CITATION: Niagara Millwork Inc. v. Urbacon/QMD Inc., 2017 ONSC 2872

COURT FILE NO.: CV-16-549149

DATE: May 9, 2017

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Niagara Millwork Inc. v. Urbacon/QMD Inc.;

BEFORE: MASTER C. WIEBE

COUNSEL: Marco Drudi for Urbacon/QMD Inc. (“Urbacon”); S. Costa for Niagara Millwork Inc. (“Niagara”);

HEARD: May 8, 2017.

REASONS FOR DECISION

[1] There are two motions to be determined. Urbacon brings a motion (“the Urbacon Motion”) seeking leave under the Construction Lien Act, R.S.O. 1990, c. C.30 (“CLA”) section 67(2) to have production and discovery of the plaintiff, Niagara. In particular, Urbacon wants an order compelling Niagara to produce its affidavit of documents on or before June 1, 2017, granting Urbacon leave to examine Niagara for discovery and requiring that this discovery take place on or before July 1, 2017. Niagara did not oppose this motion.

[2] Niagara brings a cross-motion (“the Niagara Motion”) essentially for the same relief in favour of Niagara. It wants leave under CLA section 67(2) to have production and discovery of Urbacon. In particular, Niagara wants an order that Urbacon deliver an affidavit of documents by July 31, 2017, that Urbacon be examined for discovery by September 30, 2017, and that undertakings given at these discoveries be answered by November 30, 2017. It is noted that Urbacon has delivered an affidavit of documents. Urbacon opposed this motion on the grounds that Rule 48.04(1) applied, and that the grounds for leave under that rule had not been met.

[3] The background facts are not in dispute. This is an action governed by the CLA. Niagara claims a lien in the amount $374,014.61 for monies owing for millwork and related services and material it supplied to Urbacon concerning a renovation project on the Sheraton Hotel in Toronto in which Urbacon was the general contractor. The Statement of Claim is dated March 21, 2016. On April 29, 2016 Urbacon defended the action. Urbacon claims inter alia set-off and a counterclaim of $250,000 for alleged damages it suffered for having to correct alleged deficiencies in Niagara’s work and on account of a delay in Niagara’s work. There is also an issue of a termination of the Niagara subcontract and whether the termination was proper. On May 2, 2016, Niagara delivered a Reply and Defence to Counterclaim.

[4] After reviewing these pleadings, there was no doubt in my mind that leave under CLA section 67(2) is merited for the Urbacon Motion. Production and discovery of Niagara are undoubtedly necessary to provide particulars of the allegations of deficiencies and delay. They would also lead to a resolution of the issues in dispute.

[5] I grant the Urbacon Motion.

[6] The real issue in these motions is the Niagara Motion. Further facts are necessary to understand this issue. On April 28, 2016, before the close of pleadings, Derek Schmuck, counsel for Niagara, sent an email to Marco Drudi, counsel for Urbacon, stating that his client did not want to follow the usual practice in Toronto lien actions, namely the obtaining of a judgment of reference. Mr. Drudi responded the same day stating that Urbacon, on the other hand, wanted to follow the usual practice of getting a judgment of reference. Almost two months later, on June 23, 2016, about seven weeks after the close of pleadings, Mr. Schmuck served and filed a Trial Record, setting the action down for trial in accordance with Rules 48.01 and Rule 48.02(1). Rule 48.01 specifies that “any party . . . who is ready for trial may set the action down for trial.”

[7] On several subsequent occasions Mr. Drudi tried unsuccessfully to get Mr. Schmuck to agree to his client’s discovery of Niagara. On October 19, 2016, Mr. Schmuck delivered a Certification Form to Mr. Drudi for the purpose of getting it signed, filed and a pre-trial and trial date set. The form indicated that Mr. Schmuck was seeking a 6 day trial in February and March, 2018. Mr. Drudi did not sign the document, as Urbacon was not ready for trial and did not want to prejudice its right to discover Niagara. As a result, Mr. Schmuck made an appointment with the To Be Spoken To Court.

