REASONS FOR DECISION

Kane J.

[1] The defendant 2566213 Ontario Inc. owns a condominium unit (the “Owner” and the “Unit”) in which Dr. Arasteh was to carry on his dentistry practice.

[2] The Owner on April 4, 2018, entered into a contract with GTA General Contractors Ltd. (the “Contractor”) in the amount of $207,761 for renovations to the Unit.

[3] The Contractor engaged Karar Al-Najari, who carried on business under the name Kastone Construction Management (the “Subcontractor”), as project manager for the above renovations of the Unit.

[4] The Contractor and the Subcontractor each registered a lien against the Unit for unpaid labor and materials regarding their renovation work on the Unit. The unpaid work and materials liened by the Subcontractor are part of the work contracted between the Contractor and the Owner and are included in the lien registered by the Contractor.

[5] The Owner in this motion pursuant to sections 44, 45 and 47 of the Construction Lien Amendment Act, 2017 (the “Act”), seeks:

(a) a declaration that the Contractor’s lien registered August 13, 2018 as OC2023706 (“Lien 706”) in the amount of $68,959, was not preserved or perfected in time and has expired;

(b) an order that Lien 706 be discharged;

(c) a declaration that the Subcontractor’s lien registered September 5, 2018 as OC2032803 (“Lien 803”) in the amount of $61,521, was not preserved in time, was never perfected by the commencement of an action and has therefore expired;

(d) an order that Lien 803 be discharged;

(e) an order that Lien 706 and Lien 803 be struck pursuant to s. 45 of the Construction Lien Act R.S.O. 1990, c. C.30, (the “Act”) and discharging their registration against the Unit as such liens were not as required preserved in time pursuant to s. 31(2) and 34(1) of the Act and not perfected pursuant to s. 36(1) and (3) of the Act;

(f) an order that the $86,198.95 paid into court by the Owner as security to vacate Liens 706 and 803, be paid out forthwith to the Owner; and

(g) costs.

[6] The Owner submits that:

(a) the improvements to the Unit intended to be performed by the Contractor and Subcontractor as reflected in Lien 706 and Lien 803, were completed prior to July 1, 2018;

(b) GTA intended to hand over the project, or alternatively terminated or abandoned the project, on June 18, 2018;

(c) the post-June 18, 2018 discussions between the parties were related to work deficiencies and did not extend the time to preserve the Contractor’s lien;

(d) no renovation or remedial work was performed after June 18, 2018;

(e) the time from June 18, 2018 to preserve the liens expired on August 2, 2018, after which Lien 706 and Lien 803 were registered on August 13 and September 5, 2018 respectively;

(f) Line 706 and Lien 803 were not therefore preserved or perfected within the legislative time limits; and

(g) the Subcontractor’s failure to perfect its Lien 803 includes it failure to commence an action as required in the Act.

[7] The Contractor and Subcontractor in opposing this motion submit that:

(a) the Owner failed to seek the required leave to bring this interlocutory motion under s. 67(2) of the Act;

(b) leave to bring this motion in the alternative should not be granted as the outcome thereof will not determine the underlying liability issue as between the parties for which a trial will be required as it has not met its onus in establishing that there is no triable issue requiring a trial; and

Analysis

Whether Motion is Final or Interlocutory and Whether Leave Required

[8] The court in 2016637 Ont. Inc. v. Catan Canada Inc. et al, 2012 ONSC 2055, para. 9, held that:

(a) s. 67(1) requires that the procedure in a lien action be as far as possible of summary character having regards to the amount and nature of the liens in issue;

(b) s. 67(1) recognizes there may be a broad spectrum of lien actions and the degree to which the procedure is summary will vary depending upon the amount and nature of the liens in issue;

(c) the leave requirement for introductory steps in s. 67(2) is the court’s gatekeeper function to ensure that the process is as summery as it should be; and

(d) the purpose of s. 67(2) is to permit the court to consider the degree to which a particular lien action should be summery in nature and to determine whether an introductory step is necessary to achieve procedural fairness or expedite the resolution of the issue in dispute.

[9] The court for several reasons disagrees with the Contractor’s submission that this is an interlocutory motion which cannot be brought without leave pursuant to s. 67(2) of the Act.

[10] The s. 67(2) interlocutory leave requirement exempts interlocutory steps provided for in the Act.

