Court File and Parties

COURT FILE NO.: CV-18-77373 DATE: 2019/06/05

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

9585800 Canada Inc., o/a Earth Movers Plaintiff – and – JP Gravel Construction Inc., Morguard Realty Holdings Inc. and Jean-Pierre Gravel Defendants

Counsel: Martin Diegel for the Plaintiff Ian B. McBride and Stephane P. Bond for the Defendant JP Gravel Construction Inc. and Jean-Pierre Gravel

HEARD in Ottawa: April 5, 2019

REASONS FOR DECISION

O’Bonsawin J.

Background

[1] This dispute arises out of a series of construction liens that were filed with regards to a property known municipally as 449 Hazeldean Road, Kanata, Ontario (“Project”). The Defendant, JP Gravel Construction Inc. and Jean-Pierre Gravel (“JP Gravel”), brings this motion seeking:

• leave to bring its motion;
• an Order discharging the claim for lien registered on title by the Plaintiff, 9585800 Canada Inc. o/a Earth Movers (“Earth Movers”);
• an Order dismissing the lien action;
• an Order cancelling the security posted;
• an Order for the repayment of the bonding invoice and costs of the motion posting security to be paid by Mr. Diegel, Earth Mover’s counsel, and Omar Ghadban, Project Coordinator & Civil Estimator for Earth Movers, jointly and severally; and
• costs of this motion.

[2] Earth Movers, brings a Motion without having filed a Notice of Motion, for relief from forfeiture, striking out JP Gravel’s Affidavit and amending its Statement of Claim.

Findings of Fact

[3] Based on my review of the documents and having heard submissions from counsel, I make the following findings of fact.

[4] JP Gravel entered into an agreement (“Subcontract”) with Earth Movers regarding the Project. Morguard Realty Holdings Inc. (“Morguard”), the co-defendant, was the owner of the Project. JP Gravel was hired as the general contractor for the Project, it hired Earth Movers who in turn hired Karson as its subcontractor.

[5] The original Subcontract between JP Gravel and Earth Movers was in the amount of $315,000 exclusive of taxes. The affiants disagree about the scope of the work relating to the Subcontract and the amount to be allocated for the extra work. Furthermore, there is a dispute as to whether or not Earth Movers’ work was deficient and substandard.

[6] The contractual relationship between JP Gravel and Earth Movers broke down and on May 15, 2018, Mr. Diegel, counsel for Earth Movers, registered a construction lien (“First Lien”) in the amount of $662,100.48 on the basis of a fully completed contract against the Project. On June 4, 2018, Earth Movers proceeded to discharge the lien and registered a further construction lien (“Second Lien”) for the same amount and using substantially the same information as contained in the May 15, 2018, lien.

[7] On June 8, 2018, another lien was registered on the Project by West Carleton Sand & Gravel Inc. o/a Karson Aggregates (“Karson”) in the amount of $46,256.88. Karson is a subcontractor of Earth Movers.

[8] Counsel for JP Gravel and Earth Movers corresponded with regards to the Second Lien. JP Gravel took the position that the Second Lien was invalid and should be discharged. Earth Movers’ final response was that if JP Gravel did not accept Earth Movers’ offer to settle, litigation would ensue and the Officers and Directors of JP Gravel would be named as parties to the litigation. In response, JP Gravel filed this motion.

[9] On July 24, 2018, JP Gravel paid the lien bond in the amount of $1,156 for the Karson lien and $16,553 for the Earth Movers lien.

[10] On August 3, 2018, Earth Movers issued a Statement of Claim in this matter.

[11] A bond was obtained on July 9, 2018, however, it was not served on JP Gravel. The lien was vacated on July 23, 2018, by an Order.

Issue

[12] Should the Second Lien be dismissed?

Position of the Parties

[13] JP Gravel argues that the Second Lien was invalid and wildly exaggerated given that little if anything was owed to Earth Movers.

[14] Earth Movers submits that JP Gravel’s discharge of the First Lien did not amount to a permanent release under s. 48 of the Construction Lien Act, R.S.O. 1990, c. C.30 (“CLA”), and therefore it is entitled to file its Second Lien and perfect that lien.

[15] Alternatively, Earth Movers argues that it is entitled to relief from forfeiture under s. 98 of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[16] Earth Movers acknowledges it was an error to have combined the trust claim with the lien claim and seeks to remedy this by amending its Statement of Claim as per r. 26 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

Analysis

[17] The parties agree that since the agreement in this matter predates the substantial changes to the Construction Act, R.S.O. 1990, c. C.30, the lien claim is governed by the previous act, the CLA.

