COURT FILE NO.: 09-46161
DATE: 2012/05/06
SUPERIOR COURT OF JUSTICE – ONTARIO
In the matter of the Construction Lien Act, R.S.O. 1990, c. C.30 as amended
RE: Deslaurier Custom Cabinets Inc. v
6383009 Canada Inc. o/a Le Groupe Brigil
BEFORE: Master Calum MacLeod
COUNSEL: Ronald Caza, for the Defendant/Moving party
John Margie, for the Plaintiffs/Responding parties
HEARD: May 31, 2012
REASONS FOR DECISION
[1] This is a motion pursuant to s. 46 of the Construction Lien Act for an order declaring that the lien of the plaintiff Deslaurier has expired under s. 37 and for associated relief including release of the security. Parallel motions were brought in two other actions relating to the same construction project (actions 09-46119 “Jo-Peach” & 09-46270 “Tripoli”). These reasons apply to all three motions which were argued together.
[2] The outcome hinges on the proper interpretation of s. 37 (1) 1. Despite the able and valiant efforts of Mr. Caza on behalf of his client, I am unable to grant the requested orders. To the contrary, there will be a declaration that the liens have not expired. I am satisfied that “an action in which the lien may be enforced” has been set down for trial within the 2 year period prescribed by the Act. That action is the Pomerleau lien action (09-46228). A trial record was filed on September 7th, 2011.
[3] I reserved to write reasons because I am told there is no case directly on point. Mr. Margie argues that this is because the answer is self evident and gives effect to the plain and ordinary wording of the Act. There is however room for confusion because of the need to cross reference different sections of the Act, the use of very specific terminology, strict time limits, and different procedures that exist in different parts of the province for obtaining trial dates. Though my decision reflects what I regard as the conventional view of the effect of s. 37, it is best to put any confusion to rest.
The Facts
[4] The defendant is the developer of a condominium project in Orleans known as Petrie’s Landing. The improvement in question was the construction of a 15 story residential tower; the first of four towers to be constructed on the 16 acre site. Pomerleau Inc. was the general contractor (“l’entrepeneur”) under a CCDC 3 cost plus construction contract (“à prix coûtant majoré”) and Brigil was the owner (“maître de l’ouvrage”). That contract was dated July 21, 2007. A dispute arose between Pomerleau and Brigil and as a consequence Pomerleau registered a lien for more than $5 million against the project in the fall of 2009.
[5] Though Pomerleau was the general contractor with its own subtrades, Brigil had entered into direct contracts with three finishing trades, Tripoli (for drywall), Deslaurier (for cabinets), and Jo-Peach (for painting). Each of Tripoli, Deslaurier and Jo-Peach registered their own liens against the property. While they are considerably smaller than the Pomerleau lien, they are still substantial.
[6] In addition to registering liens, each lien claimant also started an action and registered a certificate of action. The dates are important. They are as follows:
a. Deslaurier: action 09-46161 commenced September 9th, 2009 (lien was registered, July 28, 2009)
b. Jo-Peach: action 09-46119 commenced September 10th, 2009 (lien was registered, Aug 7, 2009)
c. Pomerleau: action 09-46228 commenced September 16th, 2009 (lien was registered, August 5, 2009)
d. Tripoli: action 09-46270 commenced September 18th, 2009 (lien was registered, August 6, 2009)
[7] I will not deal at length with the procedural history of the actions though it is set out in some detail in the affidavits of the plaintiffs. Suffice to say that the parties sought an order for joint case management of the actions and had discussed proceeding by a judgment of reference. Indeed a draft judgment had been circulated following a case conference in April of 2011. All of the plaintiffs assumed there would be a judgment of reference and the case conference would serve as the first hearing for directions under the reference rules or what in the Toronto practice used to be referred to as the “first pre-trial”.[^1] Consent was ultimately not forthcoming and no judgment of reference had been obtained when the second anniversary of the first of these actions approached. The Deslaurier action had been started on September 9th, 2009.
[8] On September 7th, 2011 the Pomerleau action was set down for trial by counsel for the plaintiff in that action. This was done by filing a trial record in accordance with Rule 48.02. None of the other actions were set down. On September 28th, 2011 then counsel for the defendant wrote to the plaintiffs and took the position that the Deslaurier, Jo-Peach and Tripoli liens which are the subject of these motions had expired. The question before me is whether or not this is so.
