CITATION: 1191650 Ontario Limited v. 848835 Ontario Inc., 2022 ONSC 6574
DIVISIONAL COURT FILE NO.: DC-21-924-00
DATE: 20221128
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Swinton, Matheson, Trimble JJ.
BETWEEN:
1191650 ONTARIO LIMITED cob as BIOTECHNIK
Plaintiff (Respondent in Appeal) Appellant by Cross-appeal
– and –
848835 ONTARIO INC.
Defendant (Appellant) Respondent by Cross-appeal
Fabio M. Soccol, for the Plaintiff (Respondent in Appeal) Appellant by Cross-appeal
Michael A. Polvere and James R. Leslie, for the Defendant (Appellant) Respondent by Cross-appeal
HEARD at Toronto (by videoconference): June 27, 2022
Trimble J.:
AMENDED REASONS FOR DECISION
[1] This is an appeal from the Order of Braid, J., dated 17 November 2021 (2021 ONSC 6794) in which Her Honour dismissed a motion brought by 848835 Ontario Inc. on the basis that because of the transition provisions of the Limitation Act, 2002, S.O. 2002, c. 24, Sch. B, there was no limitation on Biotechnik’s right to enforce a 1999 judgment, obtained in a construction lien proceeding, against property owned by Continental.
[2] Biotechnik cross-appealed with respect to certain parts of the Order: a) that the lien had been satisfied in that sufficient funds had been paid into court to vacate the lien, b) that certain of the claims Continental advanced against Biotechnik were properly characterized as set offs, and c) that the motion judge’s findings were binding in future proceedings to enforce the earlier judgment or on any setoff claim. Biotechnik also sought leave to appeal from the motion judge’s order that there should be no costs of the motion.
RESULT:
[3] For the reasons stated below, the Appeal is dismissed.
[4] The cross-appeal is allowed solely insofar as it is required for the purpose of correcting the formal Order and not for the purpose of determining the merits of issues not properly before the motion judge. I grant leave to appeal on the issue of costs but dismiss that aspect of the appeal.
FACTS:
[5] 848835 Ontario Inc. is a holding company that now operates as Continental Imperial Explorations Ltd. (“Continental”).
[6] In 1998, Continental purchased 152 Stanley Street, Kitchener, Ontario (the “Property”) knowing its soil and groundwater were contaminated.
[7] Continental hired 1191650 Ontario Limited (“Biotechnik”), a remediation contractor, to perform an environmental assessment of the Property. Biotechnik was not paid and in June 1998 it registered a construction lien on the Property in the amount of $88,806.26. Biotechnik also sued Continental and registered a Certificate of Action on title, thereby perfecting the lien.
[8] On April 28, 1999, Biotechnik obtained a judgment against Continental for $92,090.87 (the “Lien Judgment”) which provided that Biotechnik a) was entitled to a valid and binding lien against the Property for the total amount of the judgment, b) Continental’s interest in the Property should be sold and the purchase monies be applied toward the judgment, c) Continental deliver possession of the Property to Biotechnik, d) Continental pay costs of $3,000, and e) the judgment should bear post-judgment interest at a rate of 7% per year. Continental appealed unsuccessfully and was ordered to pay a further $1,500 in costs.
[9] On March 31, 2000, Biotechnik obtained a writ of possession for the Property, at which time the building had been condemned by the City of Kitchener. Continental asserted that Biotechnik was in possession of the Property for approximately ten years between 2000 to 2010, although Biotechnik denied ever having exclusive possession of the Property.
[10] Continental claimed that Biotechnik rented the Property to Lasso Construction and that Biotechnik and/or Lasso stripped the Property of saleable assets, disconnected utilities, and damaged the property.
[11] In 2006, when Continental first thought that Biotechnik was renting the building to Lasso, Continental wrote to Biotechnik requesting an accounting for rent, as well as the items allegedly removed from the Property. Biotechnik did not respond. Continental advanced the claims for rent and damage to the Property as set off claims in the underlying motion. Biotechnik denied that it did any of these things, denied renting the Property to Lasso, and denied receiving rent from it.
