London Divisional Court File Nos.: 1487 and 1488

DATE: 20060314

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

O’DRISCOLL, CHAPNIK AND WILSON JJ.

B E T W E E N:

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.

Appellants/Plaintiffs/Lien Claimants

• and -

DANA CANADA CORPORATION and RUMBLE AUTOMATION INC.

Respondents/Defendants

A.J. Esterbauer, for Kennedy Electric Limited

I.A. Duncan for Cassidy Industrial Contractors Ltd. and R & A Industrial Contractors Ltd.

C.A. Chekan, for Dana Canada Corporation

M.A. Davis for Rumble Automation Inc.

HEARD at London, Ontario: February 6 and February 7, 2006

O’DRISCOLL J.:

I. Nature of Proceedings

[1] The Appellants/Plaintiffs/Lien Claimants, Kennedy Electric Limited (Kennedy), Cassidy Industrial Contractors Ltd. (Cassidy) and R & A Industrial Contractors Ltd. (R & A) appeal to this Court under the provisions of s. 71(1) of the Construction Lien Act, R.S.O. 1990, c. C. 30 (CLA) from the judgment of Killeen J., dated November 26, 2004, declaring that the claims of the Appellants/Plaintiffs are not lienable under the CLA and discharging the liens of the Appellants registered on title of the St. Mary’s Ontario, property of the Respondent/Defendant Dana Canada Corporation (Dana). The reasons at trial are reported: (2004), 2004 47787 (ON SC), 73 O.R. (3d) 530.

[2] The work performed by Kennedy and its subcontractors was to assemble off site the components of an assembly line for the manufacture of truck frames then to pack, ship and reinstall the assembly line in the plant facilities owned by Dana in St. Mary’s, Ontario.

[3] The issue in these appeals is whether the services performed by Kennedy and its subcontractors, including Cassidy constitutes an “improvement” to land, within the meaning of section 1(1) of the CLA, giving rise to lien rights.

[4] The decision and the reasons of Killeen J. follow the reasons of the Court of Appeal for Ontario in Hubert v. Shinder, [1952] O.J. No 23 (Ont. C.A.). There, the Court concluded that repairing of machinery offsite, and the re-installation of that machinery in the building was not an improvement to the building giving rise to lien rights. The cases from the British Columbia Court of Appeal relied upon the appellants, including Boomars Plumbing & Heating Ltd. v. Marogna Brothers Enterprises Ltd. (1988), 1988 2870 (BC CA), 51 D.L.R. (4^th) 13 (B.C.C.A.) and Deal S.r.l. v. Cherubini Metalworks Ltd., 2001 BCCA 49, [2001] B.C.J. No 159 (B.C.C.A.), are distinguishable because they involve a different statutory definition of “improvement”.

II. Chronology and Background

[5] On September 9, 2003, Haines J. ordered the trial of an issue in the CLA proceedings on the question of the lienability of Dana’s parts plant at St. Mary’s, Ontario for the work done by a number of companies in installing a new assembly line, owned by Dana, at the St. Mary’s site.

[6] The trial of the issue took place at London, Ontario. Killeen J. heard evidence and submissions on January 12, 13, 14, 15, 16 and 19, 2004 (six (6) days) and reserved judgment.

[7] On November 18, 2004, counsel for Dana brought a motion seeking the admission of new evidence. Killeen J. heard the evidence and reserved his decision on the question of its admissibility.

[8] On November 26, 2004, Killeen J. released thirty-two (32) pages of reasons in which he declared the proposed liens were not lienable under the CLA. He also dismissed the November 18, 2004 motion to admit new evidence.

[9] Between January and May 2005, Killeen J. received written submissions as to costs. On May 30, 2005, the trial judge released his nine (9) page endorsement regarding costs.

[10] Section 71(1) of the CLA states, in part:

….an appeal lies to the Divisional Court from a judgment…..under this Act.

[11] The Ford Motor Company entered a “Target Agreement” with Dana under which Dana was to build frames for the 2004 Ford F150 pickup truck. It was known as the “P221 Project”. There was to be production of an annual volume of about 615,000 frames. The production program had a life expectancy of approximately eight (8) years. As matters evolved, it was decided that Dana would split the production – one half (1/2) at its St. Mary’s, Ontario plant and one half (1/2) at its Elizabethtown, Kentucky plant.

[12] In 1990, at the St. Mary’s site, Dana built the initial corrugated steel building of 100,000 square feet. In 1995, 60,000 square feet were added. In 1999, a further 100,000 square feet were added.

[13] The trial judge recounts the last expansion in these words:

[11] The last expansion, which started in late 2001 and finished in 2003 involved the construction of a 160,000 sq. ft. addition to the overall St. Mary’s plant and the installation in it of a custom-designed frame assembly line for the new F150 truck which was to be in production and ready for sale by about September, 2003.

[12] It seems clear from the evidence that, in 2001, Dana developed a two-stage process for the implementation of its new contract with Ford: the first step was the construction of the “generic” building addition and then followed the design, construction and installation of the new assembly line.

[13] The first step incidental to the construction of the building addition was Dana’s entry into negotiations with Stantec Consulting Ltd. to plan and design the building, Saleem Moledina, Santec’s [sic] structural designer, described in his evidence, how, in June, 2001, Dana asked his firm to design the building and coordinate the structural, mechanical and electrical trades and work.

[14] Mr. Moledina identified his design specifications (Ex. 8) which were released in August, 2001. He said that these specifications enabled Dana to move on and hire Newman Bros. to act as general contractor on the building addition.

[15] The actual purchase order from Dana to Stantec for its job was only issued on December 17, 2001, (Ex. 1, Tab 3) although Moledina emphasized that he had actually started his design work as early as June. Rather surprisingly, he said that he had no idea, when hired, about the exact nature of the machinery going into the building although he knew that some kind of assembly line was going in.

[16] His building design, based roughly on his two prior designs for the 1995 and 1999 additions, was accordingly of the flexible generic type of industrial building.

[17] Newman Bros. were selected as general contractor under a letter of intent dated September 17, 2001, although, again, there was a significant time lag to December 14 before the formal purchase order was issued at a price of $7,644,275. (Ex. 1, Tab 4). It seems that Newman started its work on site at about the end of November and completed its work, subject to minor corrective items, by July 31, 2002.

[18] Mr. Kasza [a senior employee of Dana] acknowledged that the CLA applied to the building addition and confirmed that the usual holdbacks were provided for.

[19] Newman’s progress claims are all shown at Ex. 22, and were identified by Kasza as accurate. He also identified the Certificate of Substantial Performance (Ex. 1, Tab 9) issued effective July 31, 2002, and said that the final holdback of $663,981.09 was claimed on August 7 by Newman and was paid on September 24.

[20] Mr. Kasza also identified a special milestones chart (Ex. 1, Tab 7) prepared by Newman for him which showed in meticulous detail the progress of the work item by item running from the early design work in late September, 2001, down to a rough completion date in June, 2002.

