CITATION: Environmental Building Solutions Corporation v. 2420124 Ontario Limited et al., 2017 ONSC 6202
COURT FILE NO.: CV 16-093
DATE: 20171018
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Environmental Building Solutions Corporation
Terrence A. Pochmurski, for the Plaintiff
Plaintiff
- and -
2420124 Ontario Limited, 2420125 Ontario Limited and The Corporation of the Municipality of Grey Highlands
David M. Pomer, for the Defendants, 2420124 Ontario Limited and 2420125 Ontario Limited
Defendants
HEARD: October 17, 2017
REASONS FOR DECISION ON MOTION
Conlan J.
I. Introduction
[1] In April 2016, the Plaintiff, Environmental Building Solutions Corporation (“EBSC”), commenced a Statement of Claim related to the Construction Lien Act, R.S.O. 1990, c. C.30, as amended (“CLA”).
[2] There are three Defendants, 2420124 Ontario Limited (“2420124”), 2420125 Ontario Limited (“2420125”), and The Corporation of the Municipality of Grey Highlands (“Grey Highlands”).
[3] EBSC, based in Toronto, Ontario, supplies labour and materials for the renovation, repair and remediation of buildings.
[4] 2420124 and 2420125 were at all material times the owners of the land in question, while Grey Highlands was a mortgagee of the land.
[5] By “land”, I am referring to the property that is the subject of the construction lien registered by EBSC. That land is in Euphrasia, Grey Highlands (150 Talisman Mountain Drive, Kimberley, Ontario).
[6] The amount of the registered lien is $211,875.00. The lien was filed on March 4, 2016.
[7] It is alleged by EBSC that, on or about June 2, 2014, it contracted with 2420124 for EBSC to provide project management services and to supply labour and materials for the removal of mould from the land.
[8] EBSC alleges in the Statement of Claim that it performed the work contracted for, which work improved the land, and is owed by 2420124 the sum of $211,875.00.
[9] EBSC’s claim is not limited to that advanced under the CLA, however. It also alleges that 2420124 and 2420125 are liable in quantum meruit based on unjust enrichment and/or on the basis of a breach of contract.
[10] Grey Highlands is a Defendant because part of the land was mortgaged by 2420124 to Grey Highlands on May 30, 2014, for the sum of $200,000.00. EBSC claims priority over that mortgage.
[11] 2420124 and 2420125 have defended the action and have advanced a counterclaim.
[12] Those Defendants deny that any money is owed to EBSC.
[13] Those Defendants also dispute the validity of the lien as it was registered too late given that the work was completed by the end of July 2014.
[14] Those Defendants further dispute that EBSC has any right to claim priority over the mortgage in favour of Grey Highlands.
[15] The Counterclaim seeks general damages of $750,000.00 and punitive damages of $100,000.00 based on EBSC’s improper registration of the lien which has allegedly resulted in an inability to obtain financing for and earn rental income on the land.
[16] EBSC has defended the Counterclaim.
II. The Motion
[17] 2420124 and 2420125 have brought a Motion. The prayer for relief seeks to vacate the lien and the related Certificate of Action, strike out EBSC’s pleadings, and dismiss EBSC’s action entirely, with costs in favour of the moving parties.
[18] Succinctly put, the moving parties submit that the last day of work by EBSC with respect to the Claim for Lien was on or about July 24, 2014, while the lien was not registered until March 4, 2016, well beyond the 45-day time limit required by the CLA.
[19] In addition, the moving parties submit that no money is owed to EBSC; all amounts due under the contract have been paid in full. Thus, the action should be dismissed on that ground alone.
[20] The Motion is supported, in part, by a detailed Affidavit, with numerous Exhibits attached thereto, sworn to by Brian Ellis, an officer and director of both 2420124 and 2420125, a Factum and a Supplementary Factum, and a Book of Authorities and a Supplementary casebook.
[21] The moving parties have also filed a bound collection of the answers to the undertakings given by Mr. Ellis during his out-of-court examination by opposing counsel, a transcript of that examination, plus transcripts of the out-of-court examination conducted by counsel for the moving parties of Arthur Robinson on behalf of EBSC.
