoll and Justice Janet Wilson in the majority; Justice Sandra Chapnik in dissent) dated March 14, 2006 with reasons reported at (2006), 50 C.L.R. (3d) 283 (Div. Ct.).
ARMSTRONG J.A.:
[1] The appellants, Kennedy Electric Ltd. (“Kennedy”) and Cassidy Industrial Contractors Ltd. (“Cassidy”), registered liens against the property of Dana Canada Corporation (“Dana”) in respect of a contract for the design and installation of an assembly line to be used by Dana in the manufacture of Ford truck frames. Killeen J. of the Superior Court of Justice held that the assembly line did not meet the definition of an “improvement” under the Construction Lien Act, R.S.O. 1990, c. C.30 (the “CLA”). In the result, he found that the claims of the appellants were not lienable claims and must be discharged.
[2] Kennedy and Cassidy appealed to the Divisional Court. A majority of the Divisional Court (O’Driscoll and Wilson JJ.) dismissed the appeals. Chapnik J., in dissent, would have allowed the appeals.
[3] Kennedy and Cassidy now appeal from the judgment of the Divisional Court. There are two separate appeals but they were argued together before the Divisional Court and before us.
Factual Background
[4] This factual summary is taken from the reasons of Killeen J. In October 2000, the Ford Motor Company entered into an agreement with Dana to build frames for the 2004 Ford F-150 pickup truck. This project was code-named “P221”. The annual volume of frames was expected to be approximately 615,000 over a period of eight years. It was agreed that Dana would divide its production between its plant in St. Marys, Ontario and its plant in Elizabethtown, Kentucky.
[5] In order to carry out this contract, Dana arranged for the construction of a 160,000-square-foot addition to its St. Marys plant and for the installation of a custom-designed frame assembly line for the F-150 Ford trucks which were to be in production and ready for sale in September 2003. The trial judge described the building addition as a “flexible generic type of industrial building”. It is the assembly line that is at issue in this appeal. Rumble Automation Inc. (“Rumble”) was the successful bidder for the design and installation of the assembly line in the new addition to the St. Marys plant as well as a similar assembly line at Dana’s plant in Elizabethtown, Kentucky. Rumble is now bankrupt.
[6] The plan was to build the assembly line systems at sites in Oakville and Mississauga where the lines would be tested and then disassembled and transported to St. Marys and Elizabethtown where they would be reassembled and installed.
[7] Rumble carried out much of the work through subcontractors. Part of this work was subcontracted to Kennedy. For the St. Marys plant, it was Kennedy’s responsibility to disassemble the line at the build sites and deliver the various parts by 165 transport trucks provided by Empire Transportation Ltd. to St. Marys where Kennedy employees would install the line in the new 160,000-square-foot addition.
[8] Kennedy also operated through subcontractors. It was assisted by Cassidy at the St. Marys plant. The process of disassembling, transporting and reassembling in St. Marys took from the end of September 2002 to early December 2002.
[9] The fully installed assembly line consists of 100 mezzanine platforms and 165 robots. The assembly line is attached to the floor by a system of some 2,000 to 3,000 mechanical and chemical bolts ranging from one-quarter to three-eighths of an inch in width and from six to eight inches in length. The assembly line covers approximately 100,000 square feet of the new addition. It is twenty feet high and weighs approximately 500,000 tons.
[10] The new addition also housed two other assembly lines that were installed by other companies and used to supplement the production of the F-150 truck frame line. These two lines were involved in the electronic painting, waxing and stacking of the F-150 frames.
[11] In December 2002, a dispute arose between Rumble and Kennedy. Kennedy was locked out of the site by Rumble. As a result, Kennedy and its subcontractors, including Cassidy, registered the lien claims at issue in this litigation.
The Judgment at Trial
[12] Justice Haines of the Superior Court of Justice ordered a trial of an issue in this matter. He set out the issue as follows: “whether the work performed by the plaintiff is properly lienable under the Construction Lien Act.” The trial of an issue proceeded before Killeen J. in January 2004 and his reasons were released on November 26, 2004.
[13] The trial judge started his analysis of the issue before him by reference to s. 14(1) of the CLA which provides:
14.(1) A person who supplies services or materials to an improvement for an owner, contractor or subcontractor, has a lien upon the interest of the owner in the premises improved for the price of those services or materials.
He then considered the definitions of the terms “improvement” and “land” in s. 1(1) of the CLA:
“improvement” means,
(a) Any alteration, addition or repair to, or
(b) Any construction, erection or installation on, any land, and includes the demolition or removal of any building, structure or works or any part thereof, and “improved” has a corresponding meaning;
“land” includes any building, structure or works affixed to the land, or an appurtenance to any of them, but does not include the improvement[.]
