TRS Components Ltd. v. Devlan Construction Ltd. et al.

[Indexed as: TRS Components Ltd. v. Devlan Construction Ltd.]

Ontario Reports

Court of Appeal for Ontario,

Gillese, van Rensburg and Pardu JJ.A.

April 29, 2015

125 O.R. (3d) 161 | 2015 ONCA 294

Case Summary

Construction law — Appeals — Motion judge discharging lien, dismissing construction lien action, and ordering that counterclaim for damages for breach of contract and negligence proceed to trial — Motion judge not ordering that trial proceed as ordinary action under Rules of Civil Procedure — Trial judge granting judgment on counterclaim — Judgment on counterclaim constituting judgment under Construction Lien Act for purposes of s. 71(1) of Act — Appeal lying to Divisional Court — Construction Lien Act, R.S.O. 1990, c. C.30, s. 71(1) — Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

The motion judge discharged the plaintiff's construction lien and dismissed its action. The order provided that it was without prejudice to the defendant's rights to enforce its counterclaim for damages for breach of contract and negligence "in the trial herein", and ordered that the counterclaim proceed to trial. The trial judge granted judgment on the counterclaim. The plaintiff appealed to the Court of Appeal. The defendant brought a motion to quash the appeal for want of jurisdiction.

Held, the motion should be granted.

Section 71(1) of the Construction Lien Act provides that "an appeal lies to the Divisional Court from a judgment or an order on a motion to oppose confirmation of a report under [the] Act". "[J]judgment . . . under this Act" in s. 71 includes a judgment granted in an action commenced and continued under Part VIII of the Act, including any counterclaim, cross-claim or third party claim, unless the action or any part of the action is removed from the construction lien proceeding and directed to proceed under the Rules of Civil Procedure. The motion judge did not direct that the trial of the counterclaim proceed on the "ordinary" track. The dismissal of the lien claim did not automatically remove the counterclaim from the construction lien proceeding. The failure to take certain procedural steps that are normally taken before the trial of a construction lien action did not take the mater outside of the construction lien procedure. The Divisional Court had exclusive jurisdiction over the appeal.

Teepee Excavation & Grading Ltd. v. Niran Construction Ltd. (2000), 2000 3447 (ON CA), 49 O.R. (3d) 612, [2000] O.J. No. 2554, 189 D.L.R. (4th) 210, 133 O.A.C. 247, 4 C.L.R. (3d) 193, 98 A.C.W.S. (3d) 23 (C.A.); Villa Verde L.M. Masonry Ltd. v. Pier One Masonry Inc. (2001), 2001 7060 (ON CA), 54 O.R. (3d) 76, [2001] O.J. No. 1605, 144 O.A.C. 136, 104 A.C.W.S. (3d) 1005 (C.A.), consd

Other cases referred to

211417 Ontario Inc. (c.o.b. Glasstrade) v. Stadia Industries Ltd., [2014] O.J. No. 2571, 2014 ONSC 3221, 14 C.B.R. (6th) 1, 32 C.L.R. (4th) 77, 241 A.C.W.S. (3d) 273 (S.C.J.); 986506 Ontario Ltd. (c.o.b. Grand Homes) v. Pringle, [2003] O.J. No. 5934, 30 C.L.R. (3d) 286 (S.C.J.); Arcon Group Inc. v. 1371344 Ontario Ltd., [2004] O.J. No. 5563, 36 C.L.R. (3d) 125 (S.C.J.); DCL Management Ltd. v. Zenith Fitness Inc., [2010] O.J. No. 5816, 2010 ONSC 5915, 97 C.L.R. (3d) 159, 197 A.C.W.S. (3d) 828 (S.C.J.); Pineau v. Kretschmar Inc., [2004] O.J. No. 396, 37 C.L.R. (3d) 29, 129 A.C.W.S. (3d) 30 (S.C.J.); [page162] Steeplejack Services (Sarnia) Ltd. v. Davis, [1990] O.J. No. 3149, 43 C.L.R. 66 (H.C.J.)

Statutes referred to

Construction Lien Act, R.S.O. 1990, c. C.30, Part II, s. 46(1), Part VIII, ss. 50(2), 51 [as am.], 55(2)(a), 60(4), 67, (3), 71, (1), 71(3)(b)

Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 6(1) (b) [as am.], 110

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194

MOTION to quash an appeal from the judgment of Flynn J., [2014] O.J. No. 3619, 2014 ONSC 4528 (S.C.J.) for lack of jurisdiction.

Robert J. Kennaley and Darcia Perry, for moving party.

John Margie, for responding party.

BY THE COURT: --

Introduction

[1] This is a motion to quash an appeal for want of jurisdiction. For the reasons that follow, we conclude that, as the judgment under appeal is a judgment under the Construction Lien Act, R.S.O. 1990, c. C.30 (the "Act"), the proper route for appeal is to the Divisional Court. We are exercising our discretion to transfer the appeal to that court pursuant to s. 110 of the Courts of Justice Act, R.S.O. 1990, c. C.43.

