9585800 Canada Inc. v. JP Gravel Construction Inc., 2019 ONSC 7022
CITATION: 9585800 Canada Inc. v. JP Gravel Construction Inc., 2019 ONSC 7022
DIVISIONAL COURT FILE NO.: DC-19-2498
DATE: 20191204
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Swinton, Favreau and Copeland JJ.
BETWEEN:
9585800 CANADA INC., operating as EARTH MOVERS
Plaintiff (Respondent on Appeal)
– and –
JP GRAVEL CONSTRUCTION INC., MORGUARD REALTY HOLDINGS INC. and JEAN-PIERRE GRAVEL
Defendants (Appellant)
Martin Diegel, for the Plaintiff (Respondent on Appeal)
Stéphane Bond, for the Defendant JP Gravel Construction Inc., Defendant (Appellant)
HEARD at Ottawa: November 19, 2019
Swinton J.
Overview
[1] JP Gravel Construction Inc. (“Gravel”) appeals from an order of O’Bonsawin J. dated June 5, 2019, in which she dismissed its motion to discharge a lien registered by 9585800 Canada Inc. (operating as Earth Movers) (the “Respondent”) on a property owned by Morguard Realty Holdings Inc. and found that the lien was valid. That lien had replaced an earlier lien that the Respondent had registered on the property and then discharged.
[2] At issue in the motion and on this appeal was the effect of the discharge of the first lien on the registration of the second lien. For the reasons that follow, I would allow the appeal and grant an order to discharge the second lien, as well as the related relief sought.
Factual Background
[3] Gravel is the general contractor for a construction project on a property owned by Morguard Realty Holdings Inc. Earth Movers was a subcontractor on the project.
[4] On May 15, 2018, Earth Movers registered a lien in the amount of $662,100.48 on the property. Earth Movers then discharged this lien on June 4, 2018, because the lien contained errors as to the time period in which services had been rendered to the property. The time of delivery was said to be in 2017 rather than 2018 in the first lien. A second lien for the same amount was then registered on June 4, 2018 with the time period corrected.
[5] Gravel took the position that the second lien should be discharged because of s. 48 of the Construction Lien Act, R.S.O. 1990, c. C.30 (the “Act”), the law applicable to the present dispute. That provision states:
A discharge of a lien under this Part is irrevocable and the discharged lien cannot be revived, but no discharge affects the right of the person whose lien was discharged to claim a lien in respect of services or materials supplied by the person subsequent to the preservation of the discharged lien.
[6] Nevertheless, Gravel paid a lien bond in the amount of $16,553 to remove the lien from the property. It subsequently sought leave to bring a motion pursuant to s. 47(1) of the Act seeking an order to discharge the lien, dismissing the lien action and for the repayment of the bonding invoice based on the effect of s. 48. Section 47 confers the power on the court to discharge a lien.
The Decision of the Motions Judge
[7] The motions judge granted leave to bring the motion, stating that she agreed that “this motion is the most expeditious and cost-effective way to resolve the lien claim” (Reasons at para. 19).
[8] The motions judge refused to vacate the lien, because the time frame in the first lien was clearly incorrect, since the work had not been performed during the period set out in the lien. She then stated, “I find the First Lien to be a nullity since it was a lien for non-existent work”. She then found the second lien was appropriate and valid, with the result that s. 48 of the Act did not apply. Accordingly, she dismissed Gravel’s motion and awarded costs against it.
Jurisdiction to hear this appeal
[9] As Gravel’s motion was decided under the Construction Lien Act, and not the current Construction Act, there is no appeal from an interlocutory order (see s. 71(3)). Accordingly, the Divisional Court does not have jurisdiction to hear this appeal unless it is an appeal from a final order.
[10] The formal order states in paragraph 1 that the motion is dismissed. However, paragraph 2 of the order states that the second lien is valid and shall remain in place. Paragraph 2 is a final order, as it settles the validity of the lien that was registered on June 4, 2018 and deprives Gravel of a substantive defence at trial (see HMI Construction Inc. v. Index Energy Mills Road Corporation, 2017 ONSC 4075 (Div. Ct.) at para. 12; Stubbe’s Precast Commercial Ltd. v. King & Columbia Inc., 2018 ONSC 3062 (Div. Ct.) at para. 12; 570 South Service Road Inc. v. Lawrence-Paine & Associates Ltd., 2011 ONSC 3410 (Div. Ct.) at para. 13).
[11] The present case can be distinguished from 570 South Service Road. There the motions judge had dismissed the motion for an order discharging the lien, but had refused to make a declaration of validity with respect to the lien. In that case, the order under appeal was held to be interlocutory, and the appeal was quashed for want of jurisdiction.
[12] Here, the declaration of the validity with respect to the second lien makes the order final, as the order has resolved the issue of validity. Moreover, when paragraphs 19 and 34 of the motions judge’s reasons are read together, it is apparent that she was resolving the validity issue. Accordingly, the Divisional Court has jurisdiction to hear this appeal.
The Issues
[13] Gravel submits that the motions judge erred in failing to give effect to the clear wording of s. 48 of the Act and in improperly distinguishing existing jurisprudence. In addition, it submits that the motions judge denied it procedural fairness in determining that the first lien was a nullity, as this was not an issue that had been argued before her, and the appellant was unable to make submissions on the effect of the curative provision in s. 6 of the Act, which would have been relevant. Section 6 states:
No certificate, declaration or claim for lien is invalidated by reason only of a failure to comply strictly with subsection 32(2) or (5), subsection 33(1) or subsection 34(5), unless in the opinion of the court a person has been prejudiced thereby, and then only to the extent of the prejudice suffered.
