Cosmos Hardwood Floors Ltd. v. Singh et al.
[Indexed as: Cosmos Hardwood Floors Ltd. v. Singh]
Ontario Reports Ontario Superior Court of Justice, Emery J. April 11, 2016 131 O.R. (3d) 239 | 2016 ONSC 2397
Case Summary
Construction law — Liens — Expiry — Lien which was properly perfected by setting action down for trial before second anniversary of commencement of construction lien action not expiring when action was struck off trial list.
The plaintiff registered lien claims against two properties owned by the defendant and commenced actions in Brampton and Welland. In each case, the plaintiff served and filed a trial record to set the action down for trial before the second anniversary of the commencement of the action. The Welland action was transferred to Brampton, and both actions were to be tried together. The plaintiff was subsequently dissolved pursuant to the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 when its articles of incorporation were cancelled. The action was struck from the trial list. The defendant brought a motion in each case to dismiss the action, discharge the lien claim and vacate the registration of the claim for lien, or alternatively to stay the action until the plaintiff was revived as a corporation.
Held, the motion to stay should be granted.
The plaintiff's liens had not expired. The function and purpose of setting an action down for trial is separate and distinct from having the action placed on a trial list. Once a lien has been perfected by setting the action down for trial within the period stipulated by s. 37(1) of the Construction Lien Act, R.S.O. 1990, c. C.30, the striking of the action from the trial list does not mean that the lien has expired. However, the plaintiff could not maintain either action until it was revived under s. 244 of the Business Corporations Act.
Cases referred to
Forest Carpentry Ltd. v. Shoppers Trust Co. (1994), 17 O.R. (3d) 47, [1994] O.J. No. 456, 115 D.L.R. (4th) 427, 69 O.A.C. 53, 13 C.L.R. (2d) 42, 48 A.C.W.S. (3d) 503 (Div. Ct.); Sayers & Associates Ltd. v. United Centre Inc., [1993] O.J. No. 3281, 13 C.L.R. (2d) 36, 45 A.C.W.S. (3d) 609 (Gen. Div.), consd
Other cases referred to
Glencoe Insulation Co. v. 3170497 Canada Inc., [2003] O.J. No. 5834, 38 C.L.R. (3d) 238, 2003 CarswellOnt 6310 (Div. Ct.); Nissar v. Toronto Transit Commission (2013), 115 O.R. (3d) 713, [2013] O.J. No. 2553, 2013 ONCA 361, 309 O.A.C. 8; Zangelo Investments Ltd. v. Glasford State Inc. (1988), 63 O.R. (2d) 542, [1988] O.J. No. 1167 (C.A.)
Statutes referred to
Business Corporations Act, R.S.O. 1990, c. B.16 [as am.], ss. 242 [as am.], 244(1) [as am.] Construction Lien Act, R.S.O. 1990, c. C.30 [as am.], ss. 37, (1), (2), 46, 67(3) Corporations Information Act, R.S.O. 1990, c. C.39 [as am.], s. 18 [as am.]
Rules and regulations referred to
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 48, 48.02(1), 48.06(1), 48.07, 48.11, 48.14(1)
MOTION by the defendant to dismiss the actions or, alternatively, to stay the actions.
James R. Smith, for plaintiff. Howard W. Reininger, for defendant Sharon Singh.
Endorsement
[1] Endorsement of EMERY J.: — There are two motions brought in related actions involving the same issues and, for the most part, the same parties. The orders made in this endorsement apply to both actions.
[2] The first motion is brought in this action by the defendant Sharon Singh as the homeowner. Ms. Singh brings this motion to dismiss the action of the plaintiff, Cosmos Hardwood Floors Limited ("Cosmos"), to discharge its claim for lien and to vacate the registration of the claim for lien and related certificate of action against title to her property in Mississauga.
[3] The second motion is brought by the defendants Sharon Singh and Anthony Singh as the owners of a property in the Niagara region. They seek similar relief with respect to an action commenced by Cosmos under the Construction Lien Act, R.S.O. 1990, c. C.30 in Welland, Ontario. That action has been transferred to be heard in Brampton and has been given Brampton Court File No. CV-15-1874.