[14] The trial judge conducted a thorough review of the authorities that related to the issue before him. He started by considering the Supreme Court of Canada’s approach to the interpretation of the predecessor Mechanics’ Lien Act, R.S.O. 1960, c. 233. In Clarkson Co. Ltd. v. Ace Lumber Ltd., [1963] S.C.R. 110 at p. 114, Ritchie J. quoted with approval the dissent of Kelly J. in Ace Lumber Ltd. v. Clarkson Co. Ltd., [1960] O.R. 748 at 757-58 as follows:
With the greatest respect, I am, however, of the opinion that the proper approach to the interpretation of this statute is expressed in the dissenting opinion of Kelly J.A. where he says that:
The lien commonly known as the mechanics’ lien was unknown to the common law and owes its existence in Ontario to a series of statutes, the latest of which is R.S.O. 1960, c. 233. It constitutes an abrogation of the common law to the extent that it creates, in the specified circumstances, a charge upon the owner’s lands which would not exist but for the Act, and grants to one class of creditors a security or preference not enjoyed by all creditors of the same debtor; accordingly, while the statute may merit a liberal inter-pretation with respect to the rights it confers upon those to whom it applies, it must be given a strict interpretation in determining whether any lien-claimant is a person to whom a lien is given by it.
[15] The trial judge also referred to the report of the Attorney General’s Advisory Committee on the Draft Construction Lien Act of April 8, 1982 and in particular the definition of the word “improvement” in the proposed legislation:
The definition of the term improvement has been redrafted to make it clear which types of work on land gives rise to a lien. The purpose of the Act is to protect those who contribute their services or materials towards the making of an improvement to a premises. The types of work which constitute an improvement are set out in clauses a and b. While the definition of “improvement” is broad, the Committee has attempted to draft it in such a way that it will be clear that the lien created by the Act applies only in the case of the construction and building repair industries. [Emphasis added by Killeen J.]
[16] The trial judge also cited the decision of this court in Central Supply Co. (1972) Ltd. v. Modern Tile Supply Co. Ltd. (2001), 55 O.R. (3d) 783 at para. 15 where Abella J.A. said:
The purpose of the definition of “improvement”, as set out in the Report of the Attorney General’s Advisory Committee on the Draft Construction Lien Act…was “to protect those who contribute their services or materials towards the making of an improvement to a premises”. The report also stressed that while the definition of improvement was a broad one, it was drafted to make it clear that the lien created by the Act applied “only in the case of the construction and building repair industries.”
[17] The trial judge also relied upon Hubert v. Shinder, [1952] O.W.N. 146 (C.A.). In that case, this court considered whether the repair and installation of laundry equipment in a building was covered by the Mechanics’ Lien Act. The court held that the laundry machinery was “not part of or an improvement to the building so as to constitute a lien.”
[18] The trial judge referred to the judgment of the New Brunswick Court of Appeal in Beloit Canada Ltd. v. Fundy Forest Industries Ltd. (1981), 127 D.L.R. (3d) 320 which he found “followed basically the same rationale as the Ontario Court of Appeal did in Hubert.” In Beloit, the court found that a corrugating paper machine which weighed 2,500,000 pounds installed on a concrete foundation in a building but removable from it was not an improvement under the Mechanics’ Lien Act, R.S.N.B. 1952, c. 142 [now R.S.N.B. 1973, c. M-6].
[19] The trial judge also considered the judgment of Rosenberg J. in Baltimore Aircoil of Canada Inc. v. Process Cooling Systems Inc. (1993), 16 O.R. (3d) 324 (Gen. Div.). In that case, Rosenberg J., on a motion for summary judgment, found that the CLA did not apply to the installation of a water tower which was attached to the roof of a building. He found that it was not incorporated into the building. The Court of Appeal reversed the judgment on other grounds.
[20] The trial judge referred to two B.C. cases which he found supported the approach taken in Hubert. See Spears Sales & Service Ltd. v. Westpine Fisheries Ltd. (1995), 17 C.L.R. 197 (B.C. Co. Ct.), and Chubb Security Safes v. Larken Industries Ltd. (1990), 36 C.L.R. 225. He also considered two other B.C. cases which appear to take the opposite tack, but distinguished them on their facts and on the definition of “improvement” in the B.C. Builders Lien Act, R.S.B.C. 1979, c. 40 [now S.B.C. 1997, c. 45]. See Boomars Plumbing & Heating Ltd. v. Marogna Bros. Enterprises Ltd. (1988), 51 D.L.R. (4th) 13 (B.C.C.A.) and Deal S.l.r. v. Cherubini Metalworks Ltd., 2001 BCCA 49, [2001] B.C.J. No. 159 (B.C.C.A.).
