Court File and Parties

COURT FILE NO.: CV-17-130333 (Newmarket) MOTION HEARD: 2019 05 24

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: QH Renovation & Construction Corp. v. 2460500 Ontario Ltd., 2466900 Ontario Inc. and Xiaohong Li, also known as Linda Xiaohong Li, also known as Linda Li

BEFORE: MASTER R. A. MUIR

COUNSEL: Paul H. Starkman for the plaintiff Lena Wang for the defendants

REASONS FOR DECISION

[1] This is a construction lien action. This motion is brought by the defendants seeking a declaration that the plaintiff’s lien has expired. The defendants also seek an order discharging the lien and for the return of the cash security posted by the defendants. The plaintiff is opposed.

[2] The plaintiff alleges that it was retained by the defendants to perform certain renovation work at a property located at 50 Innovator Drive, Stouffville, Ontario (the “Property”).

[3] The plaintiff alleges that it supplied services and materials to the defendants pursuant to an agreement between the parties but the defendants have failed to pay the plaintiff the outstanding amount owing under the agreement of $40,695.41. The defendants deny that any amounts are owing to the plaintiff and have brought a counterclaim alleging incomplete and deficient work. The defendants also claim additional damages for loss of revenue.

[4] The plaintiff registered a claim for lien on title to the Property on January 30, 2017. This action was started on March 15, 2017. On November 15, 2018, Master Wiebe made an order vacating the registration of the plaintiff’s claim for lien upon the defendants posting $50,868.75 cash security.

[5] I made a consent timetable order on May 3, 2018. My order provided that the parties comply with a schedule that included a provision that this action be set down for trial by March 31, 2019 and that the registrar shall dismiss this action for delay pursuant to Rule 48.14 unless the action is set down for trial by May 31, 2019. While these two deadlines are not consistent with each other, nothing turns on this inconsistency for the purposes of this motion.

[6] On March 22, 2019, the defendants brought a without notice motion seeking the same relief they are requesting on this motion. The without notice motion came before me in Toronto. I adjourned the motion to be brought on notice to the plaintiff. This motion was ultimately heard by me as an opposed motion on May 24, 2019.

[7] In the interim, the plaintiff served a trial record dated March 25, 2019. It was filed in the Newmarket court office on March 28, 2019.

[8] The Construction Act, RSO 1990 c. C.30 (the “Construction Act”) came into force on July 1, 2018. However, pursuant to section 87.3 of the Construction Act, the provisions of the former Construction Lien Act (the “CLA”) continue to apply if the contract for the subject improvement was entered into prior to July 1, 2018. For this reason, the provisions of the former CLA apply to this proceeding.

[9] Section 37 of the CLA provides as follows:

37. (1) A perfected lien expires immediately after the second anniversary of the commencement of the action that perfected the lien, unless one of the following occurs on or before that anniversary:
38. An order is made for the trial of an action in which the lien may be enforced.
39. An action in which the lien may be enforced is set down for trial.

[10] Section 46 of CLA reads as follows:

46. (1) Where a perfected lien that attaches to the premises has expired under section 37, the court, upon the motion of any person, shall declare that the lien has expired and shall make an order dismissing the action to enforce that lien and vacating the registration of a claim for lien and the certificate of action in respect of that action. (2) Where a perfected lien that does not attach to the premises has expired under section 37, the court, upon the motion of any person, shall declare that the lien has expired and shall make an order dismissing the action to realize upon that lien. (3) A motion under subsection (1) or (2) may be brought without notice, but no order as to costs in the action may be made upon the motion unless notice of that motion was given to the person against whom the order for costs is sought. (4) Where an action is dismissed under subsection (1) or (2), the court shall order that, (a) any amount that has been paid into court under section 44 in respect of that action be returned to the person who paid the amount into court; and (b) any security that has been posted under section 44 in respect of that action be cancelled.

[11] When read together, these sections of the CLA appear to require an action to enforce a lien to be set down for trial or for a trial date to be fixed within two years. If neither of these steps is taken, the court shall declare the lien expired and make an order dismissing the action to enforce the lien and order the return of any posted security.

[12] This action was started on March 15, 2017. It was not set down for trial until March 28, 2019. No order was made for the trial of this action. There is no other lien action in which the plaintiff’s lien may be enforced. The defendants submit that the plaintiff’s lien has therefore expired under section 37 of the CLA and the court must make the orders required by section 46 of the CLA.

[13] The plaintiff relies on my timetable order of May 3, 2018. The plaintiff argues that my order reflected an agreement between the plaintiff and the defendants that the time under section 37 of the CLA for setting this action down for trial would be extended to at least March 31, 2019. The plaintiff submits that the subsequent consent order made by me reflects that agreement and extends the prescribed time. The action was then set down on March 28, 2019 within the time allowed pursuant to the parties’ agreement and the consent order.

[14] The difficulty I have with the plaintiff’s argument is that there is simply no authority for the proposition that the parties may, through mutual agreement or by a consent court order, agree to extend the mandatory time period set out in section 37 of the CLA. In fact, the authorities support the opposite conclusion.

