1246798 Ontario Inc. et al. v. Sterling et al. [Indexed as: 1246798 Ontario Inc. v. Sterling]

51 O.R. (3d) 220

[2000] O.J. No. 4261

Court File No. 99-2341-DV

Ontario Superior Court of Justice

Divisional Court

O'Leary, Soubliere and Heeney JJ.

November 2, 2000

Construction liens -- Liens -- Supply of services -- Architectural services -- Architects preparing plans for construction of building -- Plans and drawings used to obtain site plan approval under Planning Act -- Plans never used in construction because owner abandoning project -- General rule being that services rendered in connection with planned improvement that does not proceed are not lienable -- Exception for preparation of designs, plans, drawings or specifications that, in themselves, enhance value of owner's interest in land -- Whether architects' services have or have not enhanced owner's interest of land must be assessed as at precise point in time when services rendered -- Whether architects having claim for construction lien to be determined at trial -- Construction Lien Act, R.S.O. 1990, c. C.30, s. 14 (1) -- Government Process Simplification Act, 1997, S.O. 1997, c. 23.

In 1998, the respondents (the "owner") retained Sterling Finlayson Architects (the "architects") to design a building for land in the City of Kitchener, Ontario. The architects prepared a Canadian Standard Form of Agreement, which they alleged was orally accepted by the owner. The architects prepared plans and drawings and submitted them to the City for site plan approval under the Planning Act, R.S.O. 1990, c. P.13. The City granted approval subject to the owner signing a development agreement and subject to a condition that if a building permit was not issued by October 22, 1998, changes to the approved site plan might be required as a result of new City policies or changes to zoning by-laws or standard conditions.

On May 28, 1999, the owner terminated the architects' retainer. The architects responded by withdrawing the building permit application and by advising the City that they had copyright in the drawings, which were not to be used without their permission. On July 9, 1999, the architects registered a claim for lien. The owner then moved under s. 47(1) of the Construction Lien Act for an order vacating the registration of the lien. The motions court judge held that the architects did not have lien rights because the services they had rendered did not in themselves enhance the value of the owner's interest in the land, and therefore their services were not a "supply of services" as defined in s. 1(1) of the Construction Lien Act. The architects appealed.

Held, the appeal should be allowed.

A motion under s. 47(1) is analogous to a motion for summary judgment under Rule 20 of the Rules of Civil Procedure, and there were genuine issues of fact that should have been left to be resolved by the trial judge. The motions judge misapprehended the evidence and exceeded his jurisdiction in concluding (1) that the parties did not enter into a Canadian Standard Form of Agreement or any written contract; (2) that the site plan approval would necessarily lapse on October 22, 1999; and (3) that the architects owned copyright in the plans. These factual errors were significant because the terms of the contract between the parties defined the rights of the parties concerning ownership and the use of the plans pending payment, and the errors played a role in the crucial finding that the services rendered by the architects did not enhance the value of the owner's interest in the land. In any event, copyright was not an issue and the real issue was ownership of the drawings and related documents. Further, the motions judge erred in finding that the architects' services in obtaining the site plan were fully paid for. Obtaining site plan approval does enhance the value of the owner's interest in the land, at least to some degree. To meet the definition of "supply of services", it is not necessary that the enhancement of the owner's interest be proportionate to the price being charged by the architect for the services. A lien will arise for obtaining site plan approval and for the cost of preparing the documentation that supports the application.

The foregoing was sufficient to dispose of the appeal, but for the guidance of the trial judge, it was appropriate to resolve two additional questions raised by the appeal. The first issue was whether services rendered by the architects other than "designs, plans, drawings or specifications" were lienable, where the planned project does not proceed. The second issue was what point in time should be used for determining "enhancement". As for the first issue, even if nothing physical is built, if the preparation and approval of the plans increases the value of the land, then the land has been improved. Work enhancing the value of the land is deemed to be an improvement. Therefore, the general rule is that services rendered in connection with a planned improvement that does not proceed are not lienable; however, there is an exception for the preparation of designs, plans, drawings or specifications that, in themselves, enhance the value of the owner's interest in the land. As for the second issue, the wording of the Act requires that the issue of whether the architects' services have or have not enhanced the owner's interest of land must be assessed as at the precise point in time when services are rendered.