Analysis
[9] The Construction Lien Act creates a statutory procedure whereby contractors and suppliers in the construction industry can obtain security for unpaid debts if they take certain defined steps. The Act is remedial legislation but it creates a statutory remedy that did not exist at common law. It has therefore been held that while the Act merits a liberal interpretation with respect to the rights it confers upon those it is designed to benefit, it must be given a strict interpretation with respect to whether or not a person has a valid and subsisting lien.[^2] Moreover the Act and its procedures are written to accommodate small and simple liens on one hand and complex overlapping liens registered by parties at different levels in the construction pyramid on the other. Importantly, the Act is neither an exclusive remedy nor is it a complete code. It is not exclusive because it is in addition to normal contractual or tort remedies. It is not a complete code because the rules of civil procedure apply to the lien action unless the rules are contrary to the Act.
[10] For purposes of this motion we need not be concerned with when a lien arises. The important thing is that there are things a lien claimant must do to assert the lien and then to keep it alive. Specifically there are strict time requirements for “preserving” and “perfecting” the lien. Generally speaking a lien must be preserved by registration within 45 days of the date of “last supply” and then must be perfected in one of two ways within 45 days of the date when the first 45 day time period would have expired. The two ways are: 1) commencement of an action and registration of a certificate of action; or 2) sheltering. The relevant section is s. 36 and in particular subsections (3) and (4) which read as follows:
How lien perfected
(3) A lien claimant perfects the lien claimant’s preserved lien,
(a) where the lien attaches to the premises, when the lien claimant commences an action to enforce the lien and, except where an order to vacate the registration of the lien is made, the lien claimant registers a certificate of action in the prescribed form on the title of the premises; or
(b) where the lien does not attach to the premises, when the lien claimant commences an action to enforce the lien.
Rules re sheltering
(4) A preserved lien becomes perfected by sheltering under a lien perfected by another lien claimant in respect of the same improvement in accordance with the following rules:
- The preserved lien of a lien claimant is perfected by sheltering under the perfected lien of another lien claimant in respect of the same improvement where,
i. the lien of that other lien claimant was a subsisting perfected lien at the time when the lien of the lien claimant was preserved, or
ii. the lien of that other lien claimant is perfected in accordance with clause (3) (a) or (b) between the time when the lien of the lien claimant was preserved and the time that the lien of the lien claimant would have expired under subsection (2).
The validity of the perfection of a sheltered lien does not depend upon the validity, proper preservation or perfection of the lien under which it is sheltered.
A sheltered claim for lien is perfected only as to the defendants and the nature of the relief claimed in the statement of claim under which it is sheltered.
[11] In simplest terms, provided a “preserved” lien has not expired (that is it was registered in time and more than 90 days have not elapsed since the date when the lien arose) the lien is “perfected” by sheltering as soon as any other lien claimant (having a lien arising from the same “improvement”) commences an action and registers a certificate of action. Thus in the case at bar all four liens, which had been duly registered and were unexpired preserved liens at the time, were “perfected” when the Deslaurier certificate of action was registered on September 9th, 2009.
[12] To be clear, on the facts of this case, had no other lien claimant started an action, they would all have remained sheltered under the Deslaurier lien which was perfected on September 9th, 2009. Assuming Deslaurier waited until the last possible day to register its lien in the first place, the Deslaurier lien would not have expired until September 11th, 2009.[^3] The registration of the Deslaurier certificate of action not only perfected the Deslaurier lien but also perfected the other liens by sheltering. Although the lien claimants are not subtrades of each other and all stand in a direct contractual relationship with Brigil, there can be no doubt that the building they were all working on is the same “improvement” within the meaning of the Act.[^4]
[13] Of course the other liens which had been “perfected by sheltering” on September 9th, were then directly perfected under subsection (3) when each one of them was the subject of their own timely certificate of action. In the final result there were four liens and four separate actions.
[14] It is not enough to perfect a lien because a perfected lien can also expire. The Act requires that active steps be taken to move the action forwards. Indeed there is a rigid and unforgiving expiry date and if it is missed, a party may move without notice to have the lien declared as expired, to dismiss the action and to release any security. S. 37 of the Act provides as follows:
Expiry of perfected lien
(1) A perfected lien expires immediately after the second anniversary of the commencement of the action that perfected the lien, unless one of the following occurs on or before that anniversary:
An order is made for the trial of an action in which the lien may be enforced.
An action in which the lien may be enforced is set down for trial.
[15] It is common ground that there has been no order for the trial of any of the actions. The Pomerleau claim was set down before the second anniversary of the date on which the first of these actions (Deslaurier) was commenced. The liens other than Pomerleau will therefore have expired under s. 37 unless the Pomerleau action is “an action in which the lien may be enforced” within the meaning of the statute. Read literally there can be no doubt that this is so. The requirement is not that “the action that perfected the lien” be set down for trial (or ordered for trial) but that “an action” be set down. And it need not be an action in which the lien “will be” or “must be” enforced but an action in which the lien “may be enforced”. The plain wording of s. 37 therefore suggests that it is sufficient if another action in which the lien may be enforced is set down for trial.
