Court File and Parties

COURT FILE NOS.: CV-19-619715 & CV-19-619717 DATE: 2020 06 26

SUPERIOR COURT OF JUSTICE - ONTARIO

IN THE MATTER OF the Construction Act, RSO 1990, c. C.30, as amended

RE: ATLANTIC CONSTRUCTION GROUP INC., Plaintiff - and - 2567616 ONTARIO INC., DSG GROUP OF COMPANIES INC., 2605097 ONTARIO LIMITED, 2608109 ONTARIO INC. and ROYAL BANK OF CANADA, Defendants

AND RE: ATLANTIC CONSTRUCTION GROUP INC., Plaintiff - and - 2567616 ONTARIO INC., DSG GROUP OF COMPANIES INC., 2605097 ONTARIO LIMITED, 2608109 ONTARIO INC. and ROYAL BANK OF CANADA, Defendants

COUNSEL: A. Kuchinsky, counsel for the defendant, 2567616 Ontario Inc. (moving party)

HEARD: In writing, ex parte

ENDORSEMENT

[1] The defendant, 2567616 Ontario Inc. (the “Landlord”), brings two motions on an ex parte basis for declarations that the liens of the plaintiff, Atlantic Construction Group Inc. (“Atlantic”), against certain leasehold units at each of 400 Adelaide Street East, Toronto (the “Adelaide Premises”) and 51 East Liberty Street, Toronto (the “Liberty Premises”) have expired. The Landlord also seeks related orders vacating the registrations of the claims for lien and certificates of action and dismissing Atlantic’s actions to enforce the liens.

[2] The Landlord is the registered owner of the Adelaide Premises and the Liberty Premises. The Landlord’s evidence is that its now-former tenants at the premises retained Atlantic to perform construction work to set up the tenants’ pharmacy and optometry offices. In each statement of claim, Atlantic claims to have been retained by the defendants in each action (including the Landlord). It is undisputed by the Landlord that Atlantic did supply services and materials to the Adelaide Premises and the Liberty Premises. It also appears undisputed that Atlantic’s services and materials were supplied solely in respect of leasehold improvements. Notably, both claims for lien indicate that Atlantic supplied “general construction for leasehold improvements”. The tenant leases themselves were apparently terminated by the Landlord for non-payment of rent on December 20, 2018, subsequent to the dates of last supply in Atlantic’s claims for lien.

[3] In the claim for lien against the Adelaide Premises, supply of services and materials is claimed from May 9 to December 14, 2018. In the claim for lien against the Liberty Premises, supply of services and materials is claimed from November 2 to December 12, 2018. The accuracy of these dates is disputed by the Landlord in its materials. Both liens were preserved by registration of claim for liens on January 22, 2019 and perfected by issuance of claims and registration of certificates of action on May 10, 2019. The Landlord argues that the liens were clearly perfected out of time and, accordingly, should be discharged.

[4] The Landlord has elected to bring this motion without notice. I have recently commented on the high evidentiary onus placed on a moving party when seeking a declaration that a lien has expired on an ex parte basis. In Davis v. Under Construction Incorporated, 2020 ONSC 3466, at para. 5, I held as follows:

Declaring a lien expired is significant relief. When a motion for such a declaration is brought ex parte, the lien claimant has no opportunity to file responding materials or argue against the relief sought. It follows that the evidence filed by the moving party must support a clear finding that the subject lien has expired.

[5] The Landlord submits that, by operation of section 87.3 of the Construction Act, RSO 1990 c. C.30 the provisions of the now-former Construction Lien Act (the “CLA”) remain applicable to both leasehold improvements at the Adelaide Premises and the Liberty Premises. Since the date claimed by Atlantic in its claim for lien for commencement of supply to the Adelaide Premises pre-dates the July 1, 2018 amendments to the CLA, I am satisfied that the contract must also have been entered prior to July 1, 2018 and thereby that the provisions of the CLA remain applicable to that improvement. It is less clear on the evidence filed that the provisions of the CLA continue to apply to the improvement at the Liberty Premises, although for the reasons that follow I have determined that they do.

