CITATION: Soo Mill & Lumber Company Ltd. v. Pozzebon, 2024 ONSC 5950
DIVISIONAL COURT FILE NO. DC-23-00002203-0000
DATE: 20241031
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
S.T. Bale, Nieckarz and Davies JJ.
BETWEEN:
Soo Mill & Lumber Company Ltd.
Plaintiff (Appellant)
– and –
Frank Pozzebon, Trisha-Ann Pozzebon, FP Contracting (GP), P.R.G. Builders Inc., R & J Holdings Inc., Ronald Archibald Champagne and Judy Ann Champagne
Defendants (Respondents)
Michael Mazzuca and Broghan Masters, for the appellant
Marc Huneault, for Frank Pozzebon, Trisha-Ann Pozzebon, Nick Pozzebon and FP Contracting (GP)
Gordon Acton and Mia Carella, for R & J Holdings Inc., Ronald Archibald Champagne and Judy Ann Champagne
Heard at Sudbury, on April 2, 2024, by video conference
On appeal from the order made on November 18, 2021, by Justice R.D. Gordon of the Superior Court of Justice, with reasons reported at 2021 ONSC 7621.
S.T. BALE J.:
INTRODUCTION
[1] Soo Mill & Lumber Company Ltd. is a supplier of building materials. FP Contracting is a home builder. R & J Holdings Inc. is a developer. Soo alleges that it is owed $600,000 for building materials supplied to FP and used to construct homes in a subdivision developed by R & J.
[2] In the underlying action, Soo Mill claims, pursuant to the trust provisions of the Construction Act, a declaration that all amounts paid or owing to the defendants, in relation to homes constructed in the subdivision, are held in trust for Soo, and damages for breach of trust.
[3] This appeal concerns one of those homes - 3 Sherbrook Drive. It was originally intended to be a model home. In July 2019, Frank Pozzebon (one of the FP partners) and his wife moved into the home. In October 2020, they sold it for $458,000.
[4] While the sale was pending, Soo Mill moved under rule 45.02 of the Rules of Civil Procedure for an order that the proceeds of sale of the home be held in court as security for its claim. Rule 45.02 provides: “Where the right of a party to a specific fund is in question, the court may order the fund to be paid into court or otherwise secured on such terms as are just.”
[5] The motion was adjourned to allow the defendants to file responding material. Pursuant to an interim order, the proceeds of sale were paid into court pending the hearing of the motion. Following the hearing, the motion judge ordered that a part, only, of the proceeds would be retained in court as security for Soo Mill’s claims.
[6] There are three primary issues on appeal. The first is whether the order under appeal is final or interlocutory and therefore whether this court has jurisdiction to hear the appeal. The second is whether the motion judge erred in ordering that only a part of the sale proceeds be retained in court as security for Soo Mill’s claims. The third is whether R & J is a statutory owner with the result that Soo would have priority over R & J’s mortgage.
[7] On the hearing of the appeal, we reserved on the jurisdictional issue, heard argument on the merits of the appeal, and reserved judgment.
[8] For the following reasons, I conclude that the order was an interlocutory order from which no appeal lies. I would therefore quash the appeal.
THE MOTION JUDGE’S DECISION
[9] The motion judge properly articulated the test for relief under rule 45.02. Citing Sadie Moranis Realty Corp. v. 1667038 Ontario Inc., 2012 ONCA 475, he held that to obtain relief under rule 45.02, the plaintiff must establish that:
(i) it claims a right to a specific fund;
(ii) there is a serious issue to be tried regarding the plaintiff’s claim to that fund; and
(iii) the balance of convenience favours granting the relief sought by the plaintiff.
[10] The motion judge found in favour of the plaintiff on the first and third parts of the test. With respect to the second part, he found there to be a serious issue to be tried, but only in relation to a part of the fund.
[11] Based upon Soo Mill’s own evidence, the motion judge found that the balance owed by FP to Soo for materials supplied to 3 Sherbrook was $4,855.69. He then added four years of interest and ordered $9,072 to be held in court. He ordered that the balance of the money held in court be paid out, first in satisfaction of a mortgage to R & J, and second to Frank Pozzebon and Trisha-Ann Pozzebon, the registered owners of the home immediately before the sale.
[12] In finding that there was a serious issue to be tried only in relation to a part of the fund, the motion judge identified the central issue on the motion to be whether Soo Mill could assert a trust claim against all the sale proceeds of 3 Sherbrook, even though it was owed much less for materials supplied to that property. He held that a s. 8(1) trust under the Construction Act is limited to the value of the materials supplied to a particular improvement and could not be extended to money owed to Soo for materials supplied to other improvements.[^1]
[13] Soo Mill argues that the motion judge erred in law in finding the trust to be limited to the value of the materials supplied to 3 Sherbrook. Soo argues that the motion judge exceeded his jurisdiction under rule 45.02 and made a substantive determination of its breach of trust claim. Soo argues that in doing so, he effectively turned a motion for interlocutory relief into a final determination on the merits. On this basis, Soo argues that the order under appeal is a final order.