[12] In 2008, Biotechnik brought a motion for an order vesting the Property in it. Continental brought a cross-motion to direct the sale of the Property, for an accounting, and advancing the “Disputed Claims” as set offs. The motion and cross-motion were adjourned sine die and were not pursued further.
[13] In 2011, Continental resumed possession of the Property. Biotechnik did not take any further steps to enforce the Lien Judgment. Biotechnik’s corporate status was cancelled in 2011, but it was revived in 2019. In early 2019, Continental paid $448,798.43 in property tax arrears on the Property. In November 2019, Continental sold the Property for $1.4 million. It did not pay anything toward the Lien Judgment.
[14] Continental brought the underlying motion seeking a declaration that the lien and Lien Judgment are unenforceable because of the expiry of a limitation period or alternatively have been satisfied, and orders that the lien claim, and certificate of action be discharged.
[15] On 24 June 2020, before the hearing on the motion was scheduled, Continental successfully brought an ex parte motion under s. 44 of the Construction Act, R.S.O. 1990, c. C.30 before Broad J. to vacate the lien. Continental paid the amount of the lien into court plus 25 percent for costs, for a total of $111,007.83, and the lien was removed.
[16] When Biotechnik learned of the ex parte order, it registered a caution on title and took the position that insufficient funds were paid into court to vacate the lien because it did not include accrued post-judgment interest. It claimed that the Lien Judgment, including post-judgment interest, was worth $248,205 as of April 22, 2022.
THE MOTION JUDGE’S DECISION:
[17] The motion judge held that the transitional rules of the Limitations Act, 2002 applied such that there was no limitation period on Biotechnik’s right to enforce the Lien Judgment. Subsection 24(2) of the Act provides:
Subject to subsection (2.1), this section applies to claims based on acts or omissions that took place before January 1, 2004 and in respect of which no proceeding has been commenced before that date.
[18] The motion judge rejected Continental’s argument that the transitional rules did not apply because the “claim” for the purposes of s. 24(2) of the Limitations Act, 2002 was the debt recognized by the 1999 Lien Judgment and the “proceeding” was the steps leading up to it, such that a proceeding was commenced before January 1, 2004.
[19] Relying on Kovachis v. Dunn, 2011 ONSC 4174, the motion judge held that “proceeding” in s. 24(2) cannot refer to the original action to obtain judgment when the court is attempting to determine the limitation period to enforce the judgment. The relevant “proceeding” that begins the limitation clock’s running upon a judgment is the suit upon the judgment to enforce it.
[20] The motion judge held, further, that the transitional provisions of the Limitations Act, 2002 applied, and pursuant to s. 16(1)(b) of the 2002 Act, there was no limitation period in respect of enforcement of the Lien Judgment. The “claim” was based on acts or omissions that took place before January 1, 2004 (non-payment of the judgment). No proceeding upon the judgment had been commenced before January 1, 2004. Therefore, no former limitation period had expired before January 1, 2004.
[21] On the cross motion, the motion judge rejected Biotechnik’s argument that since the amount paid into court did not include post-judgment interest, the amount paid into court was insufficient to discharge the lien. The motion judge held that pursuant to section 14(2) of the Construction Lien Act, R.S.O. 1990, c. C.30 (“CLA”) there is no lien for interest on a lien claim. Under section 44 of the CLA, the court must vacate the lien when the defendant pays into court the full amount of the lien plus 25% as security for costs.
[22] Continental claimed an equitable set off against the Lien Judgment for the Disputed Claims, which included rents allegedly collected by Biotechnik from Lasso, for amounts from the sale of components stripped from the property, and alleged damage to the Property. The motion judge held that Biotechnik had an obligation to account to Continental for rents collected, assets removed, and/or any benefits received during its possession of the Property, as a creditor in a similar position to a mortgagee in possession of the property or a creditor seeking enforcement by writ of seizure and sale.
[23] The motion judge, however, held that she was unable to make the requisite findings of fact to determine Continental’s claims for equitable set off on the available affidavit evidence. She held that “[s]ince the underlying action is complete, Continental must commence a new action if they wish to have the claim of set off determined by the court”, as the issue could only be determined through calling viva voce evidence.
