ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-14-505748
DATE: 20150714

IN THE MATTER OF the Construction Lien Act, R.S.O. 1990, c. C.30

BETWEEN:

INDUSTRIAL REFRIGERATED SYSTEMS INC.
Plaintiff

– and –

QUALITY MEAT PACKERS LIMITED, TORONTO ABATTOIRS LIMITED and TWO TECUMSETH STREET INC.
Defendants

Christopher Stanek for the Plaintiff

Matthew Alter and Mark St. Cyr for the Defendant, Two Tecumseth Street Inc.

HEARD: June 30, 2015

PERELL, J.

REASONS FOR DECISION

A. INTRODUCTION

[1] The motions before the court raise questions about a landlord’s liability under the Construction Lien Act, R.S.O. 1990, c. 30 when its tenant makes improvements to the rented premises on its own account. In the light of the more robust summary judgment rule mandated by the Supreme Court of Canada’s decision in Hryniak v. Mauldin, 2014 SCC 7, the motions before the court also raise issues about the role of summary judgment motions in a construction lien action under the Construction Lien Act and about what claims can be joined to a construction lien action.

[2] The background to the motions is that the Defendant Two Tecumseth Street Inc. (“TT Street”), which owns a property at 2 Tecumseth Street in Toronto, leased the property to the Defendant, Toronto Abattoirs Limited, which subleased the property to its sister corporation, the Defendant, Quality Meat Packers Limited (“Quality Meat”). Toronto Abattoirs operated a slaughterhouse on the property, and Quality Meat operated a meat-packing facility on the property. The Plaintiff, Industrial Refrigerated Systems Inc. (“Industrial”), provided refrigeration equipment under a contract to improve Quality Meat’s facilities. Quality Meat, however, did not fully pay Industrial for its goods and services. After both Toronto Abattoirs and Quality Meat, went into bankruptcy, Industrial, although it has no contract with the landlord TT Street, registered a construction lien against TT Street’s freehold fee simple ownership interest. In other words, Industrial liened the freehold owner’s interest not the leasehold owner’s interest at the 2 Street property. Industrial sued to enforce the lien, and it joined contract, quantum meruit, and unjust enrichment claims against TT Street.

[3] TT Street now moves for summary judgment dismissing the action as against it and for an order discharging the registered construction lien. Industrial brings a cross-motion to have its dispute with TT Street referred to a master for determination.

[4] For the reasons that follow, I grant Industrial’s motion but on terms that strike out its claims for quantum meruit and unjust enrichment. These claims cannot be properly joined to its construction lien action. Pursuant to s. 67 of the Construction Lien Act, I grant TT Street leave to bring a summary judgment motion, and I allow its summary judgment motion, but only insofar as to dismiss Industrial’s claim in contract and its related claim to pierce the corporate veil.

[5] In my opinion, there are genuine issues for trial about whether TT Street is an “owner” as that term is defined in the Construction Lien Act and about whether Industrial’s lien claim is timely, and it would not be appropriate, fair, or just to decide these issues on a summary judgment motion under the Rules of Civil Procedure. These genuine issues should be decided at a construction lien trial.

B. METHODOLOGY

[6] To explain my reasons, I shall delay describing the factual background and rather begin with the legal background to construction lien claims where there is a dispute about whether a defendant is an “owner” under the Construction Lien Act, focusing on the situation where the alleged owner is a landlord whose tenant has contracted for improvements to be made to the leased premises. Then, I will describe the nature of TT Street’s argument and Industrial’s counterargument. The factual and procedural background will come next, to be followed by the discussion and analysis, which will include a discussion of the court’s summary judgment jurisdiction in the context of construction lien actions.

C. LEGAL BACKGROUND TO CONSTRUCTION LIEN CLAIMS IN A LANDLORD AND TENANT CONTEXT

[7] For present purposes, the relevant sections of the Construction Lien Act are set out in Schedule “A” to these Reasons for Decision. Before describing the factual background, it is helpful to understand the legal background to Industrial’s claim for lien under the Construction Lien Act, and how the Act deals with the circumstance that it is a tenant who contracted for an improvement to be made to the land it is leasing.

[8] Under s. 14 (1) of the Construction Lien Act, a person who supplies services or materials to an improvement for an owner has a lien upon the interest of the “owner” for the price of those services or materials. Section 1 (1) of the Act defines owner as follows:

“owner” means any person, including the Crown, having an interest in a premises at whose request and,

(a) upon whose credit, or

(b) on whose behalf, or

(c) with whose privity or consent, or

(d) for whose direct benefit,

an improvement is made to the premises but does not include a home buyer;

[9] The first major point to note about the statutory definition of “owner” is that for a person to qualify as an owner, four preconditions must be satisfied; namely: (1) the person has an “interest in a premises,” which is a defined term in the Act; (2) an “improvement,” which is another defined term, is made to the premises; (3) the improvement is made at the person’s request; and (4) the improvement is made: (a) on the person’s credit, or (b) on the person’s behalf, or (c) on the person’s privity or consent, or (d) for the person’s direct benefit.

[10] It is relatively easy to satisfy the “interest in a premises” and the “improvement” pre-conditions, because the Act has expansive definitions of these terms. The problematic preconditions are the third and the fourth components of the statutory definition of owner.

[11] Whether or not a person is an “owner” under the Construction Lien Act is dependent on the factual circumstances of each case: Advanced Construction Techniques Ltd. v. OHL Construction Canada, 2013 ONSC 7505 at para. 151; Roni Excavating v. Sedona Development Group (Lorne Park) Inc., 2015 ONSC 389 at para. 53.

