CITATION: MGW Homes Design Inc. v. Pasqualino, 2024 ONSC 2852
DIVISIONAL COURT FILE NO.: 588/23
DATE: 20240531
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
Sachs, D.L. Corbett and O’Brien JJ.
BETWEEN:
MGW HOMES DESIGN INC.
John Margie and Jay Nathwani, for the
Appellant
Plaintiff / Appellant
– and –
DOMENIC PASQUALINO
Krista Chayter and Carlo Pasqualino, for the
Respondent
Defendant / Respondent
HEARD at Toronto: Dec. 12, 2023
REASONS FOR DECISION
D.L. Corbett J.
[1] The Appellant (“MGW”) appeals the order of Chozik J. dated January 16, 2023: MGW Homes Design Inc. v. Pasqualino, 2023 ONSC 411.[^1] The appeal focuses on one point concerning remedy. MGW registered an adjudicator’s determination rendering it enforceable as a court order. The Construction Act, RSO 1990, c. C.30, requires that notice be given within ten days of filing the determination with the court, and it is not contested that this was not done.
[2] The motion judge found that MGW had not complied with the clear language of the Act. She voided enforcement steps taken pursuant to the order and ordered that MGW could not enforce the adjudicator’s award.
[3] MGW only takes issue with the second aspect of the motion judge’s remedy. It agrees that it failed to comply with the Act, it accepts that there should be some consequence for this non-compliance and that voiding enforcement steps taken prior to giving notice is an appropriate remedy in the discretion of the motion judge. It argues that barring it from taking any further steps to enforce the adjudicator’s determination is not an appropriate remedy where its non-compliance has caused no prejudice, and where Pasqualino, himself, is in default of his statutory obligation to make prompt payment in accordance with the Adjudicator’s determination.
[4] Pasqualino argues that the impugned aspect of the order was within the motion judge’s discretion, or alternatively, that it is required in the circumstances of non-compliance with the notice requirement.
[5] I agree with MGW. The Act is silent on the consequences of non-compliance with the notice requirement, which puts that issue within the discretion of a motion judge. In this case, the motion judge’s order precluding enforcement of the Adjudicator’s determination is disproportionate to MGW’s non-compliance. For the reasons that follow, I would allow the appeal, and set aside the impugned term in the motion judge’s order, with costs in this court to MGW.
Jurisdiction and Standard of Review
[6] The impugned order is a final order of a judge under the Construction Act. Appeal lies to the Divisional Court pursuant to s. 71(2) of the Act (MGW-Homes Design Inc. v. Pasqualino, 2024 ONCA 422), and attracts an appellate standard of review: correctness for questions of law, and palpable and overriding error for findings of fact (Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65; Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 SCR 235, para. 21). Questions of mixed fact and law are reviewed on a deferential standard except in respect to “extricable questions of law” which are reviewed on a correctness standard.
Background
[7] MGW sought an interim payment order pursuant to the adjudication provisions of the Construction Act. By determination dated January 18, 2022, the Adjudicator required Pasqualino to pay MGW $119,314, inclusive. Pasqualino moved for leave to apply for judicial review of the Adjudicator’s determination. That motion was denied by Ricchetti RSJ on October 4, 2022: 2022 ONSC 5632.
[8] MGW filed the Adjudicator’s determination with the court, whereupon it became enforceable as if it were a court order. MGW then obtained an enforcement writ. MGW did not give notice to Pasqualino that it had filed the Adjudicator’s determination with the court.
Analysis
The Issue Below Concerned the Writ
[9] The motion judge’s reasons begin as follows:
Domenic Pasqualino brings a motion to vacate a writ for enforcement issued on June 17, 2022, by MGW Homes Design Inc…. under the Construction Act…. The writ was issued in connection with an Adjudicator’s determination under the Act dated January 21, 2022. (Decision, para. 1)
… MGW failed to give notice within the required 10 days. The issue on this motion is whether the failure to give notice within the 10 days voids the writ. (Decision, para. 3; emphasis added)
[10] The motion judge set out the controlling statutory scheme[^2] in para. 2 of her reasons, including the following statement:
Under the Act, an Adjudicator’s determination can be converted to a Court Order if it is filed with the court and notice of doing so is given to the other party within 10 days of so doing: s. 13.20(3).