[24] The motion judge rejected Continental’s argument that enforcement of the Lien Judgment was barred by the doctrine of laches. While laches was available in respect of Continental’s equitable claim, it would be unfair and unreasonable for Biotechnik to benefit from its failure to account to Continental for the benefits it received from possession of the Property.
[25] Finally, the motion judge held that since there were mixed results on the motion, and since the motion raised novel issues, the parties should bear their own costs.
[26] The conclusions made by the motion judge are found in paragraphs 90 to 92 of her “Reasons on Motion”. However, the Order includes findings of fact and other things not properly contained in an order. Subparagraphs 1 to 8 of paragraph 90 of her Reasons appear as paragraphs 1 to 8 of the Order; subparagraphs 1 and 2 of paragraph 92 of the Reasons appear as paragraphs 9 and 10 of the Order; and the last two sentences of paragraph 92 of her Reasons appear as paragraph 11 of the Order. I address this issue at the end of this decision.
THE DIVISIONAL COURT’S JURISDICTION:
[27] This court has jurisdiction over this appeal and cross-appeal pursuant to s. 71 of the Construction Act, R.S.O. 1990, c. C.30 as it read on June 29, 2018 (the former Construction Lien Act (“CLA”). The transition provisions at s. 87.3(1)(a) of the current Construction Act provides that the CLA, as it read on June 29, 2018, continues to apply with respect to an improvement if the contract for the improvement was entered into before July 1, 2018, as is the case here.
STANDARD OF REVIEW:
[28] An appellate standard of review applies. Questions of law are reviewable on a correctness standard. Questions of fact are reviewable on a standard of palpable and overriding error. Questions of mixed fact and law from which the legal principle is not readily extricable are reviewable on a standard of palpable and overriding error (see: Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 SCR 653, para. 37; Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 SCR 235, paras. 8, 10, 19 and 26-37).
ISSUES:
[29] Continental’s appeal raises the following issue:
- Did the motion judge err in holding that the limitation period had not expired?
[30] Biotechnik’s cross-appeal raises the following issues:
Did the motion judge err in finding Continental properly vacated Biotechnik’s lien?
Did the motion judge err in characterizing Continental’s Disputed Claims as “set offs”?
Did the motion judge err by ordering that the findings and rulings in the Decision were binding in future proceedings?
Did the motion judge err in declining to award costs of the motion to Biotechnik?
[31] It did not pursue the question of laches at the hearing of the Appeal.
The Appeal:
Continental’s Issue 1: The Limitations Act
The Statutory Scheme
[32] The main issue on this appeal is the proper interpretation of the transitional provisions in the Limitations Act, 2002.
[33] At the time of the Lien Judgment, the Real Property Limitations Act, R.S.O. 1990, c. L.15 was in force in Ontario. Subsection 45(1)(c) of the Real Property Limitations Act establishes a twenty-year limitation period to commence an action upon a judgment:
45 (1) The following actions shall be commenced within and not after the times respectively hereinafter mentioned,
(c) An action upon a judgment or recognizance,
Within twenty years after the cause of action arose,
[34] The current Limitations Act, 2002 contains certain relevant transitional rules:
24 (1) In this section,
“former limitation period” means the limitation period that applied in respect of the claim before January 1, 2004.
(2) Subject to subsection (2.1), this section applies to claims based on acts or omissions that took place before January 1, 2004 and in respect of which no proceeding has been commenced before that date.
(4) If the former limitation period did not expire before January 1, 2004 and if no limitation period under this Act would apply were the claim based on an act or omission that took place on or after that date, there is no limitation period.