[21] Mr. Kasza mentioned one final matter about the construction obligations of Newman. He emphasized that Newman was responsible for all services into the building such as electrical, mechanical, ventilation and argon gas. Newman used subtrades to bring the services from the street into the building to the trusses below the roof.

[14] The Respondent Rumble produces welding system assembly lines, primarily for the automotive parts manufacturing industry.

[15] On December 19, 2001, Dana awarded a contract to Rumble for it to “design, build and install” an assembly line for the frames. The contract for the St. Mary’s plant Ford F150 assembly line had a total price of $44,372,449.00.

[16] On September 20, 2002, Dana awarded Rumble a contract to “design, build and install” a similar frame production line for Dana’s Elizabethtown, Kentucky plant.

[17] The reasons of the trial judge describe Kennedy’s work this way:

[30] David Maxwell, the president of Kennedy explained how his company came into the picture and what it did.

[31] Because of the size and complexity of the contemplated line and the installation in two stages, as already described, Rumble could not do all its contract work itself. The result was that Rumble subcontracted part of its work to Kennedy.

[32] Mr. Maxwell testified that his company had been interested in getting subcontract work on the line since December, 2001, but Rumble’s Request for Quotation documents (Ex. 1, Tab 13) only went out on February 25, 2002. Changes were being made in Rumble’s quotation documents in the next few months and, finally, Rumble awarded a contract to Kennedy by purchase order, dated April 29, 2002 (Ex. 1, Tab 17). The contract price was originally for $11,422,006.04 and the first paragraph of the purchase order encapsulates Kennedy’s scope of work:

This Purchase Order is issued by Rumble Automation Inc. (Rumble) to Kennedy Electric Ltd. (Kennedy) to cover the complete Installation, Tear Down, Pack, Ship and Re-Installation of two P-221 Frame Assembly Lines for Dana. The initial installation will occur at two Rumble build sites and the final installation of line one will occur at St. Mary’s, Ontario. The second line will be re-installed in Elizabethtown, Kentucky and although that portion is part of the scope of the work awarded to Kennedy, a separate PO will be issued USF in October 2002 to cover payment for that specific work.

[33] Mr. Maxwell said that his workers had virtually nothing to do with the temporary installations at Oakville and Mississauga. As he described these build sites, the line was put together there “to prove it works”.

[34] Kennedy’s job was to disassemble the line at these sites, place its component parts on the 165 Empire Transportation Ltd. trucks and then see that it got to St. Mary’s. At St. Mary’s, the Kennedy riggers and millwrights proceeded to do an elaborate lay-out plan for the line, involving marking out the floor with chalk lines, paint and lasers and then starting the laborious process of installation itself.

[35] After Dana and Rumble signed off on operability of the line at the build sites in September, Kennedy, assisted by subcontractors (Allwright at the build sites and Cassidy’s at St. Mary’s) proceeded with the disassembly, transportation and reassembly at St. Mary’s. This entire process took from about the end of September to early December, 2002.

[37] The key components or building blocks of the F150 assembly line are the 100 mezzanine platforms and 165 robots which are central to the operations carried out on the line. As installed, the entire line covers about 100,000 sq. ft. of space, stands about 20’ tall and weighs approximately half a million tons.

[39] It is important to note that the F150 line is not the only line which was put in the building. Two other companies put in lines after the F150 line went in to accommodate and supplement the work of the F150 line.

[43] The bulk of the installation work on the line at St. Mary’s was done by December, 2002, and the line itself went into production by about September, 2003. Kennedy had a serious dispute with Rumble near the end of December, 2002, and was locked out of the site by Rumble. This led to the registration of the lien claims by Kennedy and its subtrades and suppliers.

[18] In his reasons, the trial judge recorded his conclusions as follows:

[115] In summary, my conclusions on the evidence are as follows:

(1) While the Dana “Request for Quotation”, dated July 23, 2001, (Ex. 1, Tab 2), identified the development of a new addition on the Dana plant which would accommodate the new F150 assembly line, it cannot be said that the actual steps taken on the site constituted an integrated construction project, as alleged by the plaintiffs.

(2) The construction phase of the venture started in December, 2001, after Dana entered contracts with Stantec for the design and Newman Bros. for the construction of the addition. This construction of the building was clearly subject to the CLA as an improvement on the lands of Dana and the project proceeded under the CLA with holdbacks down the contract chain. A certificate of substantial performance was issued under the CLA on July 31, 2002, and the final holdback was paid to Newman Bros. accordingly.

(3) Rumble issued a purchase order to Kennedy on April 29, 2002, for the “complete installation, Tear Down, Pack, Ship and Reinstallation of two P221 Frame Assembly Lines” for the Ford F150 pickup frames at Dana facilities in St. Mary’s and Elizabethtown, Kentucky. The lines were substantially the same although the configurations in the two plants were different because of the differing building shapes. In terms of the scope of work under Kennedy’s contract, it was not part of its work

(1) to construct or modify the St. Mary’s existing building or the addition to it, or

(2) to connect the assembly line to the existing building services such as the welding, exhaust system, mechanical services, argon gas services and compressed air system.

All of the connections between the St. Mary’s building services and the assembly line were performed by other trades and contractors independent of the assembly line installation. The work performed by Kennedy and its sub-suppliers under the purchase order contract was exclusively related to the assembly line and not the St. Mary’s buildings or building services.

(4) The chronology of work performed by Kennedy and its sub-trades goes roughly as follows:

1. Assembly and installation at the build sites from June to September, 2002.

2. Demonstration of operability of the line to Ford at the build sites on September 11.

3. Tear-down, labeling and packing of the line at the build sites in October and November, 2002.

4. First shipment of line parts from the build sites to St. Mary’s in October; last shipment to St. Mary’s in December.

5. Reassembly and installation at St. Mary’s between October and December, 2002.

(5) The assembly line sits on the floor of the addition and is securely fastened to the floor by about 2-3000 anchor bolts of two types, mechanical or wedge anchors and chemical anchors. These anchors are inserted into drilled holes in the steel-reinforced concrete floor and range in size from ¼” to 3/8” in width by 6” to 8” in length. The evidence shows that the standard way of removing these bolts in a disassembly is to cut them off flush with the floor with very little damage to the floor. The evidence shows that the line can be readily disconnected from the addition with virtually nominal damage to the addition or its services.

(6) Based on the credible evidence of John Kazsa and Glen Servos [a retired vice-president and general manager of Dana], Dana had a history through the 1990s of moving some of its lines from one of its factories to another. The removal of the P96 line in 1999 from Reading, Pennsylvania, to St. Mary’s is an example. That move, which included a 100,000 sq. ft. addition at St. Mary’s, was accomplished in under six weeks although it was concededly expensive and called for advance stockpiling of frames to accommodate the move. David Maxwell, the president of Kennedy, conceded that the F150 line could be moved although he estimated the completed move might cost upwards of $10 million, a figure which seemed speculatively high when compared with the figures for the removal of the P96 line from Reading and the removal costs from the build sites at Oakville and Mississauga to St. Mary’s.