[11] The motion was agued on the basis that the issue was whether the writ of enforcement should be voided. At para. 3 of the decision, the motion judge wrote:
… MGW failed to give notice within the required 10 days. The issue on this motion is whether the failure to give notice within the 10 days voids the writ. (Decision, para. 3; emphasis added)
At para. 11 of the Decision, the motion judge wrote:
Mr Pasqualino takes the position that the failure to give notice under s. 13.20(3) of the Act that the Adjudicator’s Determination was filed with the Court is fatal to the writ. The only just remedy is that the writ be struck. (emphasis added)
[12] As stated by the motion judge and as argued by Pasqualino below, the issue before the motion judge concerned the writ of enforcement. The motion was not brought, or argued, on the basis that MGW ought to be precluded from future steps to enforce the adjudication decision.
Motion Judge Erred in Finding that Non-Compliance with the Act Was “Fatal” to the Writ
[13] The motion judge concluded that MGW’s failure to give notice that it had obtained a court order was fatal to the writ issued to enforce the order. She so concluded on the basis that:
(a) Enforcement of an adjudicator’s determination by court order is an “extraordinary power” (Decision, para. 21);
(b) Similar to liens, “the period for expiry of a time frame under the Act is mandated by statute and leaves no room for the exercise of judicial discretion (Decision, para. 22);
(c) Enforcement of an adjudication decision “as if it were a Court Order” requires strict compliance with the Act. “In the absence of compliance, the writ issued is void” (Decision, para. 22);
(d) An enforcing party “must comply with the notice requirement within 10 days required by the Act. Nothing more. Nothing less” (Decision, para. 23).
With respect, I do not agree with the motion judge’s analysis. The failure to give the requisite notice is a breach of a statutory requirement, but no particular consequence is prescribed for this non-compliance. When the notice requirement is read in the context of the scheme of the Act in general, and the adjudication provisions in particular, remedies for non-compliance are in the court’s discretion, to be exercised judicially in the circumstances of each particular case.
(a) Enforcement by Court Order is not an “Extraordinary Power”
[14] Many sub-judicial decisions may be enforced by court order. These include arbitral decisions (see Arbitration Act, SO 1991, c. 17, s. 50), administrative decisions (see Statutory Powers and Procedures Act, RSO 1990, c. S.22 (“SPPA”), s.19 and Labour Relations Act, 1995, SO 1995, c. 1, Sch. A, s. 19) and references directed by a court: R. 54 of the Rules of Civil Procedure. The manner in which sub-judicial decisions may be enforced is prescribed in the applicable legislation. One enforcement process is a motion, on notice, for a court order: see, for example, Arbitration Act, s. 50. Reference decisions (including references under the Construction Act) are confirmed automatically and thereby become enforceable as court orders unless a party moves before a judge opposing confirmation of the referee’s report: R. 54.09.
[15] The Legislature’s choice of enforcement procedures determines what is required in a particular circumstance. The provisions at issue in this case are new, but they are a variation on an established range of processes to enforce sub-judicial decisions by court orders, a necessary and common feature of arbitral and administrative decision-making. These provisions are not an “extraordinary power” but rather a necessary feature of the Construction Act adjudication process and should be read within that context. They follow the general Ontario model for enforcement of administrative decisions prescribed in s. 19 of the SPPA.
[16] A controlling principle of the Construction Act adjudication provisions is “prompt payment”. Not just “prompt process” but “prompt payment”. When an adjudicator determines that payment is to be made, there is a positive obligation on the payor to make the payment within ten days after the determination has been communicated to the parties: Construction Act, s. 13.19(2). Consequences flow from the payment so made, including positive obligations (on the part of the payee) to use the funds received to make payments to its subcontractors and suppliers: Construction Act, ss. 6.5(8).
[17] The Legislature provided for more expeditious enforcement of Construction Act prompt payment determinations than in respect to some other sub-judicial decisions. The enforcing party does not need to bring a motion on notice. There is no option for a disappointed party to move to oppose enforcement of the payment order. A party may take an adjudicator’s determination to a court office, file it, and thereupon enforce it, all without notice to the other side. Subsection 13.20(1) of the Act provides:
A party to an adjudication may… file a certified copy of the determination of an adjudicator with the court and, on filing, the determination is enforceable as if it were an order of the court.
