CITATION: Dolvin Mechanical Contractors Ltd. v. Edge on Triangle Park Inc., (Pacific Hardwood Limited, moving party) 2016 ONSC 5461
COURT FILE NO.: CV-16-548795
DATE: August 30, 2016
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Dolvin Mechanical Contractors Ltd.
K. Sherkin for responding party Dolvin Tel:416-224-2400; Fax: 416-224-2408
Plaintiff (responding party)
- and -
Edge on Triangle Park Inc., Edge Residential Inc., Toronto Standard Condominium Corporation 2448, Urbancorp Equity Inc., Aviva Insurance Company of Canada, Terra Firma Capital Corporation
Not appearing
Defendants
- and –
Pacific Hardwood Limited
Moving party
C. Francis[^1], for moving party Pacific Tel: 416-369-4137; Fax: 416-864-9223
HEARD: June 28, 2016
CONSTRUCTION LIEN MOTION ENDORSEMENT
Introduction
Pacific Hardwood Limited (“Pacific”) owns two condominium units at 36 Lisgar Street, Toronto registered on April 29, 2015 as Toronto Standard Condominium Corporation 2448 ("TSCC 2448"). Dolvin Mechanical Contractors Ltd. (“Dolvin”) contracted with the developer, Edge on Triangle Park Inc., (“Edge Triangle”) prior to condominium registration to supply mechanical services and materials in the construction of the condominium building. On January 8, 2016, after condominium registration[^2], Dolvin registered a construction lien claim for $2,313,335.03[^3] against many of the individual units at 36 Lisgar, including the two units owned by Pacific.
Pacific, a non-party to the action commenced by Dolvin to enforce its claim for lien, moves to discharge the lien claim as against the two units owned by Pacific. The motion is brought pursuant to section 47 of the Construction Lien Act, R.S.O. 1990, c.C.30 (the “Act”) which provides that upon motion the court may discharge a lien upon "any proper ground". The moving party need not be a party to the action commenced to enforce the lien claim.
For the reasons that follow Pacific's motion is granted, the lien claim is ordered discharged as against units 701E and 801E and their associated parking spaces, and the lien claims and certificate of action are ordered vacated as against the subject premises.
Issues
- The issues are:
(a) Does Dolvin have lien rights as against Pacific?
(b) If so, did Dolvin properly preserve and perfect its lien claim against Pacific?
(c) Is the conveyance of to Pacific void by reason of section 80(2) of the Act?
Analysis (see: Appendix “I”: Chronology)
A. Does Dolvin have lien rights as against Pacific?
In 2012 Dolvin contracted with Edge Triangle to supply mechanical services and materials for the multiple unit residential building that Edge Triangle was developing as a condominium at 36 Lisgar Street. Dolvin supplied serves and materials pursuant to the contract. Dolvin issued invoices regularly from September 25, 2012 through to June 18, 2015 for work supplied to mid-May 2015. As of that date the amount owing by Dolvin according to its accounting statement was $2,313,335.03, the same amount as claimed in its claim for lien registered over six months later on January 8, 2016.
Dolvin asserts that the contract continued through to January 2016 because it was waiting for payment to return to the job and complete the contract. As a direct contractor with the developer, Dolvin's lien rights begin to run when the contract is completed or abandoned (section 31(2) of the Act). Dolvin's position is that even though it performed no further contract work after May 2015, other than the emergency work in December 2015, it did not abandon the contract until January 2016 when it became clear that it would not receive further more payment on the contract.
Whether or not Dolvin's contract was completed or abandoned in May 2015, in January 2016 or some time in between those two dates is a triable issue. For purposes of this motion, giving Dolvin the benefit of the doubt and accepting its position regarding completion or abandonment, I nevertheless find that it did not have lien rights as against Pacific.
Edge Triangle, the developer, gave notice of its intention to register the condominium corporation on March 31, 2015. Dolvin did not register a claim for lien prior to condominium registration. The condominium registration closed on April 29, 2015 and on July 6, 2015 the developer's unsold units were transferred to Edge Residential as owner. Edge Residential transferred units 701E and 801E[^4] to Pacific on November 27, 2015.
I accept the evidence of Evan Miller filed on the motion that the work relied on by Dolvin as having been completed in December 2015 pertains to pump motors for boilers which required a re-design and for which it appears that the parties entered into a separate contract. Dolvin did not invoice on the contract that is the subject of the $2.3 million construction lien after its June 18, 2015 invoice for services and materials supplied up until May 2015. Dolvin’s evidence that it supplied mechanical services and materials in December 2015 would relate to either a repair of its original work or in respect of a new contract for additional work required by a re-design of an improperly designed boiler pump system.