[15] The provisions of sections 37 and 46 are mandatory. See 310 Waste Ltd. v. Casboro Industries Ltd., [2006] OJ No. 3817 (CA) at paragraph 3. Justice Lederer considered sections 37 and 46 of the CLA in Krypton Steel Inc. v. Maystar General Contractors Inc., 2018 ONSC 3836 (Div Ct). He made the observation that the court has no power to set aside or adjust a deadline set out in a statute. See Krypton at paragraph 11. In arriving at that conclusion, Justice Lederer adopted the reasoning of the Divisional Court in Benjamin Schultz & Associates Ltd v. Samet, [1991] OJ No. 1405 (Div Ct) at paragraphs 5 and 6 of that decision:

5 It was argued in the Ramrock case and in the present case that the court had a discretion to relieve against the operation of limitation periods, and that the court should exercise its discretion in special circumstances. While the Ramrock decision refers to lands of third parties, I would adopt the following reasons as being applicable to the present case:

... [I]t is my respectful view that the legislature, in enacting s. 37, intended by the wording therein to eliminate any lien from further validity upon the expiry of 2 years if no date for trial is fixed within 2 years of the date of commencement of the action. The effect of this section is to invalidate encumbrances to the land of third parties simply by the operation of time.

It is a statutory mandate and leaves no room for judicial discretion.

Section 46, likewise, provides for a mandatory disposition upon the motion of any person. Upon such a motion the court shall and must declare the lien expired, dismiss the action and vacate the lien.

This language is pure and unequivocal and leaves no room for judicial intervention to preserve an action.

Such provisions as these no doubt exist to alleviate needless or vexatious encumbrance of land, a problem much less evident in other kinds of litigation where land cannot be encumbered so easily ex parte and where, accordingly, the rules to relieve against the inadvertent failings of parties to move an action forward are much more forgiving and flexible.

6 While there is no evidence of prejudice to any party in the present case, this is irrelevant, because there is no discretion in the court. Section 37 extinguishes a lien. It is not a limitation period and cases such as Basarsky v. Quinlan, [1972] S.C.R. 380, 24 D.L.R. (3d) 720, giving the court power to grant relief from limitation periods, are not applicable. [1]

[16] In my view, these decisions of the Court of Appeal and the Divisional Court are clear and binding on this court. The provisions of sections 37 and 46 of the CLA are mandatory. There is no room for judicial discretion. Section 46 of the CLA calls for a mandatory disposition of a motion to declare a lien expired in these circumstances. Prejudice is not a consideration. I note that in Krypton, Justice Lederer declined to give effect to a consent order that purported to satisfy the requirements of section 37 of the CLA. See Krypton at paragraph 23.

[17] The plaintiff relies on the decision of the Court of Appeal in 310 Waste Ltd. In my view, this decision does not assist the plaintiff. The Court of Appeal expressly declined to decide whether there would ever be circumstances warranting a judicial relaxation of the mandatory expiration period in section 37 of the CLA. See 310 Waste Ltd. at paragraph 4. In light of this, it is my view that the decisions of the Court of Appeal and the Divisional Court, cited above, continue to be binding on this court.

[18] In any event, even if this court has the power to extend the time limit set out in section 37 of the CLA, the circumstances of this case would not warrant the exercise of such a discretion. I am far from satisfied that the evidence on this motion supports the plaintiff’s argument that the parties agreed to extend that time limit. The plaintiff’s responding affidavit is sworn by a law clerk on information and belief. It simply states that the parties agreed to a schedule for the litigation which was eventually incorporated into a consent order. Nowhere in the plaintiff’s evidence is there a reference to an agreement for the extension of time under section 37 of the CLA. I also note that there is no evidence on this issue from the former lawyer for the defendants who was on the record until December 2018.

[19] The discovery plan agreed to by the parties indicates, incorrectly, that this is an ordinary action. The box applicable to construction lien actions was not checked off. There is no reference in the discovery plan to this being a construction lien action. My order of May 3, 2018 does not refer to an extension of the time limit under section 37 of the CLA. In fact, the CLA is not referenced at all in the consent order, including the usual reference to the CLA found in the title of proceedings. It is important to note that while this proceeding includes a claim to enforce a lien, it also includes an ordinary breach of contract claim between a contractor and owners which will continue regardless of the outcome of this motion.

[20] For these reasons, I have concluded that the plaintiff’s lien has expired and the defendants are entitled to the relief they are requesting on this motion.

[21] One final issue must be addressed. This motion was initially brought without notice to the plaintiff. This is an active and ongoing claim. The plaintiff is represented by counsel. In fact, a contested undertakings and refusals motion was scheduled to be heard in Newmarket on March 25, 2019, the next business day after the plaintiff’s lawyer appeared before me in construction lien ex parte court in Toronto. In my view, it was not appropriate for the defendants, in these circumstances, to have brought this motion without notice. Simply because a statute or rule permits a motion to be brought without notice does not make it appropriate in all circumstances.

[22] In addition, my consent order of May 3, 2018 was not included in the defendants’ evidence. I have determined that the order does not assist the plaintiff in the circumstances of this motion. However, it is obviously relevant evidence that should have been brought to the attention of the court for its consideration on a without notice motion. Without notice motions require full disclosure at all times.

[23] I therefore declare that the plaintiff’s lien has expired and order as follows:

(a) the plaintiff’s lien is discharged; (b) the accountant of the Superior Court of Justice shall deliver up to Glaholt LLP in trust the cash security, along with accumulated interest, posted by the defendants pursuant to the order of Master Wiebe of November 15, 2018 and filed as accountant’s account number 552346; (c) this action and the counterclaim shall continue as an ordinary action; (d) the formal order from this motion shall be submitted to me for signing, once approved as to form and content by counsel for the plaintiff; and, (e) if the parties are unable to resolve the issue of the costs of this motion, they shall provide the court with brief written submissions by July 2, 2019, which may be sent directly to me by email.

Master R. A. Muir DATE: 2019 05 29

[1] See Krypton at paragraph 18.