[11] Sections 45 and 47 of the Act permit the bringing of this motion before trial. This motion accordingly is exempt from the s. 67(2) requirement for leave to bring an interlocutory motion.

[12] The relief sought in any event is of a final nature because such relief if granted, will determine substantive rights of the parties and is not therefore interlocutory in nature.

[13] If the Owner’s motion to discharge Lien 706 and Lien 803 is granted:

(a) these claims as construction liens and their pursuit with the advantages afforded in lien actions under the Act will be terminated;

(b) the Subcontractor will lose the right to shelter its lien under the perfected lien of the Contractor which currently has carriage of the proceeding and will loose the summary procedure advantages and cost savings of a construction lien action;

(c) the Subcontractor, given the absence of a contractual relationship between itself and the Owner, will lose its right under the Act to pursue its claim against the Owner and will instead be required to commence a proceeding and sue the Contractor in contract: HMI Construction Inc. v. Index Energy Mills Road Corp., 2017 ONSC 4075, para. 11;

(d) this proceeding by the Contractor may be continued as a regular action in contract against the Owner but absent the expedited procedure and cost savings of a lien action; and

(e) the separate actions in contract by the Contractor and the Subcontractor will thereupon need to seek consolidation or that they be heard together given the interdependency of their claims against different defendants, in order to avoid the risk of inconsistent determinations.

[14] This motion by the Owner if successful, will thereby determine substantive rights and is not therefore interlocutory in nature.

[15] The Owner for each of the above reasons was not required to seek leave under s. 67(2) of the Act to bring this motion.

S. 47 Motion Onus

[16] S. 47 of the Act grants the court authority on this motion to vacate the registration of a construction lien, which has already occurred in this case to declare that such lien has expired or that written notice of the lien no longer binds the recipient and/or to dismiss the action.

[17] The test whether the Owner is entitled to a declaration that Lien 706 and Lien 803 are expired and should therefore be discharged pursuant to s. 47(1), is similar to the test on an R. 20 summary judgment motion there involves the following principles:

(a) the Owner as moving party must establish that there is no genuine issue for trial;

(b) if there is a genuine issue of fact, the matter should be left to be determined by the trial judge;

(c) if it is not patently demonstrable on the s. 47 motion that a party has no right to a lien, or unless the court is satisfied that the cause of action could not possibly succeed at trial, then the matter should be left to the trial judge; and

(d) credibility assessment, weighing the evidence and drawing of inferences are the function of the trial judge: Beaver Materials Handling Co. v. Hejna (2005) 2005 CanLII 23127 (ON SC), 45 C.L.R. (3d) 242 (Ont. S.C.J.) at para 24, Dominion Bridge Inc v. Noell Stahl-Und Maschinebau GMBH, 1999 CarswellOnt 3067 (Ont. S.C.J.) and Gordon Ridley Architects and Associates Inc. v. Glowinsky, 2008-CV-358090, unreported (Master), paras 3 and 9.

[18] To clarify, the Contractor on this s. 47 motion by the Owner, does not have the burden as it will at trial or upon a trial of an issue, to prove the timeliness of its preservation and perfection of its lien.

[19] The Master in Any-Wall Concrete Forming Inc. v. Bloomfield and Temple Contracting Ltd., 2012 ONSC 2374, para. 30-31, held that the plaintiff lien claimant had the onus and burden of proof to demonstrate on a balance of probabilities that its claim for lien was registered and thus preserved before it expired as required by the Act. This statement however was made on the trial of the issue whether the lien had been preserved and perfected in time under the Act, which trial proceeded on the basis of affidavits and the right to cross-examine thereon.

[20] The Contractor’s responsibility on this motion is to present evidence which, if established at trial, would entitle it to judgement. The onus on this motion remains that of the Owner, namely to establish that there is no genuine issues for trial as to the timeliness of the preservation and perfection of the liens: Gordon, supra, paras. 5 to 7.

Whether Trial Required Regarding Date of Completion or Abandonment as to Lien Preservation and Perfection

[21] There is no evidence of a certificate or declaration of substantial performance of the contract or the subcontract, pursuant to sections 31 and 32 of the Act.

[22] A lien for services or materials, absent a certification or declaration as to substantial performance, expires unless preserved by registration of a lien pursuant to s. 34(1), within 45 days after:

(a) in the case of the Contractor pursuant to s. 31 (2)(b):

(i) the date the contract is completed; or

(ii) the date the contract is abandoned; and

(b) in the case of the Subcontractor pursuant to s. 31 (3) (b), the date the Subcontractor last supplied services or materials.