(7) There are two other independent lines in the 2001 addition which must be considered. The Arbec line provides stacking facilities for the frames before they go to the second independent line, the Metokote E-Coat line, where the frames are subjected to a special electronic paint process. These lines were constructed entirely independently of the assembly line by other contractors and, at least in the case of the Metokote line, is owned and patented by the Metokote company.

[116] 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.

[117] In the result, I conclude that the claims of the plaintiffs are not lienable claims and must be discharged.

III. Standard of Review

[19] As I read the facta of counsel for the Appellants and as I understood their submissions, they do not quarrel with the findings of fact made by the trial judge. I do not recall any submissions that the trial judge made any palpable and overriding error with regard to the facts. I take that to mean that the facts are as the trial judge states them to be in his reasons.

[20] The issues in this case are: did the trial judge apply the correct law in the correct manner to the facts as he found them?

[21] As stated many times, and most recently by the Supreme Court of Canada in Housen v. Nikolaisen (2002), 2002 SCC 33, 211 D.L.R. (4^th) 577, the trial judge must be correct in her/his application of the law.

[22] In Housen (supra), Iacobucci and Major JJ., for the majority, wrote:

[1] A proposition that should be unnecessary to state is that a court of appeal should not interfere with a trial judge’s reasons unless there is a palpable and overriding error. The same proposition is sometimes stated as prohibiting an appellate court from reviewing a trial judge’s decision if there was some evidence upon which he or she could have relied to reach that conclusion.

[3] The role of the appellate court was aptly defined in Underwood v. Ocean City Realty Ltd. (1987), 1987 2733 (BC CA), 12 B.C.L.R. (2d) 199 (C.A.) at p. 204, where it was stated:

The appellate court must not retry a case and must not substitute its views for the views of the trial judge according to what the appellate court thinks the evidence establishes on its view of the balance of probabilities.

[4] While the theory has acceptance, consistency in its application is missing. The foundation of the principle is as sound today as 100 years ago. It is premised on the notion that finality is an important aim of litigation. There is no suggestion that appellate court judges are somehow smarter and thus capable of reaching a better result. Their role is not to write better judgments but to review the reasons in light of the arguments of the parties and the relevant evidence, and then to uphold the decision unless a palpable error leading to a wrong result has been made by the trial judge.

[23] In Housen, the majority opinion listed the standards of review under four (4) headings:

A. Standard of Review for Questions of Law

The majority held that the standard of review on questions of law is one of correctness.

B. Standard of Review for Findings of Fact

Here, the trial judge is not to be reversed unless it can be established that the trial judge made a “palpable and overriding error”.

C. Standard of Review for Inferences of Fact

The majority said:

[25] “…We conclude, therefore, by emphasizing that there is one, and only one, standard of review applicable to all factual conclusions made by the trial judge – that of palpable and overriding error.”

D. Standard of Review for Questions of Mixed Fact and Law

The majority held:

[37] …In our view, it is settled law that the determination of whether or not the standard of care was met by the defendant involves the application of a legal standard to a set of facts, a question of mixed fact and law. This question is subject to a standard of palpable and overriding error unless it is clear that the trial judge made some extricable error in principle with respect to the characterization of the standard or its application, in which case the error may amount to an error of law.

IV. Trial Judge’s Analysis of the Issues

[24] In reaching his conclusion, the trial judge recalled the words of Ritchie J., where, for the court, in Clarkson Co. Ltd. v. Ace Lumber Ltd., 1963 4 (SCC), [1963] S.C.R. 110, 114, he adopted the dissenting opinion in the Court of Appeal for Ontario:

With the greatest respect, I am, however, of 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 interpretation 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.

[25] As part of his analysis, Killeen J. cited the following sections of the CLA:

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.

s. 1(1) In this Act,

“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 parts thereof, and “improved” has a corresponding meaning;

s. 1(1) In this Act,

“land” includes any building, structure or works affixed to the land, or an appurtenance to any of them, but does not include the improvement;

[26] Killeen J. referred to the Report of the Attorney General’s Advisory Committee on the Draft Construction Lien Act of April 8, 1982, which led to the CLA, 1983, S.O. 1983, c. 6. The definition of “improvement” set out in the 1983 statute has remained unchanged. The Committee said at p. 7 of its Report:

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.

[27] The trial judge then referred to Central Supply Co. (1972) Ltd. v. Modern Tile Supply Co. Ltd. (2001), 2001 5037 (ON CA), 55 O.R. (3d) 783 where the Court of Appeal said:

[15] 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 (Toronto: Ministry of the Attorney (Ont.), 1982), 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.”

[28] Killeen J. concluded that the definition of “improvement” in s. 1(1) of the CLA is both exhaustive, and restrictive. On the other hand, he concluded that the definition of “improvement” in the British Columbia Builders Lien Act, R.S.B.C. 1979, c. 40 is an expansive definition.

[29] Although the CLA definition of “improvement” is broad, it is exhaustive, and applicable only to the construction and building repair industries.

[30] The trial judge in his reasons from paras. [65] – [71] referred to decisions involving “moveables”, including the following two (2) decisions:

(a) In Hubert v. Shinder, [1952] O.J. No. 23 (Ont. C.A.), Hope J.A., for the Court said:

[5] The appellant next contended that the claims of the respondents Nesbitt and Erskine Smith & Company Limited are not for any work, service or material falling within the provisions of Sec. 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 lien.

[6] The work and materials supplied by the respondent Nesbitt was performed 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 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 applied 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.

(b) In Beloit Canada Ltd. v. Fundy Forest Industries Ltd. (1981), 1981 2865 (NB CA), 127 D.L.R. (3d) 320, (N.B.C.A.): leave to appeal to S.C.C. refused: 127 D.L.R. (3d) 320n, each judge wrote reasons, all concurring in the result.

Limerick J.A. said:

The respondent Fundy Forest Industries Ltd. (hereinafter referred to as “Fundy”) relying on a guarantee by the Province of New Brunswick of a bond issue floated by Fundy in the amount of $5,000,000, purchased land in New Brunswick, erected a building thereon for the purpose of housing therein a corrugating paper machine and purchased and had installed therein a paper-making machine, the whole comprising what is commonly called a paper-mill.

The appellant (hereinafter called “Beloit”) is the vendor to Fundy of the corrugating paper machine which weighed approximately 2,500,000 pounds and cost $2,371,198. On April 16, 1971, when 60% of the purchase price had been paid according to the terms of the contract of sale, the appellant duly filed a claim for a mechanics’ lien for the balance of the purchase price claimed due and brought this action claiming the balance owing and a lien on the lands on which the paper-mill was erected. The admitted balance due on the purchase price without any addition for interest is $875,226. Interest in the amount of $880,601.33 is claimed to July 31, 1978, and thereafter at 103/4 [10.75]% per annum.