[4] In the alternative to the relief claimed on each motion, the moving party seeks an order to stay that action until Cosmos is revived as a corporation and takes steps as the plaintiff to obtain status under the Corporations Information Act, R.S.O. 1990, c. C.39 to continue each action.
Background
[5] The principals of Cosmos and Mr. and Mrs. Singh have a professional, if not personal, history between them. That is in part the reason why Cosmos provided labour and material to improve properties in two locations owned by one or both of them within the same time frame in 2010.
The Brampton action
[6] Cosmos is a flooring company. In 2010, Cosmos alleges that it provided goods and services to improve a townhouse owned by Sharon Singh located in the City of Mississauga in the Regional Municipality of Peel.
[7] On June 16, 2010, Cosmos registered a claim for lien against title to Ms. Singh's property in the amount of $58,112.25.
[8] On July 28, 2010, the statement of claim was issued at the court office in Brampton.
[9] On July 29, 2010, Cosmos registered a certificate of action against title to Ms. Singh's property.
[10] On November 25, 2010, Ms. Singh served a statement of defence.
[11] The Bank of Nova Scotia was named as a defendant but Cosmos has since discontinued the action as against it.
[12] On July 25, 2011, Cosmos served and filed a trial record with the court in Brampton to set the action down for trial.
[13] On or about October 12, 2013, Cosmos was dissolved pursuant to the (Ontario) Business Corporations Act, R.S.O. 1990, c. B.16 ("OBCA") when the ministry cancelled its articles of incorporation. There is evidence before the court from Arun Dhanda, described as the principal of Cosmos, that notices from the ministry to this effect went unheeded because they were sent to the registered office for Cosmos at Unit 6, 2355 Royal Windsor Drive in Mississauga. That property had been purchased by the Singhs in 2005. Mr. Dhanda explains in his affidavit that Cosmos had failed to change the registered office with the ministry through inadvertence, and that the notices were never received by him.
The Welland action
[14] In 2010, Cosmos alleges that it provided labour and material to improve the property owned by Mr. and Mrs. Singh in Port Colborne, near Welland, in the Regional Municipality of Niagara.
[15] On June 18, 2010, Cosmos registered a claim for lien against title to the Niagara property in the amount of $286,506.15.
[16] On July 29, 2010, Cosmos had a statement of claim issued at the court office in Welland.
[17] On July 30, 2010, Cosmos registered a certificate of action against title to the property owned by Mr. and Mrs. Singh.
[18] On or about November 25, 2010, Mr. and Mrs. Singh delivered a statement of defence and counterclaim.
[19] On or about July 24, 2012, Cosmos served and filed a reply and defence to counterclaim.
[20] The Bank of Montreal was named as a defendant in this action. The Bank of Montreal has been noted in default as it did not file a statement of defence.
[21] On or about July 26, 2012, Cosmos served and filed a trial record at the court office in Welland to set the action down for trial.
[22] As with the facts relating to the Brampton action, Cosmos had been dissolved as a corporation on or about October 12, 2013, unbeknownst to Mr. Dhanda.
[23] On July 22, 2014, a pre-trial conference in the action was held in Welland.
Current issues
[24] Mr. Reininger now represents Sharon Singh in the Brampton action, and Sharon Singh and Anthony Singh in the action transferred from Welland. Prior to Mr. Reininger's representation, these defendants were represented by Ms. Beverley Martel, a lawyer in Mississauga.
[25] On March 9, 2015, an order was obtained from Justice Andre transferring the Welland action to Brampton, with the consent of Mr. and Mrs. Singh. This order also provided that the two actions be tried together or one after the other. Mr. and Mrs. Singh were represented by Ms. Martel at the time.
[26] The order made by Justice Andre also required the defendants to provide copies of cheques that had been made payable to Cosmos. The court order further adjourned the two lien actions to the assignment court list in Brampton at 9:00 a.m. on June 22, 2015.
[27] Ms. Naaila Sangrar appeared on behalf of Cosmos before Justice Daley at the assignment court on June 22, 2015. According to Ms. Sangrar's affidavit, it appeared to her that Justice Daley did not have a copy of Justice Andre's order or the court file from Welland before him that day.