[22] Although the Motion has been adjourned multiple times at the request of EBSC, finally heard in Owen Sound on October 17, 2017, EBSC’s filings on the Motion are rather slim and include a brief Affidavit, a five-page Factum and one decision: Gillies Lumber Inc. v. Kubassek Holdings Ltd., 1999 3757 (ON CA), 1999 CarswellOnt 2160 (C.A.).
[23] That decision is relied on by EBSC as an example of how section 6 of the CLA can, according to EBSC, be resorted to in order to excuse non-compliance with the legislation, including the form and content of a Claim for Lien and the time restrictions to register a lien, where no prejudice is found.
[24] In short, EBSC admits significant deficiencies with its action: (i) the lien amount is incorrect and should be $167,063.84 rather than $211,875.00, and (ii) the claim should have been made more clear that it relates to a “very loosey-goosey arrangement” (that is the term used in EBSC’s Factum), in other words an imprecise oral contract, that the parties allegedly entered into after the initial and more formal mould removal contract had been completed, and (iii) the short description of services or materials in support of the lien is incomplete.
[25] EBSC wants to amend its Claim for Lien and its Statement of Claim, although no motion has been brought for that relief. It argues that no prejudice has been suffered by 2420124 and 2420125.
III. Analysis
A. The Validity of the Lien
The Law
[26] As both sides agree about the 45-day time period in which a lien must be registered (from the last day of work), the only provision of the CLA that must be set out herein is section 6:
- No certificate, declaration or claim for lien is invalidated by reason only of a failure to comply strictly with subsection 32 (2) or (5), subsection 33 (1) or subsection 34 (5), unless in the opinion of the court a person has been prejudiced thereby, and then only to the extent of the prejudice suffered. R.S.O. 1990, c. C.30, s. 6.
[27] Too often, lawyers and judges, myself included, refer to countless Court decisions when one or two will suffice.
[28] There is good reason why both sides relied on the Gillies, supra decision. And there is good reason why EBSC filed only that decision. It is appellate authority that remains good law and which is fully dispositive of at least part of the Motion. Unfortunately for EBSC, it works against its position.
[29] In Gillies, supra, both Chief Justice McMurtry and Justice Borins found that section 6 of the CLA could not be resorted to in order to “cure” or “save” the lien in question.
[30] Section 6 read the same then that it does now.
[31] In Gillies, supra, Justice Borins found that section 6 was unavailable to rescue the lien, for more than one reason. For our purposes, only two of the reasons are important. First, the amount claimed exceeded the value of the improvement to each property, and by a significant margin. Second, there was evidence of actual financial prejudice suffered by the owners because of the registered lien.
[32] There is nothing to suggest that Justice Borins would have permitted the lien to stand if only one of those two problems existed. In my view, either one would have caused His Honour to reach the same decision.
[33] Chief Justice McMurtry held simply that a material misstatement as to the amount of the lien could not be characterized as technical, minor or procedural so as to attract the saving power of section 6 of the CLA.
The Law as Applied to Our Facts
[34] In our case, there is no question that there was a material misstatement made as to the amount of the lien, or put another way, the amount claimed by EBSC exceeded by a significant margin the alleged value of the improvement to the land.
[35] Remember, EBSC admits that the lien does not relate to the first formal contract for the removal of the mould.
[36] Thus, the lien can only be permitted to survive if it meets the test set down by the majority of the Court in Gillies, supra but with regard to the alleged second oral contract between the parties.
[37] The fatal point for EBSC is that, by its own admission, the total alleged value of the improvement to the land resulting from its work performed under the alleged second contract is about $167,000.00, not the nearly $212,000.00 which is the quantum claimed in the registered lien.
[38] That is a difference of close to twenty-five per cent. Although less than what was at stake in Gillies, supra, that is surely a material or significant matter. It is surely not a technical, minor or procedural defect.
[39] For that reason alone, the lien cannot survive.
[40] It is unnecessary to address the prejudice issue.
[41] Section 6 of the CLA applies only where the issue is one of strict compliance with the legislation. That means compliance with minor, procedural, relatively unimportant and/or technical matters. That does not mean compliance with claiming an amount that at least bears some connection to the alleged value of the improvement to the land occasioned by the work performed by the lien claimant.