[21] After reviewing the above authorities, the trial judge made the following findings of fact:
(i) While the project included the construction of a new addition to the Dana plant in St. Marys which would accommodate the F150 assembly line, the steps taken on the site did not constitute an integrated construction project as alleged by the plaintiffs [appellants].
(ii) Construction of the new addition was subject to the CLA as an improvement on the lands of Dana. The construction of the addition was commenced in December 2001 and completed in July 2002.
(iii) Kennedy was neither involved in the construction of the new addition nor in the connection of the assembly line to the existing building services. These connec-tions were made by other trades independent of the assembly line installation. Kennedy’s work and that of its subcontractors related exclusively to the assembly line.
(iv) The chronology of the work performed by Kennedy and its subcontractors was as follows:
Assembly and installation at the build sites from June to September, 2002.
Demonstration of operability of the line to Ford at the build sites on September 11.
Tear-down, labelling and packing of the line at the build sites in October and November, 2002.
First shipment of line parts from the build sites to St. Marys in October; last shipment to St. Marys in December.
Reassembly and installation in St. Mary’s between October and December, 2002.
(v) The evidence established that the assembly line can be readily disconnected from the addition with virtually no damage to the addition and its services.
(vi) Dana had a history of moving some of its other assembly lines from one plant to another.
(vii) There are two other independent assembly lines in the new addition that were constructed entirely separately from the Kennedy assembly line by other contractors.
[22] After making the above findings of fact, the trial judge concluded as follows in paragraphs 116 and 117 of his reasons:
On the evidence, I am driven to conclude that the assembly line for F150 frames cannot be considered as part of integrated construction improvement within the building addition, giving rise to lien rights, nor can it be considered alternatively as a free-standing improvement on its own within the CLA having regard to the principles arising from the decisional law in Ontario and the peculiar facts of this case. I conclude that the assembly line installation represented the installation of manufacturing equipment in a building but did not constitute an improvement or part of an improvement within the Act.
In the result, I conclude that the claims of the plaintiffs are not lienable claims and must be discharged.
The Divisional Court
[23] O’Driscoll J., writing for himself and Wilson J. in the Divisional Court, observed that the appellants did not challenge any of the trial judge’s findings of fact. He concluded that the trial judge had applied the correct law to his findings of fact and in the result dismissed the appeal.
[24] O’Driscoll J. relied upon two decisions of courts in British Columbia that were also cited by the trial judge. The first case, Spears Sales & Service Ltd., supra, involved the repair of a pumping system in a fish plant. O’Driscoll J. referred to the following excerpt from the reasons for judgment of Boyle Co. Ct. J. at 198:
Did the pumps become part of the realty? They may have so been intended as between this lessor and this lessee but that is not determinative.
Based in considerable part upon the affidavit filed on behalf of Westpine, my original focus was upon the use of the building and the function of the business in the building. That function has been primarily fish packing. The pumping system is an integral part of that function.
But the question must be answered by looking not to the parties but to the realty. The question is: are the pumps an integral part of the function of the building? The question does not concern the function of the business it houses (although buildings and improvements may function in specific ways to suit a business). The question because of its statutory basis must be answered in strict terms.
In this light this pumping system is not an improvement. Judgment accordingly.
O’Driscoll J. also relied upon the following statement of Wetmore L.J.S.C. in Chubb Security Safes, supra:
Equipment designed and used for the operations of the business within the structure, not integral to that structure, do not thus become “improvements”.
[25] Chapnik J., in dissent in the Divisional Court, held that the trial judge had erred in “what he perceived to be the relevant case law.” In particular, she found that the trial judge erred in making the following statement at para. 64 of his reasons for judgment:
There is appellate authority in Ontario going back as far as 1952 in Ontario stating that the installation or repair of machinery used in a business operated inside a building does not give rise to lien rights. [Emphasis added by Chapnik J.]
Chapnik J. concluded at para. 55 of her reasons:
As far as can be determined, there have been only a handful of reported decisions in Ontario since the 1952 decision in Hubert v. Shinder, [1952] O.J. No. 23 (C.A.) that even remotely touch on this issue, and they are not at the appellate level, nor do they stand for the proposition embraced by the trial judge.
[26] The dissenting judge cited a number of Ontario cases in support of her conclusion that the trial judge proceeded on an erroneous legal premise. See Re IBL Industries Ltd. (1990), 80 C.B.R. 20 (Ont. S.C. in Bankruptcy); Baltimore Aircoil of Canada Inc. v. Process Cooling Systems Inc., supra; 469804 Ontario Ltd. (c.o.b. Royal Plumbing & Heating) v. Ontario Hospital Association, [1995] O.J. No. 957 (Gen. Div. – Master Clark); and Wolfedale Electric Ltd. v. R.M.P.’s Systems Automation & Design Quality in Motion Inc. (2004), 47 B.L.R. (3d) 1 (S.C.J.).