[18] I must first deal with JP Gravel’s leave to bring its motion as per s. 67(2) of the CLA. Section 67(2) states as follows:

Interlocutory steps

67 (2) Interlocutory steps, other than those provided for in this Act, shall not be taken without the consent of the court obtained upon proof that the steps are necessary or would expedite the resolution of the issues in dispute.

[19] In Limen Structures Ltd. v. Brookfield Multiplex Construction Canada Limited, 2016 ONSC 5107, 71 C.L.R. (4th) 305, at para. 6, Master Albert found that “[f]or leave to be granted the moving party must meet only one of the statutory tests.” JP Gravel argues that this motion is the most expeditious resolution of the lien claim, since it would reduce cost, complexity and time of this dispute. Furthermore, it argues that Earth Movers will not be prejudiced as it will still be within its right to commence a breach of contract claim against the Defendants if it wishes to do so. I agree with JP Gravel that this motion is the most expeditious and cost-effective way to resolve the lien claim and therefore grant JP Gravel leave to pursue its motion.

[20] At the second day of hearing, JP Gravel’s counsel advised me that his client was no longer seeking costs to be paid by Mr. Diegel. Consequently, I will not consider this issue.

[21] I will review the relevant provisions of the CLA. Section 35(1) of the CLA deals with exaggerated and/or false claims. JP Gravel submits that this provision was designed to deter the preservation of negligently or intentionally exaggerated lien claims or non-lienable claims. Section 35 reads as follows:

Liability for exaggerated claim, etc.

35. In addition to any other ground on which the person may be liable, any person who preserves a claim for lien or who gives written notice of a lien,

(a) for an amount which the person knows or ought to know is grossly in excess of the amount which the person is owed; or

(b) where the person knows or ought to know that the person does not have a lien,

is liable to any person who suffers damages as a result.

[22] Section 47 of the CLA provides for the power of the court to discharge a lien. It reads as follows:

General power to discharge lien

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 the circumstances.

[23] Section 48 of the CLA deals with whether or not a discharged lien can be revived. Section 48 reads as follows:

Discharge irrevocable

48. A discharge of a lien under this Part is irrevocable and the discharged lien cannot be revived, but no discharge affects the right of the person whose lien was discharged to claim a lien in respect of services or materials supplied by the person subsequent to the preservation of the discharged lien

[24] In Landmark v. 1535709 Ontario Ltd. (2008), 75 C.L.R. (3d) 157 (Ont. S.C.), van Rensburg J. found that the Plaintiff registered a claim for lien that it ought to have known was grossly in excess of the amount it was owed by the Defendant and awarded damages to the Defendant as per s. 35 of the CLA (see also Scepter Industries Ltd. v. MacIntosh and MacDonald Homes Inc. (Trustee of) v. 974040 Ontario Ltd. (1998), 4 C.B.R. (4th) 80 (Ont. Gen. Div.)).

[25] JP Gravel argues that Earth Movers registered a lien that it knew or ought to have known was grossly in excess of the amount owed and that the discharge of the First Lien caused the Second Lien to be invalid. Consequently, JP Gravel submits that the Second Lien is invalid. In addition, by refusing to discharge the lien, Earth Movers forced JP Gravel into paying the lien bond in the amount of $17,709. JP Gravel asks this court to find that Earth Movers is responsible for those unnecessary costs.

[26] Earth Movers argues that the First Lien was discharged on June 4, 2018, due to an error in the time of delivery of services which was stated as being to May 2017 rather than to May 2018. The time frame typographical error was corrected in the Second Lien which was registered on June 4, 2018, immediately after the discharge was registered. Earth Movers had no intention of discharging its entitlement to a lien against JP Gravel.

[27] Based on the affidavit evidence before me, I cannot find that Earth Movers registered a lien, the amount of which it knew or ought to have known had been wilfully exaggerated. Both affiants in this matter contradict each other’s evidence; there is no clear evidence one way or the other.

[28] In the alternative, JP Gravel submits that based on the facts of this matter, it possesses proper grounds to seek an Order discharging the Second Lien and dismissing the action pursuant to s. 47(1) of the CLA.

[29] Earth Movers argues that it obtained a bond which stood in place of the land as security. It submits that a lien can be bonded off by obtaining an Order to provide security to replace the lien and then filing proof of same to obtain a further Order to vacate the lien, which Order is then registered to vacate the lien. A lien can also be vacated by a court Order as per s. 48 of the CLA.