[28] Ms. Sangrar deposes that she spoke with Ms. Martel at the time about obtaining the defendants' compliance to produce the cheques ordered by Justice Andre. By then, the dissolution of Cosmos was known. Ms. Sangrar agreed that she would speak to Cosmos about its corporate status. Ms. Sangrar states in her affidavit that she departed from the courthouse on June 22, 2015 with the understanding that the parties would continue to talk about resolution, and "that if the matter had somehow been struck, the physical Welland file would be located in Brampton, and joined with the Brampton file, to be spoken to before the court".
[29] Mr. Reininger concedes that (a) the plaintiff filed the trial record in each action before the second anniversary of the commencement of the related action; (b) each trial record was filed with the court before Cosmos' articles were cancelled; (c) he does not know if the Welland action was struck off the trial list in Welland.
[30] At this time, Cosmos has not yet been revived by the filing of articles of revival or other means.
Analysis
Motion to dismiss
[31] The moving defendant in the Brampton action seeks a finding by this court that because the action was struck from the trial list after it had been set down for trial, alone or together with losing its status as a company having standing to continue an action in Ontario, its lien against Ms. Singh's property has expired under s. 37 of the Construction Lien Act.
[32] The moving defendants in the Welland action seek a finding of this court that since the Welland action was never added to the trial list in Brampton after it was transferred from Welland, alone or together with Cosmos' loss of standing to continue the action, the lien against the Niagara property has also expired.
[33] The moving parties rely on s. 37(1) of the Construction Lien Act to have the action dismissed and for an order deleting the registration of each claim for lien and certificate of action from title. Section 37(1) of the Construction Lien Act reads as follows:
Expiry of perfected lien
37(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.
[34] The term "set down for trial" is not defined in the Construction Lien Act. Section 37(1) requires a consideration of what that process means, in order to determine the proper adjudication on these motions.
[35] Section 67(3) of the Construction Lien Act provides that the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 are applicable to pleadings and proceedings under the Construction Lien Act, except where inconsistent with the Act. Rule 48 of the Rules of Civil Procedure sets out the process for setting a civil action down for trial. For the sake of thoroughness and the immediacy of reference, I set out the following subrules:
48.02(1) Where an action is defended, a party who wishes to set it down for trial may do so by serving a trial record prepared in accordance with rule 48.03 on every party to the action or to a counterclaim or crossclaim in the action and on any third or subsequent party and forthwith filing the trial record with proof of service.
Trial at Another Place
(5) Where an action is to be tried at a place other than where it was commenced, the party filing the trial record shall by requisition require the court file, including the trial record, to be sent to the court office at the place of trial.
48.06(1) A defended action shall be placed on the appropriate trial list by the registrar sixty days after the action is set down for trial or, if the consent in writing of every party other than the party who set the action down is filed earlier, on the date of filing.
(2) A defended action shall not be placed on a trial list for a sitting outside Toronto later than ten days before the commencement of the sitting, except where a judge orders otherwise.
48.07 Where an action is placed on a trial list, (a) all parties shall be deemed to be ready for trial; and (b) Revoked: O. Reg. 438/08, s. 44. (c) the trial shall proceed when the action is reached on the trial list unless a judge orders otherwise.
48.11 Where an action is struck off a trial list, it shall not thereafter be placed on any trial list except, (a) in the case of an action struck off the list by a judge, with leave of a judge; or (b) in any other case, with leave of the court.
[36] The power to discharge a lien or vacate the registration of a claim for lien or certificate of action against title does not arise from s. 37(1) itself. Rather, s. 37(2) provides that where a lien has expired under subsection (1), a motion may be made under s. 46 of the Act. Even if this motion were brought under s. 46, it would be necessary to determine if the Cosmos lien against each property has expired because the Brampton action was struck off the list or because the Welland action was never added to a trial list at all.
[37] Mr. Smith argues that there is no provision about the expiry of a lien claim after the action has been set down for trial. He relies upon Forest Carpentry Ltd. v. Shoppers Trust Co. (1994), 17 O.R. (3d) 47, [1994] O.J. No. 456 (Div. Ct.) to support his position that the lien does not expire if one of the two conditions set out in s. 37(1) are satisfied. He argues that once this has been done, it cannot be undone.
[38] It would have been prudent for Ms. Sangar to have asked Justice Daley when the Brampton action was struck from the trial list to endorse the record that it was without prejudice to the plaintiffs compliance with s. 37(1) of the Construction Lien Act. However, the failure to make that request was not fatal to the ability of Cosmos to proceed with the Brampton action to enforce its claim for lien under the Construction Lien Act.
