ONTARIO

SUPERIOR COURT OF JUSTICE

2015 ONSC 6319

COURT FILE NO.: CV-14-518776

DATE: 20151015

BETWEEN:

PCR CONTRACTORS INC.
Plaintiff

– and –

WILSON STATION DEVELOPMENT CORPORATION
Defendant

Paul Guaragna, for the Plaintiff

Ronald B. Moldaver, Q.C., for the Defendant

HEARD: October 6, 2015

M. D. FAIETA, j.

reasons for JUDGMENT

INTRODUCTION

[1] The plaintiff asks this Court to refer this action, commenced in Toronto, for trial to a master under clause 58(1)(a) of the Construction Lien Act, R.S.O. 1990, c. C.30 (the “Act”).

[2] The plaintiff claims that the defendant owes $4,675,403.07 for concrete forming and finishing services provided for the construction of the defendant’s condominium development. The plaintiff registered a construction lien in the Land Registry Office for the above amount against the defendant’s property. The lien was vacated after the defendant posted security by way of a financial guarantee bond.

[3] By counterclaim, the defendant claims that the delay of the development was caused by the plaintiff and that the plaintiff’s construction lien is for an excessive amount. The defendant seeks $5 million in damages for breach of contract and breach of the common law duty of honest performance of the contract; an additional $100,000 in damages for registering a grossly excessive construction lien; and costs of this action against the plaintiff’s operating mind and its lawyer.

[4] The plaintiff submits that this lawsuit will involve a prolonged examination of many documents and will require the taking of accounts.

[5] Amongst other reasons, the defendant submits that this motion should be dismissed on the basis that there is no evidence to justify the reference under Rule 54.02 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[6] For the reasons described below, I grant the plaintiff’s motion to refer this construction lien action to a master.

ANALYSIS

[7] Subsection 58(1) of the Act states:

On motion made after the delivery of all statements of defence, or the statement of defence to all crossclaims, counterclaims or third party claims, if any, or after the time for their delivery has expired, a judge may refer the whole action or any part of it for trial,

(a) to a master assigned to the area in which the premises or part of the premises are situate;

(a.1) to a case management master; or

(b) to a person agreed on by the parties. [Emphasis added.]

[8] The construction lien reference process before a master was recently described by Master Carol Albert in 4361814 Canada Inc. v. Dalcor Inc., 2015 ONSC 1481, [2015] O.J. No. 1073 as follows:

9 … A construction lien action may be tried either by a judge or by reference to a construction lien master. I am one of two construction lien masters in Toronto.

10 Case management was practiced in Toronto construction lien references long before the case management reforms introduced into civil actions in Toronto, Ottawa and Windsor in the 1990's by Civil Justice Review. In construction lien references case management is grounded in section 67 of [the Act] and rules 54 and 55.

11 The Act provides a mechanism for construction lien claims to be decided in as summary a fashion as is suitable to meet the needs of the case. Interlocutory steps not specifically permitted by the Act require leave of the court and interlocutory orders may not be appealed. Section 67 provides:

67. (1) The procedure in an action shall be as far as possible of a summary character, having regard to the amount and nature of the liens in question.

(2) Interlocutory steps, other than those provided for in this Act, shall not be taken without leave the consent of the court obtained upon proof that the steps are necessary or would expedite the resolution of the issues in dispute.

(3) Except where inconsistent with this Act, and subject to subsection (2), the Courts of Justice Act and the rules of court apply to pleadings and proceedings under this Act.

12 The construction lien reference procedures in place in Toronto seize the reference master of all steps in the reference, including the trial. As such the reference master becomes familiar with the facts of the case, the issues, and the dynamics between the parties and their lawyers. This level of familiarity is considered beneficial because it leads to the efficiencies demanded by the Act and the reference rule. This legislative scheme is presumed to be fair and just. It permits the reference master to take into account, in each attendance, his or her accumulated knowledge of the case, gained from previous contact with the reference.

13 By order dated May 18, 2012 Justice Stinson referred action CV-11-441381 (4361814 Canada Inc. v Dalcor Inc.) pursuant to section 58 of the Act. Section 60 of the Act provides that all lien claimants with registered liens on title become parties to the reference. Attached as Schedule "A" is a list of the ten construction lien claims initially brought together in this reference, which I refer to in these reasons as the "Unimac reference".