[6] As noted, Atlantic’s claim for lien indicates that it commenced supply of services and materials to the Liberty Premises on November 2, 2018. Atlantic pleads in the related statement of claim in CV-19-619717 that it was contracted to perform the construction work in September 2018. Notwithstanding that pleading, the Landlord argues the contract was actually entered in April 2018. Atlantic’s contract for work at the Liberty Premises is evidently a “contract” within the meaning of the Construction Act, since Atlantic’s statement of claim pleads a contract with all of the defendants, including the two tenants who would each be “owners” pursuant to subsection 1(1) of the Construction Act. However, in my view, the evidence tendered by the Landlord is insufficient to demonstrate that the contract was entered prior to July 1, 2018. I note the following:

(a) The Landlord has tendered an email dated April 9, 2018 as evidence that construction at the Liberty Premises started in April 2018. That email discusses giving “Patricia a copy of the key to the unit” and makes reference to the fact that the locks will be changed “when construction starts”. It does not state or even suggest that a contractor has already been engaged or that commencement of construction is pending. (b) I am satisfied that building permits for the Liberty Premises were obtained on April 23, 2018, which is the date noted on the permits themselves in evidence. However, the issuance of building permits does not, in and of itself, mean that a contract had already been entered. None of the building permits, the appended letters, or the permit drawings themselves appear to make any reference to Atlantic. There is no evidence supporting that Atlantic was involved in the construction permit process and, accordingly, the fact of building permits being issued does not assist the Landlord. (c) The Landlord’s affiant states that the Electrical Safety Authority (“ESA”) stopped the work in August 2018. That statement is uncorroborated by any documentary or other evidence. Although implied, there is neither a statement nor other evidence that the ESA’s work stoppage was a direction to Atlantic. Even if I accept that it was, and that Atlantic thereby must have commenced work by that time, it post-dates the July 1, 2018 amendments to the CLA, so does not assist the Landlord’s argument. (d) The Landlord’s affiant further states that he knows construction started in April 2018 and that work was stopped by the ESA in August 2018 because he regularly visited both the Adelaide Premises and the Liberty Premises to see the progress of construction. While I do not doubt the veracity of these sworn statements, they are self-serving and unsubstantiated. In my view, without corroborating evidence, the statements alone are insufficient to meet the Landlord’s evidentiary onus on this ex parte motion. (e) The Landlord’s affiant states that, in October 2019, Toronto Hydro had to be called to have the power turned on at the Liberty Premises for the first time, since Atlantic had not done so. The relevance of whether or not power was turned on by Atlantic to a determination of when the contract was entered or when work was completed is unclear. In any event, it is unreliable evidence. I am unclear from the drafting of the statement if it was the new tenant or that tenant’s contractor who contacted Toronto Hydro. There is also no clear statement regarding the source of the affiant’s information that this was “the first time” power had been turned on. In my view, the evidence does not comply with the hearsay exemption in Rule 39.01(4) of the Rules of Civil Procedure. To the extent that it is information that the new tenant received from the contractor and relayed to the affiant, it is double hearsay, which the Court of Appeal has previously held does not comply with the hearsay exemption in Rule 39.01(4): Airst v. Airst, [1999] OJ No 5866 (CA) at para 6. (f) The only other evidence is a WhatsApp conversation between the Landlord’s affiant and the principal of Atlantic. In my view, it does not clearly relate to the construction contracts, but in any event is from November 2018 and is not necessarily inconsistent with the pleading that the contract was entered in September 2018.

[7] For the foregoing reasons, I am not satisfied on the evidence filed that the contract for the improvement at the Liberty Premises was entered before July 1, 2018. However, I have determined that the provisions of the CLA nevertheless remain applicable to the improvement at the Liberty Premises.

[8] Pursuant to subsection 87.3(1)(c) of the Construction Act, the provisions of the CLA remain applicable to an improvement where the premises are subject to a leasehold interest that was first entered into prior to July 1, 2018 and a contract for the improvement was entered into or a procurement process for the improvement was commenced on or after July 1, 2018 and before the day subsection 19(1) of Schedule 8 to the Restoring Trust, Transparency and Accountability Act, 2018 came into force, which was December 6, 2018. Put more simply, for premises subject to a lease agreement entered into prior to July 1, 2018, but where the prime contract for an improvement is entered into (or procurement process is commenced) between July 1, 2018 and December 6, 2018, the provisions of the CLA still apply. The Construction Act and its regulations otherwise apply in respect of an improvement to leased premises if the prime contract was entered into (or procurement process commenced) after December 6, 2018.

