CITATION: Gandhi v. Mayfield Arcadeium Holdings Ltd., 2024 ONSC 2184
DIVISIONAL COURT FILE NO.: 72/23
DATE: 20240415
ONTARIO SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Sachs, Myers, and Shore JJ.
BETWEEN:
HARSIMRAT GANDHI
Appellant
– and –
MAYFIELD ARCADEIUM HOLDINGS LTD.
Respondent
Neal Altman, for the Appellant
Mark H. Arnold, for the Respondent
HEARD at Toronto: April 10, 2024
REASONS FOR DECISION
FL MYERS J.,
The Appeal
[1] Harsimrat Gandhi appeals from the decision of Bloom J. of the Ontario Superior Court of Justice dated October 5, 2023. In the decision, the judge held that Mr. Gandhi’s lien claim was invalid because Mr. Gandhi issued his statement of claim to enforce the lien claim nine days too late.
[2] For the reasons that follow, the appeal is allowed. The motion brought by Mayfield to declare Mr. Gandhi’s lien expired, and to cancel and return to Mayfield the lien bond that it posted with the Accountant of this court, is dismissed.
Background
[3] Mr. Gandhi and Surinder Ahuja are each 50% shareholders in the respondent Mayfield, personally or through intermediate holding companies.
[4] Mayfield is the owner of a construction project in Brampton.
[5] Mr. Gandhi and Mr. Ahuja are involved in a shareholders’ dispute. There is a separate oppression proceeding between them already before the court.
[6] In addition to his claims as a shareholder, Mr. Gandhi claims that Mayfield owes him almost $1 million for construction supervision services he provided to Mayfield on its Brampton construction project.
[7] In this proceeding, Mr. Gandhi claims that he is entitled to a lien against Mayfield’s project land for the unpaid value of his services under the former version of the Construction Act, R.S.O. 1990, c. C.30. The parties agree that the former version of the statute applies to Mr. Gandhi’s lien claim.
[8] Mayfield says that when it defends this proceeding it will raise numerous defences to Mr. Gandhi’s claims. For example, it says that Mr. Gandhi never had a contract to provide construction supervision services to Mayfield in relation to the project. It says that the services allegedly provided by Mr. Gandhi are not lienable under the statutory scheme. It says the value claimed is excessive. It says that this is really just an effort by Mr. Gandhi to extract his shareholders’ equity from the corporate owner of the project under the guise of being a secured creditor.
[9] Mayfield’s allegations in defence of the lien claim will be in its statement of defence once delivered. None of those issues are part of this appeal.
[10] Before defending Mr. Gandhi’s lien claim, Mayfield brought a motion to bond off the lien claim. That order was made and Mayfield has posted a bond of more than $1.2 million to stand in the place and stead of the lien claimed against Mayfield’s land.
The Motion to Invalidate the Lien and Release Mayfield’s Bond
[11] Mayfield then moved to set aside the lien claim and for the return of its bond on two specific grounds:
a. First, subsection 36 (2) of the (old) statute provides that lien claimants must commence a lawsuit to prove their lien claims within 90 days of the last day they supplied services to the project. Mayfield claimed that Mr. Gandhi commenced this lawsuit after more than 90 days had passed from Mr. Gandhi’s last date of supply of services.
b. Second, Mayfield claimed that Mr. Gandhi was not entitled to a lien because he was an “owner” of the project as that term is defined in the statute.
[12] The motion was heard on September 13, 2023.
[13] In the decision released October 5, 2023, the motion judge held that Mr. Gandhi was not an “owner” of the project. Therefore, his claim for lien was not invalidated on that ground as had been claimed by Mayfield. This holding is not under appeal.
[14] This appeal concerns the judge’s decision on the first issue: that Mr. Gandhi commenced this lawsuit beyond the 90-day limitation period and therefore Mr. Gandhi’s lien was lost.
The Key Dates
[15] The fact in issue is what was the last day on which Mr Gandhi supplied services to the project. That is the date that starts the 90-day clock.
[16] The evidence that was before the motion judge on this specific issue of fact consisted of Mr. Gandhi’s signed Claim for Lien form, two snippets of cross-examination of Mr. Gandhi, and screenshots of a WhatsApp conversation among the principals and others on April 11, 2023.
The Claim for Lien Form
[17] Mr. Gandhi delivered a Claim for Lien in the statutory form on April 11, 2023. In the Claim for Lien, Mr. Gandhi claimed that the “date of most recent supply” was April 2, 2023.
