Court File and Parties

COURT FILE NO.: CV-14-0819 DATE: 20180803

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

M. Fuda Contracting Inc. Plaintiff – and – 1291609 Ontario Ltd. c.o.b. as Amari General Contracting, North American (Park Place) Corporation, North American (Park Place East) Corporation and Target Canada Co. Defendants

COUNSEL: John DaRe for the Plaintiff Les J. O’Connor for Amari General Contracting Patrick G. Duffy for North American (Park Place) Corporation and North American (Park Place East) Corporation

HEARD: July 19, 2018

RULING ON MOTION TO DISMISS FOR DELAY

BOSWELL J.

[1] How long is too long for a plaintiff to bring a lien action to trial?

[2] This case has taken four years and counting. North American [1] says four years is too long in the context of a construction lien case and submits that the plaintiff’s claim against it should be dismissed for delay. Unsurprisingly, the plaintiff demurs.

[3] The following reasons explain why I am not prepared to dismiss the plaintiff’s claim yet, but also why this is a last chance opportunity for the plaintiff.

The History of the Proceedings

[4] North American is the owner and developer of a commercial shopping centre in Barrie, Ontario known as “Park Place”. In 2013, it hired Amari to act as its general contractor in relation to substantial earthworks on the site. Amari hired Fuda to complete certain parts of the earthworks and underground servicing. Fuda, in turn, hired a number of other subcontractors to perform certain parts of its work.

[5] As a result of a payment dispute, Fuda walked off the job site in May 2014. It filed a lien under the Construction Lien Act, R.SO. 1990, c. C.30 (the “CLA”) [2] for roughly $2.4 million. The amount claimed represented monies allegedly owing to Fuda as well as to its sub-trades. In the meantime, Fuda’s sub-trades also filed their own lien claims, totaling some $700,000.

[6] To clear up its title to the lands, and to keep the development moving forward, North American paid roughly $3.1 million into court to lift the various registered liens.

[7] Fuda’s lien action was commenced on July 21, 2014.

[8] North American filed a Statement of Defence on September 8, 2014.

[9] Amari filed a Statement of Defence on November 18, 2014.

[10] A Trial Record was passed on February 11, 2015. A practice direction in the Central East Region requires that a plaintiff pass a Trial Record prior to obtaining a date for a judicial pre-trial conference. The effect of this requirement, in lien proceedings, is to compel a plaintiff to pass a Trial Record early in the proceedings. In the Central East Region, the practice is to schedule an early judicial pre-trial to address procedural issues, including the exchange of Affidavits of Documents and Scott Schedules [3] and the scheduling of examinations for discovery and any follow up motions. Subsequently, a substantive pre-trial is arranged prior to the matter being placed on a trial list.

[11] A first pre-trial was scheduled in this action on April 9, 2015. A procedural schedule was established and a second pre-trial was scheduled for October 9, 2015.

[12] On October 9, 2015 a revised timetable was set because examinations for discovery remained outstanding. The discoveries were commenced in November 2015, but not completed.

[13] A third judicial pre-trial was conducted on January 8, 2016. A further revised timetable was established that contemplated the completion of discoveries before a fourth pre-trial which was scheduled for April 14, 2016.

[14] On January 8, 2016 an order was made, on consent, reducing the security paid into court by North American by about $200,000 on account of the settlement of the lien claim of one of Fuda’s sub-trades.

[15] On March 17, 2016 a second consent order reduced the amount of security by a further $550,000 or so on account of additional settlements of sub-trade liens.

[16] A fourth pre-trial conference was conducted on April 14, 2016. At this conference it became clear that Fuda required an expert report from a quantity surveyor. Additional documents were produced by Amari that were required to facilitate the work of Fuda’s expert.

[17] In the meantime, another order was issued, on consent, further reducing the security paid into court by an additional $275,000 or so.