[27] The dissenting judge also distinguished this court’s decision in Central Supply Co. (1972) Ltd., supra, on the basis that it dealt with a different issue – whether certain monies constituted trust funds under the CLA. She also concluded that Hubert v. Shinder was distinguishable from the case at bar on its facts and on the relevant provisions of the Mechanics’ Lien Act when compared with the similar provisions in the CLA.
[28] The dissenting judge considered the cases in other jurisdictions cited by the trial judge and concluded that each was distinguishable from the case at bar. See Beloit Canada Ltd., supra; Spears Sales & Service Ltd., supra; and Chubb Security Safes, supra.
[29] It is apparent that the dissenting judge took a different view of the evidence than the trial judge and, in particular, questioned his “undue emphasis on the alleged portability of the assembly line components.” [Emphasis in original.] In this respect, she said at paras. 101 and 102 of her reasons:
It appears to me, however, that the learned trial judge placed undue emphasis on the alleged portability of the assembly line components, particularly where the evidence indicated that the cost to remove them would be enormous (over $10 million) and given that the intention of the parties was a projection of at least eight years of use. Moreover, the issue of permanence constitutes only one factor to be considered in the determination of whether a claim for lien exists, and permanence itself is a flexible term. See, for example, Boomars, supra. [Emphasis in original.]
Finally, by concentrating on the matter of portability, Killeen J. may well have ignored important factors tending to show that the P221 project was viewed by the parties as a whole. For example:
The assembly line was included in the Target Agreement between Dana and Ford.
Dana issued purchase orders to Stantec to design the industrial building for expansion and to Rumble for the design, build and install of the assembly line on the same date, December 17, 2001. Moreover, though their work proceeded independently and at different times, both arms refer to the P221 Project.
Whereas the building expansion involved an expenditure of about $7 million, it cost approximately $44 million to design, build and install the assembly line.
The building designed for Dana was designed and built specifically to accom-modate the assembly line.
All parties including Dana and Stantec knew that the purpose of the new building was to house the assembly line to manufacture frames for the F150 trucks.
Though the construction of the building was substantially complete when Kennedy and its subtrades began the installation of the assembly line at St. Mary’s, a period of overlap existed where the building was completed and the assembly line was being installed in the St. Mary’s plant. Indeed, at page 4 of his judgment, Killeen J. stated:
The concrete history of the new F150 assembly line starts in the summer of 2002, roughly about the time of substantial performance of the building addition, although it is clear it was always part of the P221 Project or contract as far back as 2000. [Emphasis added by Chapnik J.]
[30] Chapnik J. also cited other evidence which she stated may have been ignored by the trial judge. She finished her review of the evidence as follows at para. 107:
The assembly line, as constructed, was proposed to last about eight years. Its various components were attached to the floor and hooked up to services in a massive and secure manner. In my view, the facts can lead to no other conclusion but that there was such a degree of substantial attachment between the installation and the premises, specifically built for this purpose, that a reasonable person would consider the premises to have been improved as a result of the installation of the assembly line at St. Mary’s.
[31] In completing her analysis, the dissenting judge concluded that, “the learned trial judge proceeded on a wrong principle and misapplied the law to the facts when he reached the conclusions he did.” Relying on Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, she held that the trial judge’s error “amounted to an extricable error in principle” which was subject to appellate review on a standard of correctness.
Kennedy’s Appeal
[32] Counsel for Kennedy relies on the dissenting reasons in the Divisional Court and urges us to adopt them. He raises the following specific grounds of appeal:
(i) The trial judge and the Divisional Court majority failed to consider the purpose of the construction lien legislation.
(ii) The courts below erred in failing to find that Kennedy provided services and materials in respect of an improvement and is therefore entitled to lien rights.
(iii) The courts below erred in concluding that there is appellate authority in Ontario to support the pro-position that the installation or repair of machinery used in a business operated in a building does not give rise to lien rights under the CLA.
(iv) The courts below erred in finding that the P221 Project assembly line was not sufficiently permanent to be an improvement.
(i) Did the trial judge and the Divisional Court majority fail to consider the purpose of the construction lien legislation?
[33] Counsel for Kennedy submits that the purpose of the CLA is to ensure that the owners of land do not receive the benefit of the labour of persons who performed work on their land but who are not in privity of contract with them without the protection of a construction lien. Counsel makes the general statement that in the absence of a lien right against Dana and given Rumble’s bankruptcy, Kennedy is without a remedy.
