Clarkway Construction Ltd. v. 2247129 Ontario Inc., 2016 ONSC 3991

Court File and Parties

COURT FILE NUMBER: CV-16-551851 DATE: June 15, 2016

Clarkway Construction Ltd. Lien Claimant

v

2247129 Ontario Inc. Owner

BEFORE: Master C. Albert

Motion Endorsement

Counsel

COUNSEL: K. A. Dhirani for owner, fax: 416-365-0695 H. Dupras for lien claimant, fax: 416-335-1214

The Motion

[1] The owner, 2247129 Ontario Inc. (“224”) asks the court to declare the lien claim of Clarkway Construction Ltd. (“Clarkway”) expired.

[2] The 45 day time limit within which a subcontractor must preserve a lien claim begins to run on the date of last supply of services or materials. The issue on this motion is whether the date of last day of Clarkway, a subcontractor to the general contractor 1892458 Ontario Inc. (“189”), can extend beyond the date on which the contract as between 224 and 189 ended by abandonment or termination.

Background

[3] 224 contracted with 189 to build a gas and service station on 224’s property at 2201 McCowan Road, Toronto. 189 subcontracted, in turn, with Clarkway to supply certain services and install certain equipment, including a water storage tank.

[4] Work commenced in 2015 and continued until November 30, 2015 when 189 stopped supplying services and materials to 224. 189 abandoned its contract with 224 on January 25, 2016 by letter delivered to 224. It is clear that as of January 25, 2016 189 had ceased to supply services and materials to 224 and had no intention of returning to the project.

[5] On February 9, 2016 224 accepted 189’s termination of the general contract and instructed 189 to remove all of its equipment from the site. A direction by an owner to its general contractor that it must remove all of its equipment from the construction site includes a direction by implication that the general contractor must in turn direct its subcontractors to remove all of their equipment from the site.

[6] Clarkway’s rented water tank remained on site and on April 14, 2016 the owner, 224, wrote directly to Clarkway asking it to remove the water tank.

[7] On April 15, 2016 Clarkway registered a construction lien claiming $72,177.58 as instrument AT4194763. In the lien claim Clarkway identifies 224 as owner and 189 as the person to whom Clarkway supplied services and materials from January 12, 2015 to April 15, 2016. Clarkway describes the services and materials supplied as “delivery and rental of 6,900 gallon poly tank for water storage on site.”

[8] Clarkway removed the water tank from the site over a two-day period beginning April 28, 2016. It is well settled law that removal of equipment does not reinstate lien rights that have expired or extend the period within which a subcontractor must preserve a lien claim.

Analysis

[9] The Construction Lien Act, R.S.O. 1990, c.C.30 (the “Act”) is remedial legislation that grants extraordinary statutory rights and remedies that would not otherwise exist. It must be strictly construed.

[10] The scheme of the Act sets up a pyramid or ladder structure for contractors and subcontractors to recover payment for services and materials supplied to improve a property. The theory underlying the Act is that supplying services and materials to improve land is akin to advancing credit. Once the services or materials have been supplied the owner enjoys the benefit of what was supplied. Therefore the supplier of the services and materials is entitled to security in the form of a lien claim for having advanced credit to the owner. The Act creates a ladder or pyramid, with the owner at the top, the general contractor under the owner and subcontractors under the general contractor. The lien claim and holdback rights and obligations flow up the ladder or pyramid to the owner.

[11] However, in order for a contractor to avail himself or herself of the extraordinary remedies provided for in the Act the lien claimant must comply strictly with the technical requirements of the Act, with relief available only for minor irregularities [^1]. Failure to strictly comply with the requirements of the Act results in no access to holdback and confines the supplier of services and materials to a contractual remedy against the party with whom they contracted directly.

[12] Section 1 provides definitions for “owner”, “contractor” and “subcontractor”. I find that 224 is an owner as defined by the Act, having an ownership interest in the lands and having requested that 189 supply construction services and materials to improve 224’s property. Similarly, 189 is a contractor, having contracted directly with 224 to supply services and materials to improve the property. Clarkway is a subcontractor as defined by the Act, not having contracted directly with the owner but having supplied services or materials to the improvement under a contract with 189 as contractor.