[18] A dispute then arose in terms of further documents that were purportedly required by Fuda’s expert and whether they would be produced by the defendants, or any of them. A fifth pre-trial conference was conducted on May 1, 2017 and leave was granted to the parties to bring whatever motions they considered necessary to move the matter forward. A motions date was scheduled for May 25, 2017. On that date, an order was consented to that (1) required production of documents by North American’s consulting engineer and (2) reduced the security paid into court to $1 million.

[19] On May 19, 2017, Fuda’s expert, Cole Engineering, produced a report. It is not, however, in the nature of a quantity survey, but rather appears to be an analysis of the state of accounts between Fuda and Amari.

[20] On February 21, 2018 leave was granted to North American to bring a motion to seek an order dismissing the action against them and releasing the remaining security paid into court.

[21] Subsequently, in May 2018, Fuda consented to a further reduction in the posted security to $400,000.

[22] On June 13, 2018, Cole Engineering produced a further report. Once again, it is not in the nature of a quantity survey, but rather appears to be an analysis of issues raised on the Scott Schedule.

[23] North America’s motion to dismiss was argued on July 19, 2018.

The Motion and the Parties’ Positions

[24] North American’s motion is brought under s. 47(1) of the CLA. That section provides as follows:

47(1) Upon motion, the court may,

(a) order the discharge of a lien;

(b) order that the registration of,

(i) a claim for lien; or

(ii) a certificate of action;

or both, be vacated;

(c) declare, where written notice of a lien has been given, that the lien has expired, or that the written notice of the lien shall no longer bind the person to whom it was given; or,

(d) dismiss an action,

upon any proper ground and subject to any terms and conditions that the court considers appropriate in all the circumstances.

[25] The motion, properly understood, is to dismiss the action against North American for delay. I say, “properly understood” because North American’s counsel cited case law holding that motions under s. 47(1) are akin to summary judgment motions under Rule 20 of the Rules of Civil Procedure. He framed his argument around certain principles applicable to summary judgment motions. In my view, this motion is not in the nature of a summary judgment motion.

[26] There is certainly authority to support the assertion that motions under s. 47(1) are akin to summary judgment motions: see, for instance, Diamond Drywall Contracting Inc. v. Ikram, 2016 ONSC 5411. Having acknowledged that, my view is that it would be a mistake to interpret s. 47(1) so narrowly that, in all instances, its use engages the test applicable on summary judgment motions.

[27] Section 47 is drafted broadly and is applicable in many situations. A summary judgment motion is one type of process that falls under the umbrella of s. 47(1). But not the only one. This motion – to dismiss Fuda’s claim against North American for delay – is another type of process that is properly addressed under s. 47(1).

[28] On a summary judgment motion, the moving party seeks a summary disposition of a proceeding on its merits. North American is not looking for a determination of this action on its merits. Instead, it asserts that Fuda has been unduly slow in prosecuting the action. It argues that the procedures established by the CLA are intended to be expedited and summary in nature. It essentially says that Fuda’s delay in prosecuting its claim has made a mockery of the expedited nature of lien actions. In the result, the action against it should be dismissed and the security posted by North American released.

[29] Amari joins North American in its position. Amari is content that the action against it proceed as an ordinary civil action grounded in contract law.

[30] Fuda denies that it has failed to prosecute its action with reasonable diligence. It asserts that this is a complex action and that it has moved the claim along reasonably promptly given all of the circumstances. Fuda opposes any relief at this stage and submits that the action ought to be determined on its merits. It submits that the case will be ready for trial by the spring sittings of 2019.

The Governing Principles

[31] The question of when enough is enough, such that an action should be dismissed for delay, is a difficult one. Appellate courts have, fortunately, provided significant guidance in this area. Appellate jurisprudence identifies a number of applicable principles, including:

(a) The civil justice system aims to resolve disputes on their merits in a fair and efficient way: 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544 (“1196158”), at para. 17;

(b) There is a strong public interest in promoting the timely resolution of disputes. Unnecessary delay strikes at the core values of the administration of justice. Excusing undue delay risks the promotion of “a culture of complacency” and tends to undermine public confidence in the justice system: see Marché D'Alimentation Denis Thériault Ltée v. Giant Tiger Stores Ltd., 2007 ONCA 695; and R. v. Jordan, 2016 SCC 27;