Subsection 13.20(3) of the Act states:
A party shall, no later than 10 days after filing a determination under subsection (1), notify the other party of the filing.
The order is enforceable “on filing” and notice is to be given “no later than 10 days after filing.” On the plain language of these provisions, enforcement may begin before notice is given. The Act is silent on what happens if notice is not given pursuant to s.13.20(3).
[18] When compared to some other prescribed processes for enforcement of sub-judicial decisions, the Construction Act provisions are more expeditious and less onerous. This is consistent with the general policy of the Act respecting adjudication: to require prompt payment so that funds flow down the “construction ladder” and the risk of work stoppages is attenuated.
(b) Enforcement of Prompt Payment Decisions Is Not Analogous to Strict Compliance Requirements for Lien Claims
[19] The motion judge correctly noted that (a) a lien claimant must strictly comply with the requirements for filing a claim for lien under the Act; and (b) a judge has no discretion to relieve from this strict compliance. However, the motion judge erred in drawing an analogy between enforcement of adjudicators’ determinations and the filing of lien claims under the Act. The requirements for lien claims and the requirement to give notice of filing an adjudicator’s determination are both found in the Construction Act, but there is no other basis for drawing an analogy between the two.
[20] A claim for lien initiates a claim and secures the claim against land. The Act provides for the creation of the lien by following a prescribed process – including prescribed time periods (Construction Act, ss. 31 - 38). Various stakeholders are entitled to rely on the state of the land’s title – including the absence of lien claims – in (among other things) making payments, securing loan advances, and releasing Construction Act holdbacks. Strict compliance with the time periods prescribed for lien claims is necessary for stakeholders to be able to rely upon the state of title in making payments under the Act, and is expressly provided in s. 31(1) of the Act, which states:
Unless preserved under section 34, the liens arising from the supply of services or materials to an improvement expire as provided in this section.
[21] By contrast, an Adjudicator’s payment determination comes into existence following a process that includes notice, an opportunity to make submissions, and then a decision by an adjudicator. The Act requires that payment be made in accordance with the direction, and this obligation does not require that the direction be filed and a court order obtained to be effective. The Act provides for no appeal from a payment direction, and only a right to seek judicial review if leave to apply for review is granted by this court. The grounds for such a review are narrowly circumscribed in the Act. The direction is not stayed pending a motion for leave to seek to judicial review or pending judicial review (if leave is granted), unless this court directs otherwise. As this court has stated previously, compliance with the payment direction is usually required before leave to seek judicial review is granted, and where payment is stayed pending judicial review, the court usually requires the disputed funds paid into court. The Act provides, and this court has held, that a payment determination requires payment promptly. There is no provision in the Act that a determination “expires” if notice is not given that the determination has been filed with the court.
[22] The process for initiating claims for lien requires strict compliance because of the relationship between those requirements and the overall scheme of rights and obligations governed by the Act. The prompt payment provisions of the Act have as their goal the swift interim determination of payment disputes, and prompt payment in accordance with those determinations so that money may flow down the construction ladder and work will continue.
[23] Only when a party has breached their obligation to make payment in accordance with an adjudicator’s determination should there be a need to file the determination with the court – the purpose of which would be to enforce in the face of the payor’s breach of its payment obligation. This context explains why the Act does not prescribe a motion on notice or a motion to oppose confirmation of an arbitrator’s determination. The adjudicative process is complete, the payor has a positive obligation to make payment, and the payor has defaulted on its statutory obligation to make payment.
[24] The importance of prompt payment, in this context, is made all the clearer by the Legislature’s choice that notice of filing the determination with the court need not be given for up to 10 days after the determination may be enforced. The notice requirement is more properly seen as a statutorily required courtesy than a strict condition that must be met before enforcement.
(c) and (d) Non-Compliance Does Not Void the Writ
[25] MGW could have obtained the impugned writ before expiry of the ten-day deadline to give notice of the order. The order and the writ would have been in “strict compliance” with the Act. Nothing in the Act provides that the writ would thereafter become “void” if notice was not given in accordance with the Act. As noted above, the Act is silent on what should happen if notice is not given as required.