Cross-Examination – The Claim for Lien is Accurate
[18] On May 15, 2023, Mr. Gandhi was cross-examined about his claim. He confirmed that he signed the Claim for Lien in his lawyer’s office. The following questions were then asked by Mr. Arnold and answered by Mr. Gandhi:
BY MR. ARNOLD:
- Q. Will you have a look at [the Claim for Lien], sir, and tell me if it is accurate?
A. Yes, it is.
- Q. Are there any changes that you would, at this point in time, wish to make to this claim for lien?
A. No.
Cross-Examination - the Last Date of Supply of Services was April 11, 2023
[19] Mr. Arnold returned to the topic later in the cross-examination. At that point, Mr. Gandhi testified that the last date on which he provided supervision services on site at the project was actually April 11, 2023. The following exchange took place:
- Q. All right. Now, let me ask you this. If I go to the next line here? It says, if you just look at it, make sure that I've read it accurately, it says, "Time within which services or materials were supplied," and then it says, "in January 15th, 2017," do you see that?
A I see that.
- Q. "To April 2nd, 2023, date of most recent –
A. I see –
- Q. -- supply, " –
A. -- that, too.
- Q. -- and I've asked you to provide to me documents, you've provided very few, when was the last date up on which you, Rick Gandhi, personally supplied services to the project?
A. April 11th, morning.
- Q. The morning of April 11th?
A. That's right.
- Q. What material or documents do you have to confirm that date?
A. You -- you have the WhatsApp document that shows you the pictures of the site condition, of gas lines; and my communication with the property management and -- and Surinder, who we were all part of one WhatsApp group; and I have met the contractors on site and gave them instructions to rectify that issue.
- Q. You say that the date you did that was April 2nd?
A. April 11th.
- Q. April 11th?
A. That's right.
- Q. Was April 11th your date of last supply?
A. That's right.
- Q. Then why does it say "April 2nd"? Is that a mistake, April 2nd, 2023?
A. That could be.
- Q. Well, not a question of could be. Is it a mistake, yes or no? Because I asked you at the beginning if this was accurate and you said it was. Now you say it's not April 2nd, it's April 11th. So, just help me understand this, what was the date of last supply?
A. April 11th.
- Q. All right. And is it your evidence on April 11th -- what service did you supply on April 11th?
A. Project management. I met the contractors.
- Q. Which contractors?
A. HVAC contractors.
- Q. Okay. In addition to an HVAC contractor, who else did you meet on April 11th?
A. I only met the HVAC contractors that day.
- Q. On April 11th?
A. Yeah. Very briefly for -- I was there for about half an hour.
- Q. Where did you meet the HVAC contractor?
A. On site.
- Q. Where on site?
A. On site in the park -- parking lot.
- Q. The HVAC contractor again was whom?
A. It was Prime Heating & Air Conditioning.
[20] The cross-examination brought out very clearly that the last day that Mr. Gandhi was on site supervising a contractor at Mayfield’s project was April 11, 2024.
[21] Mr. Arnold made no suggestion that Mr. Gandhi was wrong or that he was being untruthful. Mayfield led no evidence to the contrary. Moreover, the cross-examination was taken on May 15, 2023. That was still within the 90-day period no matter which date was used. Not knowing the date that his counsel was going to start the lawsuit some months in future, Mr. Gandhi had no reason to prefer one date over the other or to shade the truth on this issue.
WhatsApp Group Messages
[22] Prior to the cross-examination, Mr. Gandhi disclosed to Mayfield a number of screenshots of a group discussion on WhatsApp on April 11, 2023 concerning the issues at the project site that day. The screenshots include a picture taken by Mr. Gandhi at the project site. The discussion records Mr. Gandhi reporting about an HVAC issue to Mr. Ahuja and the others in the group chat.
[23] Mr. Gandhi did not exhibit the screenshots to an affidavit or swear to their truth initially. They are in the record before the court because Mayfield delivered an affidavit of a law clerk including all documents that had been produced to it by Mr. Gandhi. In addition, in answering question 199 in the transcript snippet set out above, Mr. Gandhi referred expressly to the WhatsApp discussion to corroborate his oral evidence that he was on site on April 11, 2024.
[24] Mr. Arnold made brief reference to admissibility concerns with this evidence. However, his client’s principal, Surinder Ahuja, was a recipient of the group chat messages. Mayfield put it into evidence. There was no suggestion below that there was any concern with the authenticity or admissibility of the evidence.
