Court File and Parties

COURT FILE NO.: CV-15-537018 DATE: 20170612 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: Dew Point Insulation Systems Inc. Plaintiff – and – Aqua Mechanical Contracting Ltd., Metrolinx and Grascan Construction Ltd. Defendants

Counsel: Derek Schmuck and Santiago Costa, for the Plaintiff Sharon Sam, for the Defendant Grascan Construction Ltd.

HEARD: October 17, 2016

BEFORE: Stewart J.

Reasons for Decision

Nature of the Action

[1] Dew Point Insulation System Inc. (“Dew Point”) brings this claim pursuant to the Construction Lien Act, R.S. O. 1990, c. C.30 (the “Act”). Dew Point claims payment for services and materials supplied under a contract with the Defendant Aqua Mechanical Contracting Ltd. (“Aqua”) to a project on land owned by the Defendant Metrolinx at 1865 Weston Road Toronto.

[2] The Defendant Grascan Construction Ltd. (“Grascan”) was the general contractor on the project who had engaged the services of Aqua which, in turn, hired Dew Point. Grascan takes the position in its Statement of Defence that Dew Point’s claim against it ought to be dismissed.

Background Facts

[3] Most of the facts that are relevant to the determination of this action are not in serious dispute. The majority of the pertinent events and relevant documents have been agreed upon and were set out in the evidence of Michael O’Niell, an employee of Dew Point.

[4] Metrolinx engaged Grascan Construction Ltd. (“Grascan”) as general contractor for the construction project.

[5] Grascan hired Aqua as a subcontractor on the construction project.

[6] In turn, Aqua hired Dew Point as subcontractor to supply services and materials (including pipe covering, PVC elbows, calcium silicate, alrcor, valves, caps, insulation, etc.) in connection with the project. The last day of delivery of service or materials by Dew Point was said by it to be July 7, 2015.

[7] Dew Point submitted 5 invoices to Aqua totaling $84,174.93 for the services and materials it provided. It is clear that Dew Point’s contract was with Aqua. Dew Point seeks payment of that amount, plus pre-judgment interest and costs.

[8] Aqua made no payments to Dew Point.

[9] Indeed, Aqua stopped all work being done in accordance with its contract with Grascan before the project had been completed and ceased paying many of its sub-trades, including Dew Point.

[10] Aqua registered a lien under the Act and brought an action against Grascan.

[11] Grascan posted security to vacate Aqua’s lien. Aqua’s lien action was not pursued by it.

[12] Dew Point registered its own lien against the property and started its own action against the named Defendants.

[13] Pursuant to the Order of Master Albert dated October 5, 2015, Grascan posted security by way of a lien bond pursuant to s.44 (1)(d) of the Act in the amount of $87,220.11 to vacate Dew Point’s lien. That amount comprised $69,776.09 for the amount of the lien claim, plus 5% security for costs in the amount of $17,444.02.

[14] Grascan also posted security to vacate Aqua’s lien pursuant to the Order of Master Albert of the same date, October 5, 2015, in the amount of $603,329.01 plus $50,000.00 as security for costs to address the scope of the work to be done by Aqua.

[15] Aqua did not defend Dew Point’s action and was noted in default on January 18, 2016. Dew Point obtained default judgment against Aqua on August 22, 2016 in the sum of $85,706.22, plus $1500.00 in costs.

[16] Also on January 18, 2016, Dew Point’s action as against Metrolinx was discontinued.

[17] No recovery from Aqua has been made by Dew Point. Dew Point now claims judgment against Grascan for the amended sum of $84,174.93 said to be owing to it, plus all accrued pre-judgment interest and costs.

[18] The aggregate amount claimed by Dew Point exceeds the amount of security posted by Grascan to vacate the lien. Dew Point seeks to apply some of the security that was posted by Grascan to vacate the Aqua lien to satisfy the balance owing on its claims, including its claims for pre-judgment interest and costs.

[19] Dew Point’s claim is the only remaining subcontractor claim involving work done for Aqua that has not been resolved.

[20] Although this action could have been tried before a Master, the parties sought to have the primarily legal issues heard in this Court.

Law and Discussion

[21] It is not disputed that Dew Point was entitled to default judgment against Aqua for the amounts claimed, and able to recover the amount posted by Grascan to vacate the Dew Point lien.

[22] Although Grascan for the first time at trial raised the issue of when Dew Point last provided services or materials to the site, I accept the accuracy of O’Niell’s evidence on that subject and the other documents provided, including the invoices. I consider there is no persuasive evidentiary basis to conclude that Dew Point’s lien or action were not perfected in time or otherwise barred. I am also satisfied that the work and materials were provided as described in the invoices submitted and O’Neill’s evidence.

[23] As a result, the only issues remaining for determination in this action are:

(a) Can the security posted to vacate the Aqua lien be used to satisfy Dew Point’s claims?

(b) Can the security posted to vacate the Aqua lien be applied to satisfy any award to Dew Point for costs?

(c) Is an award for pre-judgment interest recoverable from the surplus remaining in security filed with the court to vacate Aqua’s lien by Grascan by way of bond?

[24] Section 80(1)(A) of the Act provides that:

80. (1) Except where it is otherwise provided by this Act,

(a) no person having a lien is entitled to any priority over another member of the same class;

(b) all amounts available to satisfy the liens in respect of an improvement shall be distributed rateably among the members of each class according to their respective rights; and

(c) the lien of every member of a class has priority over the lien of the payer of that class.