[23] A preserved line expires unless it is then perfected pursuant to s. 36(3)(a), by commencement of an action within 45 days after the last day it could be preserved, or in the case of the Subcontractor, unless its lien is preserved within time and is perfected pursuant to s. 36 (4), by sheltering under the Contractor’s lien which was perfected by commencement of an action.

[24] Pursuant to s. 2(1) of the Act, a contract is substantially performed:

(a) when the improvement contracted for, or a substantial part thereof, is ready for use or is being used for the intended purpose; and

(b) when the improvement contracted for is capable of completion or where there is a known defect, at a cost, in this case, of not more than 3% of $500,000.

[25] Relevant dates in this case include the following:

(a) Contractor’s lien registered – August 13, 2018;

(b) Subcontractor’s lien registered - September 6, 2018;

(d) above liens were vacated by court orders upon the Owner posting security – September 6 and 19, 2018, respectively; and

(e) date of this motion – October 11, 2018.

[26] The Owner alleges the date of last performance of services or abandonment of the contract was June 18, 2018, which thereby required the preservation of the liens by registration by August 2, 2018, which did not occur by that date.

[27] The Contractor submits that, with the agreement of the Owner, it last performed services under the contract on July 26, 2018, had scheduled further performance of services shortly thereafter and never abandoned the contract.

[28] The decision as to which of the above versions of events is accurate will determine:

(a) whether the two liens were preserved in time; and

(b) whether the Contractor perfected its lien by commencement of its action in time.

[29] Independent of the above, the court notes that given that this motion is equivalent to the relief sought on a summary judgment motion, it should have been brought in the Contractor’s lien action: CV-18-78169.

Date Last Work Performed or Contract Abandonment

[30] The central issues are:

(a) the date the Contractor and Subcontractor last provided services or materials; and

(b) whether and if so, when the contract was completed or the abandonment thereof by the Contractor.

[31] The Owner alleges the two liens were not preserved within 45 days of the last day of contract performance or abandonment on June 18, 2018, and therefore were not perfected by the commencement of an action within 45 days after such perfection. In support of that argument the Owner relies upon:

(a) the wording of the Contractor’s June 18, 2018 invoice for the “completion painting and hand over” of the premises and to apply a credit to the account for the “second half of credit for cancellation of vestibule”, which the Owner alleges left only minor deficiencies to correct;

(b) the Contractor’s financial statement which indicates the contract amount, the total amount paid and the resulting balance of $213,907, $155,821 and $ 58,086 respectively, as compared to the Owner’s proof of payments totalling $176,077; and

[32] The Owner elected to not cross-examine on the affidavit filed by the Contractor in response to the Owner’s motion, as permitted under s. 40 of the Act.

[33] There is as stated no evidence of a certificate or declaration as to the date of substantial performance of this contract.

[34] S. 2 (1) states a contract is substantially performed:

(a) when the work under the contract or a substantial part thereof is ready for or is being used for the intended purpose; and

(b) when the improvement under the contract is capable of completion or correction of known defects, at a cost not exceeding 3 per cent of the first $500,000 of the contract price.

Deficiencies

[35] The Owner submits that the forty-five-day period to register a lien under s. 31(2) is not extended by work done to repair deficiencies.

[36] Generally, work performed to rectify defective work, performing minor or trivial work and cleanup work do not extend the time for registering a claim for lien: Desmasi Contracting Inc. v. AMT Group Inc., 2013 ONSC 5555 (Master) para. 23, relying on Nortown Electrical Contractor’s Associates v. 161975 Ontario Inc., (2010) 2010 ONSC 3284, 95 C.L.R. (3rd) 204.

[37] The Owner has presented no evidence as to the cost to complete the contract and/or the cost to remedy deficiencies pursuant to s. 2 (1) (a).

[38] The financial summary or statement from the Contractor relied upon by the Owner is complicated by the dispute between the parties as to whether the items identified are elements included in the contract or are agreed upon extras to the contract.

[39] The word “deficiencies” is often used to include both uncompleted elements of work under the contract, which relates to whether the contract is complete, as well as correction of defects in the work performed. The above lists of the designer and engineer do not consistently identify and make that distinction.