[8] The matter came before Justice McEwen in To Be Spoken To Court on January 23, 2017. After hearing submissions, His Honour made the following endorsement: “Pl. wants a trial date. Def. wants to conduct e/ds of pl. There is time for this to be done. I am setting a date w/o prejudice to the defs right to examine/bring motions. Trial to commence Mar. 5/18 – 6- 10 days. PTC – Jan. 26/18 @ 2:15 p.m.”

[9] Mr. Drudi argued that the only leave (for production and discovery) that is relevant to the Niagara Motion is the leave in Rule 48.04(1), that this leave is very narrow in scope and only applies where there has been a “substantial and unexpected change in circumstances,” and that there is no evidence of such a substantial and unexpected change in circumstances. There was no dispute that the applicable test for leave under Rule 48.04(1) is the narrow one, namely proof of a “substantial and unexpected change in circumstances”; see the decision of Justice E. Macdonald in Hill v. Ortho Pharmaceutical (Can.) Ltd., 1992 CarswellOnt 351 at paragraph 10. There was also no dispute that there was no evidence in the motion that would qualify as such a “substantial and unexpected change of circumstances.’ Mr. Drudi, therefore, argued that the Niagara Motion should be dismissed.

[10] Mr. Costa argued that the leave that is relevant to the Niagara Motion is the leave under CLA section 67(2) as this provision “conflicts” with the leave under Rule 48.04(1), thereby making section 67(2) paramount by operation of CLA section 67(3). I do not accept that argument. Rule 48.01 makes it clear that a party that sets the action down for trial by passing the trial record is a party “who is ready for trial,” namely a party who has determined that all interlocutory steps that are necessary and that would expedite the resolution of the issues have to been done. This means that a party that takes the step of passing the trial record under Rule 48.01 should not be allowed to then take a step that is entirely inconsistent with that earlier step by obtaining leave under CLA section 67(2). At that point, the narrower test for leave under Rule 48.04(1) should apply. Therefore, in my view, Rule 48.04(1) does not conflict with CLA section 67(2).

[11] Mr. Costa made the further argument that the test for leave under Rule 48.04(1) should be tempered by the general requirement of Rule 1.04(1), namely the requirement that “these rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.” I accept that Rule 48.04(1) should be read in the light of the requirement of Rule 1.04(1) to secure a just, expeditious and least expensive result. However, I do not understand how that standard would assist Niagara on this motion. It decided that it did not need interlocutory steps when it set the action down for trial, and indeed when it appeared before Justice McEwen. What could be more expeditious and less expensive than that?

[12] As to the question of justice, if there is any “injustice” in allowing Urbacon discovery without allowing Niagara the same, this is an “injustice” that Niagara brought on itself, presumably with full knowledge of the consequences of its actions. What Niagara now wants to do is change course, and obtain relief from the consequences of its actions. I am not aware of any authority that finds such a consequence to be an “injustice” that the court relieves from. Usually, an injustice that stirs the court to action is one that is the result of objective circumstances beyond a party’s control, such as the need to set the action down for trial due to the expiration of the two year limitation period under CLA section 37. That is not the case here, where Niagara made a deliberate choice. Indeed, Mr. Costa had no answer to my question as to why Niagara chose not to bring its motion before it set the action down for trial, other than that it wanted to move the action forward to trial expeditiously.

[13] Mr. Costa argued that Rule 2.01(1) applied to this case. This is the rule that applies to a failure to comply with the rules. It renders such non-compliance an irregularity, not a nullity. The rule expressly allows the court to grant relief in these circumstances in the interest of justice and to insure a just determination of the issues. Mr. Costa referred me to the decision in 1475707 Ontario Inc. v. Foran, 2014 ONCA 830 (Ont. C. A.). Here the issue was whether a passing of a defective trial record under Rule 48.01 caused the lien claimant to lose its lien rights by operation of CLA section 37. Apparently, lien claimant served a trial record that did not contain a pleading in the action. The Court of Appeal found that Rule 2.01(1) was available to the court (despite the stipulations of CLA section 37) to correct this irregularity by allowing the lien claimant to file an amended trial record.

