Citation and Court Information

CITATION: Jamrik v. 2688126 Ont. Inc., 2024 ONSC 2854

DIVISIONAL COURT FILE NO.: 392/23

DATE: 20240715

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

Sachs, D.L. Corbett and O’Brien JJ.

Parties

BETWEEN:

STEPHEN JAMRIK

Applicant

– and –

2688126 ONTARIO INC. o/a TURNKEY CONSTRUCTION

Respondent

Counsel and Hearing

Francois Sauvageau, for the Applicant

Calvin Chan, for the Respondent

HEARD at Toronto: Dec. 14, 2023

REASONS FOR DECISION

D.L. Corbett J.

[1] The Applicant (“Jamrik”) seeks judicial review of the decision of Adjudicator Rinaldo Stefan dated June 12, 2023, granting the Respondent’s (“Turnkey’s”) request for an order for “prompt payment” under the Construction Act and ordering Jamrik to pay Turnkey $564,812.87. The Applicant argues that the Adjudicator had no jurisdiction to make the impugned order because the underlying contract had been “completed” and the Adjudicator erred in concluding otherwise.

[2] The Adjudicator found that the contract was not “completed” within the meaning of the Construction Act because more than 1% of the contract price was owing and unpaid.

[3] The Adjudicator was plainly wrong in law in finding jurisdiction on the basis that he did. The “price of completion” in s. 2(3) of the Act refers to the value of uncompleted work, and not the quantum of disputed payment claims. In coming to a contrary conclusion, the Arbitrator misconstrued the plain meaning of the Construction Act, failed to apply settled and longstanding jurisprudence on the meaning of deemed “contract completion” under the Act, and misconceived the scheme of the prompt payment adjudication provisions of the Act.

[4] Unfortunately, the Adjudicator did not make factual findings material to the basis on which the jurisdictional issue was argued before him, and on which it ought to have been decided. These were disputed factual issues for decision in adjudication and must be sent back for determination. Therefore, for the reasons that follow, I would quash the Adjudicator’s decision and remit the matter back for a fresh determination by a different adjudicator on all contested issues.

Deciding A Case on the Basis of an Unargued Point

[5] It is, of course, open to an adjudicator to decide a point on a basis not raised before him by the parties. However, if this arises, both as a matter of procedural fairness, and to ensure that the adjudicator has the benefit of the parties’ submissions on material points, the adjudicator should give the parties notice of their concerns and give the parties an opportunity to address them. See, for example, Caledon (Town of) v. 2220742 Ont. Ltd. o/a Bronte Construction, 2024 ONSC 3739, where this court sought supplementary written submissions in respect to a point that had not been addressed by the parties.

[6] Had additional submissions been sought in this case, the parties might well have persuaded the Adjudicator that his proposed analysis was in error: it is clearly contrary to established principle, and counsel for the parties would have been obliged to provide the Adjudicator with the correct law for his consideration.

Jurisdiction and Standard of Review

[7] An application for judicial review of an adjudicator’s decision lies to this court with leave: Construction Act, s.13.18(1). Leave was granted for this application on September 25, 2023: Jamrik v. 2688126 Ont. Inc. o/a Turnkey Construction, 2023 ONSC 5362 (Div. Ct.).

[8] As stated by this court in Anatolia Tile & Stone Inc. v. Flow-Rite Inc., 2023 ONSC 1291, para. 7 (Div. Ct.):

It is in the jurisdiction of an adjudicator to decide whether a claim is properly brought under the Construction Act. Thus, for example, an argument that services or materials provided by a claimant are not lienable (because, for example, they do not constitute an “improvement” to “premises”), that a claim for lien is out of time, or that the contract in issue “is invalid” or has “ceased to exist”, are within the jurisdiction of an adjudicator to decide, and an adjudicator’s decision on these issues is reviewed in this court on a standard of reasonableness. An adjudicator does not “lose jurisdiction” if they “err” on these points: only where an adjudicator’s decision is “unreasonable” would this court intervene.

An adjudicator must be correct, in law, on jurisdictional issues, but will be afforded deference on findings of fact related to their jurisdictional analysis: see also Caledon v. Bronte Construction, 2024 ONSC 3739.

The Adjudicator’s Analysis

[9] Subsection 13.5(3) of the Construction Act provides:

An adjudication may not be commenced if the notice of adjudication is given after the date the contract or subcontact is completed, unless the parties to the adjudication agree otherwise.

Subsection 2(3) of the Act states:

For the purposes of this Act, a contract shall be deemed to be completed and services or materials shall be deemed to be last supplied to the improvement when the price of completion, correction of a known defect or last supply is not more than the lesser of,

(a) 1 per cent of the contract price; and

(b) $5,000.