Three issues were determined by the trial judge [1980 3202 (NB QB), 28 N.B.R. (2d) 656]. He held that the delivery to and installation of the paper-making machine in the premises of Fundy was not an improvement to land nor was it material used in an improvement to land.

The evidence discloses that Fundy acquired land suitable in size and location for the particular purpose of locating on it a paper-mill of a specified design and capacity. It erected on the land a building specifically designed to house a custom-designed paper-making machine and purchased the machine.

The paper machine was sold as a paper-making machine and not as a component of the building. There is no evidence submitted that the machine was furnished by Beloit with the intention that it form or become a component of the building. To Beloit the building was merely the location in which to install the machine and the concrete foundation on which the sole plate was installed was simply the required support which Fundy was obligated to supply for the machine.

I also have difficulty in believing that Fundy regarded the purchase of the machine as being something to be used as a component of an improvement. To Fundy the machine was something which would produce their earnings and the land and building were necessary accessories to house and protect the machine.

[31] Killeen J. concluded as follows:

[106] In my view, these points either taken singly or together, are not helpful to plaintiffs’ position. It is true that the word “portable” nowhere appears in any of the main contract documents but these same documents make clear that the assembly line was, by its very nature and design, a fully portable line. The contract documents show that the line was designed like a giant meccano set containing hundreds, if not thousands, of parts which were to be put together at the Oakville and Mississauga built [sic] sites for a test run and then dissembled, packed on trucks and sent to St. Mary’s, the operating site for the line. The phrase, “Final installation”, in this context, simply and obviously means the chosen operating site and not a fixed and unalterable final location for the line.

[32] If one were to disassemble the $44.372 million F-150 frame assembly line of Dana located at its St. Mary’s plant and remove it from the premises, what “improvement” would remain at the St. Mary’s plant? Except for the usual wear and tear that occurs with the passing of time, the land and the building that housed the assembly line would be the same as it was before the assembly line was installed. The assembly line is all about machinery and equipment and has nothing to do with “improvements” to the land and/or the buildings of the St. Mary’s plant.

[33] In my view, the issues in this case were summed up succinctly in two (2) British Columbia decisions:

A. In Spears Sales & Service Ltd. v. Westpine Fisheries Ltd. et al. (1985), 17 C.L.R. 197, 198, Boyle Co. Ct. J., in dismissing the lien claim, said:

The building is described as a warehouse type building used primarily for fish packing. The pumping system extracts fish waste and offal, depositing it in a reservoir for release into the Fraser River.

There were two issues: Is Westpine an “owner” within the meaning of the Builders Lien Act, R.S.B.C. 1979, c. 40, and did the repair work (which included interim rental of equipment while repairs were effected) constitute an “improvement” within the Act?

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.

B. In Chubb Security Safes v. Larken Industries Ltd., [1990] B.C.J. No. 26, Wetmore L.J.S.C. said:

Equipment designed and used for the operations of the business within the structure, not integral to that structure, do not thus become “improvements”.

V. Conclusion

[34] With respect, in my view, the trial judge correctly applied the correct law to the facts as he found them.

[35] There is no reason or basis in law to disturb the decision of the trial judge. If the Legislature wishes to widen the category, in place since 1983, of those entitled to claim a lien under the CLA, that is a matter for the Legislature to decide and to effect by an amendment to the CLA.

VI. The Bond Posted by Dana

[36] In order to discharge the liens registered on its St. Mary’s property, Dana posted a bond in lieu of the liens. At first, the bond was in the amount of $10 million, later $7 million and presently it is in the amount of $5 million with a premium of US $30,000 per annum paid by Dana. Counsel for Dana submitted that, if the appeals fail, an order should go under s. 134 of the Courts of Justice Act, R.S.O. 1990, c. C. 43 discharging the bond.

[37] In my view, if there is no appeal from this decision, the bond will end. If there is a successful application for leave to appeal to the Court of Appeal for Ontario, it will be for that court or a judge thereof to decide under rules 63.01 – 63.03 whether or not the bond should continue in place.

VII. Result

[38] The appeals are dismissed.

VIII. Costs

[39] If counsel are unable to agree on costs within fifteen (15) days of the date of release of these reasons, written submissions may be filed within a further fifteen (15) days. Thereafter, costs to be fixed.

O’Driscoll J.

Wilson J.

CHAPNIK J. (dissenting):

[40] For the reasons that follow, I am unable to agree with the majority, and find that the appeal should be allowed. This conclusion is based on my findings that the learned trial judge erred, both in his interpretation of the relevant legislation and in his application of the jurisprudence to the facts of this case.

[41] On September 9, 2003, Haines J. ordered the trial of an issue in this matter as to whether the materials and services supplied by Kennedy Electric Limited (Kennedy) give rise to a claim for lien in accordance with the Construction Lien Act, R.S.O. 1990, c. C.30 (CLA).

[42] Killeen J. conducted the trial of that issue and in a decision released November 26, 2004, he determined that Kennedy and the other lien claimants did not have a right to a lien under the provisions of the CLA. He, therefore, ordered that the claims for lien be discharged. The appellants appeal the decision of Killeen J., asserting that the learned trial judge erred in his interpretation of the various provisions of the CLA and in applying the law to the facts as found.

[43] In the reasons that follow, my references to the appellant Kennedy include the appellants, Cassidy Industrial Contractors Ltd. and R & A Industrial Contractors Ltd., in the companion action referable to this matter.

[44] It is noted that the respondent Rumble Automation Inc. (Rumble) declared bankruptcy on December 15, 2005, and an interim receiver was appointed. On December 23, 2005, by order of Farley J., an exemption was granted for this appeal to proceed as against Rumble.

BACKGROUND

[45] The background is set out in detail in the reasons for judgment of Killeen J. and in the reasons of the majority. The following constitutes only a brief summary of the salient facts:

1. On October 13, 2000, The Ford Motor Company (Ford) entered into a “Target Agreement” with Dana Canada Corporation (Dana) to have frames built for its 2004 Ford F150 pickup truck. The undertaking was known as the P221 Project.

2. The project involved the construction of a 160,000 sq. ft. addition to Dana’s industrial plant located in St. Mary’s, Ontario, near Stratford, and the installation of a custom designed frame assembly line for Ford’s new F150 truck. The trucks were to be in production and ready for sale by about September 2003. The expected volume of frames was about 615,000 per year and the assumed life span for the program was to be 8 years. The cost for the entire project was about $200,000,000.

3. Sometime in the late spring of 2001, Dana entered into negotiations with Stantec Consulting Ltd. (Stantec) to plan and design an addition to Dana’s plant and to coordinate the structural, mechanical and electrical trades. The actual purchase order to Stantec was issued on December 17, 2001, although its work commenced earlier.

4. Under a letter of intent dated September 17, 2001, Newman Bros. was selected by Dana as the General Contractor for the building addition at a price of $7,644,275. A certificate of substantial performance was issued on July 31, 2002.