[34] The courts below were called upon to consider whether on the facts before them, Kennedy and Cassidy were entitled to a lien within the provisions of the CLA. There is nothing that either the trial judge or the Divisional Court majority said in their reasons suggesting that they did not understand the purpose of the legislation. Indeed, the trial judge made specific mention of the purpose of the legislation by referring to the report of the Attorney General’s Advisory Committee on the draft legislation and to this court’s reasons for judgment in Central Supply Co.
(ii) Did the courts below err in failing to find that Kennedy provided services and materials in respect of an improvement and is therefore entitled to a lien?
[35] For convenience, I repeat the CLA definition of improvement. Section 1(1) provides that improvement means:
(a) any alteration, addition or repair to, or
(b) any construction, erection or installation on, any land, and includes the demotion or removal of any building, structure or works or part thereof, and ‘improved’ has a corresponding meaning.
[36] Counsel observes that the CLA defines land as including “works” but does not define “works”. He then takes the definition of “works” from two legal dictionaries:
(a) works. 1. A mill, factory, or other establishment for manufacturing or other industrial purposes; a manufacturing plant; a factory. 2. Any building or structure on land. (Black’s Law Dictionary, 7th ed.)
(b) works…2. Includes all property, buildings, erections, plant, machinery, installations, materials, dams, canals, devices, fittings, apparatus, appliances and equipment… (Dictionary of Canadian Law, 2d ed.)
[37] From the above, counsel submits that both definitions of “works” include factories and plants, including the machinery and installations, such as assembly lines, located inside them. From that he reasons that the F-150 assembly line logically falls within the definition of improvement in the CLA.
[38] In support of this submission, counsel cites Re A.G. Simpson Co., [2002] O.J. No. 262 (S.C.J.). Rumble, who was also a party in that case, had done some removal and demolition of parts of an assembly line and constructed and installed replacement parts. Rumble argued that “the equipment supplied comes within the definition of ‘improve-ment under the Act and may be considered ‘works’ as that term is used in the definition, thereby entitling it to a lien.” However, the court did not decide the issue. It was raised on a summary judgment motion and the motion judge concluded only that there was a genuine issue for trial. The fact that the motion judge found that there was a genuine issue for trial does not decide the issue. I do not find that Re A.G. Simpson Co. advances Kennedy’s argument.
[39] As indicated above, counsel for Kennedy adopts the approach taken by the dissenting judge in the Divisional Court. In particular, he argues that the evidence at trial established that the assembly line was a “final and permanent structure which was an integral part of the addition.” As a result, he submits that the building addition and the assembly line constituted one single “improvement”.
[40] Counsel for Kennedy further submits that the case law[^1] holds that the following factors are relevant to deciding whether an installation is an improvement:
(a) Does the installation form an integral part of the building’s systems or components, notwithstanding that it could be removed?
(b) Was the installation done with “some idea of permanency”?
(c) Is it intended that the installation would remain in place so long as it can be used for its intended purpose or is economically viable?
(d) Is the installation connected to the property’s utilities?
(e) Can the installation be removed as a unit, or could it only be moved in pieces?
(f) Would re-assembling the installation be difficult, and would it depend on a suitable site being available?
(g) Has the building been designed especially to accom-modate the item being installed?
[41] Counsel for Kennedy submits that a careful application of the above factors results in a finding that the P221 project constitutes an improvement under the CLA and gives rise to a lien in favour of Kennedy.
[42] Central to the dissenting judge’s conclusion and to Kennedy’s argument is that the trial judge erred in finding that the assembly line was portable. Indeed the dissenting judge referred to its “alleged portability”. In my view, the finding of portability is a finding of fact and therefore on appellate review subject to a standard of palpable and overriding error. I do not agree that the trial judge committed palpable and overriding error in making this finding. There was evidence to support the finding. The assembly line had been built and disassembled before being transported to St. Marys for installation. The assembly line could be readily disconnected from the addition to the plant with no damage to the plant or its services. Moreover, Dana had a history of moving assembly lines from one plant to another. While a different judge may have come to another conclusion on the issue of portability, I am satisfied that it was open to the trial judge to reach the conclusion that he did.
[43] I also wish to address the dissenting judge’s observation that the trial judge may well have ignored important factors tending to show that the P221 project was viewed by the parties as an integrated whole. I do not agree. The trial judge’s reasons were thorough. He referred to factors that both favoured a finding that the building addition and the assembly were an integrated project and those that pointed in the other direction. In the end, he concluded that the two were not part of a single project. I am satisfied that this finding was open to him on the evidence.
(iii) Did the courts below err in concluding that there is appellate authority in Ontario to support the proposition that the installation or repair of machinery used in a business operated in a building does not give rise to lien rights under the CLA?
[44] In this branch of the argument, counsel for Kennedy, as did the dissenting judge in the Divisional Court, challenges the statement of the trial judge referred to above, which I repeat for the sake of convenience:
There is appellate authority in Ontario going back as far as 1952 in Ontario stating that the installation or repair of machinery used in a business operated inside a building does not give rise to lien rights.
