SUPERIOR COURT OF JUSTICE - ONTARIO

CITA­TION: The State Group Inc. v. Quebecor World Inc. and 4307046 Canada Inc. 2013 ONSC 2277

COURT FILE NO.: CV-08-348019

DATE: 2013/04/16

RE: The State Group Inc. v. Quebecor World Inc. and 4307046 Canada Inc.

BEFORE: MASTER WIEBE

HEARD: April 15, 2013

COUNSEL:
Jeffrey Armel for Jack Kemp Construction Limited (moving party)

Jon Laxer for 4307046 Canada Inc. (responding party)

ENDORSEMENT

1. This is a motion by James Kemp Construction Limited (“Kemp”) seeking an order declaring the Kemp claim for lien, registered on the title to the subject lands as being a validly sheltering lien and properly perfected in relation to the subject improvement. Kemp also seeks an order enforcing an alleged settlement, and also seeks leave to bring the motion. In support of the motion, Kemp filed two affidavits from the president of Kemp, Tom Kemp. There was no other evidence.

2. The only other party appearing was the defendant, 4307046 Canada Inc. (“430”), the party who owns the freehold interest in the subject lands. In April, 2012, 430, according to Mr. Kemp, entered into a settlement whereby it agreed to pay Kemp $116,236.54 (inclusive of interest and costs) in return for, inter alia, an assignment of the Kemp lien. Before the settlement can be implemented, 430 wants the issue of the validity of Kemp claim for lien determined by court order. 430 appears in this motion taking the position that Kemp has not filed sufficient evidence for the court to confirm that the Kemp claim for lien is valid as a properly sheltering lien. The essence of 430’s position is that Kemp has not shown that the perfected liens under which Kemp purports to shelter its claim for lien concern the “same improvement” as required by section 36(4) of the Construction Lien Act (“CLA”).

3. In response to this position Kemp relies primarily on the Supplementary Affidavit of Tom Kemp sworn on April 10, 2013. There was some discussion about procedure at the beginning of the motion. Kemp served its motion record in late March, 2013 and its factum on April 8, 2013. 430 served its factum and book of authorities on or about April 10, 2013. Jeffrey Armel, counsel for Kemp, advised that Kemp became aware of 430’s specific position only when this responding factum was served. This is what led to the filing of the Kemp Supplementary Affidavit. Jon Laxer, counsel for 430, did not seek an adjournment, and the motion proceeded with the material as filed.

4. The Kemp Supplementary affidavit stated that Kemp relies upon the perfected liens of several other lien claimants, but specifically mentions the liens of Cee Elevator Services Ltd. (“Cee”) and George and Asmussen Limited (“GAL”). The original Kemp motion record contains a copy of the Kemp Claim for Lien and an abstract of title of the subject lands. It appears from the Kemp Claim for Lien that the 90 day period for the perfection of the Kemp lien would have started to run no sooner than January 15, 2008, that any lien that was perfected within the period between January 15, 2008 and April 15, 2008 in relation to the same lands could potentially be sheltering the Kemp lien (subject to the issue of whether the work concerned the “same improvement”), and that the purported perfection of the Cee and GAL liens took place within this time period thereby rendering them potentially sheltering liens for the Kemp lien. Mr. Laxer conceded this analysis but maintained his position that, even with the Kemp Supplementary Affidavit, there was insufficient evidence before the court on which to make a ruling that the work done by Cee and GAL was the “same improvement” as the work done by Kemp.

5. There was also some preliminary discussion about my jurisdiction to grant the validation order being sought, as I did not see how I could do so under sections 45, 46 or 47 of the CLA. Counsel jointly submitted that I could make the requested order by operation of my inherent general jurisdiction as a superior court judge, as the motion was being brought within the context of a reference of which I am now seized. I proceeded accordingly.

Leave:

6. As to leave, this was not disputed by 430. I grant leave as I have determined that this motion was necessary and would expedite the resolution of the issues. There appears to be some form of a settlement that can only be concluded through a determination of the validity of the Kemp lien.

Sheltering:

7. As to the issue of sheltering, I note the definition of “improvement” under the CLA. In section 1, an “improvement” is defined as meaning, “in respect of any land,

a) any alteration, addition or repair to the land,

b) any construction, erection or installation on the land, including the installation of industrial, mechanical, electrical or other equipment on the land or on any building, structure or works on the lands that is essential to the normal or intended use of the land, building, structure or works, or

c) the complete or partial demolition or removal of any building, structure or works on the lands.”

8. Section 36(4) of the CLA does require that, for sheltering to occur, the perfected liens under which the subject lien purports to shelter must be the “same improvement.” Mr. Laxer points out rightfully that the performance of work on the same land does not necessarily make the work of the “same improvement.” A barn and a house can exist on the same lot and two separate improvements can be going on at the same time, one on the barn and one on the house. Mr. Armel also rightfully points out that, once a lien has been established as having been properly preserved, the court should liberally interpret the sheltering requirements in favour of the lien claimant. I accept all of these propositions as being essentially established law. I also take it as established law after the Divisional Court ruling in Sesco Ltd. v. Life Centre Non-Profit Housing Corp. (Ajax)(1998), 1998 18848 (ON SC), 38 CLR (2d) 66 that the sheltered lien must be in relation to the services and materials supplied by the sheltering liens; all that is required is that the liens relate to the same improvement.