[16] How can this be the case? In an ordinary civil action, only the rights of the named parties will be adjudicated but that is not the case in a lien action for a number of reasons. In fact every action commenced to enforce a lien is an action in which all of the other liens may be enforced because by operation of the Act all lien claimants will become parties to the action at the time of trial. This is consistent with the sheltering rules, which provide that only one action need be commenced to perfect all of the liens (providing it is commenced in time) and is evident from the following provisions of the Act.
a) S. 60 of the Act requires that when the date is set for trial of a lien action, the plaintiff must serve a notice of trial on any other person having a preserved or perfected lien;
b) S. 57 (1) of the Act provides that all parties served with the notice of trial are parties to the action;
c) S. 51 of the Act requires the court to try the action and all questions “that arise therein or are necessary to be tried in order to dispose completely of the action and to adjust the rights and liabilities of the persons appearing before it or on whom notice of trial has been served” and to give all necessary relief to all “parties to the action”.
[17] One of the principle reasons that the Act requires all lien claimants to be before the court and bound by the result at the trial of any of the liens has to do with ultimate disposition of the land affected by the liens or of the security paid into court. Under provisions such as ss. 44, 65, 80 and 84 the funds paid into court or the proceeds of sale of the land to which the liens attach are pooled and shared pro-rata by the lien claimants as their interests may appear and subject to the priority rules. Consequently unless the funds exceed the total of all of the liens those funds cannot be distributed until all subsisting lien claims have been adjudicated.
[18] As has often been observed, there is an aspect of a class action to a lien proceeding. Every action commenced to enforce a lien is therefore hypothetically an action in which every lien arising from the same improvement may be enforced.
[19] This is not to say that lien claimants may always rely on the actions of other lien claimants to preserve their rights. The actions which perfect liens or protect a perfected lien from expiring must occur within the times set out in the Act. If a particular lien has expired at the time the step is taken, it will not be saved by the actions of the other lien claimant.
[20] This occurs with respect to expiry of liens under s. 36 (2) and also under s. 37 (1). Pursuant to s. 36 (2) relying on another party to commence an action will not avail a lien claimant if that action is not commenced before his or her own lien expires under s. 36. In the case at bar for example if the Deslaurier lien was perfected by a certificate of action near the end of the 45 day period and had Deslaurier not commenced its own action, it could not have sheltered under the Pomerleau or Tripoli actions because by the time those actions were commenced, the Deslaurier lien would have expired. In this hypothetical example the first lien would have expired before the later lien was perfected and that would have been fatal.[^5]
[21] Similarly, relying on one of the other plaintiffs to set down an action down for trial will not be effective if the perfected lien has already expired under s. 37 before any of the actions are set down. The latter situation would have occurred in the instant case if the Pomerleau lien was not set down until the second anniversary of the date on which it was commenced. In that case the Deslaurier lien would have expired on September 9th (the second anniversary of the day on which the action that perfected the lien was commenced) and it would not have been saved by Pomerleau.
[22] That however is not what occurred. The Pomerleau lien was set down on September 7th, 1999. This is a date that was within two years of the date when any of the actions perfecting these liens had been commenced. As such, providing it is an action that comes within the statutory definition of “an action in which the lien may be enforced” none of the liens are expired under s. 37.
[23] Mr. Caza acknowledges that if only one action had been commenced and all other liens were sheltered and if that single action had been set down for trial in time then all liens would be protected and would not expire under s. 37. For example if only the Deslaurier action was commenced and it was Deslaurier that was set down on September 7th, all four liens would have been perfected by sheltering and the action which perfected the liens would have been set down for trial before its second anniversary. But here each lien claimant started a separate action and it was the Pomerleau action that was set down for trial. Does this make a difference?
[24] Mr. Caza argues that when parties commence their own actions they have elected not to shelter and a metamorphosis occurs. He suggests this is akin to opting out of a class action. Having taken charge of their own litigation, each party with a lien must have regard to the two year limitation period and must set down the action that perfected the lien within that time period otherwise the lien expires.