[45] It appears that the dissenting judge in the Divisional Court has taken this statement to mean that there is a line of Court of Appeal cases since Hubert in 1952 which stand for the above proposition. There is clearly no such line. Indeed, the trial judge, after citing Hubert, referred to the 1981 New Brunswick Court of Appeal case in Beloit. He did not refer to any other Ontario Court of Appeal case in support of this proposition. Reading his judgment as a whole, I conclude that the trial judge was saying no more than that the Court of Appeal adopted this proposition in Hubert in 1952. The question remains, however, whether the trial judge’s assertion is correct insofar as it relates to Hubert.
[46] Hubert is a ten paragraph judgment. There were three issues in the appeal, only one of which relates to the issue before us. In Hubert, the claim for a lien under the Mechanics’ Lien Act, R.S.O. 1950, related to the connection of laundry machinery to the water and sewage systems of a building. The machinery had originally been installed in the building but had been damaged by fire and had been taken off site for repair. In finding that there was no legitimate claim for a lien, the court said at page 147:
The appellant next contended that the claims of the respon-dents Nesbitt and Erskine Smith & Company Limited are not for any work, service or material falling within the provisions of s. 5(1) of the Act. With great respect to the trial judge I am of the opinion that the evidence as to this particular work and the materials supplied does not support his finding that the same were such as to constitute a lien on the interest of the owner in the realty. While the building had been used for laundry purposes and was being so restored following a fire, nevertheless it is manifest from a perusal of the evidence that the work and material of these two claimants do not fall within the section of the Act establishing a lien.
The work and materials supplied by the respondent Nesbitt were performed and supplied jointly if not solely in the rehabilitation of the laundry machinery which had previously been installed in the building and which was damaged by the fire. This work was in the main completed off the premises in question. The claim of the respondent Erskine, Smith & Company Limited was for attaching the laundry machinery to the water and sewage systems already installed in the building on the premises. It was not a part of or an improvement to the building so as to constitute a lien. In this regard I respectfully believe the learned trial judge was in error. In my opinion the evidence clearly supports the contention that the materials supplied and the work in the installation of such materials were respectively moveables and work in the installation of moveables and neither could be classed as “used in the making, constructing, erecting, fitting, altering, improving or repairing of” the erection or building in question, as provided in s. 5(1).
[47] Section 5(1) of the Mechanics’ Lien Act provided:
…any person who performs any work or service upon or in respect of, or places or furnishes any materials to be used in the making, constructing, erecting, fitting, altering, improving or repairing of any erection, building, railway, land, wharf, pier, bulkhead, bridge, trestlework, vault, mine, well, excavation, fence, sidewalk, pavement, fountain, fishpond, drain, sewer, aqueduct, road-bed, way, fruit or ornamental trees, or the appurtenances to any of them for any owner, contractor, or subcontractor, shall by virtue thereof have a lien for the price of the work, service or materials.
[48] It is not difficult to distinguish Hubert and the other cases relied upon by the trial judge from the case at bar both on the facts and in respect of the relevant statutory provisions where a different statutory provision is in issue. That said, what emerges from the brief reasons of the Hubert case is that a mechanics’ lien will not arise where the work and materials have been applied in respect of an installation that is moveable (i.e. portable) and not an integral part of the building. A moveable installation does not improve the building in which it is located as it does not become a part of the building.
[49] A useful case that gives support to this approach is the judgment of this court in A.J. (Archie) Goodale Ltd. v. Risidore Brothers Ltd. (1975), 8 O.R. (2d) 427 where Howland J.A. said in obiter at p. 432:
In the present case Goodale alleged in its statement of claim a contractual obligation on its part to take apart, remove and transport all the machinery, equipment and chattels from Valve’s premises in Dundas to the Richmond Hill lands where they were to be installed. The work of installation might have been sufficiently extensive in scope to constitute improving the plant so as to give rise to a claim for lien. It was only after the evidence was heard by the Master that it was determined that the work was not such as would give rise to a claim for lien, but constituted work in the installation of moveables. In this respect it is similar to Hubert v. Shinder, supra, where a personal judgment was granted in parallel circumstances.
[50] I would hesitate to derive from Hubert the general proposition articulated by the trial judge. I think it is too broad. Each case will depend on its facts. In most cases, the installation or repair of machinery used in a business operated in a building, particularly where the machinery is portable, will not give rise to lien rights under the CLA. On the other hand, where machinery is installed in a building for the use of a business and is completely and permanently integrated into the building, a lien claim will arise. However, based on the findings of fact made by the trial judge in this case, it was open for him to find that no lien claim arose.