Lien rights arise when a contractor supplies services and materials to an owner at the request of the owner and for the benefit of the owner. Pacific did not request Dolvin's services and materials and there is no evidence that any of the services and materials for which the lien is claimed were supplied specifically at the request of Pacific or in respect of units 701E or 801E.
Pacific was not an owner when Dolvin supplied work up tp May 2015. There is no evidence that either Pacific as owner of units 701E and 801E or the condominium corporation contracted with Dolvin for the December 2015 work. However, since Dolvin never charged for the supply of services and materials it is reasonable to draw an inference that either the work was rectification work in respect of the original contract, which does not revive an otherwise expired lien claim, or else it was in relation to a separate contract of which there is no evidence that Pacific is a party. Furthermore, the evidence suggests that the work was performed on a single day. The case law is clear: performance of a trivial amount of work is not sufficient to revive a lien which otherwise had expired (Wildberry Homes inc. v Prosperity One Credit Union Limited, 2008 CaanLii 70790 (Ont.S.C.) .
Pacific argues that Dolvin did not supply services and materials at the request of Pacific because the contract under which Dolvin supplied services and materials was entered into between Dolvin and the developer prior to Pacific purchasing the property and prior to condominium registration. In response Dolvin argues that Pacific is included as an owner by reason of the condominium corporation having been named as an owner in the claim for lien and the statement of claim. Dolvin argues that once the condominium corporation is registered, all unit owners are captured when the condominium corporation is named as an owner, unless the new unit owner is a new home buyer as that term is defined in the Act. I reject Dolvin's argument on that issue.
If Dolvin intended to assert a claim for lien against the owner of units 701E and 801E it should have named the unit owner as an owner in its claim for lien and statement of claim. By naming TSCC 2448 and not the individual unit owner Pacific's exposure, if any, is solely to TSCC 2448 should there be a special assessment by TSCC 2448 for repairs to the building's mechanical system. Pacific has no direct liability to Dolvin as it did not contract with Dolvin.
The purpose and intent of the Act must be considered. The Act creates extraordinary statutory rights and remedies to give lien claimants priority and security for unpaid services and materials supplied to an owner pursuant to a contract. Absent the Act such priority rights and claims to another's property do not exist. A lien claimant must comply strictly with the requirements of the Act and the Act must be strictly construed so as to avoid expanding the extraordinary rights that the Legislature saw fit to extend to contractors who extend credit by improving another person's property.
Lien claimants are entitled to claim lien rights against owners and, if they are subcontractors, against the contractors above them on the construction ladder.
The Act defines an owner as:
"any person...having an interest in a premises at whose request and ... for whose direct benefit an improvement is made to the premises... [^5]"
Pacific did not contract with Dolvin to supply services and materials. In 2012, when Dolvin entered into a direct contract with the owner Edge Triangle, Pacific did not own the subject units. Dolvin did not name Pacific as an owner in its claim for lien. Pacific was not an owner within the meaning of the Act.
I conclude that Dolvin has no lien rights as against Pacific.
B. Did Dolvin properly preserve and perfect a lien claim as against Pacific?
Had I found that Dolvin had lien rights as against Pacific I would have granted Pacific's motion on the basis that Dolvin failed to preserve and perfect a lien claim against Pacific in accordance with the Act.
The Act provides at section 34 that a claim for lien is preserved by registering a claim for lien in accordance with Part V of the Act. Subsection 34(5) provides that a claim for lien must set out the name and address the owner of the premises against which the lien claim is preserved, the name and address of the person for whom the services and materials were supplied and the time within which the services and materials were supplied.
Dolvin, in its claim for lien, names as owners Edge Triangle, Edge Residential, TSCC 2448 and the mortgagees. Dolvin does not name Pacific as an owner in its claim for lien, notwithstanding that Pacific took title to units 701E and 801E on July 6, 2015, six months prior to Dolvin registering its claim for lien. Nor does Dolvin name Pacific as the person for whom the services and materials were supplied.
Dolvin's failure to name the owner of units 701E and 801E in its claim for lien is fatal to its lien claim as against the owner of those units.
A claim for lien is perfected by commencing an action to enforce the claim for lien and registering a certificate of action against an owner's title to the premises within the specified timeframe. In this case Dolvin issued a statement of claim and registered a certificate of action but did not include a claim against Pacific.
Even if Dolvin had preserved its claim for lien against Pacific by naming Pacific as an owner in its claim for lien, its lien rights as against Pacific (if it had any lien rights against Pacific) would have expired by reason of Dolvin's failure to perfect a claim against Pacific in its statement of claim.