[40] The Owner’s engineer’s letters dated June 18 and 20, 2018, lists deficiencies in completed work as well as unfinished items of work, which include the construction of the office vestibule, installation of the main entrance doors and door operators, installation of A/C and roof condensing unit, insulation of copper pipes and several other required connections. This report includes but is not limited to defective work performed. It includes the above remaining work which is required in order to obtain an occupancy permit and thereby indicates contract completion had not occurred by June 20, 2018.

[41] Correspondence between the parties contains conflicting evidence as to when the work under the contract, or a substantial part thereof, was ready for or was being used or occupied for the intended purpose pursuant to s. 2 (1) (b), and therefore whether this contract was substantially performed on June 18, 2018.

[42] The Contractor on June 19, 2018 advised the Owner that it would complete the remaining contract work but required payment of outstanding invoices in order to pay trades and suppliers. The Contractor undertook to provide the Owner as requested with a list of remaining work and a schedule dates to perform the same. This communication is not limited to deficiencies to be corrected.

[43] The Contractor wrote the Owner on June 20, 2018 and stated:

(a) it was aware occupancy was still not available due to the remaining work and the need for an occupancy permit;

(b) the project was not 100% complete, was only at a “Milestone” where payment was required in order to send the trades back in to complete electrical, plumbing, piping and HVAC work; and

[44] The dispute as to the vestibule to be constructed includes what the project drawings specify as to that element. Those drawings and details as to the contested issues regarding that element are not before the court on this motion, thus preventing certainty as to that issue.

[45] The Contractor wrote counsel for the Owner on June 25, 2018 and stated it required payment excluding the 10% holdback, in order to proceed with the remaining work to completion which had been delayed.

[46] The Contractor wrote the Owner’s counsel on July 4, 2018 following a site meeting with the Owner on July 3, and:

(a) listed the remaining work to be completed for occupancy and final work, which includes construction and installation of the interior vestibule;

(b) stated that substantial performance of the contract was reached without indicating the date thereof and the receipt in “mid-June” of the occupancy permit from the City; and

(c) stated that the Contractor would continue to coordinate work with suppliers and schedule work starting the following week, upon receipt of a partial payment from the owner by July 6, 2018.

[47] The Contractor’s above June 20, 25 and July 4, 2018 letters:

(a) do not indicate that performance of the contract was completed or abandoned by the Contractor on June 18, 2018;

(b) indicate the remaining work included uncompleted work under the contract and to remedy deficiencies to the work performed; and

[48] There is an absence of evidence as to the proportion and value of completed versus uncompleted work and the extent of deficiency work to be done.

[49] The Owner’s designer sent a “Deficiency List” of 14 items on July 12, 2018, as revised on August 13, 2018, which includes items apparently included but not completed in the contract as opposed to defective work performed, such as the absence of door operators, the absence of the installed vestibule, uninstalled utility room floor and ceiling and the absence of a motion sensor light.

[50] The Owner’s counsel in its July 16, 2018 letter, proposed and requested the Contractor’s consent to proposed events and timing for release of the remaining payments, pursuant to which:

(a) the remaining amount owed to GTA was $44,692, which includes a $12.5K credit for the vestibule which was to be excluded from the original contract and would be built by the Owner, and excludes two change orders totalling some $13.4 K; and

(b) the specified payments, minus holdbacks for the full project, were to be made upon completion of listed work which included the Contractor’s ordering and installation of the vestibule, the completion of outstanding HVAC, plumbing and electrical work identified by the engineer as well as the items listed in the designer’s report.

[51] The Contractor points to this letter in support of its submission that the Owner on July 16, 2018 continued to seek the Contractor’s completion thereafter of work under the contract.

[52] The Contractor on July 21, 2018, responded to the Owner’s engineer’s report which lists twenty-three combined items of incomplete work and work deficiencies. The Contractor therein states it wished to resume the contract work and responds to the engineer’s list in order to “expedite the work without further delay”. The Contractor states that the agreed upon work to be done included the door operators, the A/C installation with roof top condenser and then lists several items which were in dispute, namely whether they were included or extras to the contract, such as door operators, washroom light sensors and installing a split A/C with condenser in the mechanical room.

[53] The Contractor in its letter dated July 25, 2018 states that Unit occupancy was still not available and that it would proceed to complete the outstanding deficiencies once agreed upon, within 3-4 weeks.