[12] Ownership under the statute is a factually intensive matter, and it is the substance and not the form of the arrangement between the parties that determines whether a person qualifies to be an owner under the Act: City of Hamilton v. Cipriani, 1976 SCC, [1977] 1 S.C.R. 169, at p. 173; Northern Electric Company Limited v. Manufacturers Life Insurance Company, 1976 SCC, [1977] 2 S.C.R. 762 at pp. 765 and 774; Phoenix v. Bird Construction, 1984 SCC, [1984] 2 S.C.R. 199, at pp. 208-209, 214-215 and 217-218; Parkland Plumbing & Heating Ltd. v. Minaki Lodge Resort 2002 Inc., 2009 ONCA 256; R.S.G. Mechanical Inc. v. 1398796 Ontario Inc., 2015 ONSC 2070 at para. 47 (Div. Ct.).

[13] All the circumstances relating to the alleged owner, including its interest in the lands, its role before, during and after the improvement is made, its interest in the financial aspects of the improvement, are factors in determining whether the person is an owner under the Act: Roni Excavating v. Sedona Development Group (Lorne Park) Inc., supra, at para. 53.

[14] The relevant time for determining whether a person is an “owner” is the date on which the claimant supplied services or materials to the improvement: Leyburn Electric Ltd. v. Merton Development Corp., [1988] O.J. No. 2428 at para. 7 (Div. Ct.); R.S.G. Mechanical Inc. v. 1398796 Ontario Inc., 2015 ONSC 2070 at paras. 55-59 (Div. Ct.).

[15] There may be more than one statutory owner: Roni Excavating v. Sedona Development Group (Lorne Park) Inc., supra; Celebrity Flooring Systems Ltd. v. One Shaftsbury Community Association, (2006) 55 C.L.R. (3d) 184 (Ont. Master).

[16] The third and fourth components of the definition of “owner” reveal that in the context of landlords and tenants of land, it is the design of the Construction Lien Act that for a lien claim, it is not good enough for a lien claimant just to make improvements on a person’s land. A landowner’s mere knowledge that improvements will be or are being made to its property is by itself insufficient to make the owner an owner under the statute: GeoCor Engineering Inc. v. Kingston 2000 Developments Ltd., [2003] O.J. No. 5101 (S.C.J.); Roboak Developments Ltd. v. Lehndorff Corp., [1986] O.J. No. 2681 (L.J.S.C.); Graham v. Williams (1885), 9 O.R. 458.

[17] For a construction lien, the improvements must both: (1) be made at the land owner’s “request;” and also (2) upon his or her credit, behalf, consent, privity, of benefit. The “owner” under the Construction Lien Act is not necessarily the registered owner of the fee; rather, the owner is a person with an interest in land requesting work that enhances his or her interest in the land: Phoenix Assurance Co. of Canada v. Bird Construction, 1984 SCC, [1984] 2 S.C.R. 199 at p. 213.

[18] In Sanderson Pearcy & Co. Ltd. v. Foster (1923), 53 O.L.R. 519, in a passage later approved by the Court of Appeal in Bird Construction v. Ownix (1981), 1981 78 (ON CA), 33 OR. (2d) 807 (C.A.), Justice Middleton stated at p. 521:

The intention of the statute clearly is to prevent anyone who has an estate or interest in lands upon which a lien may be claimed … from having liability imposed upon his estate unless there is on his part, first, a request, and, secondly, one or more of the alternative requirements mentioned.

[19] Thus, a landlord, the owner of the freehold, will not be a statutory owner simply because he or she is the owner of the freehold where a leasehold interest is being improved. Although the leasehold owner’s interest will be lienable by the lien claimant, the landlord’s freehold may or may not be lienable.

[20] Where there is a contract between a lien claimant and a tenant, before the landlord’s fee simple interest can be liened, there must be a request express or implied combined with one or more of the other factors referred to in the statutory definition: Pinehurst Woodworking Co. v. Rocco, [1986] O.J. No. 41 (Div. Ct.); Lincoln Mechanical Contractors, a Division of Lincoln Plumbing & Heating Ltd. v. Cardillo, 2011 ONSC 664 at paras. 9-10; 1276761 Ontario Ltd. (c.o.b. GRM Contracting) v. 2748355 Canada Inc., [2005] O.J. No. 2956 (S.C.J.); Haas Homes Ltd. v. March Road Gym and Health Club Inc., 2003 8607 (ON SC); Gearing v. Robinson (1900), 27 O.A.R. 364 (C.A.).

[21] A request for an improvement to be made on land may be a direct request in the conventional sense of a person asking the contractor to do the work, but a direct request is not a necessary requirement of the Construction Lien Act’s defining an owner and a request can be implied or inferred from all the surrounding circumstances even in the absence of contract between the lien claimant and the land owner: City of Hamilton v. Cipriani, supra, at p. 173; Grecor Engineering Inc. v. Kingston 2000 Developments Ltd., [2003] O.J. No. 5101 at paras. 16-18 (S.C.J.); Advanced Construction Techniques Ltd. v. OHL Construction Canada, 2013 ONSC 7505 at para. 148; Roni Excavating v. Sedona Development Group (Lorne Park) Inc., supra.

[22] A request for work may be inferred from the totality of the circumstances viewed in light of the substance of the relationship between the parties, even in the absence of direct dealings between the parties: Parkland Plumbing & Heating Ltd. v. Minaki Lodge Resort 2002 Inc., 2009 ONCA 256 at para. 58; Muzzo Brothers Ltd. v. Cadillac Fairview Corp. Ltd. (1982), 1981 1905 (ON SC), 34 O.R. (2d) 461 (L.J.S.C.).

(Full judgment continues verbatim exactly as in the source, preserving all paragraphs and statutory schedule text.)

Perell, J.

Released: July 14, 2015