NEWMARKET COURT FILE NO.: CV-14-117671-00 DATE: 20160726

ONTARIO SUPERIOR COURT OF JUSTICE

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

BETWEEN:

Dalcor Inc. Plaintiff – and – Unimac Group Ltd., and Mount Albert United Church Senior Citizens’ Foundation Defendants

No one appearing Justin P. Baichoo, for the Defendants

AND

ONTARIO SUPERIOR COURT OF JUSTICE

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

BETWEEN:

Yong Tai Construction Limited. Plaintiff – and – Unimac Group Ltd., and Trustees of the Mount Albert United Church Congregation of the United Church of Canada, Mount Albert, Ontario Defendants

No one appearing Justin P. Baichoo, for the Defendants James W. MacLellan, for added party Trisura Guarantee Insurance Company

Heard: March 16, 2016

DECISION ON MOTIONS

sutherland J.:

Overview

[1] The plaintiffs registered construction liens on the land and premises of an existing senior apartment building in Mount Albert, Ontario where each provided services and materials to the construction of a three-story addition.

[2] Unimac Group Inc. was the general contractor and Trisura Guarantee Insurance Company was the surety insurer for Unimac with respect to the construction project.

[3] The owner, Mount Albert United Church posted a lien bond with the Accountant of the Superior Court of Justice to vacate the construction liens of the general contractor and the subcontractors, including the plaintiffs. The amount of the bond posted was $1,088,867.76.

[4] Several of the subcontractors construction liens registered have either been settled, paid or discharged by court Order [1]. The Yong Tai action is the only action that continues.

[5] The amount of the posted bond was reduced by Vallee J. on February 9, 2015 to $757,318.40.

[6] Trisura issued a labour & material payment bond on behalf of Unimac. Trisura and Unimac, along with other persons, executed an Indemnity Agreement whereby the indemnitor’s, including Unimac, jointly and severally agreed to indemnify Trisura on any monies paid out on the payment bond issued by Trisura.

[7] Trisura has posted a reserve in the amount of $2,550,563.13 to deal with any outstanding liability under the payment bond issued to the indemnitors, which includes Unimac. Trisura states it registered a Personal Property and Security Act security on the basis of the Indemnity Agreement.

[8] Trisura has commenced an action against the indemnitors for exoneration and damages based on the Indemnity Agreement. This action is pending in Toronto as court file number CV-12-463645.

[9] Mount Albert United Church had assigned and transferred any interest, right or title it may have in the bond posted with the Accountant to Unimac [3].

[10] The lawyers for Unimac, BPR Litigation Lawyers obtained a Charging Order, without notice, to Trisura on February 2, 2016 against the posted bond still deposited with the Accountant pursuant to the order of Vallee J. The amount of the Charging Order is $879,646.96.

[11] Trisura obtained an order from Master Wiebe on February 12, 2016 adding Trisura as a party to the Yong Tai action in a limited fashion to be “joined only to make submissions as to the disposition of any posted security once all lien remedies have been resolved. It will not serve any pleadings or take any position in the lien action itself. It will indeed “stand on the sideline” while the Yong Tai action is litigated.” Master Wiebe also ordered that the costs for that motion in front of him are reserved to the Judge hearing the motion for payment out of the posted bond.

[12] The issues to be decided on the two motions brought by Trisura are:

(a) Does Trisura require leave pursuant to the Construction Lien Act (CLA) to bring its motion for an order setting aside the Charging Order and if it does, should leave be granted? (b) Does Trisura have standing to bring its motion to set aside the Charging Order? And if so, should the Charging Order be set aside? (c) Is Trisura granted leave pursuant to the CLA to bring its motion for exoneration? (d) Does Trisura have the right of exoneration based on the terms of the Indemnity Agreement? And if so, should the amount of the bond posted, less the claim of Yong Tai, be paid out to Trisura?

[13] For the reasons following, I find that:

(a) Trisura does not require leave to bring its motion for an order setting aside the Charging Order. (b) Trisura does have standing and that Unimac was obligated to provide notice to Trisura of its motion for a Charging Order against the bond posted with the Accountant. (c) Trisura is not granted leave to bring its motion for exoneration. (d) Trisura claim for exoneration based on the terms of the Indemnity Agreement is to be determined in the Toronto action requesting the same relief.

Does Trisura require leave to bring the motion to set aside the Charging Order?

[14] Section 67(2) of the CLA mandates that a party that wishes to bring an interlocutory step, like a motion that is not already allowed by the provision of the CLA requires leave of the court. Unimac contends that Trisura is required to request and obtain leave to bring its motion because the proceedings are under the provisions of the CLA. Trisura did not seek leave in its Notice of Motion and further has not provided the court with any evidence to satisfy the requirement of section 67(2). Accordingly, Unimac asserts, the motion should be summarily dismissed.