[13] The Act prescribes strict time limits within which a claim for lien must be preserved by registering a claim for lien against the property. The significance of a claim for lien in this case is that Clarkway’s claim against 224 is solely against the holdback that 224 is required to retain as owner of the property. If Clarkway failed to register its claim for lien prior to the expiry of its lien rights then it has no claim against 224 under the Act.

[14] Section 31(3) sets out the time limits for a lien claimant other than a direct contractor to preserve a lien claim. In this case there was no certificate of substantial performance so subsection 31(3)(b)(i) applies: the lien claim expires 45 days after the date of last supply of services or materials to the improvement.

[15] The issue in this case is whether a subcontractor’s lien rights against an owner can continue to accrue after the contract between the owner and the general contractor ends. Clarkway argues that because the owner did not give Clarkway notice of termination of the 189 contract then Clarkway’s lien rights against the owner continued at least until April 14, 2016 when 224 instructed Clarkway to remove the water tank.

[16] Clarkway argues that a case of equipment rental is different from a case of the supply of labour because the equipment remains on site and the supplier of the rental equipment may not have any knowledge that the main contract has ended.

[17] I reject this argument. Clarkway has no direct contractual relationship with 224. It supplied rental equipment to 189 and had a responsibility to keep itself informed as to the status of the project to which it had supplied the equipment, particularly in view of the arrears accruing monthly with the rental payments for the water tank falling further and further into arrears. When asked questions on cross-examination about its knowledge of the status of the project Clarkway’s representative refused to answer relevant questions. I draw an adverse inference from these refusals.

[18] Justice DiTomaso in 1442968 Ontario Ltd. v Houston Engineering & Drafting Inc. [^2] determined that the contract of a subcontractor ends when the contract as between the owner and the general contractor ends. I find that the reasoning in that case applies to the present case, where even though the lien claim in the short description refers to rental of tanks, the invoices underlying Clarkway’s claim for lien show that the amounts claimed include services supplied over and above rental of equipment. As a matter of law I find that the lien rights of Clarkway as subcontractor do not extend beyond the date on which the general contract between 224 and 189 came to an end, such date being, at the latest, February 9, 2016.

[19] Similarly, in U.A.W. Local Union 853 v Metro Sprinkler & Fire System Co. [^3] Master Clark found that the time for union labourers to preserve a lien claim started to run when the labourers’ employer abandoned the contract. By analogy, the time for a subcontractor to preserve a lien claim starts to run when the general contractor with whom the subcontractor had contracted abandons or terminates its contract with the owner.

[20] Clarkway argues that the subcontractors “preservation clock” should not begin to run until the potential lien claimant has been given notice, relying on a statement made by Duncan Glaholt in his annotated Construction Lien Act [^4] that the time should run only from a date that can be readily ascertained by that claimant. I agree with Mr. Glaholt’s statement but reject Clarkway’s application of it: the date of 189’s abandonment of the general contract, namely January 25, 2016 or at the latest February 9, 2016, was readily ascertainable had Clarkway made the appropriate inquiries on an ongoing basis, particularly in view of the ongoing and increasing rental arrears.

Conclusion

[21] Giving Clarkway the benefit of the doubt, the last possible date on which the preservation clock could start to run was February 9, 2016. The last date to preserve a claim for lien was March 25, 2016. Clarkway registered its claim for lien on April 15, 2016.

[22] For the reasons given I find that the lien claim registered by Clarkway has expired, having been registered more than 45 days after February 9, 2016.

[23] It is appropriate for costs to follow the event, calculated on a partial indemnity scale. Considering the relevant factors as set out in section 86 of the Act and rule 57.01, a fair and reasonable quantum for costs in this case is $7,000.00 for fees inclusive of HST plus $2,878.77 for disbursements for a total costs award of $9,878.77 payable by Clarkway Construction Ltd. to 2247129 Ontario Inc.

MASTER C. ALBERT

[^1]: Section 6 of the Act [^2]: [2008] O.J. No. 1460; 71 C.L.R. (3d) 165 [^3]: [1995] O.J. No. 3200 [^4]: Carswell, commentary following section 31