APPEAL from an order of Quinn J. (1999), 1999 15095 (ON SC), 46 O.R. (3d) 72, 49 C.L.R. (2d) 218 (S.C.J.) made in a motion pursuant to s. 47(1) of the Construction Lien Act, R.S.O. 1990, c. C.30.

Cases referred to Ardecon Consultants Ltd. v. Mogul Syndication Group Inc., [1992] O.J. No. 2092; Armbro Materials & Construction Ltd. v. 230056 Investments Ltd. (1975), 1975 480 (ON SC), 9 O.R. (2d) 226, 60 D.L.R. (3d) 68 (S.C.); Clarkson Co. v. Ace Lumber Ltd., 1963 4 (SCC), [1963] S.C.R. 110, 4 C.B.R. (N.S.) 116, 36 D.L.R. (2d) 554; Dominion Bridge (Re) (October 20, 1999), Ferrier J. (S.C.J.) (unreported); Irving Ungerman Ltd. v. Galanis (1991), 1991 7275 (ON CA), 4 O.R. (3d) 545, 83 D.L.R. (4th) 734, 20 R.P.R. (2d) 49n, 1 C.P.C. (3d) 248 (C.A.); Perkins/Wardle Partnership v. Domus Design Co., 1984 747 (BC CA), [1984] 3 W.W.R. 176, 51 B.C.L.R. 56, 7 D.L.R. (4th) 615, 43 C.P.C. 1, [1984] B.C.J. No. 3 (C.A.); Peter Hemingway Architect Ltd. v. Abacus Cities Ltd. (1980), 1980 ABCA 182, 113 D.L.R. (3d) 705, [1980] 6 W.W.R. 348, 15 R.P.R. 151 (Alta. C.A.); Read v. Whitney (1919), 1919 457 (ON CA), 45 O.L.R. 377, 48 D.L.R. 305 (C.A.) Statutes referred to Construction Lien Act, 1983, S.O. 1983, c. 6 Construction Lien Act, R.S.O. 1990, c. C.30, ss. 1(1) "improvement""supply of services", 3(4), 14(1), 15, 47 Government Process Simplification Act, 1997, S.O. 1997, c. 23 Mechanics' Lien Act, R.S.O. 1970, c. 267 Planning Act, R.S.O. 1990, c. P.13, s. 41 Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 20 Authorities referred to McLachlin, Wallace and Grant, The Canadian Law of Architecture and Engineering, 2d ed. (Toronto: Butterworths, 1994), p. 264

J.W.W. Neeb, Q.C., for respondents. P.J. Brunner, for appellants.

The judgment of the court was delivered by

[1] HEENEY J.: -- This appeal deals with the circumstances under which an architect can claim a construction lien for services rendered on a construction project that does not, ultimately, proceed. It is, we are advised, the first case to be decided on this point since architects were given the right to claim construction liens, by virtue of the passage of the Government Process Simplification Act, 1997, S.O. 1997, c. 23. Before this legislation was enacted, architects and their employees were denied the right to claim a lien by s. 3(4) of the Construction Lien Act, R.S.O. 1990, c. C.30 (the "Act"). That section was repealed in 1997 and replaced by a provision that expressly gives architects and their employees the right to claim a construction lien under s. 14(1) of the Act.

The Facts

[2] On July 31, 1998, the appellants Sterling Finlayson Architects (the "architects") were retained by the respondent Ontario Die International Inc. to design an industrial/office building on land owned by the respondent 1246798 Ontario Inc. at Kitchener, Ontario. It is agreed that it is not necessary to differentiate between the respondents, and for the sake of brevity they will collectively be referred to as the "owner".

[3] The architectural and engineering services to be performed included programming, research, schematic design, design development, preparing building permit drawings, obtaining site plan approval and building permits from municipal authorities, preparing tender and contract documents and administering the construction of a manufacturing facility on the project site. It is the evidence of the architects that the building was to be unique and custom tailored to the specific landscape of the building site, as opposed to an "off the rack" design.