[10] The Adjudicator’s initial jurisdictional determination is a brief one-page decision. The Adjudicator found that he had jurisdiction because “[t]he outstanding payment is much larger than 1% of the contract price. Any different determination would imply that final invoices or holdbacks could not be disputed through adjudication.”

[11] The Adjudicator included these reasons in his final determination:

I find that the Respondents have not met their obligation under the contract in reference to payment of Invoice #1290 and as such the contract was not substantially completed.

[12] The Adjudicator did not cite any legal authority for their interpretation of “contract completion” – even though there is a great deal of jurisprudence on this issue.

[13] The parties did not argue the jurisdictional issue before the Arbitrator on the basis on which the Arbitrator found that he had jurisdiction. Rather, they took contrary positions on whether there was outstanding contract work to be completed and the value of that outstanding work. Both parties argued that there was a “swale” to be constructed, outside the home, that was part of the original contract work. It was not contested that the “swale” had not been constructed and was later completed by the owner (using a different contractor). The two points on which the parties joined issue were:

(a) whether the swale work had been removed from the contract work by mutual agreement, and therefore was no longer part of the scope of the work required for the contract to be completed; and

(b) whether the “price of completion” of the swale work was less than $5,000.

The Adjudicator did not make factual findings about these two issues.

[14] It is a matter of discretion whether to address alternative theories of a point under decision. However, it is often a service to the parties and to the administration of justice to make factual findings in respect to alternative arguments, so that a reviewing court will have the necessary factual findings to assess and decide all available arguments. Here, if the Adjudicator had also gone on to make the necessary factual findings about whether any contract work remained for completion and its value, this court might have been able to dispose of this matter on a final basis, rather than sending it back for a fresh determination.

Contract “Completion” Pursuant to the Construction Act

[15] The definition of contract “completion” in s. 2(3) of the Construction Act applies to the entire Act, and not just to the adjudication provisions of the Act. It does not mean different things for the purposes of construction lien claims and adjudication claims.

[16] It is clear from the lien provisions of the Act and decades of jurisprudence that the concepts (i) “completion”, (ii) “substantial completion” and “last supply” of services and materials to an improvement, all relate to the status of performance of contract work, and not the state of accounts between contracting parties. This is trite in construction lien law: otherwise, the right to assert construction liens would be temporally unlimited except where the value of a dispute was de minimis in the context of the contract. That is not the law. See, for example, Wood Lumber Co. (Ontario) Ltd. v. Eng (1999) 1999 15030 (ON SCDC), 45 OR (3d) 795 (Div. Ct.); Micon Interiors General Contractors Inc. v. D’Abbondanza Enterprises Inc., 2008 53869 (Ont. SCJ); Gordon Ridgely Architects Inc. v. Glowinsky, 2009 6834 (Ont SCJ); DCL Management Ltd. v. Zenith Fitness Inc. et al., 2010 ONSC 5915 (Ont. Master); Rosedale Kitchens Inc. v. 2114281 Ontario Inc., 2012 ONSC 3161 (Ont. Master); Lido v. Joy, 2012 ONSC 5058 (Ont. Master); Martin Creek Construction Ltd. v. Emelko et al., 2014 ONSC 485 (SCJ); V.I.E.W Systems Inc. v. Mansions of Forest Glen Inc., 2014 ONSC 2616 (SCJ); Scepter Industries Ltd. v. Georgian Custom Renovations Inc., 2018 ONSC 988, rev’d on other grounds but upheld on this point: 2019 ONSC 7515 (Div. Ct.), paras. 8-9; Osmi Homes Inc. v. Kumar, 2020 ONSC 2712, para. 278 (Ont. Master). “Price of completion” in s. 2(3) of the Act refers to the price to complete contract work, and not the value of outstanding claims to payment.

[17] The Respondent argued that the Adjudicator was “not bound by previous case authorities interpreting the deemed completion [terms] of s. 2(3) of the Act because all, or substantially all, of these past case authorities relate to the distinguishable issue of deemed completion in relation to commencement and expiry of a lien period…” (Factum, para. 40). The Respondent further argues that requiring adjudicators to seek guidance from the caselaw would frustrate the goal of timely adjudication, because of the time required to undertake legal research and analysis, and thus that it is “reasonable for… adjudicators… to avoid seeking guidance from case authorities….”

[18] I cannot accept this argument. By its express language, s. 2(3) applies to the entire Act. Adjudicators are bound to follow decisions of the Divisional Court and the Court of Appeal, and would be well advised to consider persuasive authorities, including decisions of Justices and Associate Justices of the Superior Court. The concern raised by the Respondent about the difficulty involved in properly stating and applying the law should be attenuated considerably by seeking submissions from the parties on any legal issues that may arise.