14 With judgment of reference in hand the next step is to obtain an order for trial from a construction lien master, setting the action down for trial within two years of issuing the action. I signed the order for trial on June 5, 2012 directing a trial date of August 7, 2012. The return date is not the start of the evidentiary portion of the trial. Rather, on the appointed date the construction lien master becomes seized of the reference and conducts a hearing for directions which is, in effect, a case conference. Typically the parties have not yet produced their documents prior to this first attendance.

15 Rule 55.01 requires the reference master to take firm and steady control of the reference, including:

55.[01(01)] ...devise and adopt the simplest, least expensive and most expeditious manner of conducting the reference and may:

(a) give such directions as are necessary; and

(b) dispense with any procedure ordinarily taken that the referee considers to be unnecessary, or adopt a procedure different from that ordinarily taken.

16 Hearings for directions in a construction lien reference are used to case manage the reference. The court reviews the abstract of title and affidavit of service to ensure that all parties entitled to notice have been properly served. The court attempts to narrow issues and streamline the proceeding by having lawyers and unrepresented parties identify the issues in dispute. Usually a hearing for directions is collaborative in terms of lawyers and the court discussing the procedural steps required to prepare the reference for trial and the legal and factual issues in dispute. The attendance is informal. The court gives procedural directions regarding pleadings, production, discovery and any other necessary pretrial procedural step. Construction lien references in Toronto have been conducted in this manner for decades. Depending on the complexity of the reference and the quantum in issue a construction lien reference may require one or more hearings for directions before the evidentiary portion of the trial can begin.

17 Some of Unimac's complaints stem from Mr. Baichoo's apparent failure to understand the nature, purpose and appropriate conduct of lawyers participating in hearings for directions in a construction lien reference. Many of the decisions that historically in civil actions (prior to the implementation of case management for civil actions) required expensive, lengthy, contentious and time consuming motions can be accomplished quickly, efficiently and at minimal cost at a hearing for directions, consistent with section 67 of the Act and rule 55.

18 The case management phase of the reference is different from the trial phase. It is less formal. The master participates in the discussion. In Gaultierei v Canada (A.G.) Master (now Justice) Beaudoin, on a motion for recusal, wrote:

15. Case management, because of the close interaction between the judicial officer and the parties and the informality of many case conferences, can create situations where the judicial officer will make comments with respect to the conduct of the case. …

19 As the master seized of the Unimac reference all interlocutory proceedings are returnable before me and, unless I recuse myself, I will preside over the reference trial. The Unimac reference is complex with multiple lien claims ranging from $799,436.25 down to $14,944.00, multiple counterclaims and crossclaims brought by Unimac, and multiple parties. Adding to the complexity is an overlapping trust claim action Unimac issued in Newmarket, a different judicial region, arising from the same events as the Toronto lien proceedings.

20 To ready the Unimac reference for trial I conducted several hearings for directions and case conferences, presided over motions and issued numerous procedural orders in an effort to streamline the reference and narrow the issues. [Footnotes omitted.]

[9] A master’s report shall contain his or her findings and conclusions. It has no effect until it has been confirmed. The report will be confirmed unless a party to the reference has filed a notice of motion opposing its confirmation within 15 days of having been served with the report.[^1] The motions judge may confirm the report in whole or in part or make such other order as is just.[^2]

Must a Construction Lien Action be Referred to a Master?

[10] The plaintiff submits that not only should this Court refer this construction lien action to a master but that it is “entitled” to have its claim heard by a master of the Ontario Superior Court of Justice given that such actions are, as a matter of course, referred to them under this provision and, as a result, those masters have expertise in relation to construction lien matters and in adjudicating such actions in a summary manner.

[11] However, a party to a construction lien action is not entitled, at law, to have an action referred to a master. In the 1950s the predecessor of subsection 58(1) provided that a construction lien action in the County of York “shall” be tried before a master. In Ontario (Attorney General) v. Victoria Medical Building Ltd., 1959 20 (SCC), [1960] S.C.R. 32, the Supreme Court of Canada held that provision to violate section 96 of the British North America Act, 1867. As a result, the legislation was amended to provide that a judge of the Supreme Court of Ontario would hear a construction lien action unless the Court exercised its discretion to refer such actions to a master.[^3]

Principles for the Exercise of Discretion in Deciding Whether to Refer a Construction Lien Action to a Master

[12] As noted earlier, s. 58(1)(a) of the Act simply provides that a judge may refer a construction lien action for trial to a master.