[35] Pursuant to s. 16 of the Limitations Act, 2002, there is no limitation period in respect of a proceeding to enforce a court order:
16 (1) There is no limitation period in respect of,
(b) a proceeding to enforce an order of a court, or any other order that may be enforced in the same way as an order of a court…
Continental’s Position
[36] Continental argued that the transitional rules of the Limitations Act, 2002 do not apply; the twenty-year limitation period in s. 45(1)(c) of the Real Property Limitations Act, R.S.O. 1990, c. L.15 applied; and it had expired. Pursuant to s. 24(2) of the Limitations Act, 2002, the transitional provisions apply to claims in respect of which no proceeding has been commenced before January 1, 2004. Here, a proceeding was commenced prior to January 1, 2004; namely Biotechnik’s action to obtain the Lien Judgment, commenced by a Statement of Claim dated July 27, 1998. The transitional provisions therefore do not apply. Instead, s. 45(1)(c) of the Real Property Limitations Act applies, giving Biotechnik 20 years from April 28, 1999 (the date of the Lien Judgment). That period expired on April 28, 2019.
Biotechnik’s Position
[37] Biotechnik argued that the motion judge correctly applied the transition provisions of the Limitations Act, 2002, holding that there was no limitation period in respect of the Lien Judgment pursuant to s. 16(1)(b) of the Limitations Act, 2002.
[38] The terms “claim” and “proceeding” within the meaning of s. 24 of the Limitations Act, 2002 cannot refer to the original action to obtain judgment. Rather, the relevant “claim” is the right to enforce the judgment and the relevant “proceeding” is a suit on the existing judgment to extend its life, not the original proceeding. No proceeding was commenced before January 1, 2004 in respect of the claim to enforce the lien judgment.
[39] In the alternative, Biotechnik submitted that the Limitations Act, 2002 does not apply to the Lien Judgment because it is a statutory remedy under the CLA, which provides a complete statutory code. There is no basis under the CLA for a lien judgment to expire.
Analysis
[40] In my view, the motion judge made no error.
[41] Kovachis v. Dunn, 2011 ONSC 4174 is on all fours with this appeal. In that case, the Defendant obtained judgment against the Plaintiff in 1982 and filed writs of execution immediately thereafter. The Defendant renewed the writ in 1988, 1994, and 2000. The writ expired in 2006. In 2011, the Defendant filed a caution against the Plaintiff’s property. The Plaintiff moved to have the caution declared null because of the expiry of the limitation period.
[42] The issue was the application of the transition provisions of the 2002 Act. The Plaintiffs took the same position in that action as Continental here, and the Defendants the same position as Biotechnik here.
[43] We adopt the approach Corrick, J. took at paragraph 19:
[19] Ms. Dunn's claim is based on a 1982 judgment, the enforcement of which was barred after twenty years under the old [Limitations] Act, unless it was kept alive by the continuous renewal of a writ of seizure and sale. The writ was not continuously renewed, and Ms. Dunn's right to enforce the judgment expired in 2002, subject to being granted leave under rule 60.07(2) to obtain an alias writ. Her claim is based on an act that took place before January l, 2004 and no proceeding to enforce her judgment had been commenced before January 1, 2004. Thus, the transitional provisions of the new Act apply, and Ms. Dunn's application for an alias writ is barred as a result of s. 24(3), which provides that no proceeding shall be commenced in respect of a claim if the former limitation period expired before January 1, 2004.
[44] The motion judge’s analysis at paragraphs 42 and 43 is correct. The relevant “proceeding” in s. 24(2) is the proceeding upon the existing judgment to enforce it or extend its life, not the original proceeding, no proceeding was commenced upon the judgment in this case before January 1, 2004, and no limitation period had expired before that date. Therefore, in accordance with s. 24(2) and 24(4) of the transitional provisions, and s. 16(1)(b) of the Act, there is no limitation period in respect of a proceeding to enforce the Lien Judgment. Accordingly, the appeal is dismissed.
The Cross-appeal:
Biotechnik’s Issue #1: Did the motion judge err in finding Continental properly vacated Biotechnik’s lien?
Biotechnik’s Position
[45] Biotechnik argued that the motion judge erred in finding that Continental paid sufficient funds into court to vacate the lien. Continental only paid $111,007.83 into court, whereas the amount of the Lien Judgment, including post judgment interest, was in excess of $248,000 as of April 22, 2022.
[46] Biotechnik submitted that the purpose of s. 44 of the CLA is to allow a person to bring an interlocutory motion to clear title and permits funds to be paid into court. A motion to vacate a lien under s. 44 is not available once a final judgment has been rendered, as occurred here.