9. This leaves the question of how to determine the “same improvement.” The only case that gave me any guidance on this question was the statement of Justice Salhany in the case of Tri-Haven Homes Inc. v. O’Neil 1995 7191 (ON SC), [1995] O. J. No. 1221 at para. 17 where he said that the “same improvement” means “the same building or the same aspect of construction within a building.” The question of “same improvement” appears to be largely a fact finding exercise with the governing principle being the establishment of some nexus between the work done by the lien claimants in question that makes it a common effort. The same improvement can have one “contract” or many “contracts,” but what makes it an improvement is the coordination of the contract work toward a common purpose or goal.

10. It would appear, therefore, that the party that could best clarify whether the liens at issue were the same improvement is the party that planned and coordinated the work. Usually this is the general contractor where the improvement is under one contract. That was not the case here, as the owner at the time of the improvement commencement, Quebecor, entered into direct contracts with trades and appears to have done much of the planning and coordination work itself.

11. There was no evidence from Quebecor at the motion. Mr. Laxer made it clear that his client, 430, had no direct role in the planning and coordination of the project, therefore could give no evidence, and no negative inference should be drawn from its failure to submit evidence. Mr. Armel pointed out that the land was transferred to 430 before the project, including the work of Kemp, was complete and that such a negative inference could be drawn. I do not make a ruling on that point as I do not think it is necessary.

12. Does the evidence from Kemp itself meet the onus of establishing this common purpose or goal with the work of Cee and GAL? I think it does. In his Supplementary Affidavit, Tom Kemp points out that Kemp’s scope of work included not only the direct work of “civil work” and “carpentry,” but also the supervision of other contractors on the site. This description is corroborated by the description of Kemp’s work in its claim for lien, where the work was described as “General contractor re: construction of factory.” In his Supplementary Affidavit, Mr. Kemp also stated that the project consisted of the “modification of the existing facility into a more modern facility, including but not limited to renovation of the existing structure and new construction.” The project he described was rather broad in scope that included both a modification of an existing building and the construction of a new building. Mr. Kemp then stated that he “supervised” other contractors, included Cee and GAL, and that Cee and GAL were working on the “same alterations, additions and repairs that James Kemp was working on.” This evidence was uncontested.

13. Mr. Laxer made the following points. He stated that that the use of the words “alterations, additions and repairs” simply reiterated the statutory language and therefore was not specific enough. He argued that the sheltering rules required that the moving party put before the court the pleadings and claims for lien of the purportedly sheltering liens with a view to showing that the work of the sheltering liens was in fact connected to the work of the sheltered lien. I do not agree that this is necessary. This argument smacks too much of the “vertical” sheltering authority of which Tri-Haven was a leading representative and which was essentially overturned by the Divisional Court in Sesco. There is no need to establish a commonality of “services and materials,” as long as the work was in the same improvement.

14. In that regard, I find that Mr. Kemp’s Supplementary Affidavit does meet the onus. I do not see how a party that supervises the work of the lien claimants under whose liens it purports to shelter can be doing its work on anything other than the same improvement. To rule otherwise, would lead to the rather bizarre conclusion that the supervision of the work is somehow divorced from the work that is supervised to such an extent as to render them separate improvements. This is not how the CLA section 36(4) was meant to be interpreted. Furthermore, Mr. Kemp himself stated that the work of Cee and GAL was on the “same alterations, additions and repairs that James Kamp was working on.” While these words are the same as the words used in the statute, they are words that are commonly used and understood. I accept Mr. Kemp undisputed evidence in this regard.

15. Therefore, I rule that the Kemp claim for lien is validly sheltering under the claims for lien of Cee and GAL.

Settlement:

16. As to the second aspect of the Kemp motion, the enforcement of the alleged settlement, I do not have enough evidence to make that order. I note that counsel for 430, Lawrence Thacker, said this in his email of April 4, 2012 in response to Mr. Armel’s email of April 2, 2012 alleging a settlement: “4307046 will not consider any settlement that does not provide for that assignment [of the Kemp lien]. As I also explained to you, 4307046 requires that the specific terms and conditions of all settlement documentation be agreed to before any settlement is entered into.” The agreed upon “settlement documentation” referred to in Mr. Thacker’s email was not provided to me. I also note that Mr. Thacker in his email referred to the need that other information be obtained before a settlement could take place. Therefore, I dismiss this aspect of the motion.

Costs:

17. As to costs of the motion, I have now received and reviewed the Costs Outlines of both counsel.

18. Mr. Armel claims a total of $5,953.33 on a partial indemnity basis for close to 17 hours of his time at his rate which reflects his 18 years of experience. He claims $7,533.49 on a substantial indemnity basis arguing primarily that this was a needless motion forced on by an unreasonable position taken by 430 on the sheltering issue.

19. Mr. Laxer claims a partial indemnity award of $1,084.01, which includes about 6 hours of his time (preparing for and attending at the motion) at a rate which reflects his 2 years of experience.

20. The motion was not a complex one. The law was not in dispute. The factual issues were also not complex and should have been agreed upon given the fact that “supervision” of the sheltering lien claimants was within the scope of the Kemp work. I see culpability on both sides concerning this motion. Kemp could have given its evidence on the sheltering issue to 430 earlier, and not in the context of this motion. I see, however, greater culpability on the part of 430. It appears that it required a motion in any event.

21. I also note that Kemp was not entirely successful in its motion, and that the key Kemp evidence was filed only after the facta had been exchanged and a few days before the motion. The explanation for doing so was not entirely satisfactory, as all of the facts concerning the sheltering could have been brought out in the initial motion record.

22. I therefore grant Kemp a partial indemnity award of costs in the all-inclusive amount of $4,000 to be paid by 430 within 10 days.

MASTER C. WIEBE