[9] I am satisfied that the Liberty Premises are subject to a leasehold interest that was entered prior to July 1, 2018. The relevant leases are in evidence and were all executed on December 1, 2017. If Atlantic’s contract for the Liberty Premises was not entered into prior to July 1, 2018, which I am unable to determine on the evidence filed, then the contract must certainly have been entered into sometime between July 1, 2018 and December 6, 2018. In that instance, the requirements of subsection 87.3(1)(c) of the Construction Act would be met. I am accordingly satisfied that the provisions of the CLA are applicable to the improvement at the Liberty Premises.

[10] As noted above, both of Atlantic’s certificates of action were registered on May 10, 2019. Subsection 36(2) of the CLA provides that a contractor’s lien expires at the conclusion of the 45-day period following the last day on which the lien could have been preserved. Subsection 31(2) of the CLA provides that a contractor’s lien expires at the conclusion of the 45-day period following the date the contract is completed or abandoned (since there appears to have been no certificate of substantial performance). Accordingly, the perfection deadline under subsection 36(2) can only be ascertained once the date of completion or abandonment is determined. The Landlord argues that the date of last supply in both liens should be used to determine the perfection deadline. I disagree. The date of last supply in a claim for lien is not necessarily the same as the date of contract completion. Last supply is not relevant to the lien rights of a prime contractor.

[11] In my view, it is proper to begin the assessment by considering if the evidence supports a finding that the liens had already expired by the time the claims for lien were registered. As already noted, both of Atlantic’s liens were registered on January 22, 2019. Accordingly, pursuant to subsection 31(2) of the CLA, if either of the two contracts was completed or abandoned prior to December 8, 2018, then Atlantic’s lien rights in respect of that contract would already have expired at the time the lien was registered.

[12] There is no evidence supporting abandonment of either contract. In both cases, the Landlord argues that the contracts were completed. Given the contract prices as stated in the claims for lien, subsection 2(3) of the CLA deems that each contract would be completed when the price of completion or correction of a known defect is $1,000 or less.

[13] In my view, the evidence does not support a clear finding regarding a date of acknowledged completion or deemed completion of either contract.

[14] With respect to the Adelaide Premises, the Landlord’s affiant states that construction work was completed by October 18, 2018, with cleanup work completed by November 2, 2018. The only corroborating evidence tendered in support of that assertion are photographs purportedly taken on December 8, 2018. However, while a picture is said to be worth a thousand words, it is not dispositive of whether the price of completion or correction of a known defect at that time was $1,000 or less. In my view, the WhatsApp messages exchanged with the principal of Atlantic on November 2 and December 12, 2018 do not clearly admit or acknowledge that the full contractual scope of work had been completed. To find that they do, without first giving Atlantic an opportunity to explain them, would in my view be unjust.

[15] With respect to the Liberty Premises, as outlined above, the only evidence regarding completion is that the ESA stopped work in August 2018 and that the Landlord’s affiant knows that the work was stopped because he was regularly in attendance during construction. This evidence is insufficient to demonstrate either actual completion or deemed completion pursuant to subsection 2(3) of the CLA.

[16] Since I am unable to make a determination from the evidence filed on when either contract was completed or at least a date by which either of them was clearly completed, I am unable to find that either lien was preserved out of time.

[17] Based on the date of registration of the certificates of action, for perfection to have been timely, both contracts must have been completed by no earlier than February 9, 2019. If they were complete prior to that date, then even if preserved in time, Atlantic’s lien rights would have expired prior to perfection. In both lien actions, Atlantic pleads only that it “ceased work” in December 2018. There is no evidence regarding the circumstances of cessation. Since I am unable to make a finding on the date of completion, it follows that I cannot determine with any certainty that the liens were perfected out of time. There is simply insufficient evidence on which to find that either contract was completed or abandoned prior to February 9, 2019.

[18] In my view, the Landlord has not met its evidentiary onus. Given the nature of the motion and the evidence put before the court, in my view, fairness dictates that Atlantic be afforded an opportunity to defend the timeliness of its liens. Accordingly, if the Landlord intends to pursue these motions, then the motions must be brought on notice to Atlantic. Given current remote operations, a case conference with counsel for the Landlord and Atlantic (if not all parties) should be arranged with my Assistant Trial Coordinator to confirm if the motions are opposed by Atlantic and, if so, to set a timetable and hearing date for the motions. If my Assistant Trial Coordinator has not been contacted to arrange a case conference within ten (10) days of the release of this endorsement, then both motions will be deemed dismissed without prejudice to bringing them again at a later date on notice to Atlantic.

MASTER TODD ROBINSON DATE: June 26, 2020