[47] Alternatively, Biotechnik argued that the motion judge ignored Continental’s failure to make “full and frank disclosure of all materials facts” in bringing its ex parte motion before Broad J. The omitted facts included failing to attach a copy of the actual Lien Judgment, failing to disclose that the Lien Judgment required that the sale proceeds be applied towards payment of the Lien Judgment, failing to disclose the numerous letters from Biotechnik’s counsel requesting an accounting and security with respect to the sale proceeds; failing to disclose the actual amount outstanding under the Lien Judgment; and failing to disclose Biotechnik’s response to the pending motion. The motion judge erred in finding Continental had paid sufficient funds into court to vacate the lien and in ignoring that the Lien Judgment requires that the sale proceeds be applied towards the Lien Judgment.
Continental’s Position
[48] Continental argued that this ground of appeal is an improper collateral attack on Broad J.’s order vacating the lien. Biotechnik has never appealed the Order and the matter was never properly before the motion judge.
[49] Continental argued, in any event, that the motion judge was correct in concluding that the lien was properly vacated. Under s. 44 of the Construction Act, the Court must discharge a lien where the Defendant posts the amount of the lien and an additional 25% for costs.
Analysis
[50] This aspect of the cross-appeal must be dismissed.
[51] Broad, J., by his 24 June 2020, ordered the lien vacated. The motion judge did not sit on appeal from Broad, J.’s order. His order is res judicata. The only order that the motion judge made with respect to the lien was to vacate the notice of the lien registered on title, which had not been removed by Broad, J.’s 24 June 2020 Order. There is no basis for appellate intervention.
Biotechnik’s Issue #2: Did the motion judge err in characterizing the Disputed Claims as set offs?
Biotechnik’s Position
[52] Biotechnik argued that the motion judge erred in characterizing the Disputed Claims as set offs that Continental is entitled to set off against the Lien Judgment. Biotechnik agreed with the motion judge’s finding that the underlying action is complete, and Continental must commence a new action if it wishes to pursue the Disputed Claims. However, they are not set offs. If Continental chooses to pursue the Disputed Claims, it would in effect be pursuing a separate cause of action and not a defence of set off.
[53] Both s. 17(3) of the Construction Act and s. 111(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43 also provide for a defence of set off. However, whether Continental’s claim for set off is grounded in the Construction Act, Courts of Justice Act, or at equity, it must have pleaded set off to make the defence applicable, and it did not do so. Biotechnik submitted that both legal and equitable set off can only be used as a shield and not as a sword.
[54] In the alternative, the legal test for equitable set off has not been met. The equitable ground must go to the root of the plaintiff’s claim, and this element is not satisfied here. Continental’s Disputed Claims are for alleged tortious conduct that occurred well after the contract was performed and do not go to the root of the contractual relationship.
[55] Further, to pursue the Disputed Claims, Continental would have to commence a new action. The alleged time frame for the Disputed Claims was before 2010, and any action Continental brought to pursue the Disputed Claims at this stage would be limitation-barred.
Continental’s Position
[56] Continental argued that the motion judge correctly characterized Biotechnik’s damage to, and theft of things attaching to the Property as set off claims. When Biotechnik took possession of the Property in 2000 it became a creditor in possession and had a duty to account to Continental. Biotechnik let Lasso use the Property and either did or could have obtained enough rent to satisfy the Lien Judgment. Biotechnik and/or Lasso also damaged the Property, and such damages should also be set off from any amounts claimed under the Lien Judgment.
Analysis
[57] This aspect of the cross-appeal is also dismissed.
[58] It is not clear whether the motion judge determined for herself that Continental’s Disputed Claims were equitable or legal set offs, or merely accepted Continental’s characterization of the Disputed Claims as set offs.
[59] In any event, the motion judge held that since the underlying action was complete, and since there was conflicting evidence with respect to the Disputed Claims that could only be resolved after viva voce evidence, Continental would have to pursue those Disputed Claims by way of a separate action. In doing so, she exercised her discretion. She is entitled to deference. I see no reason to disturb this aspect of the Order.
