Court of Appeal for Ontario

Date: 2024-05-23 Docket: COA-23-CV-0084 Judges: Miller, Harvison Young and Thorburn JJ.A.

In the Matter of: an adjudication for Ontario Dispute Adjudication for Construction Contracts (ODACC) pursuant to the Construction Act, R.S.O. 1990, c. C.30 as amended.

Between: MGW-Homes Design Inc., Plaintiff (Appellant)

And: Domenic Pasqualino, Defendant (Respondent)

Counsel: John Margie and Jay Nathwani, for the appellant Krista Chaytor and Carlo Pasqualino, for the respondent

Heard: October 13, 2023

On appeal from: the order of Justice Erika Chozik of the Superior Court of Justice, dated January 16, 2023, with reasons reported at 2023 ONSC 411.

Reasons by: Harvison Young J.A.

[1] The appellant, MGW-Homes Design Inc. (“MGW”), appeals from an order vacating a writ of enforcement issued in connection with an adjudicator’s determination under the Construction Act, R.S.O. 1990, c. C.30. As a preliminary issue, MGW raised the issue of whether this court has jurisdiction to hear the appeal. The answer to that question turns on whether, under s. 71(1) of the Construction Act, the order appealed from constitutes a “judgment”. If it does, the appeal lies to the Divisional Court.

[2] At the oral hearing, the appeal was dismissed with reasons to follow. These are those reasons.

[3] In short, a review of the case law indicates that this court has consistently interpreted the term “judgment” in s. 71(1) broadly: see Villa Verde L.M. Masonry Ltd. v. Pier One Masonry Inc. (2001), 54 O.R. (3d) 76 (C.A.); TRS Components Ltd. v. Devlan Construction Ltd., 2015 ONCA 294, 125 O.R. (3d) 161. Applying that approach here, I would find that the order under appeal falls within the meaning of “judgment” in s. 71(1) of the Construction Act.

FACTS

[4] The facts of this case are not in dispute and may be briefly reviewed.

[5] MGW is a contractor who performed work and supplied materials in relation to Mr. Pasqualino’s home. After a dispute arose between the parties, MGW registered a Claim for Lien in the amount of $169,184.94 and subsequently issued a statement of claim. Mr. Pasqualino paid $211,481.18 into court as security ($169,184.94 plus $42,296.24 for security for costs) and the lien was vacated. Mr. Pasqualino delivered a statement of defence and counterclaim.

[6] Under Part II.1 of the Construction Act, MGW sought a construction dispute interim adjudication. Adjudication is a relatively new procedure available under the Construction Act that came into force in 2019, allowing parties to seek an interim adjudication on designated issues.

[7] Under s. 13.15 of the Construction Act, the adjudicator’s determination is binding on the parties until a determination of the matter by a court, an arbitration, or a written agreement between the parties is made.

[8] Under s. 13.20 of the Construction Act, a party to an adjudication may file a certified copy of the adjudicator’s determination with the court and, on filing, upon notice to the other party within 10 days, the determination is enforceable as if it were an order of the court.

[9] Both parties participated in the adjudication. The adjudicator made a determination that Mr. Pasqualino had to pay MGW $119,314, inclusive of HST. Mr. Pasqualino did not pay this amount. Instead, he sought and was denied leave to judicially review the determination pursuant to s. 13.18 of the Construction Act: see Pasqualino v. MGW-Homes Design Inc., 2022 ONSC 5632.

[10] Around the same time, MGW filed the adjudicator’s determination with the court within the deadline prescribed in s. 13.20(2) of the Construction Act. However, MGW failed to give notice to Mr. Pasqualino as required pursuant to s. 13.20(3) of the Construction Act. MGW obtained a writ of enforcement from the court.

[11] Mr. Pasqualino brought a motion to vacate the writ because MGW had failed to give the required notice. The motion judge allowed the motion.

[12] The motion judge found that the failure to give notice of filing the adjudicator’s determination with the court was fatal to the writ. She ordered that the writ be vacated and that MGW be barred from re-filing any writs of execution or taking any other enforcement steps in connection with the adjudicator’s order. She also ordered costs in the amount of $5,000 payable to Mr. Pasqualino. These are the orders that the appellant seeks to appeal.