[25] Moreover, the WhatsApp discussion is not hearsay evidence. On this motion, it was not used to prove the truth of its contents. The WhatsApp discussion concerned HVAC issues. It is not used to prove that what was said by Mr. Gandhi or discussed among those involved about the HVAC problem was truthful. Rather, on this motion, the screenshots of the discussion are being used to prove circumstantially that Mr. Gandhi was at the project site engaged in construction issues on April 11, 2024. That is a non-hearsay purpose for which the WhatsApp screenshots are admissible.
The Legal Issue
[26] The question before the motion judge was whether Mr. Gandhi commenced this litigation within 90 days of his last supply of services of the project. This is a question of fact to be determined on the evidence.
[27] Mr. Gandhi commenced this action on July 10, 2023.
[28] If the date of last supply was April 2, 2023, as set out in Mr. Gandhi’s Claim for Lien form, then he commenced this lawsuit nine days too late. If the date of last supply was April 11, 2023, as Mr. Gandhi affirmed in cross-examination and as supported by the WeChat screenshots, then the litigation was commenced just in time.
[29] The motion judge analyzed the issue as follows:
[22] The contents of a claim for lien are a significant part of the statutory scheme; that document is not a mere pleading as argued by the Responding Party. Moreover, the contents of a claim for lien constitute an admission by the Responding Party under the law of evidence, an exception to the hearsay rule. In my view the testimony that they might have been mistaken are not convincing, despite other evidence given by Gandhi about relevant activity after April 2, 2023.
[23] In my view the claim for lien is to be taken at its face value in the case at bar. Powerful evidence, not present before me, will be necessary for the lien claimant to overcome the strength of assertions in his own claim for lien.
[24] Those assertions have consequences which determine the issue of which act applies and whether perfection was timely.
[30] The motion judge held that because the Claim for Lien was an important document and an “admission” for the purposes of the law of evidence, powerful evidence is necessary for a lien claimant to overcome its contents.
[31] The appellant submits that the motion judge made an error of law by setting too high a test. His task, the appellant submits, was to find as a fact, on all the admissible evidence, the last date of supply of services by the lien claimant. There is no special high burden to overcome the date set out in a Claim for Lien form. Rather, the appellant submits that s. 6 (1) of the Construction Act provides that absent prejudice, a claim for lien is not to be invalidated just because it fails to comply strictly with the technical content requirements, including the date of the last supply of services required by s. 34 (5) of the statute.
[32] So while the actual issue to decide the case is one of fact, this appeal concerns the legal test applicable to make that determination.
[33] I hasten to note that s. 6 (1) of the Construction Act issue was not argued in the parties’ factums or orally below.[^1] The motion judge cannot be expected to have been cognizant of a very particular statutory term that was not brought to his attention by the parties’ lawyers. I deal below with the question of whether this court should consider s. 6 (1) when raised for the first time on appeal.
Jurisdiction and Standard of Review
[34] This appeal is brought as of right under s. 71 (1) of the Construction Act.
[35] The standard of review is the usual standard for appeals set out by the Supreme Court of Canada in Housen v. Nikolaisen, 2002 SCC 33, at paras. 8, 10, 19, 26-37. Lococo J. recently described this standard of review comprehensively in Kitmitto v. Ontario (Securities Commission), 2024 ONSC 1412:
[25] The standard of review is correctness for questions of law, including legal principles extricable from questions of mixed fact and law.
[26] The standard of review is palpable and overriding error for questions of fact and for questions of mixed fact and law (where the legal principle is not readily extricable), including with respect to the application of correct legal principles to the evidence.
[27] A palpable and overriding error is an obvious error that is sufficiently significant to vitiate the challenged finding: Longo v. MacLaren Art Centre, 2014 ONCA 526, 323 O.A.C. 246, at para. 39. The appellant must show that the error goes to the root of the challenged finding such that it cannot safely stand in the face of the error: Waxman v. Waxman (2004), 2004 39040 (ON CA), 186 O.A.C. 201 (C.A.), at para. 297, leave to appeal refused, [2004] S.C.C.A. No. 291.
Analysis
Question of Law
[36] No law is cited for the proposition that a Claim for Lien form has special status as evidence in a lien proceeding.