[14] I fail to see how this case applies to the Niagara Motion. The Foran case dealt with a mistake in the trial record. I was not made aware of any mistake in the trial record or in the passing of the trial record in the within case. Niagara has not failed to comply with the rules for the purpose of Rule 2.01(1). It simply took a step under the Rules that it now wishes to undo. I am not aware of any authority that would allow the court to do so undo the step.

[15] I make two final comments. First, I am mindful that to allow the relief claimed by Niagara in its motion would potentially significantly alter lien practice in Toronto. In Toronto, Mr. Drudi is correct. The practice in the vast majority of cases is to obtain a judgment of reference under the CLA and to have a lien master manage and try the lien action(s) using the broad powers conferred by CLA section 58 following the obtaining of an order for trial and the service of a notice of trial. The parties can choose the alternative of moving to trial through the system devised by the Rules of Civil Procedure, which of course includes Rule 48.01. But to allow a lien claimant to readily circumvent the prohibition in Rule 48.04(1) in that event, as Niagara is trying to do in this motion, would be to encourage parties to follow this alternative system. Parties would quickly pass trial records and move for interlocutory orders while sitting on trial lists. This would undermine the established reference practice in Toronto. Such a change needs to be thought through before it is countenanced. Are the judicial resources in Toronto appropriate for such a change? What are the benefits or detriments of having interlocutory orders made by persons other than the trial judge? I note that some jurisdictions have versions of this alternative system, such as York and Durham Regions, but these other systems were instituted through practice directions after careful thought. I am not prepared, therefore, to readily open this door through a motion such as this.

[16] The second comment is that I am not sure in reading Justice McEwen’s endorsement that His Honour did not implicitly deny Niagara leave to conduct interlocutory steps such as discovery. His Honour stated only that Niagara wanted a trial, and he ordered one. Therefore, to now grant Niagara leave to conduct discoveries may be an amendment to His Honour’s ruling, which I am not allowed to do. On the other hand, the leave His Honour gave Urbacon was not clearly enough of one under CLA section 67(2) as to obviate the need for the Urbacon Motion. I can see why Urbacon brought its motion.

[17] Therefore, I dismiss the Niagara Motion.

[18] Concerning costs, both parties filed costs outlines. The Niagara Costs Outline showed $4,192.36 for actual costs, and $2,838.06 for partial indemnity costs. The Urbacon Costs Outline showed $6,666.42 for partial indemnity costs. Urbacon was entirely successful in these two motions, and is entitled to costs. Its claim is more than what Niagara could reasonably have expected to pay. However, I notice that the Niagara costs outline does not contain any time for Mr. Schmuck, and he swore the affidavits in the Niagara motion material. Therefore, the Niagara claim is unreasonably low. I see no reason for further submissions on costs as it seems unlikely that the parties exchanged offers to settle. I, therefore, have decided to award Urbacon $4,000 in partial indemnity costs to be paid by Niagara in thirty days.

[19] If the parties exchanged offers to settle the motions and the court is notified in writing of this fact on or before May 12, 2017, this order as to costs is subject to review and amendment. Otherwise, the order stands. If notice is received in time, and if the parties cannot agree as to costs, I herewith allow the parties to make brief written submissions on costs. Urbacon has until May 19, 2017 to deliver such written submissions of no more than one page. Niagara has until May 29, 2017 to deliver responding written submissions of no more than one page. Urbacon has until June 1, 2017 to deliver reply written submissions of no more half a page.

DATE: May 9, 2017

MASTER C. WIEBE