(c) Superior courts have the inherent jurisdiction to control their own processes, which includes the discretionary power to dismiss an action for delay: Housser v. Savin Canada Inc. (2005), 77 O.R. (3d) 251 at para. 9 (S.C.J.);

(d) Motions to dismiss for delay require a careful balancing of two fundamental principles. The first is that civil actions should, if possible, be decided on their merits. The second is that the procedural rules that aim to resolve disputes in a timely and efficient manner can only achieve their goal if they are respected and enforced: 1196158, at para. 18;

(e) The primary responsibility for the progress of an action lies with the plaintiff: Prescott v. Barbon, 2018 ONCA 504, at para. 30;

(f) The presumptive ceiling for listing a civil action for trial reminds plaintiffs of their obligation to move their actions forward expeditiously: Southwestern Sales Corp. v. Spurr Bros. Ltd., 2016 ONCA 590, at para. 11; see also Rule 48.14(4) of the Rules of Civil Procedure and, more specific to this motion, s. 37(1) of the CLA;

(g) The plaintiff generally suffers the consequences of a dilatory regard for the pace of the litigation: Wellwood v. Ontario Provincial Police, 2010 ONCA 386 at para. 48;

(h) The longer the delay, the more cogent the plaintiff’s explanation for the delay must be: Kara v. Arnold, 2014 ONCA 871 at para. 17;

(i) The conduct of a defendant may be relevant, especially where a plaintiff who tries to move an action along is faced with “some resistance” from the defendant, or tactics inconsistent with the fair and efficient resolution of a proceeding on its merits: Bolohan v. Hull, 2012 ONCA 121, at para. 17; and,

(j) The presence or absence of prejudice to a moving party/defendant in permitting an action to continue is an important factor to consider: Hamilton (City) v. Svedas Koyanagi Architects Inc., 2010 ONCA 887, at para. 33. That said, the absence of actual prejudice does not automatically trump the values of timeliness and efficiency. The presence or absence of actual prejudice is just one factor to consider in the context of the just determination of a dispute on its merits: 1196158, at para. 33.

[32] I will analyze North American’s motion in light of the foregoing principles.

Discussion

[33] Counsel did not cite any CLA-specific cases where actions were dismissed and/or liens vacated for delay, notwithstanding compliance with s. 37(1) of the CLA. North American’s counsel took the position, nevertheless, that not only do the principles outlined above apply to slow-moving lien actions, but that they apply with added vigor, given that lien claims are intended to be expeditious and summary in nature. I agree with that submission.

[34] Southwestern Sales Corp. v. Spurr Bros. Ltd., as above, is a case where a number of consolidated construction lien actions were dismissed for delay at a status hearing. The plaintiff had registered six claims for lien on lands in Windsor in December 2000. The defendant paid in excess of $330,000 into court in order to vacate the liens. Claims were commenced in January 2001. The actions were consolidated in April 2002 and a trial record passed in January 2003. They were eventually set down for trial in September 2009. The trial did not proceed at that time, for reasons not entirely clear to me. A number of interlocutory proceedings followed. The matter was struck from the trial list in 2012. It had still not been tried as the calendar turned to 2014. Eventually all six actions were dismissed for delay at a status hearing in October 2014.

[35] Remarkably, the plaintiff, who failed to attend the status hearing in October 2014, moved to set aside the order dismissing its actions. The motion failed. The plaintiff appeal to the Court of Appeal and failed again.

[36] Brown J.A., writing for a unanimous panel, made the following observations, at para. 10:

The Rules of Civil Procedure contain general and specific provisions to create a culture of timely civil justice. At the general level, rule 1.04(1) requires courts to construe the rules "to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits." At the specific level, rule 48.14 establishes a presumptive timeframe for the listing of a civil action for trial which, if not met, requires the plaintiff to show cause why the action should not be dismissed. Rule 48.14 provides the court with a tool by which to assume an active role in controlling the pace of litigation. (Internal citations omitted).