[13] The defendant submits that the exercise of discretion under s. 58(1) of the Act should be exercised in the manner employed by Justice Cory (as he then was) in V.K. Mason Construction Ltd. v. Courtot Investments Ltd. (1975), 1975 408 (ON SC), 9 O.R. (2d) 325 (H. Ct. J.). In that case, the Court considered s. 31(2) of The Mechanics’ Lien Act, R.S.O. 1970, c. 267, which stated:

In the Judicial District of York, the action shall be tried by a judge of the Supreme Court, but,

(a) on motion after defence or defence to counterclaim, if any has been delivered or the time for such delivery has expired, a judge of the Supreme Court may refer the whole action to the master for trial pursuant to section 72 of The Judicature Act; or

(b) at trial, a judge of the Supreme Court may direct a reference to the master pursuant to section 71 or section 72 of The Judicature Act. [Emphasis added.]

[14] In turn, section 72 of The Judicature Act, R.S.O. 1970, c. 228, stated:

In an action,

(a) if all the parties interested who are not under disability consent, and, where there are parties under disability, the judge is of opinion that the reference should be made and the other parties interested consent; or

(b) where a prolonged examination of documents or a scientific or local investigation is required that cannot, in the opinion of a court or a judge, conveniently be made before a jury or conducted by the court directly; or

(c) where the question in dispute consists wholly or partly of matters of account,

a judge of the High Court may at any time refer the whole action or any question or issue of fact arising therein or question of account either to an official referee or to a special referee agreed upon by the parties.

[15] In dismissing a motion to have a mechanic’s lien action referred to a master, Cory J. stated the following at p. 328:

The provisions of s. 31(2) of the Mechanics’ Lien Act are mandatory and require the action to be tried by a Supreme Court Judge unless s. 72 of the Judicature Act applies and that there was, at this time, no material before the Court which would make s. 72 applicable. …

I have come to the conclusion, regretfully, that for the present, at least, the action ought not to be referred to the Master at Toronto.

The wording of s. 31(2) is mandatory. The action must be heard by a Judge of the Supreme Court unless there is a consent filed or there is material before the Court which would make the provisions of s. 72 of the Judicature Act applicable. … [emphasis added]

[16] In my view, the Courtot case is distinguishable and inapplicable as Clause 58(1)(a) of the Act bears little resemblance to s. 31(2) of The Mechanics Lien Act.

[17] First, unlike subsection 31(2) of The Mechanics’ Lien Act, the current Act simply provides that a judge may refer a construction lien action to a master for trial.

[18] Second, the circumstances when a judge may refer a construction lien action to a master under s. 58(1)(a) of the Act are not specifically enumerated nor are they expressly limited by the Act to the three circumstances described in section 72 of The Judicature Act (which today is largely reflected in Rule 54.02 of the Rules of Civil Procedure), namely: (1) consent of the parties; (2) where there is a prolonged examination of documents or a scientific or local investigation is required that cannot be conducted by the court directly; or (3) where the question in dispute consists wholly or partly of matters of account.

[19] The defendant submits that this Court has no jurisdiction to refer this action to a master because there is no evidence before this Court that the parties consent to such referral nor is there credible evidence that the Court’s time will be “bogged down with tedious documentary or accounting matters”. These considerations are not pre-conditions to the exercise of discretion under s. 58(1)(a) of the Act in light of how the Act is written today.

[20] The exercise of a statutory discretion must accord with the objectives of the statute. The objectives of the Act are to provide security for work and materials supplied by contractors as well as a relatively cheap and quick way of adjudicating such claims. See Teepee Excavation & Grading Ltd.v. Niran Construction Ltd. (2000), 49 O.R. (3d) 612 at para. 24 (C.A.) and Progressive Drywall & Interior Systems Inc. v. Lombardo, 1991 CarswellOnt 815 at para. 20 (Gen. Div.). Also see subsection 67(1) of the Act which states that “…[t]he procedure in an action shall be as far as possible of a summary character, having regard to the amount and nature of the liens in question.”