[4] The retainer was based on two written proposals dated July 8 and 17, 1998. The architects prepared a Canadian Standard Form of Agreement incorporating those proposals, and delivered it to the owner. The architects allege that the Agreement was verbally accepted by the owner. This allegation is denied by the owner.

[5] The architects' work proceeded over the following months, and a design emerged for manufacturing facilities incorporating office areas and plant areas, a gym and change facilities, an interior court, site-specific landscaping and other features. The architects hired several engineering firms as sub- consultants for the structural, mechanical and electrical components of the plans.

[6] The building site is within an area of site plan control, so that no building may be constructed without first obtaining site plan approval from the City of Kitchener. On March 1, 1999, the architects submitted to the City an Application for Site Plan Approval, pursuant to s. 41 of the Planning Act, R.S.O. 1990, c. P.13, which was supported by drawings and other documents prepared by the architects. On April 22, 1999, the City approved the application on the basis of the plans and drawings submitted by the architects. The approval required the owner to enter into a development agreement with the City, and also contained the following condition:

That, in the event that a building permit for the proposed development has not been issued by October 22, 1999 being six months from the date of site plan approval, revisions, additional conditions or changes to the approved site plan may be required by the City's Director of Planning, in said Director's sole discretion as a result of new City policies or changes to zoning by-laws or standard City conditions.

[7] On April 29, 1999, the architects submitted an application for a building permit, supported by architectural, structural, mechanical and electrical drawings.

[8] On May 28, 1999, however, the owner terminated the architects' retainer, claiming that they had failed to design a functional building that could be built at reasonable cost. Two weeks later, the architects wrote to the City of Kitchener to withdraw the building permit application. They also advised the City that the drawings, specifications and construction details were the property of the architects, and were to be returned to them as soon as they were no longer required by the City. The letter put the City on notice that the architects retained copyright in these plans, and that the plans were not to be used without their written consent.

[9] On July 9, 1999, the architects registered a Claim for Lien. By that point in time, the owner had paid $49,035.25 toward the total contract price, leaving invoices in the total amount of $67,529.80 still outstanding.

The Decision Below

[10] A motion was brought by the owner before J.W. Quinn J. on September 1, 1999, seeking an order under s. 47(1) of the [Construction Lien] Act vacating the registration of the claim for lien and certificate of action. In his written decision of September 14, 1999, the motions judge granted the owner's motion, holding that the architects had no lien rights under the Act. The matter comes before this court by way of an appeal from that order.

[11] Section 47(1) of the Act reads as follows:

47(1) Upon motion, the court may,

(a) order the discharge of a lien;

(b) order that the registration of,

(i) a claim for lien, or

(ii) a certificate of action,

or both, be vacated;

(c) declare, where written notice of a lien has been given, that the lien has expired, or that the written notice of the lien shall no longer bind the person to whom it was given; or

(d) dismiss an action,

upon any proper ground and subject to any terms and conditions that the court considers appropriate in the circumstances.

[12] The motions judge ruled that in a motion under s. 47, he should limit himself to deciding whether the question of the validity of the architects' lien merits a trial; in other words, is there a genuine issue for trial? With that approach, we agree. A motion under s. 47 is analogous to a motion for summary judgment under Rule 20: Re Dominion Bridge, October 20, 1999 (S.C.J.) Ferrier J. (unreported). As such, if there are genuine issues of fact the matter should be left to be determined by the trial judge: Irving Ungerman Ltd. v. Galanis (1991), 1991 7275 (ON CA), 4 O.R. (3d) 545, 83 D.L.R. (4th) 734 (C.A.).