ANALYSIS
Construction Lien Act appeals
[14] Before July 1, 2018, the Construction Lien Act prohibited appeals from interlocutory orders. On that date, it was amended to provide for such appeals to the Divisional Court with leave, and the title of the Act was changed to “Construction Act”. However, pursuant to the transition provisions of the new Act, interlocutory appeals continue to be prohibited if the contract for the improvement was entered into before it came into force. In the present case, although the parties do not agree on the contract date, they do agree that no appeal lies if the order of Gordon J. was interlocutory. Where they differ is on the question of whether the order was final or interlocutory.
[15] In support of its position that the order is a final order, Soo Mill makes two general arguments.
[16] First, Soo Mill argues that the motion judge made final determinations of fact and law which ought to have been left to the trial judge:
• he found that FP was not under a single contract for the construction of multiple dwellings, but rather that there were separate contracts for each of the properties upon which it did work; and
• he found Soo Mill’s trust claim against the proceeds of sale of 3 Sherbrook to be limited to the amount it was owed for materials supplied to that property. Soo argues in doing so, the motion judge made a final determination of the scope of the trust.
[17] Second, Soo Mill argues that the order is final because it disposes of the balance of the money now in court, over and above the $9,072 ordered to remain, leaving it with less security for its claim. Soo argues that if the balance of the fund is paid out as ordered, the money will disappear and its claim that the entire proceeds are subject to a trust will be frustrated.
[18] I disagree, for the following reasons.
Test for distinguishing between final and interlocutory orders
[19] In Hendrickson v. Kallio, 1932 123 (ON CA), [1932] O.R. 675 (C.A.), the court set out the test for distinguishing between final and interlocutory orders:
The interlocutory order from which there is no appeal is an order which does not determine the real matter in dispute between the parties — the very subject matter of the litigation, but only some matter collateral. It may be final in the sense that it determines the very question raised by the applications, but it is interlocutory if the merits of the case remain to be determined.
See also, Paulpillai Estate v. Yusuf, 2020 ONCA 655, at paras. 15-17.
[20] In Sun Life Assurance Co. v. York Ridge Developments Ltd. (1998), 28 C.P.C. (4th) 16 (Ont. C.A.), at para. 17, the court adopted the following explanation of the Hendrickson test from Holmested and Watson: Ontario Civil Procedure, at 62-24:[^2]
[W]hat the Hendrickson test really means is that to be final an order must deal with the substantive merits as opposed to mere procedural rights, no matter how important the procedural rights may be. The test focuses on whether the order under appeal finally disposes of the rights of the parties, in the sense of substantive rights to relief (in the case of a plaintiff) or a substantive defence (in the case of a defendant).
[21] In Drywall Acoustic Lathing Insulation Local 675 Pension Fund (Trustees of) v. SNC-Lavalin Group Inc., 2020 ONCA 375, the court said, at para. 16: “An interlocutory order is one which does not determine the real matter in dispute between the parties—the very subject matter of the litigation—or any substantive right to relief of a plaintiff or substantive right of a defendant.”
[22] Soo Mill claims damages for breach of trust and a declaration “that all amounts paid to the Defendants … and all amounts owing to or received by the Defendants … on account of or related to the Projects … constitute trust funds for the benefit of the Plaintiff pursuant to the provisions of the Construction Act….” [^3]
[23] Soo Mill argues that the motion judge made a substantive determination of the scope of its breach of trust claim and effectively turned a motion for interlocutory relief into a final determination on the merits. I agree that the question of the scope of Soo’s trust claim against the proceeds of sale of 3 Sherbrook forms a part of the “real matter in dispute between the parties” (even though it is not specifically mentioned in the statement of claim), and that if the motion judge had made a final determination of that issue, it would be a final order. The question then becomes whether the motion judge’s order finally determined that issue or any other substantive issues of fact or law.
Whether the motion judge finally determined issues of fact or law
[24] In 1476335 Ontario Inc. v. Frezza, 2021 ONCA 822, at paras. 9-10, the motion judge dismissed the plaintiffs’ motion for a certificate of pending litigation. The primary reason for denying the motion was that the action was statute-barred. On appeal, the plaintiffs argued that the order was final, based upon the reasons of the motion judge. The court held that the order was interlocutory. The reasons for denying the certificate would not be binding on the trial or summary judgment judge. They did not constitute a final determination of the limitation issue, because the court had not been asked to determine that issue for the purpose of granting or denying judgment.
[25] Similarly, in the present case, the motion judge was not asked to make a final determination of the scope of the trust. Soo Mill asked the court to determine whether there was a serious issue to be tried regarding its claim to the sale proceeds and the motion judge found, for the purposes of deciding the motion, that there was a serious issue to be tried only in relation to the amount owing to Soo for materials supplied to 3 Sherbrook (plus interest). That finding will not be binding on the trial judge.