ISSUES

[13] MGW raised two substantive arguments on appeal: first, that the motion judge erred in finding that the notice requirement in s. 13.20(3) of the Construction Act is a precondition to enforcement of the writ; and second, that the motion judge erred in finding that the failure to give notice barred MGW from taking any other enforcement steps.

[14] However, as a preliminary issue, MGW raised a jurisdictional question of whether the appeal was properly before this court or whether it should be heard by the Divisional Court. Given that adjudication is new to the Construction Act, MGW noted that the jurisdictional issue is “novel” and, as a result, it perfected its appeal in both the Divisional Court pursuant to s. 71(1) of the Construction Act and this court pursuant to s. 6(1)(b) of the Courts of Justice Act, R.S.O. 1990, c. C.43 (the “CJA”). The appeal before the Divisional Court was scheduled to be heard on October 16, 2023, shortly after the hearing in this court.

[15] Section 71 of the Construction Act contains the statute’s only appeal provision:

71 (1) Except as otherwise provided in this section, an appeal lies to the Divisional Court from a judgment or an order on a motion to oppose confirmation of a report under this Act.

(3) No appeal lies from an interlocutory order made by the court, except with leave of the Divisional Court.

[16] The issue is whether the order appealed from falls within the definition of “judgment” in this provision.

[17] MGW argues that the term “judgment” should be interpreted broadly and, as a result, the appeal should be heard by the Divisional Court. In its factum and in oral submissions, MGW relied on Villa Verde and TRS for the following propositions:

1. A final order is the same as “judgment” under s. 71(1) of the Construction Act;
2. This court has interpreted “judgment” broadly so that it does not just apply to construction liens, but also applies to trust claims; and
3. This court has interpreted that a judgment on a counterclaim which was neither a lien nor a trust, but still arose from a proceeding brought under the Construction Act, was still a “judgment” for purposes of s. 71(1).

[18] Taking these propositions into account, MGW argues that this court should interpret “judgment” broadly here to include the final order at issue in this case, which is an order from a proceeding under the Construction Act, namely an adjudication.

[19] Mr. Pasqualino disagrees, arguing that the adjudication process and the court or arbitration process are separate and parallel legal proceedings allowed under the Construction Act. Mr. Pasqualino submits that the motion judge’s order (which is separate from the adjudication decision) should be considered a “final order” because it extinguishes a “substantive right” and should therefore be heard by this court.

[20] In oral submissions, counsel for Mr. Pasqualino argued that s. 71(1) of the Construction Act is an exception to the normal appeal route under s. 6(1)(b) of the CJA and should therefore be interpreted narrowly. Counsel for Mr. Pasqualino argued that Villa Verde and TRS are distinguishable because those cases related to liens (and proceedings related to liens), which have their own procedure under Part VIII of the Construction Act. In contrast, this case was an adjudication under Part II.1, which has a separate procedure.

[21] In reply, MGW pointed out that Villa Verde was about a trust claim and would not have followed the procedure under Part VIII.

ANALYSIS

[22] The broad purpose of the Construction Act has been described as providing “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”: Teepee Excavation & Grading Ltd. v. Niran Construction Ltd. (2000), 49 O.R. (3d) 612 (C.A.), at para. 24. Lower court case law also reflects the general sense that efficiency – both financial and temporal – animates the Construction Act.

[23] The motion judge recognized that the new adjudication process in Part II.1 helps facilitate the goal of efficiency:

[Part II.1] of the Construction 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.

[24] I would reject Mr. Pasqualino’s submission that s. 71(1) of the Construction Act provides an exception to the normal appeal route under the CJA and should therefore be interpreted narrowly. In my view, such an interpretation would undermine the purpose of efficiency and would be contrary to case law interpreting the appeal provision.

[25] First, this court in both Bird Construction Co. v. C.S. Yachts Ltd. (1990), 38 O.A.C. 147 (C.A.), and Villa Verde, held that the appeal provision, “being a provision under a special act dealing with construction liens, takes precedence over the appeal provisions in the Courts of Justice Act, which is a general act dealing with appeals from the final order of a superior court judge”: Villa Verde, at para. 9; Bird Construction, at para. 9. It is therefore not merely a narrow exception to the appeal route in the CJA.

[26] Second, this court in both Villa Verde and TRS has interpreted s. 71 of the Construction Lien Act, R.S.O. 1990, c. C.43 (which is substantially the same as s. 71 of the Construction Act), broadly. Specifically, both decisions have given a broad interpretation to the term “judgment” in s. 71. As is evident from the discussion of these cases below, neither case limits this broad interpretation to the specific procedure for lien claims, as argued by Mr. Pasqualino.