[13] The central question considered by the motions judge was whether or not the services rendered by the architects met the definition of "supply of services" in s. 1(1) of the Act. That definition reads as follows:

"supply of services" means any work done or service performed upon or in respect of an improvement, and includes,

(a) the rental of equipment with an operator, and

(b) where the making of the planned improvements is not commenced, the supply of a design, plan, drawing or specification that in itself enhances the value of the owner's interest in the land,

and a corresponding expression has a corresponding meaning;

[14] In brief, the motions judge held that the services rendered by the architects did not, in themselves, enhance the value of the owner's interest in the land. As a result, those services did not meet the requirements of subsection (b) of the definition, leading to the conclusion that no lien rights arose. The chain of reasoning and findings of fact that led the motions judge to his decision can be summarized as follows:

-- The parties did not enter into a Canadian Standard Form of Agreement or any written contract;

-- The site plan approval required that a building permit be obtained by October 22, 1999, failing which the site plan approval would lapse;

-- The owner cannot construct the building because copyright in the plans is held by the architects, nor can the owner obtain a building permit before the site plan approval lapses on October 22, 1999;

-- Therefore, the services rendered by the architects in obtaining site plan approval are of no value to the owner, and did not enhance the owner's interest in the land;

-- In any event, the undisputed evidence is that the architects were paid in full for their services regarding the application for site plan approval;

-- There is no evidence that any other services performed by the architects enhanced the value of the owner's interest in the land;

-- Since the services performed by the architects did not enhance the value of the owner's interest in the land, those services do not meet the definition of "supply of services" in s. 1(1) of the Act, and therefore no lien arises under s. 14(1).

Analysis

[15] In our view, the motions judge misapprehended the evidence in several respects in coming to the factual conclusions he did. Furthermore, he made findings of fact despite the existence of conflicting evidence, in situations where genuine issues of fact existed that should have been left to be resolved by the trial judge.

[16] To begin with, the motions judge found that the parties did not enter into a Canadian Standard Form of Agreement or any written contract. The evidence on that point is in conflict. The affidavit material filed by the architects indicates that a Canadian Standard Form of Agreement was prepared by them based on their two written proposals, and that this contract was verbally accepted by the owner. This evidence was disputed by the owner. This gives rise to a genuine issue for trial since, if the evidence of the architects were accepted, the conclusion would be that the parties did indeed enter into the Canadian Standard Form of Agreement that was prepared by the architects, with all of the terms of that contract being in writing save and except for the signature of the owner.

[17] This issue has some significance because the terms of the contract between the parties define the rights of the parties concerning ownership and use of the plans pending payment in full of the contract price.

[18] The motions judge then, in our view, misapprehended the evidence in stating that site plan approval would lapse on October 22, 1999. The letter granting site plan approval does not say that it will lapse on that date. Rather, it says that if a building permit is not issued by that date, revisions or additional conditions to the approval may be required by the Director as a result of zoning changes or changes in policies. Thus, site plan approval remains in place after October 22, 1999, subject only to amendment in the event that there have been relevant changes in zoning or policy. Absent such changes, a building permit could be obtained at any time without any amendment to the site plan approval whatsoever.

[19] This factual error is of critical importance to this appeal, since the stated "fact" that a building permit could not be obtained before site plan approval lapsed played a pivotal role in the motion judge's finding that the services rendered by the architects did not enhance the value of the owner's interest in the land.

[20] Focusing on the date of October 22, 1999 also caused the motions judge to disregard the potential future use of the architects' plans. The evidence filed by the owner stated that they would not be applying for a building permit before October 22, 1999. Significantly, the evidence did not state that they will never apply for a building permit in the future. Since site plan approval remains, as noted above, in force subject only to possible amendment, it would be open to the owner to apply for a building permit at any time based on the architects' plans. If it did so, it could hardly argue that the architects' services were of no value.

[21] This leads to the next point where, in our view, the motions judge fell into error. He held that the architects owned copyright in the plans, as a result of which the owner was unable to use them to obtain a building permit to construct the building specified in the site plan approval, leading to the conclusion that the value of the owner's interest in the land was not enhanced.