5. On December 17, 2001, Dana issued a purchase order to Rumble for the design and installation of an assembly line for the Ford F150 pickup truck frames (as well as for a similar line at Dana’s factory in Elizabethtown, Kentucky). The purchase order for the “design, build and install” contract at St. Mary’s was for a total price of $44,372,449.

6. Pursuant to a Request for Quotation, Rumble awarded a contract to Kennedy, the successful bidder, for the complete installation, tear down, pack, ship and re-installation of two P221 frame assembly lines for Dana, in the amount of $11,422,006.04.

7. The key components or “building blocks” of the F150 assembly line built and installed by Kennedy and its subtrades are 100 mezzanine platforms and 165 robots which are central to the operations carried out on the line. As installed, the entire line covers about 100,000 sq. ft. of space, stands about 20 feet tall and weighs approximately half a million tons. The line was hooked up to a complex network of services in the building.

8. Two other companies installed lines after the F150 line was built in order to accommodate and supplement the F150 assembly line’s work, one to accommodate a special E-coat process and another for waxing and stacking the F150 frames.

9. The assembly line parts were first assembled at Rumble’s two “build sites”, one located in Oakville, and another in Mississauga, as a test run. They were then trucked to St. Mary’s to be assembled and hooked up to services there. The bulk of the installation work on the line at St. Mary’s was completed by December 2002, and the line went into production by about September 2003.

10. Due to a serious dispute between Rumble and Kennedy, Kennedy was locked out of the site near the end of December 2002. This led to the registration of the lien claims by Kennedy and its subtrades and suppliers.

THE COURT’S JURISDICTION AND THE STANDARD OF REVIEW

[46] The Divisional Court has jurisdiction to hear this appeal pursuant to section 71 of the CLA, in which 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, except where the amount claimed is $1,000 or less, or where the order appealed from is interlocutory.

[47] I agree with the majority’s application of Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 to determine the standard of review.

[48] Whereas the standard of review applied to all factual conclusions made by the trial judge is that of palpable and overriding error, a question of mixed fact and law involves the application of a legal standard to a set of facts. Such a question is subject to a standard of palpable and overriding error unless it is clear that the trial judge made some extricable error in principle with respect to the characterization of the legal standard or its application; in that case, the error may amount to an error of law and is therefore subject to the standard of correctness.

[49] As the issues in this appeal involve alleged errors on questions of law and the application of appropriate legal principles to the facts, the applicable standard is a more stringent one than that of palpable and overriding error, closer to the standard of correctness.

ANALYSIS

The Applicable Statutory Provisions

[50] The CLA provides lien rights to a person who supplies services or materials to an “improvement” for an owner, contractor or subcontractor. The lien attaches to the interest of the owner of the improved premises for the price of those services or materials.

[51] In his decision, the learned trial judge relied upon three provisions in the CLA: s. 14(1), and the definitions of “improvement” and “land” in s. 1(1). Section 14(1) of the Act reads:

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.

[52] In my view, the following definitions in s. 1(1) of the Act are significant (emphasis added):

“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;

“land” includes any building, structure or works affixed to the land, or an appurtenance to any of them, but does not include the improvement;

“premises” includes,

(a) the improvement,

(b) all materials supplied to the improvement, and

(c) the land occupied by the improvement, or enjoyed therewith, or the land upon or in respect of which the improvement was done or made;

“materials” means every kind of moveable property,

(a) that becomes, or is intended to become, part of the improvement, or that is used directly in the making of the improvement, or that is used to facilitate directly the making of the improvement, or

(b) that is equipment rented without an operator for use in the making of the improvement.

The Relevant Jurisprudence

[53] After setting out the positions of each of the parties, the learned trial judge launched into a discussion of what he perceived to be the relevant case law. This is where, in my respectful view, he erred.

[54] At para. 64 of his judgment, Killeen J. states:

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]

[55] 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.

(a) Ontario Cases

[56] In Re IBL Industries Ltd. (1990), 80 C.B.R. 20, (Ont. Sup. Ct.), Registrar Ferron found that components for an emission control system installed at the plant of a steel company fell within the definition of an “improvement” under the provisions of the then Construction Lien Act. The appellant in that case had manufactured and supplied a hood car, truck frame and walkway to be used as part of the emission control system installed at the respondent’s premises. Despite the fact that some of the components were capable of being removed and utilized at an alternate site, the court found the system could not function without the hood car and other components. As an “integral part of the system”, these components were held to fall within the definition of “improvement” under the Act.

[57] Another case relied on by the trial judge was Baltimore Aircoil of Canada Inc. v. Process Cooling Systems Inc. (1993), 1993 5496 (ON SC), 16 O.R. (3d) 324 (Gen. Div.), which dealt with the question of whether a large water tower installed on the roof of a manufacturing plant was a lienable improvement. The water tower was located outside the factory building and was mounted on a pump house. Not only was the water tower not attached to the building, but it did not form part of the manufacturing process carried on by the owner in the building. On summary judgment, Rosenberg J. found no liability for breach of trust under the CLA, based on the finding that there was no entitlement to a lien. However, the decision was later overturned by the Court of Appeal on the basis that the entire matter should proceed to trial.

[58] The learned judge also cited 469804 Ontario Ltd. (c.o.b. Royal Heating & Plumbing) v. Ontario Hospital Association, [1995] O.J. No. 957 (Gen. Div.). In that case, Master Clark concluded that an ice melter coil implanted in the driveway of a commercial building property was lienable as an improvement. In making his decision, Master Clark adopted the reasoning of Chadwick J. in Stacey Heating & Plumbing Supplies Limited v. Tamasi (1988), 1988 4606 (ON SC), 65 O.R. (2d) 481 (H.C.J.), rev’d on other grounds (1991), 1991 7204 (ON CA), 6 O.R. (3d) 341 (C.A.), in which the court held that air conditioning equipment and ducts incorporated into the building were lienable. Specifically, Chadwick J. concluded on the facts of that case, that “notwithstanding the fact that they could be removed, the air-conditioning units were an integral part of the air-conditioning to the factory and were incorporated into the building”.

[59] In Wolfdale Electric Ltd. v. R.M.P.’s Systems Automation and Design Quality In Motion Inc. et al. (2004), 2004 66291 (ON SC), 47 B.L.R. (3d) 1 (Sup. Ct.), the plaintiff and the defendant had contracted for electrical work on a special car owned by a third party. The court found the materials and services supplied constituted an improvement within the meaning of the CLA. After reviewing the facts and relevant case law, Kruzick J. stated:

The end result is an improvement under the Act so that the components supplied by the plaintiff are an integral part of the system. Without doubt, the shuttle car operation would have no purpose and could not have functioned were it not for the improvements performed by the plaintiff.