[21] It has been common practice to refer construction lien actions to a master for more than 50 years.[^4] The description of the reference process in Dalcor case, cited earlier, reflects the expertise and processes employed by masters in construction lien references to adjudicate such references in a relatively flexible, summary and inexpensive manner. In Snowmount Investments Corp.v. Elliott, [1997] O.J. No. 4408 (Gen. Div.), the Court found, at para. 22, that it was in “…the public interest to preserve the Toronto practice that all proceedings in construction lien actions, after the reference order, are disposed of before the master” for reasons of “simplicity and expeditious resolution of disputes of this kind”. In my view, the practice of referring construction lien actions to a master should be continued unless the circumstances dictate otherwise in light of the objectives of the Act.

[22] The defendant has not advanced any reasons which would demonstrate that the objectives of the Act would not be served by the referral of this construction lien action to a master.

[23] In addition to the two reasons described above, the defendant also baldly asserts that the issues raised by the claim and the counterclaim are too complex and beyond a master’s expertise.

[24] The defendant submits that the plaintiff’s claim is a contract claim rather than a construction lien claim and thus is outside the expertise of a master. However, s. 55(1) of the Act provides that a plaintiff in an action may join with a lien claim a claim for breach of contract or subcontract. Accordingly, the Act clearly contemplates that a master may adjudicate a claim for breach of contract as part of a construction lien reference.

[25] The defendant further submits that its counterclaim is too complex for a master. In addition to a claim for breach of contract its counterclaim raises “matters akin to slander of title”. However, the Act directs that a master shall try the action including any counterclaim and all related questions. Specifically, section 51 and clause 55(2)(a) of the Act state that:

51. The court, whether the action is being tried by a judge or on a reference by a master, a case management master or a person agreed on by the parties,

(a) shall try the action, including any set-off, crossclaim, counterclaim and, subject to section 56, third party claim, and all questions that arise therein or that 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 upon whom notice of trial has been served; and

(b) shall take all accounts, make all inquiries, give all directions and do all things necessary to dispose finally of the action and all matters, questions and accounts arising therein or at the trial and to adjust the rights and liabilities of, and give all necessary relief to, all parties to the action.

55. (2) A defendant in an action may,

(a) counterclaim against the person who named the defendant in respect of any claim that the defendant may be entitled to make against that person, whether or not that claim is related to the making of the improvement. [Emphasis added.]

[26] These provisions of the Act contemplate that a counterclaim on a reference to a master is not limited to breach of contract and need not be related to the making of the improvement. These provisions do not support the defendant’s view that such matters would be too complex for a master to determine.

CONCLUSIONS

[27] I grant the plaintiff’s motion to refer this construction lien action to a master. The referral of this action to a master is consistent with the objects of the Act.

[28] I encourage the parties to make best efforts to resolve the issue of costs. If the parties are unable to do so, then the plaintiff shall deliver its costs submissions within one week of today’s date. The defendant shall deliver its costs submissions within two weeks of today’s date. The costs submissions shall not exceed two pages in length exclusive of an outline of costs.

Mr. Justice M. D. Faieta

Released: October 15, 2015

[^1]: See Rules 54.06, 54.07 and 54.09 of the Rules of Civil Procedure.
[^2]: See Rule 54.09(5). Also see RSG Mechanical Inc. v. 1398796 Ontario Inc., 2015 ONSC 2070, 41 C.L.R. (4th) 124 at paras. 22-23 (Div. Ct.).
[^3]: See Duncan W. Glaholt and David Keeshan, The 2015 Annotated Ontario Construction Lien Act (Toronto: Carswell, 2014), at pp. 418-419, for the legislative history of this provision. At issue in the Victoria Medical case was subsection 31(1) of The Mechanics’ Lien Act, R.S.O. 1950, c. 227, which provided that “… where the land is situate wholly in the County of York the action shall be tried before a Master of the Supreme Court or an Assistant Master”. In response to this decision, “shall” was removed but the judge was given a discretion to direct a reference to a master in certain circumstances. See The Mechanics Lien Act, R.S.O. 1960, c. 233, s. 31(3). This provision was further revised and has been in its current form since 1994.
[^4]: Glaholt and Keeshan, p. 419. Also see Orlando Masonry Contractors (1971) v. Dinardo (1971), 1971 705 (ON SC), 3 O.R. 774 (H. Ct. J.), at p. 775, where Justice Houlden stated over 44 years ago that “… [t]he usual practice in mechanics’ liens actions in the Judicial District of York is to refer the whole action to the Master at Toronto for trial (s. 31(2) of the Mechanics’ Lien Act, R.S.O. 1970, c. 267, and s. 72 of the Judicature Act)…”.