[25] In support of this interpretation, he points to s. 59 (2) of the Act which permits the court to consolidate all lien actions into one action where “more than one action is brought to enforce liens in respect of the same improvement” and he refers the court to the decision in D.W. Buchanan Construction Ltd. v. Bruce Township (1996) 27 C.L.R. (2d) 180 (Gen.Div.) which he argues stands for the proposition that obtaining an order for trial of one action does not protect the others and that consolidation after a lien has expired cannot save an expired lien. Consolidation he argues would not be necessary if in fact all liens were captured by any one action being set down for trial.
[26] Additionally he points to the precise wording of s. 57 (1) which states that all parties served with notice of trial are parties to the action and to s. 62 (6) which provides the court discretion to “let in” a person with a perfected lien who was not served with notice of trial. Arguably the parties do not become parties to the action that has been set down until they are actually served with a notice of trial or are “let in”. If the lien has expired prior to that date then he argues there is no longer a perfected lien and these provisions would be inoperative.
[27] In the case at bar, all lien claimants were served with a notice of trial but not until January 20th, 2012 when counsel for the plaintiff in the Pomerleau action received notice of a pre-trial preparatory to setting an actual trial date. In Mr. Caza’s submission it is only then, on the assumption that service with notice of trial for a pre-trial date complies with ss. 60 & 57 (1) that the other lien claimants are constituted as parties to the Pomerleau action and by then it is too late.
[28] In fact the consolidation provisions of s. 59 (2) do not assist the defendant. A situation of chaos would result if each of four lien claimants set their action down for trial and then served notice of trial on all lien claimants for different dates. In those circumstances a consolidation order under s. 59 (2) might well be necessary. At the very least an order for trial together would be required particularly if there are counterclaims, cross claims and non lien claims intertwined with the liens as in the case at bar. The fact that the Act contains a mechanism to bring order to chaos and avoid duplicate proceedings through a consolidation order hardly makes the case that liens expire unless each action is individually set down for trial. It should be noted that an additional purpose of s. 59 is to deal with “carriage disputes”. The section allows the court to award carriage of all actions to one party and one counsel.
[29] Buchanan Construction, is problematic for the plaintiffs if it is binding authority and if it stands for the proposition advanced by the defendant. With respect, I am unable to agree that this is so. Buchanan cannot be said to be authority for the proposition that “an action in which the lien may be enforced” means “the action” by which the lien was perfected and no other action. Buchanan is fact specific and the facts are unclear.
[30] In Buchanan it appears there were numerous lien actions including actions in which Buchanan Construction was a defendant. There had been an order for trial of what appears to be a subtrade lien by Ferrier Framing Inc. It does not appear that trial took place. Subsequently there was an order consolidating the Ferrier lien action with 16 actions of which seven were lien actions and which included the Buchanan Construction lien action against Bruce County. On another date some months later there was an order in what appears to be another subtrade lien action providing that 12 lien actions but not including the Buchanan Construction lien were to be tried on February 20th, 1995. At a later date still there was an order vacating certain lien claims and dismissing certain actions. Included in the dismissed actions were the Ferrier lien claim and 13 other lien claims but there is no reference in the order to the Buchanan lien.
[31] The court in Buchanan held that the Buchanan lien had expired. It was held that the Ferrier lien claim was ordered to trial but the Buchanan lien was not part of the action at the time. It was held that the subsequent consolidated action that did include the Buchanan lien was never ordered to trial. It was held that the other orders did not affect the Buchanan lien. The court attempts to distinguish the case from the decision in 601039 Ontario Ltd. v. Meadowvale Green Phase I Ltd. (1991) 1991 CanLII 7380 (ON SC), 5 O.R. (3d) 26 (Gen.Div). The latter is authority for the proposition that if a consolidated action is ordered to trial within two years of the date on which the action with which the others have been consolidated was commenced, the liens will not be declared expired. But it is not clear from Buchanan how it is distinguishable because the dates when each of the liens involving Buchanan expired are not articulated.
[32] Consequently Buchanan is of very little assistance. The facts are so confusing and the procedural history so convoluted it is impossible to determine what principles the court has applied. Secondly it is not clear from the reported decision whether the liens referred to are in respect of the same improvement. Thirdly the court uses the phrase “the action in which the lien could be enforced”. It is clear that the court was proceeding from the premise that it was the specific Buchanan lien action that had to either be set down or be ordered for trial and there is no hint that counsel argued otherwise. The court does not engage in statutory analysis or otherwise address the question as to whether or not it would be sufficient if another action in which the lien could be enforced had been ordered to trial. The case is only concerned with when consolidation took place and whether in fact there was an order for trial that included the Buchanan lien action. There is certainly nothing in Buchanan to suggest that the court considered any timing issue about the service of notices of trial.