[60] In reaching his conclusions, Killeen J. placed considerable reliance on the statement of purpose adopted by a panel of the Ontario Court of Appeal (sitting as a panel of the Divisional Court for the purposes of the appeal) in Central Supply Co. (1972) Ltd. v. Modern Tile Supply Co. Ltd. (2001), 2001 5037 (ON CA), 55 O. R. (3d) 783 at para. 15, where Abella J.A. (as she then was) stated:

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 (Toronto: Ministry of the Attorney General (Ont.), 1982), 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.”

[61] Central Supply involved an entirely different issue, that is, whether monies received by Modern Tile from the retail sale of its product to members of the public constituted trust funds pursuant to the provisions of the CLA, and whether personal liability should attach to the individual named defendants. Not surprisingly, the Court of Appeal held that the Act was not intended to apply to retailers who sell to members of the public and who have no direct connection to any improvement to any premises. In that case, the proposed lien clearly did not involve “the construction and building repair industries.” That does not in any way reflect the situation here.

[62] Thus, the basic premise upon which Killeen J. proceeded, that appellate authority in Ontario supports the proposition that installation or repair of machinery used in a business operated in a building does not give rise to lien rights, appears to me to be erroneous.

(b) Hubert v. Shinder

[63] Moreover, Hubert v. Shinder, supra, the 1952 case relied upon by the trial judge, is distinguishable from the case at bar, both on the relevant law in force at the time and on the facts of the case. In Hubert, the court concluded that repairing machinery offsite, and installing machinery in a building did not constitute an improvement to the building and did not give rise to lien rights.

[64] Neither “improvement” nor “land” was a defined term in the Mechanics’ Lien Act, R.S.O. 1950, c. 227, which appears to have been the applicable statute in that case. The relevant section contained the following:

5. (1) …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 appurtenances to any of them for any owner, contractor, or subcontractor, shall by virtue thereof have a lien for the price of the erection… [etc.] [emphasis added]

[65] This provision is arguably not as broad as s. 14(1) of the CLA, which gives lien rights to “[a] person who supplies services or materials to an improvement…” [emphasis added].

[66] As was noted above, “improvement”, as defined in s. 1 of the CLA, includes any alteration, addition or repair to or any construction, erection or installation on land, including the demolition or removal of any building, structure or works or part thereof. The statute defines “land” to include (and thus, it is presumably not limited to), any building, structure or works affixed to the land, or an appurtenance to any of them. The long list of specific categories in the 1950 statute, which lists such items as fishponds and ornamental trees, has been removed, apparently demonstrating a legislative intention to make the provision more general in its application.

[67] In any event, the facts in Hubert are clearly distinguishable. In that case, laundry machinery previously installed in a building was damaged by fire. Work and materials were supplied “in the rehabilitation of the laundry machinery”. The work in the main was completed off the premises and involved simply “attaching the laundry machinery to the water and sewage systems already installed in the building” (at para. 6).

[68] There is no indication in the judgment that the laundry machinery was attached in any way to the floor. The work in question was, essentially, a simple matter of hooking up the laundry machinery to the existing water and sewage systems. Furthermore, though the building “had been used for laundry purposes and was being so restored”, there is no evidence that this was the primary purpose for which the building existed.

[69] It was in these circumstances, that the court in Hubert held that the work was not part of or an improvement to the building so as to constitute a lien. The court concluded that the materials supplied and the work done in the installation of the repaired laundry machine were “moveables”, and could, therefore, not be classed under the Mechanics’ Lien Act as used “in the making, constructing, erecting, fitting, altering, improving or repairing of” the erection or building in question.

[70] It should also be noted that under the current statute, the definition of “materials” includes every kind of moveable property that becomes, or is intended to become, part of the improvement or that is used directly in the making of the improvement or to facilitate directly the making of the improvement.

[71] In any event, the facts in Hubert portray a very different picture than the factual matrix in the case at bar. In the instant case, Kennedy’s portion of the P221 Project involved: (1) temporarily connecting at Rumble’s build sites, all of the devices and components for the assembly line, including the pneumatic services, hydraulic air, electrical and argon gas; (2) disassembling and shipping the components to Dana’s St. Mary’s plant; and (3) installing the assembly line there. It took 165 tractor trailer truck loads to transport the parts from the build sites to St. Mary’s. The P221 Project was described as “massive” and was the largest ever undertaken by Rumble.

[72] Clearly, the bulk of the work took place at the St. Mary’s site. As noted previously, the assembly line at St. Mary’s is comprised of 100 mezzanine platforms, about 10 by 20 feet each, which are interconnected. It contains approximately 165 robots central to its operations. The entire line covers approximately 100,000 sq. ft. of space (in the 160,000 sq. ft. plant addition in St. Mary’s) stands approximately 20 feet tall and weighs about half a million tons.

[73] At Dana’s St. Mary’s location, the 165 truck loads of components and equipment had to be taken from the trucks, leveled and then secured to the floor. Approximately 3,000 chemical anchors and anchor bolts were used to physically attach the mezzanines and other components to the floor in the Dana plant. The attachment to the floor involved attaching the “legs” of the mezzanines to longer legs and bolting them into the floor. A lighting system was installed and, as noted by Killeen J., “an elaborate layout plan for the line, involving marking out the floor with chalk lines, paint and lasers,” was instituted for the placement of the various components.

[74] Although Newman Bros. was responsible for bringing all the services such as electrical, mechanical, ventilation and argon gas from the street into the building to the trusses below the roof, Kennedy and its subtrades connected the services to the line. This involved securing six separate fluid power systems with fluid conveyance piping to the floor, channeling 100,000 feet of pneumatic and hydraulic piping to a compressor room, affixing trays to the trusses, welding and hard-piping the argon gas system with copper piping and even building a room on one of the mezzanines in the assembly line to contain control panels and computer stations for data collection.

[75] Indeed, the assembly line was described by those involved as the “grand-daddy of all production lines.”

[76] Given the distinctions that can be drawn between Hubert and the case at bar, and given the lack of Ontario case law supporting Justice Killeen’s statement that “the installation or repair of machinery used in a business operated inside a building does not give rise to lien rights,” upon what authority did the learned trial judge base this finding?

(c) Cases from Other Jurisdictions

[77] The trial judge relied upon the decision of the New Brunswick Court of Appeal in Beloit Canada Ltd. v. Fundy Forest Industries Ltd. (1981), 1981 2865 (NB CA), 127 D.L.R. (3d) 320, leave to appeal to S.C.C. refused, (1981), 127 D.L.R. (3d) 320n. Beloit involved a situation where the seller and installer of a large corrugated paper machine weighing about 2½ million pounds claimed a lien for the balance of the price. In holding that the machine, including its concrete foundation, was not an improvement to the building capable of creating lien rights, Limerick J.A. stated, at paras. 21-22:

The paper machine was sold as a paper-making machine and not as a component of the building. There is no evidence … that the machine was furnished by Beloit with the intention that it form or become a component of the building. . . . . .

To Fundy the machine was something which would produce their earnings and the land and building were necessary accessories to house and protect the machine.