[22] To begin with, an issue of copyright does not arise in this case. There is no suggestion that anyone is seeking to copy these plans for use elsewhere. The real issue is ownership of the drawings and related documents. This confusion is illustrated in the following passage from McLachlin, Wallace and Grant, The Canadian Law of Architecture and Engineering, 2d ed. (Toronto: Butterworths, 1994), at p. 264:

Ownership of drawings, specifications and other documents used in the construction of a work is frequently confused with ownership of copyright. The ownership of drawings and related documents refers to the ownership of the drawings themselves, and is governed by the contract between the architect or engineer and the client. The ownership of copyright, on the other hand, refers to the ownership of the expression of the idea embodied in the drawings and the right to reproduce that expression. Architects or engineers who create the copyright work retain copyright in the work unless they expressly assign it to another.

[23] Since ownership of the documents is determined by the contract, it is impossible to make a finding in this respect without first determining what the terms of that contract are. As noted above, there is a genuine factual issue in this regard.

[24] If the evidence of the architects were accepted that the Canadian Standard Form of Agreement is binding on the parties, then the architects would retain ownership of the drawings until payment in full is made.

[25] Would this mean that the plans and drawings therefore have no value to the owner, since the owner has refused to pay the balance of the architects' account? Clearly not. Although the precise terms of the contract will await the determination of the trial judge, it is the architects' position that the owner is contractually bound to pay for the services contracted for. Thus, the owner's failure to pay may be held to be a breach of contract. It is not open to the owner to raise its own breach as a defence, and argue that because it has not paid for the plans, it therefore does not own the plans and cannot use them, and therefore the plans have no value. It is within the owner's power to pay for the plans at any time, and thereupon have full use of them. Similarly, if the architects succeed at trial in recovering the moneys owing to them, the plans will thereupon have been paid for in full, and the owner will own them and be in a position to make full use of them.

[26] To summarize, the motions judge found as a fact that the services rendered by the architects in obtaining site plan approval did not enhance the value of the owner's interest in the land. He based that conclusion on a misapprehension of the evidence, on findings of fact that should have been left to the trial judge, and on the erroneous notion that because the owner refused to pay for the plans upon which site plan approval was based, they therefore have no value to the owner. Accordingly, his finding cannot stand.

[27] The motions judge did, however, go on to find that the architects' services in obtaining site plan approval were, in any event, fully paid for. It is conceded by counsel for the respondent that the motions judge misapprehended the evidence in coming to this conclusion. The "undisputed" evidence relied on by the motions judge was an affidavit sworn by Gregg King on August 31, 1999, in which he deposes that the owner paid $500 on March 1, 1999 for the site plan approval application. However, the architects' invoice of May 29, 1999, shows a charge of $2,250 in fees for "Site Plan Application". It is admitted that this invoice remains unpaid.

[28] If it were held that obtaining site plan approval does enhance the value of the owner's interest in the land, then clearly a lien would arise. It is not necessary, for purposes of the owner's motion, to determine the amount of the lien, but only whether there is a genuine issue as to its existence. A lien for as little as $2,250 would be sufficient to dispose of the motion.

[29] Having said that, these comments should not be interpreted so as to restrict the architects' lien to the fee for services rendered in preparing the application itself. An application for site plan approval is not made in a vacuum, and is based on a great quantity of drawings, plans and specifications, the cost of which is charged elsewhere on the architects' invoices. If obtaining site plan approval enhances the value of the owner's interest in the land, then it follows that the cost of preparing the documentation that supported the application would also give rise to a lien.

[30] It seems obvious that services rendered in obtaining site plan approval, with respect to land encumbered by the constraints of site plan control, will enhance the value of the owner's interest in the land, at least to some degree, The evidence is that the right to construct a building in accordance with the site plan approval granted to the owner may be assigned to a third party purchaser. Conceivably, the right purchaser exists who wishes to construct an industrial/office building along the lines of the architects' design, and who would be prepared to pay more for this land, which carries with it a complete set of plans that have been approved by the City, than it would pay for raw land where the site plan approval process had not yet been commenced. It is not necessary, to meet the definition of "supply of services", that the enhancement of the owner's interest be proportionate to the price being charged by the architects for their services. So long as there is some enhancement of value, however small, the definition will have been satisfied.