[30] In Southridge Construction Group Inc. v. 667293 Ontario Ltd. (1992), 11 O.R. (3d) 56 (Gen. Div.), aff’d (1993), 12 O.R. (3d) 223 (Div. Ct.), the Plaintiff, a general contractor, registered a lien against the property of the Defendant. The Plaintiff subsequently discovered that it had mistakenly understated the amount of its lien and registered a second lien for the correct amount and discharged the first lien by registering a release of lien. The Plaintiff then started its action and registered a certificate of action. The Defendant moved as per s. 47(1) of the CLA to discharge the lien, vacate the registrations and dismiss the action based on s. 48 of the CLA since the Plaintiff’s right to pursue the lien had been lost by the registration of the discharge. Master Sandler found in favour of the Defendant since the lien rights in the second claim for lien had been eliminated and discharged by the registration of the Release. However, he commented in obiter that the proper procedure should have been as follows (at pp. 61-62):

once the error in amount was discovered, and because the plaintiff was still in time to register another claim for lien, was to register a second claim for lien claiming the additional amount that had been omitted, in error, from the first claim for lien, and then start an action to enforce both liens. A second, acceptable alternative would have been to register a second lien for the correct full amount of the plaintiff's claim, again assuming it could be done in time, and then move, under s. 47(1)(b), on notice, for an order vacating the registration of the first lien, so as to avoid any liability under s. 35 of the Act for “exaggerated claims”. Of course, if the error in amount is discovered after the time limited for registering a lien has expired, then the only thing the lien claimant can do, is seek to amend the statement of claim in any action commenced to enforce the lien, within the limits set down in Favot Construction Ltd. v. Maplecrest Inc. (1990), 42 C.L.R. 34 (Ont. Gen. Div.), and my own recent judgment in AFG Glass Inc. v. Glaxo Ltd., Ont. Gen. Div., Master (unreported), February 27, 1992 14 pages [summarized 31 A.C.W.S. (3d) 867]. [Emphasis in original.]

[31] In the appeal decision, Steele J. stated: “[a]lthough in equity the result appears harsh I agree with the decision of the Master” (at p. 223).

[32] I find that this matter is distinguishable from Southridge in which the error related to the amount listed in the lien. The second registered lien encompassed the work completed in the first lien. Consequently, s. 48 of the CLA applied. In this matter, the error related to the year in which the work was performed. As per article 4.1 of the Subcontract, the “Subcontractor shall perform the Subcontract Work: …3 starting on or about 30/10/2017 and substantially perform the Subcontract Work by, on or about 31/01/18.” In the First Lien that was registered, the document noted under the heading “Statements”: “Time within which services or materials were supplied from 2017/10/30 to 2017/05/09.” This timeframe is clearly incorrect since the work was not performed during this period. I find the First Lien to be a nullity since it was a lien for non-existent work. Consequently, I find that the Second Lien is an appropriate lien. Since the Second Lien is valid, s. 48 of the CLA does not apply in this matter.

[33] Earth Movers argues that s. 48 of the CLA amounts to a forfeiture of the lien claimant’s security in the land by way of a lien and, as such, amounts to a forfeiture. Since I have found the Second Lien to be valid, I need not review the issue of forfeiture.

Conclusion

[34] Based on all of the evidence before me, I find that the Second Lien is valid and shall remain in place. Consequently, I dismiss JP Gravel’s motion.

Costs

[35] Earth Movers is the successful party in this case. A successful party is presumptively entitled to costs in a reasonable amount (Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.)). The amount awarded is intended to be fair and reasonable for the unsuccessful party, but not fixed by the actual costs incurred by the successful party (Boucher at paras. 24 and 26).

[36] The court has discretion to award costs pursuant to s. 131 of the Courts of Justice Act, and r. 57.01 of the Rules (Goldman v. Weinberg, 2017 ONSC 4743, at para. 4 (citing Chandra v. CBC, 2015 ONSC 6519)). Rule 57.01(1) sets out a number of factors to be considered in determining costs.

[37] Parties often argue that costs should follow the event. This was confirmed in Schreiber v. Mulroney, at para. 2. Substantial indemnity costs are the exception to the rule.

[38] I have taken into consideration the factors in Rule 57.01(1), for example, the matter was partially complex, the issues were important to both parties and I did not conclude that the conduct of the parties were inappropriate.

[39] I find that the costs sought by Earth Movers are very reasonable. I exercise my discretion and award reasonable costs in the amount of $3,350.

[40] Mr. McBride acted as agent for Morguard. However, Morguard did not file any material or put forward a position at this Motion. Consequently, it is not awarded any costs.

Justice M. O’Bonsawin

Released: June 05, 2019