Facts

[2] On October 15, 2010, the appellant, TRS Components Ltd. ("TRS"), registered a construction lien in relation to unpaid invoices for labour and materials supplied for the construction of a church in Waterloo, Ontario. It then commenced an action against the respondent Devlan Construction Ltd. ("Devlan"), seeking to enforce the lien claim under the Act. Devlan delivered a statement of defence and counterclaim, in which it alleged that TRS's work was incomplete or deficient, and claimed damages for breach of contract and negligence. The action was listed for trial and scheduled to be tried for three weeks in November 2013.

[3] Devlan brought a motion to have TRS's claims dismissed as a result of its failure to answer undertakings and refusals. On September 6, 2013, Parayeski J. ordered that TRS's lien be discharged and its action dismissed. The order provided that it was without prejudice to Devlan's rights "to proceed to enforce its counterclaim in the trial herein", and ordered that the counterclaim "be allowed to proceed and . . . not be struck from the [page163] trial list without further Order of [the] Court unless discontinued by Devlan".

[4] The trial of the counterclaim took place over two days in November 2013 and continued for four days in June 2014. On July 30, 2014, Flynn J. granted judgment on the counterclaim in the sum of $69,432 plus interest.

[5] TRS appealed the judgment on the counterclaim to this court, perfecting its appeal in January 2015. Devlan brought this motion to quash the appeal for want of jurisdiction.

Issue on the Motion

[6] Section 6(1)(b) of the Courts of Justice Act provides that an appeal lies to the Court of Appeal from a final order of a judge of the Superior Court of Justice, except an order from which an appeal lies to the Divisional Court under another Act. Section 71(1) of the Act provides that "an appeal lies to the Divisional Court from a judgment or an order on a motion to oppose confirmation of a report under [the] Act".

[7] Accordingly, the issue is whether Flynn J.'s judgment on the counterclaim is a "judgment . . . under" the Act. If it is, the appeal lies to the Divisional Court, and was not properly brought in this court.

Positions of the Parties

[8] Devlan submits that the judgment under appeal was a "judgment . . . under [the] Act" because it was obtained in construction lien proceedings. The Act provides that all claims asserted by a party will proceed in the same construction lien proceedings. The discharge of the lien and the dismissal of the lien claim did not change the character of the proceedings; indeed, the title of proceedings remained the same. The matter proceeded on the construction lien track, as there was no order transferring the matter to the ordinary track, to be determined in accordance with the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the "Rules"), instead of the specialized and summary construction lien procedure.

[9] TRS contends that, once its lien was discharged and its lien action dismissed, the proceedings were no longer governed by the Act, and the judgment obtained on Devlan's counterclaim was not a judgment under the Act. At trial, no relief, remedy or determination was requested by either party under the Act. Neither the judgment nor the reasons for judgment refer to the Act. TRS points to the fact that certain steps typically required prior to a construction lien trial were not taken: Devlan did not deliver a notice of trial as required by s. 60(4) of the Act; and [page164] no one filed an up-to-date abstract of title showing all deleted instruments or execution or bankruptcy searches.

Analysis

[10] In our view, the judgment under appeal is a "judgment . . . under [the] Act", and is subject to appeal to the Divisional Court. We reach this conclusion on the following analysis.

[11] Part VIII of the Act provides for a summary procedure for the determination of construction lien proceedings. As Carthy J.A. noted in Teepee Excavation & Grading Ltd. v. Niran Construction Ltd. (2000), 2000 3447 (ON CA), 49 O.R. (3d) 612, [2000] O.J. No. 2554 (C.A.), at para. 12:

The Construction Lien Act serves a specialized purpose in a narrow field. A lien claimant may commence an action, provide shelter for other claimants, obtain a form of execution before judgment, and proceed to trial in summary fashion without production of documents, discovery or other interlocutory steps except by leave. A plaintiff may join with a lien claim a claim for breach of contract and a defendant may counterclaim in respect of any claim against the plaintiff. There may also be cross-claims and third party claims. There are no appeals from interlocutory orders.

[12] The Courts of Justice Act and Rules apply to pleadings and proceedings under the Act, except to the extent they are inconsistent with the Act: s. 67(3) [of the Act].

[13] In response to an action to enforce a lien, a defendant may assert a counterclaim, cross-claim or third party claim. Section 55(2)(a) of the Act provides that a defendant in an action may counterclaim against the person who named the defendant as a defendant in respect of any claim that the defendant may be entitled to make against that person, whether or not that claim is related to the making of the improvement. Devlan asserted its counterclaim in the construction lien proceedings commenced by TRS. It did not seek the enforcement of a lien; rather, it claimed damages for breach of contract and negligence.