[15] I disagree. The motion brought by Trisura is to set aside a Charging Order that was obtained by BPR, without notice to Trisura. The Dalcor proceeding has been dismissed by my Order following a summary judgment motion brought by Unimac. The Yong Tai proceeding still continues.

[16] Thus, the interlocutory step taken by Trisura is not a step, I find, that is directly part of the construction lien proceeding. It is a step dealing with legal costs owed as between BPR and its former client, Unimac. It does not deal with either of the plaintiffs in the proceedings nor the discontinued defendant, Mount Albert United Church.

[17] I make this finding based on the wording of section 67(2). The motion of Trisura does not concern the “issues in dispute” in the construction lien proceedings. The issues described in Trisura’s motion are separate and apart from the issues set out on the pleadings of both the Dalcor and Yong Tai proceeding.

[18] Leave is not required by Trisura to bring its motion to set aside the Charging Order.

Does Trisura have standing to bring its motion to set aside the Charging Order and if so, should the Charging Order be set aside?

[19] Trisura brings its motion pursuant to Rules 37.07 (1) and 37.14 (1) of the Rules of Civil Procedure.

[20] Trisura submits that Unimac was mandated to serve the motion for a Charging Order upon it as Trisura is a person “affected by an order obtained on motion without notice”. Trisura accordingly claims that it has standing to move to set aside or vary the Charging Order.

[21] BPR disagrees and submits that Trisura is not a person affected by the order because the Charging Order only affects BPR and Unimac. Unimac consented to the Charging Order after receiving independent legal advice. Trisura, at best, is a possible unsecured creditor. The court has not yet adjudicated Toronto action against the Indemnitors, bearing court file number CV-12-463645. The defendants in the Toronto action include Unimac Group Inc., Leon Hui, the principle of Unimac Group Inc., along with other corporate defendants which executed the Indemnity Agreement in favour of Trisura.

[22] Before I begin the analysis on whether the order of the Charging Order should be set aside, what is a Charging Order?

[23] The Ontario Court of Appeal in Taylor v. Taylor, 60 O.R. (3d) 138, [2002] O.J. No. 2313 reviewed Charging Orders under section 34(1) of the Solicitors Act in a family law setting and spousal support. The Court found that a Charging Order is discretionary and “can be made against “the fruits of litigation” where real or personal property has been recovered or preserved through a lawyer’s litigation efforts.” The Court further stated: “Historically, courts have exercised their discretion liberally in favour of Charging Orders, which are said to benefit the lawyer and client, since they encourage lawyers to represent clients who are unable to pay their cases progress” [8].

[24] A Charging Order is simply that; a charge or claim against real or personal property recovered or preserved by the lawyer’s litigation efforts. It is not an order or direction for payment of the legal costs incurred.

[25] The Superior Court, notwithstanding any statutory authority, has the inherent jurisdiction to have the account(s) of the lawyer reviewed or assessed. This inherent jurisdiction is not subject to a time limit [9].

Analysis and Law

[26] Trisura must show that it has a direct interest that is affected by the Charging Order. And in having a direct interest Trisura must also show that the Charging Order was obtained without notice to it. A direct interest is in respect to the proprietary or economic interest of Trisura [10].

[27] It is not in dispute that the motion for the Charging Order was made without any notice to Trisura.

[28] If the rights of Trisura are affected by the Charging Order, Unimac is obligated to have provided Trisura with notice of its motion to obtain the Charging Order. Since Unimac failed to provide such notice, the order must be set aside [11].

[29] If the rights of Trisura are not directly affected by the Charging Order than notice was not required and thus, Trisura has no standing to request to order to set aside the Charging Order.

[30] Has the rights of Trisura in respect to its proprietary or economic interests been directly affected by the Charging Order?

[31] I find that Trisura’s rights have been directly affected.

[32] Trisura and Unimac, along with others, entered into an Indemnity Agreement. The Indemnity Agreement indicates that the Indemnitors, including Unimac, shall indemnify and “keep indemnified the Surety, against any and all losses, charges, expenses, costs, claims, demands and liabilities…of whatsoever kind or nature…” Further paragraph 15 (b) of the Indemnity Agreement provides an assignment and transfer to Trisura, “as collateral, all right, title and interest of the Indemnitors to every contract, retained percentages, holdbacks, progress payments, deferred payments, earned moneys, compensation for extra work, proceeds of damage claims..”

[33] The bond that was paid into court by Mount Albert United Church has been transferred and assigned to Unimac. By the Indemnity Agreement, Unimac’s interest in the bond has been assigned or transferred to Trisura. Further, Unimac has agreed to indemnify Trisura to any and all losses, charges, expenses, costs or claims.

[34] Having known the existence of this Indemnity Agreement, Unimac and BPR had knowledge of the rights and interests of Trisura.

[35] It seems clear that by BPR obtaining a Charging Order against the bond posted with the Accountant, BPR has directly affected Trisura’s right to both its proprietary and economic interests in the bond. BPR is making a claim against the bond to pay its legal fees when Trisura has a direct interest in that bond.