Adjudication is an Interim Remedy on Ongoing Construction Projects

(a) The Normal Process for Litigation of Contract Claims

[19] In general, contract claims are civil claims and must be brought by way of ordinary civil action. Some contract claims are within the monetary jurisdiction of the Small Claims Court (currently $35,000 or less). Contract claims not within the jurisdiction of the Small Claims Court are ordinarily brought by way of an “action” in the Superior Court of Justice and are subject to the processes prescribed by the Rules of Civil Procedure.

[20] As a general proposition, a plaintiff in an action is not entitled to “execution before judgment”. That is, until the claim has been disposed of by the court, a plaintiff is not generally entitled to collect on or to secure its claim. Resulting payment delay is addressed by an award of interest; resulting difficulties in collecting a judgment are addressed in a suite of available legal processes, details of which are not material here. The point is this: in the ordinary course, someone suing on a contract is not generally entitled to security or payment before judgment. Orders for interim payment or interim security pending judgment are rare. See Lister & Co.v. Stubbs (1890), 45 Ch. D. 1 (CA); Mills and Mills v. Petrovic et al. (1980), 1980 1871 (ON SC), 30 OR (2d) 238 (Ont. HCJ), per Galligan J. (as he then was); Chitel et al. v. Rothbart et al. (1983), 1982 1956 (ON CA), 39 OR (2d) 513 (CA) [approving of the availability of Mareva injunctions “under special and limited circumstances” derogating from the general principle against execution before judgment].

(b) Construction Liens and Trusts

[21] Construction liens and construction trusts are exceptional claims that provide a measure of security for certain construction claims prior to judgment. This is a derogation from the general rule against “execution before judgment” and arose in the unique context of the building construction industry. See Teepee Excavation and Grading Ltd. v. Niran Construction Ltd. (2000), 49 OR (3d) 612 (CA); TRS Components Ltd. v. Devlan Construction Ltd., 2015 ONCA 294, para. 11.

[22] Construction liens and construction trusts are not ancient legal claims in the same way that basic contact law can be traced back to early common law. They are a legal innovation dating back to the founding of Washington, D.C., to spur construction of that city (see Kevin Patrick McGuiness, Construction Lien Remedies in Ontario (2nd ed., 1997), chs. 1-4). The premise of this innovation is that the equity in the land to be improved by construction may stand as security for payment, thus encouraging construction firms to work on credit with some assurance that they will be paid for the services and materials they supply to the land.

(c) Interim Construction Payment Determinations

[23] The prompt payment provisions of the Construction Act are a recent innovation. These provisions were pioneered in the United Kingdom at the turn of the millennium and were adopted by Ontario in 2017. They are intended to address the problem of interruptions in the flow of funds on construction sites as a result of delays inevitable in the litigation process. They do not exist because construction contract claims are unworthy of a formal litigation process, or because payment claimants on construction sites are more worthy of prompt attention to their claims than are other contract payment claimants. They exist because payment delays on ongoing construction projects can, and do, cause cascading losses – by delay in construction, increased costs, and in some cases, avoidable insolvencies. They exist because of a recognition that money should continue to flow, and work continue to be done, pending final determination of claims through the litigation process. See MGW Homes Design Inc. v. Pasqualino, 2024 ONSC 2852 (Div. Ct.), para. 24; Anatolia Tile & Stone v. Flow-Rite Inc., 2023 ONSC 1291 (Div. Ct.), paras. 3, 6; SOTA Dental Studio Inc. v. Andrid Group Inc., 2022 ONSC 2254 (Div. Ct.), para. 9. The principled basis for interim payment determinations through adjudication disappears once a contract is completed.

No Factual Findings For this Court to Rule on Whether the Contract was Completed

[24] As noted above, the Adjudicator did not make factual findings on the two key issues argued before him respecting the jurisdictional issue. Without those findings, this court cannot dispose of the jurisdictional issue on a final basis and must send it back for a fresh determination. In my view, in light of the errors in process and principle below, the entire decision must be regarded as unsafe, and I would refer all issues back for a fresh determination before a different Adjudicator.

Disposition

[25] I would grant the application, quash the Adjudicator’s decision, and remit the matter back for adjudication before a different adjudicator. The Applicant is entitled to aggregate costs of $9,000.00, inclusive for the application and the motion for leave, payable by the Respondent within thirty days.

“D.L. Corbett J.”

I agree: “Sachs J.”

I agree: “O’Brien J.”

Date of Release: July 15, 2024

CITATION: Jamrik v. 2688126 Ont. Inc., 2024 ONSC 2854

DIVISIONAL COURT FILE NO.: 392/23

DATE: 20240715

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

Sachs, D.L. Corbett and O’Brien JJ.

BETWEEN:

Stephen Jamrik

Applicant

– and –

2688126 Ontario Inc. o/a Turnkey Construction

Respondent

REASONS FOR DECISION

D.L. Corbett J.

Date of Release: July 15, 2024