[37] One could make similar observations with respect to the provisions of the CLA. Section 67(1) is a general provision designed to foster a culture of timely justice. It provides that the procedure in an action under the CLA shall be “as far as possible of a summary character, having regard to the amount and nature of the liens in question.” On a more specific level, s. 37(1) of the CLA provides that a perfected lien expires after the second anniversary of the commencement of the action that perfected the lien, unless an order is made for the trial of the action or the lien action is set down for trial. Again, this is a presumptive timetable which is undoubtedly instructive when assessing assertions of undue delay.

[38] In addressing the specific CLA context to the actions in Southwestern, Brown J.A. quoted approvingly from the ruling of the motions judge, Hebner J., who held:

A lien claim can be an onerous thing for a defendant. A defendant is faced with the prospect of either having its land tied up as a result of the registration of a claim for lien or, alternatively, having to finance sometimes substantial payments into court in order to free up title to the land…For these reasons, it seems to me that a lengthy delay in a claim for lien case…constitutes prejudice to the defendants...If the lien claimant wants to take advantage of the provisions of the Construction Lien Act and tie up title to a defendant's property, it ought to proceed expeditiously to have its claim determined... A lien claimant ought not to be entitled to sit back and allow years to pass while the defendant's property (or, as in this case, the defendant's money) is held hostage. (Southwestern, para. 16).

[39] Unsurprisingly, the thirteen year delay in bringing the Southwestern actions to trial was held to be entirely unreasonable. The dismissals were upheld.

[40] Where the delay involved is thirteen years, the decision to dismiss for delay is not a particularly difficult one. The same cannot be said when the delay is four years. To be fair, and taking plaintiff’s counsel at his word, this case will not be ready for trial until the spring sittings in 2019, so the delay in getting this case to trial will inevitably be more like five years, rather than four.

[41] Reasonable people may differ about whether a five year delay in getting a lien action to trial is presumptively unreasonable. I consider this to be a straddle case. In other words, it is in the grey zone between clearly acceptable and clearly unacceptable. It is necessary, in a case like this one, to take a careful and nuanced look at all of the prevailing circumstances.

[42] I intend to examine the prevailing circumstances under the following headings: (a) statutory guidance; (b) the complexity of the proceedings; (c) the explanation for the delay; and, (d) prejudice.

(a) Statutory Guidance

[43] The current iteration of Rule 48.14 of the Rules of Civil Procedure provides that, unless ordered otherwise, actions are to be dismissed by the registrar unless set down for trial or otherwise terminated within five years of commencement, or where the matter was not restored to a trial list within two years of being struck from the list. In other words, a presumptive ceiling of five years has been set for ordinary civil cases to be set down for trial.

[44] The Construction Lien Act has a presumptive ceiling of two years to set an action down for trial under s. 37(1). The amended Construction Act does not alter that presumptive ceiling. If a lien action is not set down for trial within two years, or if an order for a trial has not been obtained within two years, the lien expires. On motion, the court is required to dismiss the lien action and vacate the lien.

[45] The Legislature must, of course, be taken to have acted intentionally in setting a markedly shorter time period in which to set a lien action down for trial, as opposed to an ordinary civil claim. There are valid reasons for the distinction.

[46] First, as I noted above, lien actions are intended to be, insofar as possible, summary proceedings.

[47] Second, sub-contractors, like Fuda, normally have no cause of action against an owner at common law; at least not in contract. [4] The CLA creates a statutory claim against an owner, based on the principle that an owner ought not to obtain a benefit of improvements to its lands without paying for them: see Laskin J.A. in dissenting reasons in Gillies Lumber Inc. v. Kubassek Holdings Ltd., [1999] O.J. No. 2692. Because the CLA creates a right not otherwise available at common law, many of its provisions are strictly construed. Given the mandatory consequences that flow from a failure to comply with s. 37(1), the time period in which to set a lien action down for trial is clearly intended to be strictly construed.