Orders made on interlocutory motions presumed to be interlocutory
[26] In Skunk v. Ketash, 2016 ONCA 841, at para. 60, the court said, in the context of the dismissal of a motion for summary judgment, “in the absence of an express indication of the motion judge that her determination is to be binding on the parties at trial, it should be presumed that in expressing a conclusion on a point of law when dismissing a summary judgment motion, she is simply explaining why she concluded that there is a genuine issue requiring a trial, and did not intend her determination to be binding on the parties.”
[27] I see no reason why, in the absence of any indication in the motion judge’s reasons to the contrary, a similar presumption should not apply in this case.
Whether order is final because it disposes of the balance of money now in court, leaving Soo with less security for a successful claim
[28] In Deltro Group Ltd. v. Potentia Renewables Inc., 2017 ONCA 784, at para. 3, the court held that an order dismissing a motion for an interlocutory injunction is interlocutory, even where the practical effect of refusing the injunction ends some aspect of the litigation. The characterization of an order as being final or interlocutory depends upon its legal nature rather than its practical effect.
[29] Frezza is analogous to the present case. In Frezza, the underlying action was to set aside three alleged fraudulent conveyances. The plaintiff’s motion for certificates of pending litigation was dismissed. At the time of the motion, a sale of one of the properties was pending. On appeal, the court held the dismissal order to be interlocutory. The fact that without the certificates, the properties could be sold thus frustrating the plaintiff’s claim did not result in a finding that the order was final.
[30] The question of whether the entire proceeds of sale of 3 Sherbrook are trust funds for the benefit of Soo Mill was not finally determined by the order under appeal. Soo’s position on this issue amounts to an argument that because FP may dissipate the balance of the sale proceeds before the case reaches trial, its right to receive those proceeds has been finally determined.
[31] While it is true that the order provided for payment out of court of the balance of the sale proceeds, the reason for that was that the money had been paid into court pending the hearing of the motion and the motion having been determined, there was no basis upon which to order that the money remain in court.
[32] If the motion had been dismissed in its entirety on its initial return date, it would clearly have been interlocutory because it would have had no effect on the claims or defences. The action would have proceeded as it would have, had the motion not been made. The fact that an interim order was made or that the motion was allowed in part cannot be relied on to argue that the order as made was final.
[33] An order under rule 45.02 is discretionary, and by limiting the scope of the payment into court, the order did not take away anything to which Soo was otherwise entitled. It remains open to Soo to argue at trial that the entire proceeds of sale are subject to the trust, and if successful in doing so, to obtain relief accordingly.
Analogous orders that have been held to be interlocutory
[34] There being no specific authority on the question of whether orders dismissing (or partially dismissing) motions under rule 45.02 are final or interlocutory, a consideration of the most closely analogous cases is instructive. These include Deltro (order dismissing motion for interlocutory injunction is interlocutory) and Frezza (order dismissing motion for certificate of pending litigation is interlocutory).
[35] Another analogous case is Cook v. Ovenden, [2004] O.J. 675 (C.A.). In Ovenden, the plaintiffs had obtained an ex parte Anton Pillar order permitting them to search the business premises of the various defendants and seize documents and computer records. The order was subsequently set aside. On appeal, the court held that the setting aside order was interlocutory. Important as the issue of entitlement to the Anton Pillar order was, it was collateral to the subject-matter of the litigation.
DISPOSITION
[36] For the reasons given, I would quash the appeal.
[37] As agreed by the parties, I would order that Soo Mill pay the costs of the respondents Frank Pozzebon, Trisha-Ann Pozzebon and FP Contracting in the amount of $7,500, and the costs of the respondents R&J Holdings Inc., Ronald Archibald Champagne and Judy Ann Champagne in the amount of $5,000.
Released: October 31, 2024
“S.T. Bale J.”
“I agree. Nieckarz J.”
“I agree. Davies J.”
CITATION: Soo Mill & Lumber Company Ltd. v. Pozzebon, 2024 ONSC 5950
DIVISIONAL COURT FILE NO. DC-23-00002203-0000
DATE: 20241031
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
S.T. Bale, Nieckarz and Davies JJ.
BETWEEN:
Soo Mill & Lumber Company Ltd.
Plaintiff (Appellant)
- and –
Frank Pozzebon, Trisha-Ann Pozzebon, FP Contracting (GP), P.R.G. Builders Inc., R & J Holdings Inc., Ronald Archibald Champagne and Judy Ann Champagne
Defendants (Respondents)
REASONS FOR JUDGMENT
S.T. Bale J.
Released: October 31, 2024
[^1]: Soo Mill had argued the applicable trust to be a contractor’s trust under s. 8 of the Act, and the motion judge referred to s. 8 in his reasons. In my view, the applicable trust is a vendor’s trust under s. 9 of the Act. However, given the view I take on jurisdiction, it is unnecessary for me to deal with this issue.
[^2]: The quoted passage appears at §82.9 in the current release of Holmested and Watson.
[^3]: The statement of claim also includes claims akin to a Mareva injunction. Apparently, no such orders have been sought.