[31] Other courts have held that obtaining site plan approval enhances the owner's interest in the land. In Ardecon Consultants Ltd. v. Mogul Syndication Group Inc., [1992] O.J. No. 2092, Master Sandler held that such work would "clearly be lienable" (p. 2). In Perkins/Wardle Partnership v. Domus Design Co., 1984 747 (BC CA), [1984] 3 W.W.R. 176, 51 B.C.L.R. 56, [1984] B.C.J. No. 3, the British Columbia Court of Appeal held that the services of an architectural firm in obtaining a development permit from the city clearly enhanced the value of the land, even though the project did not proceed.

[32] In the final analysis, though, it is not the opinion of this court, nor the opinion of the motions judge, that is relevant. The evidence of the architects stated that their services in obtaining site plan approval enhanced the value of the owner's interest in the land. The evidence of the owner stated that there was no such enhancement. This gives rise to a genuine issue of fact, and the motions judge exceeded his authority in purporting to resolve the issue. In our view, this task must be left to the trial judge.

[33] The foregoing is sufficient to dispose of this appeal. However, two questions raised by this appeal remain unanswered, as to the interpretation and application of the provisions of the Act which come into play where a planned improvement does not proceed. There is a dearth of caselaw dealing with these provisions. For the guidance of the trial judge, therefore, it is appropriate to resolve these questions at this stage.

Are services rendered by the architects, other than "designs, plans, drawings or specifications", lienable, where the planned project does not proceed?

[34] Counsel for the architects argued that the motions judge erred in failing to draw a distinction between work done by the architects in preparing designs, plans, drawings and specifications, on the one hand, and other services such as preparing the site plan application, the building permit application, tender documents etc., on the other.

[35] The argument advanced by the architects is as follows: Where the services rendered relate to the preparation of "designs, plans, drawings or specifications", the work is caught by subsection (b) of the definition of "supply of services", so that such work is not lienable unless it is proven to enhance the value of the owner's interest in the land. However, it is argued that other services rendered by the architects are not caught by this condition, and are lienable irrespective of whether they enhance the value of the land.

[36] To analyze this argument, we begin by considering s. 14(1) of the Act, which creates the lien. It reads as follows:

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.

[37] We will ignore the supply of materials for present purposes, and confine the analysis to a supply of services. Section 14(1) specifies two necessary elements to give rise to a lien:

1. There must be a "supply of services", which term is defined in the Act;

2. Those services must be supplied to an "improvement", which term is also defined.

[38] There is a third element, that the supply be for an "owner, contractor or subcontractor", but it is not material to the analysis, and will be ignored for present purposes.

[39] Dealing with the first element, we must look to the definition of "supply of services", which has been reproduced earlier. Since the argument under analysis involves services other than the supply of a design, plan, drawing or specification, subsection (b) of that definition does not apply. Thus, to give rise to a lien, those other services must consist of "work done or service performed upon or in respect of an improvement".

[40] This leads us to the definition of "improvement". It is defined in s. 1(1) of the Act as follows:

"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 part thereof, and "improved" has a corresponding meaning;

[41] The plain meaning of the words requires that something physically be done to, or created on, the land in question. In the case at bar, nothing has been constructed, because the planned project did not proceed. There has not, therefore, been any alteration, addition, repair, construction, erection or installation of any kind on any land. While work has been done by the architects, it was not done in connection with an "improvement" as defined; it was instead done in connection with a planned improvement that was never commenced.

[42] The definition of "improvement" does not include a planned improvement which is not commenced. This sets our Act apart from jurisdictions such as Alberta, where the definition of "improvement" includes anything constructed or "intended to be constructed". Accordingly, decisions such as Peter Hemingway Architect Ltd. v. Abacus Cities Ltd. (1980), 1980 ABCA 182, 113 D.L.R. (3d) 705, [1980] 6 W.W.R. 348 (Alta. C.A.) must be read with caution.

[43] The architects argue, however, that a planned improvement must impliedly be included in the definition of "improvement", because to hold otherwise would render subsection (b) of the definition of "supply of services" meaningless.