[33] In my view the Pomerleau lien was an action in which the other liens “may be enforced” and when it was set down for trial it was prior to the second anniversary of the date on which any of the actions to enforce the liens were commenced. As such none of these liens have expired under s. 37.
[34] This interpretation is consistent with the plain and ordinary meaning of the phrase “an action in which the lien may be enforced” but it also is an interpretation that makes sense of the statutory language. If the legislature meant that the very action which perfected the lien must have been set down for trial or ordered to trial, there would be no need for the saving language in the sub-section. It is also consistent with the pattern of procedural economy established by the Act. Though the Act requires specific timely steps to preserve and protect lien rights, it does not require every party to duplicate every step. As an example the sheltering rules provide that it is only necessary for one lien claimant to commence an action. Similarly any one lien claimant may take the initiative to obtain a trial date. It is not necessary (though it may be prudent) for each of the parties to do so independently.
[35] Consequently the motions of the defendant will be dismissed.
Discretion
[36] I have determined that as a matter of law, on the facts of this case, the liens have not expired under s. 37 and as such there is no need for me to consider the arguments that the court should exercise discretion in favour of the plaintiffs. One area for the exercise of discretion if the lien has expired is to determine whether or not the non lien actions should be allowed to continue. I do not have to decide whether that would have been appropriate because the moving party conceded that the breach of contract claims could continue.[^6] The need to consider whether or not to exercise discretion would otherwise arise only if I had concluded that the liens had expired but there remained some discretionary remedial remedy open to the court.
[37] I do not rule out the possibility that a defendant could be estopped from enforcing its rights under s. 37 in appropriate circumstances but I express no opinion as to whether or not such circumstances arise in the case at bar.[^7] There was considerable affidavit evidence directed to this point by the various solicitors who obviously feel strongly that previous counsel for the defendant had misled them concerning the judgment of reference.
[38] I will make this observation. A judgment of reference as such does not stop the clock from running under s. 37 of the Act. If the parties wish to proceed by reference they require both a judgment of reference and an order for trial. Alternatively they must do what was done in this case and set down at least one of the lien actions before any of them expire. Master Sandler dealt with this situation in some detail in Pineau v. Kretschmar Inc.[^8]
[39] In the final analysis there is no need to exercise discretion as on the facts of this case, the liens have not expired.
Conclusion
[40] In summary the motions of the defendants in these three related lien actions are dismissed. There will be a declaration that the Pomerleau lien claim is an action in which the other three liens may be enforced and, because it was set down for trial in time, the liens have not expired.
[41] Counsel are to immediately confer and to agree on a timetable for completion of all remaining steps to bring these actions to conclusion. There will also be an order directing that all of these lien claims shall be tried together or one after the other as the court may direct. Should any of the parties wish, they may seek a consolidation order under s. 59. Further direction may be sought concerning interlocutory steps pursuant to s. 67 (2). Such direction may be obtained at a case conference or by a motion for directions.
[42] The plaintiffs are entitled to costs of these motions on a partial indemnity scale. I invite counsel to agree on the appropriate costs disposition in which case it may be incorporated into the formal order. I may otherwise be spoken to in order to obtain an appointment to speak to costs.
[43] I thank counsel for their able and cogent arguments.
Master MacLeod
DATE: June 5, 2012
[^1]: See for example: Pineau v. Kretschmar (2004) 37 C.L.R. (3d) 29 (S.C.J. Master) [^2]: See L. Di Cecco Co. v. Ace Lumber Ltd. 1963 CanLII 4 (SCC), [1963] S.C.R. 110 [^3]: In fact Deslaurier states that the date of last supply was July 3, 2009 and accordingly it would have had until October 1st to perfect. [^4]: See Moffat & Powell Ltd. v. 682901 Ontario Ltd. (1992) 40 C.L.R. 205 (Ont. Gen. Div.) [^5]: As noted above, it is probable in reality that the deadline for perfecting the Deslaurier lien did not expire until October so in fact each of these liens would have sheltered under any of the other actions. [^6]: See Ravenda Homes Ltd. v. 137208 Ontario Inc. 2010 ONSC 881, (2010) 90 C.L.R. (3d) 250 (S.C.J.). J.W. Quinn J. held that the liens had not expired but if they had he would have exercised discretion to allow the breach of contract claims to continue. [^7]: See Golden City Ceramic & Tile Co. v. Iona Corp. (1993) 1993 CanLII 9364 (ON SCDC), 106 D.L.R. (4th) 532; (1993) 12 C.L.R. (2d) 1 (Ont. Div.Ct.) [^8]: Supra @ note 1 - see in particular para. 16 of that decision