[51] Counsel for Kennedy submits that the majority of decisions dealing with lien rights in respect of the installation or repair of machinery used in a business support Kennedy’s position. He referred to the following cases:
(i) Re IBL Industries Ltd., supra – supply of parts for an emission control system;
(ii) Stacey Heating and Plumbing Supplies Ltd. v. Tamasi (1988), 65 O.R. (2d) 481 – the installation of two air conditioning units placed on a roof of a building and connected to the duct work;
(iii) Stirn v. Vancouver Arena Co. Ltd., [1932] B.C.J. No. 72 (Co. Ct. Vancouver) – a temporary race track installed in an arena for a six-day bicycle race;
(iv) V.A.W. Manufacturing Ltd. v. Electric Furnace Products Company Ltd., [1984] A.J. No. 892 (Q.B. Master) – the supply of nuclear vane separators and related equipment for an ethylene glycol process-sing plant; and
(v) Wolfedale Electric Ltd., supra – electrical work on a scrap shuttle car which enabled a rail system to function.
[52] My review of the above cases and indeed a number of the other cases cited by counsel on both sides of this issue is that they are fact-driven. Whether they fall within the definition of improvement is essentially a fact-finding exercise. While a trial judge must apply the statutory definition of “improvement” to the evidence and he or she is therefore engaged in deciding a question of mixed fact and law, the factual determination is by far the more significant element in the exercise.
[53] Although I have said that the trial judge’s articulation of the law from Hubert and other cases is too broadly stated, I do not conclude that he committed reversible error. His detailed review of the evidence and resulting findings of fact support his conclusion that the F-150 assembly line did not meet the definition of an improvement under the CLA. In my view, based on those findings of fact, he was justified in reaching the conclusion that he reached.
(iv) Did the courts below err in finding that the P221 project assembly line was not sufficiently permanent to be an improvement?
[54] This branch of the argument appears to flow directly from the discussion concerning portability. Counsel for Kennedy cites two British Columbia Court of Appeal cases in respect of the permanency factor. In Boomars Plumbing & Heating Ltd., supra, the court held that modular units previously used in construction camps and installed on vacant land for use as a motel constituted improvements under the B.C. legislation. The units were installed without any foundation and secured by their own weight. In discussing the issue of permanency, the court said:
“permanent” is a relative term which does not necessarily involve remaining in the same state and place forever or for an indefinitely long period. It is used in contradistinction to “occasional”. If the thing is intended to remain in place so long as it serves its purpose, that satisfies the element of permanency.
[55] In the second case, Deal S.r.l., supra, the court held that the supply of moulds that were used to form concrete components for a rapid transit project constituted an improvement and that the material supplier had a right to claim a lien. In addressing the issue of permanency, the court said:
Moreover, it is clear that the moulds were intended to be in place for at least the duration of the project which, in the context of this case and the purpose of the moulds and the shed, is a substantial time sufficient to satisfy the require-ments of the definition.
[56] Counsel for Kennedy submits that the definition of “improvement” in the B.C. statute is narrower than the Ontario definition yet the court was able to find in both the above cases that lien rights attached to these installations.
[57] Counsel for Kennedy also relies on the following excerpt from Construction Lien Remedies in Ontario (2d ed.), by Kevin Patrick McGuiness at pp. 62-63:
Moreover, there is case law which clearly suggests that the permanence of a structure erected or installed is only one of a number of criteria that may be considered in deciding whether a premises has been improved. Thus it has been held that the mere fact that a building or structure may be removed in some way is not in itself sufficient to prevent its construction from being considered to be an improvement. Modern engineering techniques permit virtually every structure to be removed from one site and re-assembled elsewhere. The key question in many cases is to decide whether the installation of a particular thing has caused a sufficient change to be made to the premises so that its installation has enhanced the value, beauty or utility of the premises itself. The fact that the thing installed has not become completely or irreversibly affixed to the land on which it sits is not necessarily conclusive of the question of whether the premises have been improved (although the installation of a fixture will clearly give rise to a lien). The court may also consider whether there is such a degree of substantial attachment between the thing installed and the premises on which the installation was made, that a reasonable person would consider the premises to have been improved as a result of the installation. Although this is a difficult test to satisfy, provided it is satisfied then even a temporary structure may be seen to constitute an improve-ment. [Footnotes omitted.]
[58] At the risk of repeating myself, what I take from both the B.C. cases and the excerpt from the learned author is that the approach to what is or is not an improvement essentially involves a fact finding exercise.
[59] I would not give effect to this ground of appeal.