[78] While there are some similarities to our case on the facts, (since the building in that case was constructed specifically to house a custom-designed paper-making machine), Beloit was decided based on the interpretation of “material to be used in an improvement” in the New Brunswick Mechanics’ Lien Act; that is, the result in Beloit depended on the particular statute in force at the time. Whereas in the first lien statute in New Brunswick, passed in 1894, the furnishing or placing of machinery could create a lien, in the subsequent legislation, the statute was amended to specifically delete machinery as an improvement. Moreover, the operating statute at the time of that decision did not include a definition of “material”. As noted above, “material” in the Ontario statute is a defined term which encompasses moveable property.

[79] According to Killeen J., two earlier British Columbia cases support the principle that equipment designed and used for the operation of a business within a structure but not integral to the structure do not become improvements: Spears Sales and Service Ltd. v. Westpine Fisheries Ltd. (1985), 17 C.L.R. 197 (B.C. Co. Ct.) and Chubb Security Safes v. Larkin Industries Ltd. (1990), 36 C.L.R. 225 (B.C.S.C.).

[80] The problem with relying on these cases is not only that the legislation in effect differs from ours, but the factual matrix in each case also differs considerably from the peculiar fact situation in this case. In Spears, a contractor undertook offsite repairs to certain pumps that were used for the waste disposal in a fish packing plant. The court held that while the pumps were an integral part of the function of the business in the building, they were not integral to the function of the building itself. Since they did not become part of the realty, they did not fit within the definition of “improvement” in the B.C. statute.

[81] In Chubb, the lien claimant supplied a free-standing safe at the leased premises of a trust company. The safe was relatively small and was removable. The court in that case established an objective test: would the reasonable supplier in supplying a chattel and placing it upon the land conclude he was supplying and installing that item for the enhancement of the land or simply for the use or convenience of a user of land? The British Columbia Supreme Court established several factors to be weighed in such a situation: - the elements of the method of attachment, the degree to which the land (or the building) had to be adapted to accommodate the item, and the permanence of the attachment. In my view, the safe in Chubb cannot in any way be compared to the massive truck assembly line built and installed at St. Mary’s.

[82] In his decision, Killeen J. distinguished the findings in Boomars Plumbing & Heating Ltd. v. Marogna Brothers Enterprises Ltd. (1988), 1988 2870 (BC CA), 51 D.L.R. (4^th) 13 (B.C.C.A.). In Boomars, nine modular units previously used for construction camps had been installed on a vacant property, for use as a motel. Though the pre-fabricated modular units were about 25 years old and could be disassembled and moved, the court held the units fell within the relevant definition of “improvement” which required that they be “attached to the land or intended to become part of it.” In reaching this conclusion, notwithstanding the moveable nature of the modular units, the court in Boomars stated as follows, at page 25:

… “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. [emphasis added]

[83] Killeen J. distinguished Boomars, stating:

My short comment on the Boomars holding is that it is distinguishable on its facts and is tied to an expansive definition of improvement taken from a legal dictionary.

The finding that the modular motel units were improvements to the land may be defensible under the B.C. Act but there is a world of difference between a set of motel buildings and machinery in a plant.

[84] Another British Columbia (“B.C.”) decision distinguished in the judgment is Deal S. r. L. v. Cherubini Metalworks Ltd., 2001 BCCA 49, [2001] B.C.J. No. 159 (B.C.C.A.), which dealt with large steel moulds that were used to form large concrete components for a rapid transit project in Vancouver. A large open shed was constructed, and the moulds were housed in it on a reinforced concrete floor in the shed. The supplier of the moulds pursued lien rights under the B.C. statute.

[85] In holding that the moulds were an improvement within the meaning of the B.C. statute, the court found a sufficient permanence of attachment to the land had been achieved.

[86] After distinguishing the B.C. cases on their facts, Killeen J. stated:

While the more open-ended definition of improvement in the B.C. Act may support the findings in Boomars and Deal, I do not believe a contextual reading of the Ontario Act yields a similar result for manufacturing equipment which was plainly not placed in the 2001 addition as an improvement but, rather, as an integral part of the business operation of the Dana Company.

[87] Whereas the B.C. statute was described by the trial judge as expansive or “open-ended,” in reality the B.C. definition of “improvement” is, although framed to be inclusive, narrower in scope than the Ontario definition. “Improvement” is defined in the Builders Lien Act, S.B.C. 1997, c. 45 as follows:

"improvement" includes anything made, constructed, erected, built, altered, repaired or added to, in, on or under land, and attached to it or intended to become a part of it, and also includes any clearing, excavating, digging, drilling, tunnelling, filling, grading or ditching of, in, on or under land.

[88] In contrast, the definition of “improvement” in the Ontario CLA contains no requirement that an improvement be “attached to” or “intended to become part of” the land. In fact, the Ontario definition explicitly includes “removal” of any building, structure or works or part thereof. Clearly, if the “removal” of a structure can constitute an improvement in Ontario, permanence of attachment is not an essential feature of an improvement. In my view, the Ontario definition is broader in scope than the B.C. definition.

[89] For some reason, however, the learned trial judge was stuck on the proposition that machinery in a plant used in the operation of a business, is not lienable. I cannot find any support for that finding in the jurisprudence. On the contrary, a number of Ontario cases have concluded that suppliers of parts and/or materials to a business operation or enterprise have lien rights. As previously noted, in Re IBL industries, the Ontario bankruptcy court held that a hood car, truck frame and walkway used for an emissions control system for Algoma Steel, fell within the definition of improvement in the Act and hence, lien rights were available. In Stacey Heating, the installation of two air conditioning units placed on a roof of a building and connected to duct work was lienable.

[90] Courts in other jurisdictions have made similar findings. In Stirn v. Vancouver Arena Co. [1932] B.C.J. No. 72 (Co. Ct.), lien rights were granted under the 1924 British Columbia Mechanics’ Lien Act in respect of a temporary race track. The track was fastened to the building with nails for a six-day bicycle race meet in an arena. The court granted the lien rights, notwithstanding that the track was removed after the race.

[91] In another case, nuclear vane separators and related equipment for an ethylene glycol processing plant constructed on land, were held to constitute an improvement under the Alberta Builders’ Lien Act: see V.A.W. Manufacturing Ltd. v. Electric Furnace Products Company Ltd. et al. (1984), 54 A.R. 243 (Q.B.), Master Funduk.

The Trial Judge’s Reasons

[92] After his review of the relevant case law, Killeen J. enumerated a number of evidentiary factors which, he stated, “tell against the arguments of the lien claimants.” Those factors are:

1. While the parties involved in the construction of the building addition clearly understood it was a construction project, no such common understanding prevailed with respect to the assembly line undertaking.

2. The purchase order contract between Dana and Rumble calls for Rumble to “design, build and install” the assembly line but makes no reference to the CLA, lien rights or holdbacks under the CLA.