[27] In Villa Verde, Rosenberg J.A. determined that an appeal of a construction trust under Part II of the Construction Lien Act lay to the Divisional Court under s. 71(1). He specifically held that the word “judgment” should not be interpreted restrictively to only include lien claims, but rather should be interpreted to also include judgments arising out of trust claims: see paras. 7-9. This is significant not only because of the broad interpretation of s. 71(1) but also because, like in the current Construction Act, trust claims in the Construction Lien Act did not fall under the same part as lien claims (in other words, this case was not dealing with lien claims and their particular procedures under Part VIII of the Construction Act).

[28] In coming to this finding, Villa Verde relied on this court’s decisions in Bird Construction (interpreting the Construction Lien Act, 1983, S.O. 1983, c. 6) and Durall Construction Ltd. v. W.A. McDougall Ltd. (1979), 25 O.R. (2d) 371 (interpreting the Mechanics’ Lien Act, R.S.O. 1970, c. 267).

[29] In Bird Construction, this court held, at para. 6, that an order dismissing an action after the plaintiff’s claim for a lien had expired constituted a “judgment” for the purposes of the appeal provision, “notwithstanding the fact that it is referred to as an order, and notwithstanding the fact that it was made without a trial having taken place.”

[30] In Durall, this court held, at p. 373, that the word “judgment” in the appeal provision could apply “to any decision by the appropriate Judge or Master by which the rights of a party to the mechanics’ lien proceedings are finally disposed of, and that the matter is not to be tested by the name which is given to that disposition nor by the terminology within it.”

[31] The broad approach to the interpretation of s. 71 of the Construction Lien Act (and the identical provision in the Mechanics’ Lien Act) demonstrated in the above cases was applied more recently in TRS. In that case, the appellant appealed a decision that was grounded in contract and negligence, but which had initially been brought as a counterclaim to a construction lien action. The construction lien action had been dismissed, however the trial had proceeded on the construction lien procedural track even though the only claim remaining was the contract and negligence counterclaim. The appellant argued that Villa Verde stood for the proposition that it was the substantive claim in the action that determined the route of appeal, not the fact that the proceedings were commenced under the Construction Lien Act. This court rejected that argument, at paras. 17-18, and in doing so provided an unrestrictive definition of “judgment”:

Because the judgment (in Villa Verde) 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”.

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, crossclaim 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.

[32] I would not accept the respondent’s argument that this unrestrictive definition limits the term “judgment” to lien proceedings under Part VIII of the Construction Act. This would be contrary to Villa Verde which, as discussed above, dealt with a trust claim, not a lien claim, and is not supported even on the plain reading of the definition in TRS.

[33] The court in TRS expressly followed its earlier decision in Teepee, where Carthy J.A. held that a counterclaim for contract that had been brought in response to a construction lien action could proceed under construction lien procedure even though the construction lien had been dismissed. In so holding, Carthy J.A., at para. 12, delved into the policy behind the Construction Lien Act:

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.

[34] As discussed above, this specialized procedure promotes the goal of efficiency. In my view, the Construction Act now adds construction dispute adjudication to this mix of remedies and procedure specialized to this field. The appeal provision in s. 71 of the Construction Act is an important part of this statutory scheme.

[35] In light of the Construction Act’s purpose of promoting efficiency, and in light of the clear trend toward a broad interpretation of the term “judgment” over a number of years, I see no persuasive reason why an appeal from an order arising from a party seeking to enforce an adjudicator’s determination would not fall under the appeal provision of the Construction Act.

[36] In conclusion, adjudication under Part II.1 of the Construction Act is a “proceeding under the Act” and the motion judge’s order on the enforceability of the adjudicator’s determination is a “judgment … under [the] Act”. The appeal therefore lies to the Divisional Court.

DISPOSITION

[37] The appeal is dismissed. Given that the appeal has already been heard at the Divisional Court, it is not necessary to make any order in relation to that proceeding. As the parties agreed, there will be no costs awarded.

Released: May 23, 2024 “B.W.M.” “A. Harvison Young J.A.” “I agree. B.W. Miller J.A.” “I agree. Thorburn J.A.”