[54] The Contractor in two emails to the Owner on July 25, 2018 stated:

(a) the only item needed for final occupancy was the door operator;

(b) its HVAC sub-contractor would, as agreed, attend on July 26, 2018, and complete the HVAC work;

(d) that the contracted work was to be completed, whereupon the deficiencies would be completed.

[55] The Contractor points to the fact that its HVAC subcontractor, pursuant to its July 25, 2018 agreement with the Owner, attended on site and performed work on July 26, 2018, for which it invoiced the Contractor $1,235 and the Contractor’s its undertaking to have its electrical and plumbing subcontractors attend the following week to complete their work.

[56] The Owner does not deny this alleged agreement with the Contractor nor provide my evidence that the A/C subcontractor did not perform work in the Unit on July 26, 2018,

[57] The Owner by written notice to the Contractor on August 7, 2018, revoked its prior project completion proposal and terminated the contract for the following reasons:

(a) the Owner’s correspondence of July 25, 2018 indicates clearly that GTA would not complete the work unless it was paid as contract extras;

(b) the amount paid to date, excluding hold backs, exceeded the current contract value;

(c) the Contractor had abandoned the project on June 18, 2018, claiming it was entitled to full payment when work completion had not occurred;

(d) the Owner never agreed to a vestibule credit and to having that work done by others;

(e) the Contractor made unauthorized drawings and specification deviations; and

(f) cites instances of faulty workmanship.

[58] The Owner cannot agree to permit completion of the contract work, then reverse that position by terminating the contract and now argue that the July 26, 2018 HVAC work was minimal and done solely to extend the time to register a lien.

Sheltering of Subcontractor’s Lien

[59] If the Contractor’s lien was preserved within 45 days from the date of substantial completion or abandonment, the Subcontractor’s lien is sheltered under the Contractor’s perfected lien and thereby perfected pursuant to ss. 36 (4) (1) (ii). The fact the Subcontractor has not commenced an action accordingly was not required as the Owner submits.

Conclusion

[60] The court is being asked without evidence to interpret and speculate as to:

(a) the meaning of portions of the reports from the Owner’s designer and engineer as to what portions thereof are contract completion work versus remedying deficient work performed; and

(b) the nature of the work the parties in their correspondence did or did not agree to.

[61] The Owner has not presented sufficient evidence to establish under s. 2 that the contract as of June 18, 2018, was substantially performed as:

(a) the work thereunder or a substantial part thereof rendered the unit then ready for or was being used for the intended purpose; and

(b) the costs to complete and/or correct the deficiencies under the contract did not then exceed 3% of the first $500,000 of the contract price.

[62] The Owner has not established with certainty that there is no trial issue:

(a) as to the date of substantial performance under the contract;

(b) whether it on July 25, 2018, agreed to the Contractor’s continued performance under the contract which included the July 26 attendance of the HVAC subcontractor and the alleged scheduled attendance the following week of the electrical and plumbing subcontractors;

(c) that the Contractor therefore did not perform and was scheduled to perform uncompleted work under the contract subsequent to June 18, 2018; and

(d) that the two liens in issue accordingly were not preserved and perfected within the times limits of the Act.

[63] The Owner’s s. 47 motion is accordingly dismissed.

Costs

[64] Any party seeking costs of this motion shall serve and file written submissions within 30 days from the date of this decision.

[65] Any reply to such costs submissions are due within 20 days after being served with the submissions seeking cost.

Mr. Justice Paul Kane

Released: December 20, 2019

COURT FILE NO.: CV-18-77712 / CV-18-78169

DATE: 20191220

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

GTA General Contractors Ltd. and Karar Al-Najari

Lien Claimants

– and –

2566213 Ontario Inc.

Defendant

REASONS FOR DECISION

Kane J.

Released: December 20, 2019

GTA General Contractors Ltd. v.2566213 Ontario Inc., 2019 ONSC 7370

Case Summary

REASONS FOR DECISION

Analysis

Whether Motion is Final or Interlocutory and Whether Leave Required

S. 47 Motion Onus

Whether Trial Required Regarding Date of Completion or Abandonment as to Lien Preservation and Perfection

Date Last Work Performed or Contract Abandonment

Deficiencies

Sheltering of Subcontractor’s Lien

Conclusion

Costs

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Issues

Statutory Provisions 4

Legal Tests 1

Legislation 1