[36] Accordingly, I find that Trisura falls within the meaning of Rule 37.14 and that according to Rule 37.07 (1) Unimac/BPR was mandated to serve the notice of motion for the Charging Order upon Trisura.

[37] I also add that in reviewing the motion material filed to obtain the Charging Order, no mention was made of the existence of the Indemnity Agreement signed by Leon Hui in his personal capacity and on behalf of all the corporate Indemnitors.

[38] To therefore answer the question, I find that Trisura does have standing and the Charging Order is set aside.

Is Trisura granted leave to bring its motion for exoneration?

[39] The motion brought by Trisura for exoneration and payment out of the bond posted with the Accountant does require leave to be brought pursuant to section 67(1) of the CLA.

[40] The Notice of Motion of Trisura does seek leave to bring the motion. Trisura further requests payment out of the bond posted pursuant to the provisions of the CLA.

[41] The issues of the Trisura’s motion, to pay portions of the bond to Trisura deals with issues of the Yong Tai action, namely whether any of the bond posted should be paid to Unimac, as the defendant general contractor on the project.

[42] Having said the above, should the court exercise its discretion to grant leave?

[43] In order for the court to grant leave pursuant to section 67(1), the court must be satisfied that the motion “are necessary or would expedite the resolution of the issues in dispute.” The CLA is remedial legislation that grants lien claimants as defined in the CLA with a statutory regime of security. The construction lien proceeding is a summary procedure to provide simplified, inexpensive way to resolving issues arising from contract(s) for the supply of material and labour for the improvement to property [12].

[44] Trisura’s claim is for exoneration on a separate Indemnity Agreement executed by Trisura, Unimac and others. If Trisura is successful in receiving exoneration, it is requesting that the excess amount of the bond, after Yong Tai claim for lien has been paid, be paid to Trisura.

[45] Furthermore, Trisura has commenced a separate non construction lien action to recover exoneration and damages pursuant to the terms of the Indemnity Agreement.

[46] Trisura has not provided any evidence on how does its motion for exoneration falls within the provisions of section 67(1) of the CLA.

[47] Hence, I do not find the issues of the motion for exoneration by Trisura fall within the purpose of section 67(1) of the CLA; that granting of leave will reduce costs, simplify or expedite the actions of Dalcor or Yong Tai.

[48] In addition, Trisura has commenced a separate action in Toronto requesting the relief claimed in this motion for exoneration. Unimac has defended that action alleging breach of contract, breach of duty and failure to mitigate against Trisura. The issues raised in the Toronto action have not been adjudicated. I cannot and I refuse to deal with the multitude of issues raised in the Toronto action on this motion for exoneration.

[49] I therefore refuse to grant Trisura leave to bring its motion for exoneration as an interlocutory step in the construction lien actions of Dalcor and/or Yong Tai.

[50] Moreover, I agree with the submission of the responding parties’ counsel that “a finding regarding the enforceability of the Indemnity Agreement is material to a determination of the Indemnity Action in Toronto. Accordingly, there is a high risk of inconsistent findings of fact, and also double recovery in the event that Trisura is successful in its Indemnity action as against...” [13] the indemnitors. The motion for exoneration, in my opinion, should be brought by Trisura in the Toronto action and not as a motion in these two construction lien actions. All the issues can be examined by the court with a full record in the Toronto action. Master Wiebe in his order limited Trisura’s involvement in the Yong Tai action.

[51] I dismiss the motion brought by Trisura for exoneration, without prejudice to Trisura’s right to seek the relief for exoneration in its Toronto action.

Disposition

[52] I make the following order:

(a) The Charging Order of Quinlan J. dated February 2, 2016 is set aside, without prejudice to BPR to bring a motion for a Charging Order with the motion record served upon Trisura and Yong Tai. (b) The motion brought by Trisura for exoneration is dismissed, without prejudice to Trisura’s right to seek the relief for exoneration in its Toronto action. (c) If the parties cannot agree on costs, the Trisura to serve and file its submissions for costs within 30 days from the date of this decision, and Unimac/BPR will have 30 days thereafter to serve and file their submissions. The submission to be no more than three pages, double spaced, exclusive of any cost outline, case law and offers to settle. Submissions are to be filed with the court. If no submissions are received within the time period set out herein, an order will be made that there will be no costs.

Justice P.W. Sutherland

Released: July 26, 2016

[1] Order of Vallee J dated February 9, 2015 and Order of Sutherland J. dated January 12, 2016. [3] Paragraph 2 of the consent order of Vallee J. dated February 9, 2015 [8] Supra, paragraphs 28 and 29; Weig v. Weig, 2014 CarswellOnt 1087 (SCJ) [11] Ivandaeva, supra; 1317621 Ontario Inc. v. Krauss, [2008] O.J. No. 5170 (Div. Ct.) [13] Factum of the Responding party to the motion for exoneration, paragraph 44.