Biotechnik’s Issue #3: Did the motion judge err in ordering that the findings of the Decision shall be binding in future proceedings?
[60] This aspect of the cross-appeal is allowed. Both parties agreed that the issue of whether the motion judge’s findings would be binding in later proceedings to enforce the lien judgment was neither raised nor discussed before her.
Biotechnik’s Issue #4: Did the motion judge err in not awarding costs to Biotechnik?
Biotechnik’s Position
[61] Biotechnik argued that the motion judge erred by not awarding it costs despite Biotechnik’s being successful on the issue of the validity of the Lien Judgment, and in its argument that the motion was not the proper venue to determine Continental’s Disputed Claims. Further, Biotechnik argued that the motion judge erred in finding the issues raised were novel, as the Superior Court previously dealt with substantially the same fact scenario in Kovachis v. Dunn. Finally, she erred by deciding there would be no costs without first providing the parties with an opportunity to make submissions.
Continental’s Position
[62] Continental argued that the motion judge was within her discretion not to award costs. A costs order should not be set aside unless the judge made an error in principle, or the order was plainly wrong.
[63] In any event, Continental argued that the motion judge correctly considered the split success between the parties in deciding not to award costs.
Analysis
[64] While I grant leave to appeal costs, this aspect of the cross-appeal is also dismissed.
[65] While it would have been preferrable for the motion judge to have invited submissions, this court has now received the costs submissions and, having considered those submissions, I am not prepared to interfere in the motion judge’s exercise of her discretion regarding costs.
FORM OF ORDER
[66] The cross-appeal is allowed in part to address issues in the form of the Order. The Order of the motions judge shall be amended to delete and/or amend the following paragraphs for the following reasons:
a. Paragraphs 2, 3, 5, 6, 7, and 11 – these contain the motion judge’s findings. They are not actually orders.
b. Paragraphs 2 and 3 – these issues were decided by Broad, J. in his order of 24 June 2020. The motion judge was not sitting on appeal from Broad J.’s order.
c. Paragraph 6 - This paragraph is a finding by the motion judge. The order that flows from it, which should be in the Order, is: “The claims alleged by Continental cannot be determined at this hearing. Continental must commence a new action to pursue those claims.” Paragraph 6 of the Order is to be amended, accordingly.
d. Paragraph 11 – The only part of this paragraph which is an order is the last sentence: “I am not seized.” The statement that the motion judge’s findings are binding in another proceeding is not properly in this Order. The parties agreed that this issue was not discussed before the motion judge nor was she asked to rule on it.
CONCLUSION
[67] The appeal is dismissed. The cross-appeal is allowed in part, as follows:
(i) Paragraphs 2,3,5 and 7 of the Order are deleted;
(ii) Paragraph 6 of the Order is amended to read as follows: “The claims alleged by Continental cannot be determined at this hearing. Continental must commence a new action to pursue those claims.”
(iii) Paragraph 11 of the Order is amended to read as follows: “I am not seized.”
[68] Leave is granted to appeal from the motion judge’s disposition of costs but that aspect of the appeal is dismissed.
COSTS OF THE APPEAL AND CROSS-APPEAL
[69] Given that the appeal was dismissed, and the cross-appeal was allowed only to the extent that it was necessary to rectify the Order, there are no costs awarded for the appeal and cross-appeal.
NOTE: Amended: paragraphs 58 and 59 were emended to correct the party’s name.
Trimble, J.
I agree
Swinton, J.
I agree
Matheson, J.
Released: November 28, 2022
CITATION: 1191650 Ontario Limited v. 848835 Ontario Inc., 2022 ONSC 6574
DIVISIONAL COURT FILE NO.: DC-21-924-00
DATE: 20221128
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Swinton, Matheson, Trimble JJ.
BETWEEN:
1191650 ONTARIO LIMITED c.o.b. BIOTECHNIK
Plaintiff (Respondent in Appeal) Appellant by Cross-appeal
– and –
848835 ONTARIO INC.
Defendant (Appellant) Respondent by Cross-appeal
AMENDED REASONS FOR JUDGMENT
Trimble J.