[26] I agree with the motion judge that giving notice of the order within ten days is mandatory. Statutory requirements are not “suggestions”. But I do not agree that failure to comply “voids” the writ. Nor do I agree that a further consequence ought to be imposed that precludes a party from ever enforcing an adjudicator’s determination. The requirement to make prompt payment is far more central to the scheme of the prompt payment provisions than is the requirement to give notice of filing of the determination, as explained above. Procedural formalism should not overwhelm the clear intent of the Legislature that prompt payments decisions should be followed without delay and without additional formal processes.
[27] So, what should the court do where a party is entitled to payment in accordance with an adjudicator’s determination, the payor breaches their statutory obligation to make payment, the party has filed the determination and obtained a court order, but the party has neglected to give notice of the order.
[28] There should be some consequence for non-compliance with a statutory requirement. In the absence of a statutory provision stipulating the consequence, it falls to the court to exercise its discretion as to an appropriate sanction, given all the circumstances. There is no automatic consequence.
The Appropriate Remedy in this Case
[29] The applicant framed its case on the basis that it accepts that voiding enforcement steps taken prior to its giving notice of the order would be an appropriate sanction in the circumstances of this case. Given this concession, it is not necessary for this court to consider whether this sanction is appropriate or whether some lesser sanction might be imposed in the circumstances of this case. Certainly it is a sufficient sanction, in the circumstances of this case.
[30] For the benefit of motion judges called upon to consider this issue in future, however, I would add that setting aside enforcement steps is not a minimum or required sanction. The court should consider the extent of the non-compliance, any explanation for the non-compliance, any prejudice – or absence of prejudice – to the payor arising from the failure to give notice, and any other relevant circumstances, and then should place these matters in the overall context of the dispute and the breach by the payor of its statutory obligation to make prompt payment in accordance with the Act. If it appears to the court that the non-compliance was an oversight, in circumstances where it ought to have been clear that enforcement steps would be taken, and where there is no evidence of prejudice arising from the non-compliance, the court might well conclude that a simple declaration of non-compliance might be a sufficient remedy. Where there is evidence of actual prejudice, where there is no reasonable explanation for the failure to give notice, or where there are other circumstances that commend a more significant sanction, the court could consider voiding pre-notice enforcement steps, suspending interest for the period of non-compliance, an order for costs, or other sanctions that are proportional to the harm resulting from the failure to comply with the notice requirement. It is difficult to imagine any circumstance that would justify an order so draconian as to disentitle a party to ever enforce an adjudicator’s payment determination as a consequence for failure to respect the statutorily required courtesy of notice of the order after it has been obtained and after it has become enforceable.
Disposition
[31] I would grant the application for judicial review and strike out paragraph 2 of the motion judge’s order, with costs of this appeal to the Appellant of $15,000.00, inclusive, payable by the Respondent within thirty days.
___________________________ D. L. Corbett J
I agree: ___________________________
Sachs J.
I agree: ___________________________
O’Brien J.
Date of Release: May 31, 2024
CITATION: MGW Homes Design Inc. v. Pasqualino, 2024 ONSC 2852
DIVISIONAL COURT FILE NO.: 588/23
DATE: 20240531
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Sachs, D.L. Corbett and O’Brien JJ.
BETWEEN:
MGW Homes Design Inc.
Appellant
– and –
Domenic Pasqualino
Respondent
REASONS FOR DECISION
D.L. Corbett J.
Date of Release: May 31, 2024
[^1]: The motion judge’s decision has a neutral citation but has not been released to legal databases. The decision should be so released: disseminating judicial decisions to legal databases is one aspect of promoting the “open court” principle, giving the public access to judicial decisions in a practical and convenient manner.
[^2]: The motion judge stated that adjudicators “are not legally trained”. This statement is slightly inaccurate. Adjudicators need not be persons with legal training. However, there is no prohibition on legally trained persons acting as adjudicators, and in this instance, as it happens, the Adjudicator, Mr Colin Stevenson (now Justice C. Stevenson) was a senior member of the bar with many years’ experience as a lawyer and arbitrator.