[25] Dew Point refers to a settlement by Grascan with another lien claimant (Applied Energy Systems Inc.) which it says amounts to the granting of an improper priority over members of the shared class of lien claimants, contrary to s.80 (1)(a) of the Act.

[26] Dew Point submits that the bond posted as security for the Aqua lien is pooled with the bond posted as security for the Dew Point lien.

[27] Accordingly, the bond posted as security for the Aqua lien is pooled with the bond posted as security for the Dew Point lien, vacated pursuant to the order made by Master C.A. Albert dated October 5, 2015, in the lien claim bearing the court file number CV-15-537018.

[28] In the Court of Appeal decision of P & D Holdings Ltd. v. Alta Surety Co., 1996 CarswellOnt 2937, Austin J. A. stated as follows:

The effect of an order under s. 44(1) or (2) is to detach the lien from the premises and to attach it to the security in court, in this case, the bond. The title to the premises is cleared and any enforcement procedures are directed at the bond instead of the premises. What occurs in the event of such procedures is governed by s. 44(9), rule 2, that is, the bound is subject to the claims of “all persons having a lien.” That language is reasonably clear. It could be rephrased as “all persons having lien claims” and is to be interpreted as meaning “ the lien claims of all persons having same,” not “ all claims of all persons having lien claims.’ The first interpretation is supported by the concluding words of rule 2, namely, that the security is to be “distributed among all claimants.”

[29] For the reasons set out in Dew Point’s analysis, and relying on the authority of P & D Holdings Ltd., supra, I agree that the security posted by Grascan to vacate the Aqua lien may be used to satisfy Dew Point’s claims to the extent they exceed the security posted in connection with its own lien.

[30] Can the security posted by Grascan to vacate the Aqua lien be applied to satisfy Dew Point’s claim for costs?

[31] As mentioned above, the $653,329.01 posted as security by Grascan to vacate the Aqua lien is notionally pooled with the money paid by Grascan to vacate the Dew Point lien, with the result that $740, 549.12 is available to satisfy the Dew Point claims.

[32] In P & D Holdings Ltd., supra., the Court further held that:

I see no reason why, at least in the circumstances of this case, security for costs should not be pooled as well. In would order, therefore, that should the costs awarded to P&D exceed $22,531.23, P&D may recover the excess from the costs portions of the bonds put up by Alta with respect to the claims of Dalma and D-Dixie.

[33] I therefore also agree that the costs claimed by Dew Point are ones that maybe payable out of the security posted by Grascan to vacate the Aqua lien.

[34] Pursuant to the decision in P & D Holdings Ltd., supra, in the event that Dew Point’s costs exceed the $17,444.02 for costs posted as security to vacate the Dew Point lien, the excess costs may be recovered from the bond posted by Grascan with respect to the Aqua lien.

[35] The total costs claimed have not been quantified by Dew Point, although they would include the $1500.00 ordered by Sanderson, J. in granting default judgment against Aqua. If the subject of the quantification of these costs cannot be agreed upon, further submissions in writing may be provided.

[36] Finally, is an award for pre-judgment interest recoverable from surplus remaining in security posted by Grascan?

[37] The grounds upon which a lien claimant may make a claim for interest are found in the Courts of Justice Act, R.S.O. 1990, c.C.43, and in sections 55 and 63 of the Act.

[38] Section 63 of the Act provides that:

Subject to paragraph 3 of subsection 36 (4), the court may award any lien claimant a personal judgment, whether the claimant proves the lien or not, upon any ground relating to the claim that is disclosed by the evidence against any party to the action for any amount that may be due to the claimant and that the claimant might have recovered in a proceeding against that party.

[39] Whether an award for interest arises out of a judgment, or is otherwise awarded pursuant to the wider discretion of the court under s. 128 and s. 130 of the Courts of Justice Act, the recovery of such an award for interest is not precluded by the Act (see: Smith & Smith Kingston Ltd. v. Kinalea Development Corp., 1994 CarswellOnt 1111).

[40] I therefore consider that interest may also be recoverable from the security posted by Grascan to vacate the Aqua lien. This case is similar to that addressed by Master Albert in D’Urzo Demolition Inc. V. Damaris Developments Inc., 2012 ONSC 3938, where it was observed that the treatment of interest and costs in excess of that recoverable under the Act should be treated as a collection matter in the absence of competing creditors. The debt, including the lien amount, costs and interest, should accordingly be paid out of the pooled security held in court.

[41] This is consistent with section 51 of the Act, which requires the Court to take all accounts, make all inquiries, give all directions and do all things necessary to dispose finally of the action on all matters, question 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. This approach produces the most just result in these circumstances.

Conclusion

[42] For these reasons, Dew Point shall have judgment for $84,174.93, plus prejudgment interest in accordance with the Courts of Justice Act, plus costs to be agreed upon and fixed. To the extent that the aggregate amount of these components is greater than the security available posted to vacate the Dew point lien, the excess may be recovered from the security posted by Grascan to vacate the Aqua lien.

Costs

[43] If the costs of this action cannot be agreed by the parties or if any further order is required to give effect to this judgment, written submissions may be provided on a timetable that may be devised by them.

Stewart J. Released: June 12, 2017

Original Document Footer

COURT FILE NO.: CV-15-537018 DATE: 20170612 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: Dew Point Insulation Systems Inc. Plaintiff – and – Aqua Mechanical Contracting Ltd., Metrolinx and Grascan Construction Ltd. Defendants REASONS FOR DECISION STEWART J. Released: June 12, 2017