[44] The logic of this argument is not immediately apparent without again returning to the basic elements of a lien under s. 14(1). As noted above, there are two elements: "services", coupled with an "improvement" to or in respect of which those services are rendered. Subsection (b) of the definition of "supply of services" includes the preparation of designs, plans, drawings or specifications, where the planned improvement is not commenced. Significantly, no complementary amendment was made to the definition of "improvement", to include situations where a planned improvement is not commenced.

[45] Thus, where services are rendered in preparing plans for a planned improvement that does not proceed, those services will meet the definition of "services" in the Act if they enhance the value of the owner's interest in the land. Once this threshold is met, the "services" element in s. 14(1) has been supplied. However, one must still go on to determine whether the second element has been satisfied: has there been an "improvement"? To determine that, one looks to the definition of "improvement", which on its face requires something physically taking place on the land, and does not include a planned improvement.

[46] The logical conclusion that emerges is this: even though the preparation of plans for a planned improvement which does not proceed might supply the element of "services" necessary to give rise to a lien, the second element of an "improvement" would still be lacking.

[47] This is, in our view, a case of sloppy legislative draftsmanship. If it was intended to create a lien for certain work done where a planned improvement does not proceed, then the legislature should have amended both the definition of "services" as well as the definition of "improvement" to make them compatible with each other.

[48] The legislature did not do so. However, they clearly intended to create a lien for certain specified work done in connection with a planned improvement that does not proceed. To give effect to this legislative intention, therefore, we are urged to imply that the definition of "improvement" must include "planned improvement".

[49] If this argument were to be accepted, then all services rendered by anyone in connection with a planned improvement would, as a general rule, be lienable, even though the planned improvement did not proceed. Only the services specified in subsection (b), relating to designs, plans, drawings or specifications, would require proof of the additional element of enhancement of value.

[50] The problem with this argument is that it substantially broadens the scope of services that would be lienable under the Act. The law is clear that the Act must be given a strict interpretation in determining whether any lien claimant is a person to whom a lien is given by the legislation: Clarkson Co. v. Ace Lumber Ltd., 1963 4 (SCC), [1963] S.C.R. 110 at pp. 113-15, 36 D.L.R. (2d) 554 at pp. 557-58.

[51] There is, however, another way in which the Act can be interpreted that gives effect to the intention of the legislature, without unduly broadening the scope of the Act. This approach focuses on the plain meaning of the word "improvement" and on the overall purpose of the Act.

[52] Subsection (b) of the definition of "supply of services" came into being with the passage of the Construction Lien Act, 1983, S.O. 1983, c. 6. The leading case at that time, relating to the supply of services on a project that was never commenced, was Armbro Materials & Construction Ltd. v. 230056 Investments Ltd. (1975), 1975 480 (ON SC), 9 O.R. (2d) 226, 60 D.L.R. (3d) 68 (S.C.). Indeed, given the similarity of the language used, this case may well have provided the genesis for subsection (b).

[53] Armbro involved a surveyor who was retained to prepare the plans of the sewage lines, water mains and roads for a proposed subdivision. These plans were prepared and submitted to the municipality, and were approved by them. Construction of the subdivision and installation of the services, however, did not proceed due to financial problems on the part of the developer.

[54] Chartrand L.J.S.C. held that the plans in question were specific to the land in question, and "approved as they are, advance the value of the land considerably" (p. 228). Accordingly, he held that it would be "unjust and unfair not to grant a lien to the people who have increased the value of the land".

[55] This conclusion was arrived at without considering whether the work done fell within the applicable definitions of the Mechanics' Lien Act, R.S.O. 1970, c. 267. However, it certainly accords with the fundamental purpose of the legislation, as described by Meredith C.J.C.P in Read v. Whitney (1919), 1919 457 (ON CA), 45 O.L.R. 377 at p. 378, 48 D.L.R. 305 (C.A.):

The general purpose of the Act, stated generally, is to give to those whose work or services or "materials" go, in the manner provided for in the Act, to the owner, in enhancement of the value of his land, security, as far as is just and practicable, upon the land and its improvements for payment for such work or services or materials.

(Emphasis added)

[56] Seen with this purpose in mind, the decision of Chartrand L.J.S.C. makes perfect sense. If the preparation and approval of the plans increased the value of the land, then the land has thereby been "improved" even though nothing physical was built on the land, rendering it fair and just to grant a lien to the supplier of that improvement.