3. Rumble’s Request for Quotation to subcontractors is equally negative on the question of lien rights.

4. It is an “inescapable” fact that the assembly line was designed as a portable line, fully capable of being assembled, disassembled and then removed to another site for re-activation. (In that regard, the line was described by the trial judge as a “giant meccano set” containing hundreds, if not thousands, of parts to be put together at the Oakville and Mississauga build sites for a test run and then disassembled, packed on trucks and sent to St. Mary’s, the operating site for the line.)

[93] In reaching his conclusions, Killeen J. observed that the work performed by Kennedy and its sub-suppliers under the purchase order contract was exclusively related to the assembly line and not to the St. Mary’s buildings or building services; that the line could be readily disconnected from the addition with virtually nominal damage to the addition or its services; and that there were two other independent lines constructed in the 2001 addition.

[94] The appellants do not dispute these facts. They point out, however, that the evidence also disclosed the following: Although the building part of the project proceeded under the CLA with holdbacks down the contract chain, neither the main contract for the P221 Project, nor the contract or the purchase order with Newman Bros. contained reference to the CLA, lien rights or holdbacks.

[95] Rumble’s Request for Quotation to subcontractors, although negative on the question of lien rights, does contain a proviso to protect the owner, Dana, in the event a subtrade registers a lien.

[96] The agreement with Kennedy called for progress payments starting with a 10% deposit with later percentage payments at the meeting of specified mileposts. The final payment of 20% was due on November 25, 2002 when the reinstallation at St. Mary’s was expected to be completed.

[97] The word “portable” appears nowhere in any of the contract documents.

[98] Though the component parts were tested at the build sites, disassembled, placed on 165 trucks and re-installed at St. Mary’s, the characterization of the final assembly line as portable is disputed by the appellants. On the contrary, they described the final installation of the assembly line at St. Mary’s, which included 3,000 bolts in the cement floor as being, by its nature, permanent; and their work performed there to be very different in nature and scope than the testing of the components and services at the build sites.

[99] In the end, Killeen J. held that the assembly line installation represented “the installation of manufacturing equipment in a building but did not constitute an improvement within the Act.” He concluded that the assembly line could not be considered either part of an integrated construction improvement within the entire building addition or a free-standing improvement within the CLA.

[100] With the greatest of respect, I do not agree that the conclusions reached by the trial judge are supported either by the decisional law in Ontario or the peculiar facts of the case. There is no doubt that the relevant statutory provisions must be strictly construed. As noted in Central Supply, supra, the lien created by the Act applies only in the case of the “construction and building repair industries.”

[101] 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.

[102] 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:

1. The assembly line was included in the Target Agreement between Dana and Ford.

2. 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.

3. Whereas the building expansion involved an expenditure of about $7 million, it cost approximately $44 million to design, build and install the assembly line.

4. The building designed for Dana was designed and built specifically to accommodate the assembly line.

5. 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.

6. 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]

[103] The question of the relevant criteria on lienability was discussed by Kevin Patrick McGuiness in Construction Lien Remedies in Ontario, 2d ed., (Carswell, 1997). At pages 61 to 68, the learned author emphasizes that the permanence of a structure is only one of a number of factors to be considered in deciding whether a premises has been improved. He states:

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 reassembled 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 upon which it sits is not necessarily conclusive of the question of whether the premises has 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 that it is satisfied then even a temporary structure may be seen to constitute an improvement. [emphasis added]

[104] In this case, Dana obtained a contract from Ford and produced the frames for its F150 pickup trucks. Dana then proceeded to construct the necessary improvement to the property it owned in order to produce the required trucks. As part of the P221 Project, Dana hired contractors to design and build the addition to its plant and to build and install the assembly line and related facilities to produce the F150 truck frames. Kennedy and its subtrades provided services and materials to Rumble, one of the contractors hired by Dana to construct the assembly line part of the project.

[105] The P221 Project was completed and Dana has been producing the frames for Ford’s new F150 pickup truck that went on sale in North America in September 2003. We were advised that Ford’s F150 pickup truck has been rated as the best selling truck in Canada both in 2004 and 2005.

[106] Clearly, the installation of the massive assembly line at St. Mary’s has caused sufficient change to be made at the premises so that its installation has “enhanced the value, beauty or utility” of the premises. In that regard, counsel for the appellant directed our attention to the following portion of the transcript of the discovery of John Kasza, Dana’s P221 program manager, who was asked about the integrity of the building as opposed to the assembly line:

Q. Here, are you, by being able to write things off quickly, by treating them as, in one form or another, that doesn’t change its usefulness or the way it’s fixed to the land?

A. Are you referring to something specific? The assembly line or the, both being treated as two different assets, can be viewed in two different ways.

Q. But from the, Dana’s point of view, you’ve treated them in a different way, correct?

A. For accounting purposes and for costing, yes.

Q. But from the point of view of productivity, you treat that whole thing as a plant, that is to produce profit for you?

A. That’s right.

[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.

[108] Accordingly, in applying the principles articulated by Kevin Patrick McGuiness in Construction Lien Remedies in Ontario, supra, the only reasonable conclusion on the whole of the evidence is that the materials and services provided by Kennedy form part of an “addition” to or a “construction, erection or installation” on Dana’s land and thus, fall squarely within the definition of “improvement” in the CLA.

[109] The purpose of the CLA (and the lien legislation in other jurisdictions) is to ensure that owners of land do not benefit from the labour of those persons who have performed work on their land. Because of the lack of privity between the owner and the lien claimants, their rights must be strictly construed. Nevertheless, once those rights are established, such persons are entitled to protection by requiring owners and others in the construction pyramid to maintain holdbacks and assume trust obligations.

[110] It appears that the trial judge did not fully consider the purpose of the Act within the context of this particular case, that is, the fact that if not granted lien rights, Dana may well reap the benefit of millions of dollars from Kennedy’s labour without having any corresponding obligations to the persons whose labour created such a large and profitable enterprise.

CONCLUSION

[111] In my respectful view, the learned trial judge proceeded on a wrong principle and misapplied the law to the facts when he reached the conclusions he did. This amounted to an extricable error in principle. The appeal is, therefore, allowed.

[112] The judgment of Killeen J. dated November 26, 2004, is set aside; and in its place judgment is granted declaring that the work completed by Kennedy and its subtrades constitutes the supply of services and materials to an improvement, entitling the appellant to a lien against the interest of Dana in the St. Mary’s premises, pursuant to the provisions of the CLA.

[113] If the parties are unable to agree on the issue of costs, I will entertain written submissions on costs within 30 days of the release of these reasons.

Chapnik J.

Released:

London Divisional Court File Nos.: 1487 and 1488

DATE: 20060314

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

O’DRISCOLL, CHAPNIK AND WILSON JJ.

B E T W E E N:

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.

Appellants/Plaintiffs/Lien Claimants

• and -

DANA CANADA CORPORATION and RUMBLE AUTOMATION INC.

Respondents/Defendants

REASONS FOR JUDGMENT

Released: March 14, 2006