[39] The function and purpose of setting an action down for trial is separate and distinct from having the action placed on a trial list. An action is set down for trial by serving and filing a trial record with the prescribed contents. The process set out under rule 48.02(1) is not the process that places the action on the appropriate list at the place for trial. A defended action is placed on the appropriate trial list by the registrar 60 days after the action is set down for trial under rule 48.06(1). The language in rule 48.06(1) itself distinguishes the setting of the defended action on the appropriate trial list by the registrar from setting the action down for trial, as the language explicitly recognizes that placing a defended action on the trial list is a function of the registrar. That is different from the act of a party to set the action down for trial. An action therefore remains set down for trial even though it has been struck from a trial list.
[40] It is clear from rule 48.07 that placing an action on a trial list is deemed to mean that all parties are ready for trial, and that the trial shall proceed when the action is reached on that trial list unless a judge orders otherwise. Setting the action down for trial is the means by which the administrative process of placing the action on the appropriate trial list is initiated.
[41] In Sayers and Associates Ltd. v. United Centre Inc., [1993] O.J. No. 3281, 13 C.L.R. (2d) 36 (Gen. Div.), the court held that a plaintiff need not set an action down for trial and obtain a trial date to meet the requirements of s. 37(1). The decision in Sayer is consistent with the decision of the Divisional Court in Forest Carpentry Ltd. v. Shoppers Trust Co. The two cases stand as authority that the language used by the legislature in enacting s. 37(1) of the Construction Lien Act recognizes that there are two distinct steps to obtain a trial date for a construction lien action. One avenue to obtain a trial date is to set the action down for trial, which engages the process under Rule 48 of the Rules of Civil Procedure. The other is to obtain an order for the trial of an action directly from the court. The claim for lien does not expire if one of those steps is taken before the second anniversary of the date the action was commenced.
[42] I find the language in rule 48.11 that applies to an action that is struck off the trial list supports this interpretation. Rule 48.11 provides that an action that is struck off a trial list by a judge shall not be placed on any trial list except with leave of a judge, or in any other case, with leave of the court. Rule 48.11 does not mention, let alone specify when or how an action that is struck off a trial list impacts the action was set down for trial in the first place. Of course, under the recent amendments, where an action that is struck off the trial list and has not been restored to a trial list or otherwise terminated by any means by the later of the second anniversary of being struck off the list or January 1, 2017, the registrar shall dismiss an action for delay under rule 48.14(1), unless the court orders otherwise.
[43] I therefore conclude that the Cosmos lien against the two properties did not expire after they were each set down for trial.
Motion to stay
[44] In the alternative, Mr. Reininger seeks an order that the action be stayed because Cosmos has not yet been revived as a corporation. He argues that a stay is an appropriate order as the principals of Cosmos have not obtained leave of the court to maintain or continue this action on its behalf under the Corporations Information Act.
[45] Section 242 of the OBCA relates to the commencement or continuation of actions by or against a corporation after dissolution:
242(1) Despite the dissolution of a corporation under this Act, (a) a civil, criminal, administrative, investigative or other action or proceeding commenced by or against the corporation before its dissolution may be continued as if it had not been dissolved; (b) a civil, criminal, administrative, investigative or other action or proceeding may be brought against the corporation as if it had not been dissolved; (c) property that would have been available to satisfy a judgment, order or decision if the corporation had not been dissolved remains available for that purpose, subject to subsections (1.1) and (1.2); and (d) land belonging to the corporation immediately before the dissolution remains available to be sold in power of sale proceedings, subject to subsection (1.1).
[46] For ease of reference, s. 244(1) of the OBCA provides that:
244(1) Any property of a corporation that has not been disposed of at the date of its dissolution is immediately upon such dissolution forfeit to and vests in the Crown.