[57] In our view, this reflects the intention of the legislature in enacting subsection (b) of the definition of "supply of services". It is intended to give a lien to a person supplying designs, plans, drawings or specifications where that work actually enhances the value of the land, even though an actual "improvement" as defined by the Act is never commenced. Effect can be given to this provision by presuming that the legislature intended that such work which enhances the value of the land is deemed to be an improvement, without the need to resort to the definition of that word in the Act. In other words, the subsection is self-contained, and effects an expansion of both definitions, but only in relation to the services specified therein.

[58] This more restrictive interpretation accords with the constraints imposed by Clarkson Co. v. Ace Lumber (supra). The general rule, therefore, is that services rendered in connection with a planned improvement which does not proceed are not lienable. An exception is created, however, for the preparation of designs, plans, drawings or specifications that, in themselves, enhance the value of the owner's interest in the land. Accordingly, it is only those specified services provided by the architects that can give rise to a lien.

[59] Applied to the facts of this case, this does not mean that services rendered in obtaining site plan approval would not give rise to a lien. Quite the contrary. Designs, plans, drawings and specifications are part and parcel of the site plan approval process, and constitute the supporting documentation for the application. If it is determined at trial that obtaining site plan approval enhanced the value of the owner's interest in the land, then all of the designs, plans, drawings and specifications that laid the groundwork for and supported the application would give rise to a lien.

The point in time for determining "enhancement"

[60] In his reasons, the motions judge addressed the question as to whether the services provided by the architects enhanced the value of the owner's interest in the land, by considering the facts as they stood at the date of the motion. By that point in time, the project had been cancelled, the architects had written to the City demanding the return of their plans, and the owner was insisting that it could not obtain a building permit before site plan approval lapsed.

[61] At the hearing of the appeal, counsel for the owner suggested that the appropriate point in time for determining whether enhancement has occurred is the date of registration of the lien.

[62] In our view, neither approach is sound. We conclude that the wording of the Act requires that the issue as to whether the architects' services have or have not enhanced the owner's interest in the land, must be assessed as at the precise point in time when the services are rendered.

[63] The starting point is s. 15 of the Act. It reads as follows:

15 A person's lien arises and takes effect when the person first supplies services or materials to the improvement.

[64] The plain meaning of these words is that the lien arises at the instant the services are supplied. Registration of the claim for lien merely preserves the lien that first arose as and when the work was done.

[65] In dealing with the services of the architects, on a planned improvement which does not commence, the situation is somewhat more complicated. The services rendered by the architects are not "services" within the meaning of the Act unless and until they meet the conditions set out in the definition of that word. In other words, the work done by the architects may only give rise to a lien if it consists of the supply of a design, plan, drawing or specification that, in itself, enhances the value of the owner's interest in the land.

[66] Services rendered by an architect may begin with sketches, concepts and rough ideas, none of which might, in themselves, be said to enhance the value of the land. Work progresses, however, and more site-specific and detailed work is done, work that has value that can be sold along with the land and increases the value thereof. Once work of the specified type is done by the architects that enhances the value of the owner's interest in the land, the definition of the word "services" has been satisfied. At that precise moment, therefore, a lien arises pursuant to s. 15.

[67] As applied to a planned improvement which does not ultimately commence, the scheme of the Act, which creates liens as and when the services are supplied, can only be effectual if the enumerated services are scrutinized as and when they are rendered, to determine whether they meet the definition of "supply of services". The question whether such services enhance the value of the owner's interest in the land must, therefore, be assessed against the factual backdrop that existed at the time the services were supplied. At the instant that services are rendered which meet the statutory definition, a lien thereupon arises.

Disposition

[68] For the reasons given above, the appeal is allowed and the order of J.W. Quinn J. dated September 14, 1999 is set aside. The issue as to validity of the architects' lien shall be determined by the trial judge.

[69] Costs were disposed of by way of an endorsement at the hearing of the appeal, and that disposition need not be repeated.

Order accordingly.