Cassidy’s Appeal
[60] Counsel for Cassidy raises essentially the same arguments as does counsel for Kennedy. In addition to the many authorities cited by counsel for Kennedy, counsel for Cassidy relies upon a critique of the trial judge’s decision contained in a paper by John Margie & Martin Rotterdam, “Recent Developments in Construction Lien Law”, presented to the Ontario Bar Association – Continuing Legal Education, October 7, 2005. The authors of the paper give the following critique of the trial judge’s decision at pages 6 and 7:
The Kennedy decision is problematic. The main problem is the court’s refusal to regard the entire project as an integrated project. While it may very well be true that the building addition that housed the line would not be damaged if the line were removed, the fact is that without the line, the building itself would be useless and be of no value. The building was built for the sole purpose of housing the line. While it would surely constitute an “improvement” with the line in it, it would be nothing but an empty shell without it. There is a world of difference between installing an immensely complex robotic assembly line in a building built specifically for that purpose and repairing and reinstalling washing machines which had been previously installed in a building, as was the case in Hubert v. Shinder, the Ontario Court of Appeal case relied upon by the court in Kennedy. In Beloit, another case relied upon by the court, it was held that there was no evidence that the machine in question was furnished with the intention that it form part of the building. Again, in Kennedy, not only was the line supposed to form part of the building, the sole purpose of the building was to house the line. Why then differentiate between the two? Why not treat it as an integrated project?
As for the argument that the line was intended solely to enhance the manufacturing process or used solely for the operation of a business inside the building, is the same not true for the building addition itself? Presumably, any commercial project is built for the operation of a business. What about work done by or on behalf of a commercial tenant? Under standard leases, upon termination of a lease, a tenant has to leave the premises behind as they were when the tenant first moved in. The sole purpose of work done by tenants is to improve the operation of the business conducted inside the building. Should such work therefore generally be unlienable?
[61] When the authors of the above paper say that the main problem is the court’s refusal to regard the entire project as an integrated project they are, in effect, saying that the trial judge made an error in his finding of facts. As I have already said, I am satisfied that the trial judge was justified in making such a finding even though another judge may have come to a different conclusion. As an appellate court, we are bound by a long line of cases, including Housen, supra, that prevents us from interfering with findings of fact by a trial judge, or indeed findings of mixed fact and law, in cases such as this, unless we can find palpable and overriding error.
[62] I do not agree with the authors of the paper when they say that the building addition would be useless and of no value without the F-150 assembly line. There is simply no evidence to support that conclusion. The suggestion that without the assembly line, the building would be nothing but an empty shell is mere speculation. Dana has been involved in the automobile manufacturing business for many years and is presumably in a position to use the building addition for other purposes if it decides to do so.
[63] In the second paragraph of the above quotation the authors of the paper appear to suggest that the trial judge’s theory concerning the lienability of machinery used in a business is too broadly stated. In my view, they carry the analysis beyond the point suggested by the trial judge when they apply it to the building itself. However, as I have said, I accept that the trial judge’s theory is too broadly stated. I have also said that in this case, given the findings of fact of the trial judge, I cannot conclude that the trial judge erred in the result.
[64] Counsel for Cassidy advances one additional argument. He submits that the work that Cassidy did in St. Marys is traditionally lienable work and, even though Cassidy did this work as a subcontractor of Kennedy, it should be entitled to a construction lien irrespective of the entitlement of Kennedy.
[65] The lienable work that Cassidy refers to is the supply and installation of 2,000 to 3,000 chemical and mechanical anchors to the floor. In addition, Cassidy painted lines on the floor to establish the location of the assembly line within the building. Counsel further submits that its work physically altered the building and constituted an “improvement” under the CLA.
[66] Counsel for Dana responds to the above argument by referring to the evidence of the president of Cassidy who, in cross-examination at trial, testified that in its subcontract work it neither altered the building nor modified the floor.
[67] In my view, the work carried out by Cassidy was part and parcel of the work carried out by Kennedy and I see no basis to treat it any differently. I would not give effect to this argument.
Disposition
[68] For the reasons above, I would dismiss both appeals.
Costs
[69] I would award costs in favour of Dana for the motions for leave to appeal and the appeals on a partial indemnity scale fixed in the total sum of $18,500 inclusive of disbursements and GST. The appellants shall each be responsible for fifty per cent of the costs.
RELEASED:
“SEP 27 2007” “Robert P. Armstrong J.A.”
“DOC” “I agree Dennis O’Connor A.C.J.O.”
“I agree R.G. Juriansz J.A.”
[^1]: See Stacey Heating and Plumbing Supplies Ltd. v. Tamasi (1988), 65 O.R. (2d) 481 at 490 (H.C.J.), revd on other grounds (1991), 6 O.R. (3d) 341 (C.A.); Re IBL Industries Ltd., supra; 469804 Ontario Ltd., supra; Boomars Plumbing & Heating Ltd., supra.