[47] The Divisional Court held in Glencoe Insulation Co. v. 3170497 Canada Inc., [2003] O.J. No. 5834, 2003 CarswellOnt 6310 (Div. Ct.) that upon revival, a corporation is restored to its legal position retroactively, including all the rights and privileges it possessed at the date of dissolution, as if it had not been dissolved. In Glencoe, the parties had agreed that the cancellation of a "charter" did not render a company non-existent, but rather placed the company in a legal state of limbo capable of restoration, save for rights acquired by any person in the interim. Reference was made to Zangelo Investments Ltd. v. Glasford State Inc. (1988), 63 O.R. (2d) 542, [1988] O.J. No. 1167 (C.A.) in that regard.
[48] Mr. Reininger cites these authorities to me for the proposition that the cancellation of Cosmos' articles of incorporation somehow affect its ability to maintain a place on the trial list. I do not consider this issue to be relevant for the purposes of the motion in view of my conclusion that the legal effect of being struck off the Brampton trial list on June 22, 2015 did not alter the fact that the Brampton action and remained set down for trial.
[49] I also find it unnecessary to consider whether Cosmos meets the test to restore the Brampton action to the trial list under Nissar v. Toronto Transit Commission (2013), 115 O.R. (3d) 713, [2013] O.J. No. 2553, 2013 ONCA 361. There was no motion for the Brampton action to be restored to the trial list before me when the defendants' motions were argued, nor could there be until Cosmos is revived as a corporation.
[50] All of my reasons for finding that the Brampton action remains set down for trial applies to the Welland action, despite the fact that it was not placed on a trial list in Brampton after it had been transferred from Welland. Therefore, neither claim for lien expired by virtue of s. 37(1) of the Construction Lien Act.
[51] I also note that no defendant in either action gave notice of this motion to the Crown, which would be an interested party if one or both liens vested as forfeited property under s. 244(1) of the OBCA.
[52] Section 18 of the Corporations Information Act also states that:
18(1) A corporation that is in default of a requirement under this Act to file a return or notice or that has unpaid fees or penalties is not capable of maintaining a proceeding in a court in Ontario in respect of the business carried on by the corporation except with leave of the court.
Idem
(2) The court shall grant leave if the court is satisfied that, (a) the failure to file the return or notice or pay the fees or penalties was inadvertent; (b) there is no evidence that the public has been deceived or misled; and (c) at the time of the application to the court, the corporation has filed all returns and notices required by this Act and has no unpaid fees or penalties.
Contracts valid
(3) No contract is void or voidable by reason only that it was entered into by a corporation that was in contravention of this Act or the regulations at the time the contract was made.
[53] It is clear from these statutes that Cosmos cannot maintain either action until it is revived under s. 244 of the OBCA, unless it obtains leave of the court under s. 18 of the Corporations Information Act. Why it has done neither up to this point in time, particularly in the face of the two motions before the court, is a mystery to me. It is an even bigger mystery why Cosmos or its lawyers did not obtain articles of revival after receiving a notice letter dated December 16, 2015 from Mr. Reininger that he would bring a motion for a stay, at least in the Brampton action.
Conclusion
[54] I conclude that the lien in each of the Brampton action and the Welland action did not expire under s. 37(1) just because one was struck off the trial list and the other was not added to the Brampton trial list by the registrar. Therefore, the motion of each moving party under s. 37(1) of the Construction Lien Act is dismissed.
[55] Each action is stayed until Cosmos is revived and properly constituted as a corporation capable of maintaining an action in the Province of Ontario, or leave is obtained under s. 18 of the Corporations Information Act.
[56] Counsel for the parties have agreed that the moving parties are withdrawing that part of each motion seeking security for costs from the plaintiff pending the outcome of the issues in this decision. By agreement, that withdrawal is made without prejudice for those moving parties to bring a motion for security for costs if and when Cosmos is revived as a corporation.
[57] Despite the divided success on these motions, Cosmos has clearly been the dilatory party. The moving parties have obtained the greater share of success and are entitled to their costs, subject to any offer to settle that may apply.
[58] I encourage counsel to settle those costs between them. However, if the parties cannot agree on costs, Mr. Reininger is invited to file costs submissions consisting of no more than two typed pages, not including a costs outline, by April 19, 2016. Mr. Smith shall then have until April 29, 2016 to file responding submissions subject to the same restrictions. No submissions in reply shall be permitted without leave. All submissions may be made by fax or by e-mail to my judicial assistant, Mr. Christopher Charles, at 905-456-4834 or christopher.charles@ontario.ca.
Motion to stay granted.