[14] Under s. 51 of the Act, the court hearing the action has broad authority to "try the action, including any . . . counterclaim", and to do everything necessary to finally dispose of it. In accordance with these provisions, Devlan's counterclaim, which was asserted in response to TRS's lien claim, proceeded within the lien action, to be tried and disposed of within that action.

[15] Both parties refer to a decision of this court, Villa Verde L.M. Masonry Ltd. v. Pier One Masonry Inc. (2001), 2001 7060 (ON CA), 54 O.R. (3d) 76, [2001] O.J. No. 1605 (C.A.), with respect to the interpretation of "judgment" as used in s. 71(1) of the Act. In that case, the respondent had obtained judgment on a trust claim asserted under Part II of the Act. Subsection 50(2) prohibits the joinder of [page165] a trust claim with a lien claim, so the trust claims were asserted in a separate action, although tried at the same time as the related construction lien action. This court held that the judgment determining the trust claim was a judgment under the Act for the purpose of s. 71(1). Rosenberg J.A. stated, at para. 7, "I can see no basis for giving the word 'judgment' a restrictive meaning so that it relates only to a judgment on a lien claim. There is nothing in the Construction Lien Act that suggests such an unusual interpretation."

[16] TRS contends that Villa Verde stands for the proposition that it is the substantive claim in the action that determines the route of appeal, and not the fact that the proceedings were commenced under the Act.

[17] We do not agree that Villa Verde should be interpreted in this narrow fashion. The only issue in that case was the route of appeal of a judgment in a proceeding involving a trust claim brought under Part II of the Act, which was tried at the same time as a lien claim brought under Part III. Because the judgment involved substantive claims under the Act, it resulted from a proceeding under the Act. While the court observed, at para. 1, that "an appeal involving only proceedings under the [Act] is to be brought in the Divisional Court", the case did not address the full scope of "proceedings under the Act". In particular, Villa Verde did not address whether a judgment on a counterclaim in a lien action is a judgment in "a proceeding under the Act".

[18] In our view, "judgment . . . under this Act" in s. 71 includes a judgment granted in an action commenced and continued under Part VIII of the Act, including any counterclaim, cross-claim or third party claim, unless the action or any part of the action is removed from the construction lien proceeding, and directed to proceed under the Rules.

[19] This interpretation is supported, not only by s. 51 of the Act, referred to above, but also by the decision of the High Court of Justice in Steeplejack Services (Sarnia) Ltd. v. Davis, [1990] O.J. No. 3149, 43 C.L.R. 66 (H.C.J.). That case involved the specific provision in the Act that prohibits appeals from interlocutory orders (now s. 71(3)(b)). A defendant in a construction lien action counterclaimed for goods alleged to have been wrongfully seized. He brought a motion for return of the goods, which was dismissed. The defendant attempted to appeal, and was confronted with the equivalent of the current s. 71(3)(b). In quashing the appeal, Austin J. rejected the argument that the counterclaim was a separate action outside the construction lien proceedings. He stated, at p. 67 C.L.R., that "although it is [page166] a separate action, by virtue of its being brought as a counterclaim in an action under the Act, it is governed by the provisions of the Act".

[20] TRS contends that the dismissal of the lien claim removed the counterclaim from the construction lien proceedings that were commenced under Part VIII, and from the ambit of the Act. We disagree. In our view, where a lien is discharged, the court may then order that the remainder of the action proceed on the "ordinary" track. However, unless such an order is made, the trial of the action or any part of the action commenced under the Act will proceed under the Act, and will result in a "judgment . . . under [the] Act" within the meaning of s. 71(1).

[21] In Teepee Excavations, the plaintiff's lien claim was dismissed as expired, because it was not set down for trial within two years. Under s. 46(1) of the Act, where the lien has expired, the court is required to dismiss "the action to enforce that lien". The issue in Teepee was whether the plaintiff's contract claim could continue under the Act, once its lien claim had been dismissed.

[22] Carthy J.A. observed, at paras. 24 and 25:

The broad purpose of the legislation is to provide an efficient means of dealing with trade claimants that would otherwise be left behind without security if unpaid on a building project where payments typically flow from above and follow performance. On a failing or failed project, there may be many such claimants. In setting down the rules, the Act does not go so far as to restrict claims thereunder to lien claims. Contract claims by the plaintiff and counterclaims of any kind are permitted, presumably to avoid duplication of proceedings . . . [T]he Act should not be available as a subterfuge for pursuing an ordinary action by summary procedure; but where all of the steps have been taken and a conclusion reached at a hearing, the court should not dismiss the action for lack of a lien claim and thus compel a further proceeding concerning the same issue. The same reasoning suggests that the court has available the discretion to dismiss or to permit the action to proceed without the lien claim, as the circumstances dictate.