[42] There is, however, another reason why the lien cannot be allowed to stand.
[43] The discussion thus far assumes that EBSC ought to be permitted to relate the existing registered lien to the alleged second oral contract between the parties. I am not at all confident that it would be prudent to grant that indulgence to EBSC.
[44] One look at the current Statement of Claim makes it abundantly clear that the whole action, including the entire Claim for Lien, relates exclusively to the first formal contract between the parties for mould removal.
[45] It would be intellectually dishonest for this Court to treat the Statement of Claim as having been amended to assert a second contract and then rescue the existing lien by declaring that it relates to that alleged second contract despite its clear wording otherwise.
[46] As I said in Court during oral submissions by counsel, the existing lien is a mess. A big mess. It has to go, along with its related Certificate of Action.
[47] Those parts of the relief sought in the Motion are therefore granted. There is an Order vacating the lien and the Certificate of Action.
[48] In making that Order, I am fully aware that it is akin to granting partial summary judgment in favour of the moving parties.
[49] Treating both (i) Rule 20.04, clauses (2), (2.1) and (2.2), of Ontario’s Rules of Civil Procedure and (ii) the guidance of the Supreme Court of Canada in its decision in Hryniak v. Mauldin, 2014 SCC 7 as being relevant by analogy to the expunging of a construction lien, I am satisfied on balance that there is no genuine issue for trial as to whether this lien is a valid one.
B. The Striking of the Pleadings and the Dismissal of the Action
[50] I refuse to strike EBSC’s pleadings. Thus, I also refuse to dismiss its action.
[51] This is where substance and common sense must prevail over form.
[52] There are clearly three alternative bases for liability set out in EBSC’s Statement of Claim – the CLA, quantum meruit (unjust enrichment), and breach of contract.
[53] The latter two bases of liability have nothing to do with and do not depend at all on the validity of the lien.
[54] I was initially tempted to find favour in counsel for the moving parties’ argument that the action cannot continue on those two latter bases of liability because the whole Statement of Claim relates to the first formal contract between the parties which EBSC admits has been paid for in full.
[55] It is true that the Statement of Claim deals exclusively with the first formal contract. It is also true that there appears to be no monies owing on that first formal contract.
[56] So this Court dismisses the whole action. We all know what will occur – EBSC will commence a new action for the sum of $167,000.00, approximately. Then the moving parties will defend that action and likely plead a limitation period argument. Everyone will be back in Court on another motion.
[57] The better course for all involved is to allow the existing Statement of Claim to continue but require EBSC to move to amend it to assert a second contract and seek the appropriate relief on the bases of quantum meruit and/or breach of contract. The Defendants will then be able, of course, to take whatever position they wish in response to that motion.
[58] Thus, I order that EBSC bring that motion to amend without delay. To be more specific, I see no reason why it cannot be served and filed within sixty days of the date of these Reasons, and I so order.
[59] Otherwise, the Defendants may request again that the current Statement of Claim be dismissed.
IV. Conclusion
[60] For these reasons, the Motion is granted in part.
[61] The lien and the Certificate of Action are hereby vacated.
[62] The remaining substantive items of relief sought, namely the striking of EBSC’s pleadings and the dismissal of its action, are neither granted nor dismissed at this time. They are adjourned to whatever date the Plaintiff’s anticipated motion to amend its current Statement of Claim is returnable in Court.
[63] This disposition of the Motion, that is the adjournment of part of the relief sought, is deliberate as it could have costs consequences. Thus far, the moving parties have been successful.
[64] If counsel wish to address costs now as opposed to later, he/they may contact the trial coordinator in Owen Sound to make that request. If such a request is made, I will decide whether to entertain costs submissions now and, if so, in what form/manner.
Conlan J.
Released: October 18, 2017
CITATION: Environmental Building Solutions Corporation v. 2420124 Ontario Limited et al., 2017 ONSC 6202
COURT FILE NO.: CV 16-093
DATE: 20171018
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Environmental Building Solutions Corporation
Plaintiff
- and -
2420124 Ontario Limited, 2420125 Ontario Limited and The Corporation of the Municipality of Grey Highlands
Defendants
REASONS FOR DECISION ON MOTION
Conlan J.
Released: October 18, 2017