[48] Third, the CLA grants contractors and sub-contractors a limited priority over other creditors. It makes good commercial sense that the priority be resolved as expeditiously as possible.

[49] Finally, a lien claimant is able to tie up an owner’s lands, or alternatively money, for a potentially considerable period of time, pending resolution of the dispute.

[50] In summary, the Rules of Civil Procedure, the relevant provisions of the CLA, and the animating principles of that Act, support the conclusion that lien actions are intended to be prosecuted diligently and expeditiously.

(b) Complexity of the Proceedings

[51] As lien actions go, this one is reasonably complex. It is not at the high end of complexity, which I would reserve for mega projects with multiple layers of liens. On the other hand, it is not at the low end of complexity, which I would reserve for the typical home renovator type of case.

[52] Park Place is a substantial project. The work done by Fuda was at the site servicing stage of the project. It was a sizeable contract – something in excess of $6 million – which is the largest contract Fuda had ever undertaken. It involved three separate purchase orders and, arguably, an additional oral contract. Substantial revisions to the scope of the work occurred as the project progressed. Following the course of the contracted work is a difficult task in and of itself. On top of that there are alleged deficiencies and back charges. Expert evidence is evidently necessary to address the scope of the project and the validity of any deficiency claims. Moreover, Fuda admittedly walked off the job site. Whether they were lawfully justified in doing so will be a central issue for trial.

[53] While the presumptive ceiling of two years provided for in s. 37(1) of the CLA is instructive in terms of delay issues, not all lien claims are alike. Obviously some are substantially more complicated than others. This one is sufficiently complicated that some leeway must be afforded to Fuda in terms of the time needed to get the case trial ready.

(c) Explanation for the Delay

[54] The principal of Fuda, Mr. Michael Fuda, swore an affidavit on June 14, 2018 in which he did his best to explain why this action has taken four years to get to its current state of being another year shy of trial readiness. He said as follows:

(a) Pleadings were complete by the fall of 2014;

(b) Discoveries were completed by March, 2016;

(c) In July 2016, the parties held a settlement meeting, which included their respective consulting engineers. Fuda’s expert expressed the need for additional documents. North American took the position that they would not provide further documentary disclosure;

(d) Following a motion brought by Fuda, North American, on consent, provided additional documentation requested by Fuda’s expert in July 2017, including a revised Scott Schedule;

(e) Fuda produced an expert’s report, based on the additional documentation, in June 2018. Fuda is now ready to attend a comprehensive, substantive pre-trial, which is necessary before this matter is placed on the ready trial list.

[55] There was a time, probably not that long ago, where courts would consider the progress of this action – as outlined by Mr. Fuda – to be unremarkable. But the culture has changed. It did not change on a dime. For years, access to justice issues, including delays and costs, have been a major talking point in legal circles. The Supreme Court has signaled very clearly in cases like R. v. Jordan, as above, and Hryniak v. Mauldin, 2014 SCC 7, that a paradigm shift is required in terms of the way justice is delivered in this country. Courts and litigants share a collective burden of ensuring that judicial resources are utilized as efficiently and effectively as possible and that cases proceed through the judicial system as quickly as reasonable practicable.

[56] In the climate in which we currently operate, it strikes me as problematic that it took the better part of a year and a half to complete discoveries in this proceeding, once pleadings were complete. Moreover, discoveries were completed in this proceeding, which is fully case-managed by the way, in the spring of 2016. It is now mid-summer 2018 and the case is still not trial ready. Again, problematic.

(d) Prejudice

[57] This case is an odd one in terms of assessing prejudice.

[58] There is no assertion by Fuda or Amari that North American did not comply with its holdback obligations. Fuda has no independent claim against North American above and beyond their respective interests in the funds paid into court. Accordingly, the prejudice to North American is focused solely on the fact that they have $400,000 held by the Accountant of the Superior Court pending the final resolution of this case.