All of the arguments against denying a defendant the procedures and protections of the usual form of litigation can be answered by the court's discretion under s. 47(1) (d) to dismiss the action because the defendant will be prejudiced or because little has transpired in the action that would be duplicated or by imposing conditions for continuance to assure protection of the defendant. The legislature intended more than claims for liens to be litigated in lien claim actions and that intention is best served by an interpretation of s. 46(1) and s. 47(1) (d) that leaves it to the court to monitor the interests of the parties and the procedure to be followed.

[23] According to Teepee, when a lien action is dismissed, the court has the discretion to determine whether to allow the contract claims to proceed at all, and the procedure that will be followed. See, also, various decisions of Master D.H. Sandler, confirming that, where the court allows a contract claim to [page167] proceed after a lien claim is dismissed, the court may decide whether the Act's procedures apply. For instance, in 211417 Ontario Inc. (c.o.b. Glasstrade) v. Stadia Industries Ltd., [2014] O.J. No. 2571, 2014 ONSC 3221, 32 C.L.R. (4th) 77 (S.C.J.), Master Sandler remarked as follows, at para. 51:

[I]n such a case, the court could transfer the contract action to the Small Claims Court if the claim was under $25,000, or it could direct that it proceed as an ordinary Superior Court action but possibly be governed by the Rule 76 Simplified Procedure if the claim was between $25,000 and $100,000, or it could direct that it proceed as an ordinary action and be governed by the general Rules of Civil Procedure without any reference to the Simplified Procedure if the claim was in excess of $100,000, or it could even direct that the contract claim would continue within the framework of the statement of claim in the now-dismissed lien action, with judgment to be given pursuant to s. 63, and still to be governed by the procedure under the Construction Lien Act, and, in particular, procedural sections 51-63, 67, and 71.

See, also, DCL Management Ltd. v. Zenith Fitness Inc., [2010] O.J. No. 5816, 2010 ONSC 5915, 97 C.L.R. (3d) 159 (S.C.J.), at para. 35; Pineau v. Kretschmar Inc., [2004] O.J. No. 396, 37 C.L.R. (3d) 29 (S.C.J.), at para. 82; Arcon Group Inc. v. 1371344 Ontario Ltd., [2004] O.J. No. 5563, 36 C.L.R. (3d) 125 (S.C.J.), at para. 17; and 986506 Ontario Ltd. (c.o.b. Grand Homes) v. Pringle, [2003] O.J. No. 5934, 30 C.L.R. (3d) 286 (S.C.J.), at para. 2. These cases contemplate that, when a lien is discharged, and the lien action dismissed, the court may make an order to determine whether or not the remaining claims will proceed under the Act.

[24] In this case, the action proceeded under the Act's regime. When TRS did not provide answers to undertakings, Devlan brought a motion, seeking as part of its relief leave to bring the interlocutory motion, as required by s. 67 of the Act. When Devlan moved to strike TRS's claim, the action was already on the trial list. Parayeski J., in dismissing the lien action, ordered that the counterclaim proceed "in the trial herein", that is, the construction lien trial that was already scheduled to proceed in November. He also ordered that the counterclaim "be allowed to proceed", but did not order that it would proceed under the Rules. The dismissal of the lien claim did not automatically remove the counterclaim from the construction lien proceeding; to the contrary, the counterclaim continued in the original construction lien action, with the same title of proceedings.

[25] Finally, we turn to TRS's argument that, as certain procedural steps normally taken before the trial of a construction lien action were not taken, the matter proceeded under the Rules and not under the Act. We agree with Devlan that the failure to take certain procedural steps typically required before [page168] a construction lien trial does not take the matter outside of the construction lien procedure. The requirement to deliver a notice of trial is a formality intended to ensure notice to the participants at a trial. In the present case, when the construction lien claim was struck, a trial date had already been set, and both parties attended at trial. The other two procedural steps referred to by TRS, while relevant to a trial of a construction lien claim, would not apply in any event to the trial of a counterclaim based on breach of contract and negligence, in which no lien rights are asserted.

[26] It is therefore our conclusion that, in the absence of an order directing that the proceeding is to continue as an ordinary action, the appeal of a judgment in a construction lien proceeding, whether or not in respect of a lien claim, and including any counterclaim, is subject to s. 71(1) of the Act. Accordingly, the Divisional Court has exclusive jurisdiction over the appeal.

Disposition

[27] The Divisional Court has exclusive jurisdiction over this appeal. In the present circumstances, where there was an arguable question on the issue of jurisdiction, it is appropriate to transfer the appeal to the Divisional Court under s. 110 of the Courts of Justice Act. Costs, as agreed between the parties, are fixed at $3,000, inclusive of applicable taxes and disbursements, in favour of Devlan, the moving party.

Motion granted.

End of Document