[37] The fact that a statement in a document is an “admission” for the purposes of the law of evidence just means that it is admissible in evidence despite being hearsay. If a document is used to prove the truth of its contents, it is hearsay because it is a statement made out of court. Hearsay evidence is presumptively inadmissible unless there is an applicable exception to the exclusionary rule.
[38] Admissions are a recognized exception to the hearsay exclusion rule. Admissions are anything said, written, or done by a party tendered by the opposite party in evidence: Lederman, Bryant, and Fuerst, The Law of Evidence in Canada, Fourth Edition (Markham: LexisNexis Canada, 2014) at §6.417.
[39] The fact that a piece of evidence is an admission, i.e. a statement made by a party out of court, just makes it admissible as an exception to the hearsay rule. It has no greater significance.
[40] However, there is a recognized category of formal admissions made in pleadings, and formal documents in litigation can be subject to special rules to limit a party’s ability to withdraw that kind of admission. See, for example, Rule 51 of the Rules of Civil Procedure, RRO 1990, Reg 194. But as Lederman et al. note at §6.418,
As in the case of all admissions, except those known as “judicial or formal admissions”, the party who made it may later lead evidence at trial to reveal the circumstances under which the admission was made in order to reduce its prejudicial effect.
[41] The motion judge accepted that Mr. Gandhi’s Claim for Lien was not a pleading. Its contents, no doubt, are an admission by Mr. Gandhi. That means that they are provable against him in evidence for the truth of their content despite being a statement made out of court and therefore hearsay.
[42] But, absent a formal judicial admission and an applicable special standard, like Rule 51 of the Rules of Civil Procedure, the date in a Claim for Lien form has no special status requiring especially “powerful evidence” to rebut it.
[43] This point is supported by s. 6 (1) of the Construction Act that says:
6 (1) No certificate, declaration or claim for lien is invalidated by reason only of a failure to comply strictly with subsection 32 (2), 33 (1) or 34 (5) unless, in the opinion of the court, a person has been prejudiced as a result, and then only to the extent of the prejudice suffered.
[44] Subsection 34 (5) of the statute is expressly referred to in s. 6 (1). It lists the details which are required to be disclosed in a Claim for Lien form. These include, “the time within which the services or materials were supplied”.
[45] As a result of s. 6 (1) therefore, in the absence of prejudice, a claim for lien is not defeated by reason only that there has not been strict compliance with the requirement to disclose in the Claim for Lien form the dates of supply of services.
[46] In 9585800 Canada Inc. v. JP Gravel Construction Inc., 2019 ONSC 7022, Swinton J., writing for a panel of this court, considered the scope of s. 6 (1). In that case, a claim for lien had the wrong date. It was off by a year. To try to correct the typo, the applicant discharged the claim for lien and then tried to file a new one containing the correct date.
[47] The motion judge held that the second lien was valid. She was apparently concerned that the lien claimant not be deprived of an otherwise valid lien.
[48] The Divisional Court overruled because s. 48 of the Construction Act provides that when a lien is discharged, it cannot be revived. In discussing her reasoning, Swinton J. noted that she was not leaving a lien claimant without a way to fix a mistaken date in a Claim for Lien form. She held that s. 6 of the statute provided a simpler mechanism to fix the errant date in the first lien claim. She wrote:
[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., 1999 3757 (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. [Emphasis added.]
[49] Mr. Arnold was not able to articulate any prejudice suffered by Mayfield by the correction of the date of the last supply of services in Mr. Gandhi’s Claim for Lien form.
[50] Nothing of note happened in the nine days between April 2 and April 11, 2023. In fact, Mr. Gandhi’s Claim for Lien was only delivered on April 11, 2023.
[51] The fact that a lien claim is not defeated by a minor irregularity is not in itself prejudice for this analysis, as this is the very purpose of s. 6 (1) of the statute.
[52] Not having s. 6 (1) before him, the motion judge was not directed by the parties to consider the issues of whether a change in the date was a “minor irregularity” which will not defeat the lien claim absent prejudice.
[53] Rather than considering the issues through the lens of correcting minor irregularities, including the date, the motion judge approached the evidence from the perspective that the Claim for Lien form was a formal admission that could not be withdrawn except by powerful evidence. He started then with a set date and with Mr. Gandhi bearing a high burden to prove a different date.