C. Is the conveyance from Edge Residential to Pacific void as contrary to section 80(2)?
Dolvin relies on section 80(2) of the Act in support of its position that the conveyance from Edge Residential to Pacific is void. Section 80 of the Act addresses priorities as between lien claimants of the same class and of different classes. Subsection 80(2) provides that a conveyance of premises to any person entitled to a lien on that premises in payment of or as security for that claim for lien is void, whether given before or after the lien arises.
Pacific had supplied services and materials to Edge Triangle up to February 15, 2015 under the name "Reliable Lumber Products" and issued invoices for the work. Edge Triangle owed Pacific $459,594.83. Edge Triangle paid by cheques that were returned after June 9, 2015 for insufficient funds. Pacific never registered a claim for lien but asserted a contractual entitlement to payment. By June 9, 2015 Pacific's lien rights had expired and it was no longer entitled to claim a lien.
Edge Triangle arranged for Edge Residential to transfer units 701E and 801E to Pacific to extinguish the debt. The transfer was not effected until November 27, 2015, long after Pacific's lien rights had expired.
Dolvin's argument that the transfer of the units to Pacific is void is akin to an argument in a bankruptcy situation that such a transfer would be a fraudulent conveyance designed to defeat the claims of creditors. In that situation the applicable legislation confines the period of fraudulent conveyance to a specified timeframe.
In construction lien matters section 80 does not render void all transfers where contractors are owed payment. It only voids transfers in payment of lien claims that have been or could be registered. Pacific was never a lien claimant. By the time Edge Triangle transferred the units to Edge Residential, and clearly by the time Edge Residential transferred the units to Pacific, any lien rights that Pacific may have had had long been extinguished.
Section 80 is designed to protect members of a class of lien claimants (i.e. those at the same level on the construction ladder in relation to each other) from receiving priority by the transfer of property at the expense of other members of the same class. Pacific and Dolvin are not lien claimants who are members of the same class because Pacific is not and never was a lien claimant. Section 80(2) does not apply.
Conclusion
For all of these reasons the motion brought by Pacific Hardwood Limited for an order discharging the lien claim registered by Dolvin against suite 701E, Unit 30, Level 6 [PIN 76448-0373] and the attached parking space, Unit 81, Level C [PIN 76448-1255], and suite 801E, Unit 29, Level 7 [PIN 76448-0433] and the attached parking space, Unit 82, Level C [PIN 76448-1256] is granted.
If the parties are unable to are on costs they may file written submissions of up to three pages (the page count excludes costs outlines, offers to settle and case law) with the moving party's submissions filed by September 7, 2016, the responding party's submissions filed by September 14, 2016 and reply submissions, if any filed by September 19, 2016, all filings to be made with the construction lien Assistant trial co-ordinator, 6th floor, 393 University Avenue.
______________________________________
MASTER C. ALBERT
Appendix “I”
Chronology
| Date | Event |
|---|---|
| 2012 | Edge Triangle and Dolvin enter into a mechanical contract |
| March 31, 2015 | Notice of intention to register condominium is issued under the Construction Lien Act |
| April 29, 2015 | TSCC 2448 is registered |
| May 28, 2015 | Last date of supply by Dolvin prior to the December 15, 2015 work regarding a design error |
| June 18, 2015 | Dolvin's final invoice disclosing a balance owing of $2,313,335.03 |
| July 6, 2015 | Edge Triangle (developer) transfers unsold units to Edge Residential |
| Nov. 27, 2015 | Edge Residential transfers units 701E and 801E to Pacific |
| Dec. 21, 2015 | Last date of supply stated by Dolvin in its claim for lien |
| Dec. 21, 2015 | Dolvin issues a statement of account recording $2,313,335.03 as owing from accounts over 120 days old |
| Jan. 8, 2016 | Dolvin registers a construction lien for $2,313,335.03 against 162 units including units 701E and 801E. Pacific is not named in the claim for lien as an owner |
| March 15, 2016 | Dolvin issues a statement of claim. Pacific is not named as a defendant |
| March 17, 2016 | Dolvin registers a certificate of action as AT4169881 |
[^1]: Assisted in part by Mr. Rutherford [^2]: the condominium was registered as Toronto Standard condominium corporation 2448 on April 29, 2015 [^3]: Instrument AT4112384 [^4]: reference in these reasons to units 701E and 801E includes the parking spaces transferred with the units [^5]: s.1 of the Act, only relevant portions of teh definition are reproduced