[14] The Respondent argues that the decision of the motions judge is based on a finding of fact with respect to the nullity of the first lien, and this Court should give deference to that finding. Counsel does concede, however, that the issue of nullity and the effect of s. 6 were not raised in oral argument.
[15] The Respondent also argues that if this Court is inclined to grant the appeal, the matter should be sent back for a rehearing on the issue of relief from forfeiture. The Respondent did not file a formal notice of motion claiming that the discharge of the second lien would amount to forfeiture. However, counsel raised this in oral argument. The motions judge did not deal with the issue, given her finding that the second lien was valid. The Respondent seeks an opportunity to have this issue determined if the appeal is allowed.
The Standard of Review
[16] The standard of review on this appeal is correctness, as the appeal turns on the correct legal interpretation of s. 48 of the Act (Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 at para. 35). The issue of procedural fairness requires no standard of review, as the appellate court must decide if the necessary procedural fairness was accorded.
Analysis
[17] In my view, the motions judge erred in failing to give effect to s. 48 of the Act. The wording of the section is clear, as set out earlier in these reasons. If a lien is discharged under Part VII, the discharge is irrevocable, and the discharged lien cannot be revived by the registration of another lien. That is what happened here: the Respondent discharged the first lien and registered a second lien for the same amount.
[18] The result may appear harsh, but that is the effect of the provision, as described by Master Sandler in the leading authority, Southridge Construction Group Inc. v. 667293 Ontario Ltd. (1992), 11 O.R. (3d) 56 (Ont. Ct. (Gen. Div.)). In that case, the lien claimant, having failed to include the total amount owing in its Claim for Lien, discharged its lien and registered a second lien for the correct amount. The Master ordered that the second lien be discharged, explaining how the lien claimant should have proceeded to correct the mistake without discharging the first lien. The Master’s decision was upheld in brief reasons by the Divisional Court (Southridge Construction Group Inc. v. 667293 Ontario Inc. (1993), 12 O.R. (3d) 223).
[19] The motions judge distinguished Southridge because the error there was in relation to the amount claimed in the lien. Here, the error was in relation to the year in which the work was performed, which made the first lien, in her view, a nullity. This argument about nullity was not raised by the parties. Therefore, it was a denial of procedural fairness to decide the motion on this basis without giving the parties notice and a chance to make submissions on the issue of nullity.
[20] Moreover, had the appellant been given the opportunity to make submissions, counsel would have been able to raise the significance of s. 6 of the Act. I have quoted s. 6 above. It allows a court to refuse to find a claim for lien to be invalid because of minor irregularities (see Gillies Lumber Inc. v. Kubassek Holdings Ltd. (Ont. C.A.).) Notably, s. 6 states that a claim for lien is not invalidated because of a failure to comply with certain subsections, including s. 34(5). Subsection 34(5) specifies the content of a claim for lien. Along with such information as the name and address of the person claiming the lien, paragraph (a.2) refers to “the time within which the services or materials were supplied.” Reading s. 34(5) with s. 6, it appears that an error made with respect to the time within which the services or materials were supplied is a minor irregularity within the meaning of s. 6, and a court can refuse to declare the claim for lien invalid or vacate the lien after the court determines the issue of prejudice to the other parties. Gravel concedes that it would not have suffered any prejudice had the Respondent sought an order to correct its error with respect to the timing of the services.
[21] The motions judge cited no case law in support of her conclusion that the error here rendered the first lien a nullity. Counsel conceded at the argument of the appeal that they had found no case law to support her conclusion.
[22] The appellant cited one case, Stubbe’s Precast Commercial Ltd. v. King & Columbia Inc., 2018 ONSC 995, that suggested such an error would be a minor irregularity. In Stubbe’s, the motions judge held that an error in naming the lien claimant, using “Ltd.” rather than “Inc.”, was a minor technical error that did not warrant an order to discharge the lien, given s. 6 (at para. 16).
[23] Similarly, s. 6 would have permitted a court to apply the curative provision in the present case had the first lien not been discharged. However, the Respondent chose to discharge that lien and to register a second lien. Section 48 of the Act makes the discharge irrevocable. Accordingly, the motions judge erred in failing to order that the second lien be vacated, and the appeal should be allowed, and her order set aside.
[24] The Respondent sought an order referring this matter back to a Superior Court judge because his argument with respect to relief from forfeiture was not dealt with by the motions judge. I note that he brought no formal notice of motion seeking relief from forfeiture. He has provided no legal authority to support his argument that a court could grant relief from forfeiture resulting from the application of a statutory provision, namely s. 48 of the Act. In the circumstances, there is no need to refer this matter back, given the lack of material to support the Respondent’s argument.
Conclusion
[25] Accordingly, the appeal is allowed, and the order of the motions judge is set aside. An order is to go discharging the lien, dismissing the lien action, and returning the security posted by Gravel for cancellation.
[26] Costs of the motion in the agreed amount of $6,000 and costs of the appeal in the agreed amount of $6,000 are payable by the Respondent to Gravel.
Swinton J.
I agree _______________________________
Favreau J.
I agree _______________________________
Copeland J.
Released: December 4, 2019
CITATION: 9585800 Canada Inc. v. JP Gravel Construction Inc., 2019 ONSC 7022
DIVISIONAL COURT FILE NO.: DC-19-2498
DATE: 20191204
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Swinton, Favreau and Copeland JJ.
BETWEEN:
9585800 CANADA INC., operating as EARTH MOVERS
Plaintiff (Respondent on Appeal)
– and –
JP GRAVEL CONSTRUCTION INC., MORGUARD REALTY HOLDINGS INC. and JEAN-PIERRE GRAVEL
Defendants (Appellant)
REASONS FOR JUDGMENT
Swinton J.
Released: December 4, 2019