[54] The judge was unimpressed by Mr. Gandhi’s reluctance to admit that the Claim for Lien contained an error. But since he was misdirected to look only for powerful evidence to overcome a binding judicial admission that April 2, 2023 was the relevant date, he never seems to have considered that Mr. Gandhi’s oral testimony, that the last day of supply was April 11, 2023, was not challenged or contradicted by Mayfield. Moreover, it was corroborated, indeed conclusively proven, by the unchallenged circumstantial evidence provided by the WhatsApp screenshots.
[55] Were the issue on appeal a review of a finding of fact based on a palpable and overriding error standard, I would find such an error. But the issue really is one of law in that the error of fact is readily explicable because the motion judge started from the perspective that the April 2, 2023 date was binding and had to be overcome. Had he known of s. 6 (1) and case law concerning the search for prejudice in cases of minor errors in a Claim for Lien form, I dare say that the result below would have been different.
Raising a New Issue on Appeal
[56] As mentioned above, the court raised with counsel the question of whether the appellant should be heard to raise s. 6 (1) of the statute for the first time on appeal. The presumptive rule is that parties may not raise on appeal new issues that were not argued below: Perez v. Governing Council of the Salvation Army in Canada, 1998 7197 (ON CA). However, the case law recognizes that the court has the discretion to hear a matter raised for the first time on appeal.
[57] L’Heureux-Dubé J. set out the governing considerations in a criminal case in her dissent in R. v. Brown, 1993 114 at para. 20:
In summary, the following three prerequisites must be satisfied in order to permit the raising of a new issue, including a Charter challenge, for the first time on appeal. First, there must be a sufficient evidentiary record to resolve the issue. Second, it must not be an instance in which the accused for tactical reasons failed to raise the issue at trial. Third, the court must be satisfied that no miscarriage of justice will result from the refusal to raise such new issue on appeal.
[58] Counsel confirmed that the submissions below included issues of whether the change of date was a minor error and whether Mayfield suffered prejudice by the error. All the evidence and the issues were before the court, although in the context of the wrong legal paradigm. Thus, there is a sufficient evidentiary record to resolve the issue.
[59] There is no basis on which to conclude that the decision not to raise s. 6 was a tactical one. There was no advantage to Mr. Gandhi in not mentioning s. 6 to the motion judge. Mr. Arnold concedes in Mayfield’s factum that it is appropriate to proceed as if the judge below knew the applicable law despite counsel not laying it before him.
[60] Finally, we are satisfied that it is in the interests of justice to hear the arguments with respect to s. 6. This is not a case where the motion judge did not deal with the issue of whether the Claim for Lien form could be amended or corrected. He agreed that it could be, but he erred in law in how he approached the issue. To understand his error it was necessary to refer to s. 6. Second, we were concerned to ensure that we were not interfering unduly with the finality of the motion. Allowing new issues on appeal and then sending matters back for a do-over can lead to litigation by instalment. But here, the motion itself is fully resolved. The lawsuit will just proceed in the ordinary course.
[61] Accordingly, the appeal is allowed and the motion to strike the Claim for Lien and to return the lien bond is dismissed.
[62] Counsel agreed that the quantum of costs of the appeal would be fixed at $20,000 all-inclusive, but wished to make submissions in writing on the question of entitlement.
[63] In addition, the order of costs in favour of Mayfield below cannot stand. If the parties cannot agree on the reversal of the costs order, we require submissions from the parties on that issue as well.
[64] Counsel for Mayfield may deliver no more than three pages of costs submissions by May 3, 2024. Counsel for Mr. Gandhi may respond with no more than three pages of submissions by May 17, 2024. Counsel for Mayfield may reply only on the issue of costs of the initial motion sought by Mr. Gandhi with no more than two pages of submissions delivered by May 24, 2024.
[65] All submissions shall be accompanied by the initial Costs Outlines used by the parties on the motion below. Counsel may also include copies of any offers to settle on which they rely for costs purposes. These are not included in the page limits above.
“FL Myers J”
“Sachs J”
“Shore J”
Released: April 15, 2024
CITATION: Gandhi v. Mayfield Arcadeium Holdings Ltd., 2024 ONSC 2184
DIVISIONAL COURT FILE NO.: 72/23
DATE: 20240415
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Sachs, Myers, and Shore JJ.
BETWEEN:
HARSIMRAT GANDHI
Appellant
– and –
MAYFIELD ARCADEIUM HOLDINGS LTD.
Respondent
REASONS FOR DECISION
FL Myers J.
Released: April 15, 2024
[^1]: Mr. Altman was not counsel for Mr. Gandhi below.