[59] It seems axiomatic that anyone with $400,000 tied up in court is going to want it back as soon as possible. But the obvious prejudice to North American in having its money tied up in court is attenuated in large part by the following factors:

(i) This was a major project. While $400,000 is a lot of money, it is less than 10% of the value of Fuda’s contract and a tiny fraction of the overall value of the project;

(ii) Fuda has consented to numerous, significant reductions in the amount of security held in court. It has been reduced from $3.1 million to $400,000, which is almost a 90% reduction;

(iii) Clearly there was some validity to the lien claims of Fuda and/or its subcontractors. Roughly $3/4 million has been paid out to Fuda’s sub-trades since this action began; and,

(iv) North American commenced a separate action against Fuda for slander of title in November 2014. Their counsel confirmed that they have every intention of pursuing that action to its conclusion. Accordingly, regardless of the outcome of this motion, North American will continue to be involved in litigation with Fuda; litigation where the validity of Fuda’s claim for lien must be litigated. For North American, success on this motion will accomplish two things: return of the remaining $400,000 in security and an advantage in the companion litigation. It will not bring an end to the litigation between the parties, nor even reduce the issues to be litigated.

[60] This case is a close call. Undoubtedly Fuda could, and should, have moved the case along with more pace. They are, in my view, beyond the time frames reasonably contemplated by the CLA for the prosecution of actions under that statute.

[61] At the same time, there are reasonable explanations for at least some of the delay. First, this is a reasonably complex action. It is unrealistic to expect it would have been trial ready within two years. Second, there was a dispute between the parties regarding the production of documents. From my current vantage point I cannot say who was right or wrong in terms of the dispute. But it clearly held up proceedings somewhat.

[62] It is also not the case that the file, from the plaintiff’s point of view, has simply been collecting dust in a filing cabinet. Fuda has not moved the file as quickly as it ought to have, but at the same time, it has pushed the file forward in a consistent manner. Additionally, Fuda has been very compromising in consenting to reductions of the amount of security paid into court. Those reductions go a long way to alleviating any ongoing prejudice to North American. In view of the reductions and the existence of the ongoing companion action, I am not persuaded that the prejudice to North American or to the reputation of the administration of justice has reached the point where dismissing Fuda’s action is justified. But it is getting close.

[63] North American’s motion is dismissed. But it may be reinstated should Fuda not have this matter on the ready trial list prior to the spring 2019 trial sittings. Fuda will be required, in the meantime, to serve any expert reports it intends to rely upon and arrange for a substantive settlement conference by the end of this calendar year.

[64] If the parties are unable to agree on the costs of this motion they may make submissions to me in writing, not to exceed two pages in length (excluding any Costs Outlines). Fuda shall serve and file its submissions by August 17, 2018. Amari a week after that. North American, by August 31, 2018. Submissions should be filed electronically with my assistant, Diane Massey, at diane.massey@ontario.ca.

Boswell J.

Released: August 3, 2018

Notes

[1] For the purposes of this motion, there is no relevant distinction between the parties North American (Park Place) Corporation and North American (Park Place East) Corporation. I will refer to them collectively as “North American”

[2] The Construction Lien Act was very recently amended by the Construction Lien Amendment Act, S.O. 2017, c. 24, Bill 142, which came into force on July 1, 2018. The Act is now known as the Construction Act, R.S.O., c. C.30. Section 47 has been amended, however the amendments do not apply to actions, like this one, where the contract for the improvement in issue was entered into before the amendments came into effect: see s. 87.3(1).

[3] A Scott Schedule is a table that provides details about the issues between the parties and their respective positions. For instance, a contractor may set out, in numerical order, the various items of work done, the amounts paid and the balance outstanding. An owner may then add columns indicating any complaints with the work done and any costs required to rectify deficient work.

[4] Fuda’s counsel argued that his client has a claim against North American grounded in unjust enrichment, but the pleadings contain no such claim. North American is a party to this proceeding solely because it paid money into court to vacate the liens on its lands. I add that there is no dispute that North American complied with its holdback obligations. Apart from its potential interest in the funds paid into court to vacate the liens, Fuda has no independent claim against North American.