COURT FILE NO.: CV-18-7432 and CV-18-7443

DATE: 2020 10 16

SUPERIOR COURT OF JUSTICE – ONTARIO

Court File No.: CV-18-7432

RE: Encompas Construction Ltd., Plaintiff (Responding Party)

AND:

2503147 Ontario Inc., (Moving Party), Terrence Chiu-Kin Chu, Tali Tsui-Ping, Antonio Digregorio and Elizabeth Digregorio, Defendants

AND BETWEEN:

RE: 2503147 Ontario Inc., (Moving Party), Terrence Chiu-Kin Chu, Tali Tsui-Ping, Plaintiffs by Counterclaim

AND:

Encompas Construction Ltd., Defendant to Counterclaim (Responding Party)

Court File No.: CV-18-7443

RE: Mattwell Developments Inc., Plaintiff (Responding Party)

AND:

2503147 Ontario Inc., (Moving Party), and Encompas Construction Ltd., Defendants

BEFORE: Conlan J.

HEARD: October 9, 2020 via Zoom

COUNSEL: Jonathan Goode, Counsel for Encompas Construction Ltd.

Michael C. Mazzuca, Counsel for 2503147 Ontario Inc.

H. Keith Juriansz, Counsel for Mattwell Developments Inc.

ENDORSEMENT

I. Introduction

The Issue

[1] The only issue left for this Court to decide is that of costs with regard to two related Motions brought by the same party in two companion Court files, both of which were ultimately disposed of, in their entirety, on consent.

The Two Related Court Actions

[2] To be clear, this Endorsement pertains to two Court files – that ending in 7432 (with Encompas Construction Ltd., hereinafter referred to as “Encompas”, as the Plaintiff) and that ending in 7443 (with Mattwell Developments Inc., hereinafter referred to as “Mattwell”, as the Plaintiff).

The Motions

[3] In each action, governed under the former Construction Lien Act, R.S.O. 1990, c. C.30, as amended (“CLA”), 2503147 Ontario Inc. (“250”), one of the Defendants, brought a Motion for, in the main, (i) a declaration that the Plaintiff’s lien had expired, and (ii) for the return of the cash security that had been posted by 250, and (iii) for an Order dismissing the action.

[4] By the time that this Court first became involved in the matters, on September 23, 2020, it was clear that the substantive relief being sought by 250 in each Motion was not being contested. On that date, the Motions were adjourned to October 9, 2020 in order to permit counsel for Mattwell and counsel for Encompas to make enquiries with the Lawyers’ Professional Indemnity Company, as section 37 of the CLA had not been complied with by the Plaintiffs (Mattwell and Encompas).

[5] 250 had brought the Motions in question because, under section 37 of the CLA, a perfected lien expired after the second anniversary of the start of the action unless (i) an order was made for a trial or (ii) the action was set down for trial. In the midst of the COVID-19 health pandemic, and the resulting potential confusion about what statutory deadlines had or had not been extended, it is clear that both Mattwell and Encompas had failed to keep their liens alive.

The Motions Resolved on Consent

[6] On October 9, 2020, but for the issue of costs, both of the Motions brought by 250 were formally granted and the draft Orders filed by counsel for 250 were approved, all on consent of both Mattwell and Encompas.

The Positions of the Parties on Costs

[7] On October 9, 2020, via Zoom, this Court heard oral submissions from the parties as to costs, which submissions supplemented some written materials that had been filed. The decision of the Court was reserved.

[8] Regarding costs, 250 seeks the following: (i) in Court file ending in 7432, substantial indemnity costs in the amount of $21,141.27 or, alternatively, partial indemnity costs of $15,823.35, and (ii) in Court file ending in 7443, substantial indemnity costs in the amount of $16,274.68 or, in the alternative, partial indemnity costs of $12,158.54.

[9] For their parts, both Mattwell and Encompas submit that no costs ought to be awarded in favour of 250 or, alternatively, if any costs are granted, a quantum far less than what is sought by 250 with respect to each Motion, on a reduced partial indemnity scale.

[10] Mr. Juriansz, counsel for Mattwell, submits that the quantum of costs being sought by 250 is wildly excessive when one considers that the only substantive thing done in the actions was the pleadings, and those are straightforward and largely boilerplate. Further, he submits that the hourly rates and the number of lawyers working on the file for 250 are excessive. In addition, Mr. Juriansz argues that there is significant duplication of time spent by the lawyers for 250 between the two Court files. Finally, it is submitted by counsel for Mattwell that the conduct of 250’s counsel was contrary to the Rules of Professional Conduct, particularly Rule 7.2-5 and Rule 7.2-2, which provisions are set out below.

7.2-5 A lawyer shall answer with reasonable promptness all professional letters and communications from other legal practitioners that require an answer, and a lawyer shall be punctual in fulfilling all commitments.

7.2-2 A lawyer shall avoid sharp practice and shall not take advantage of or act without fair warning upon slips, irregularities, or mistakes on the part of other legal practitioners not going to the merits or involving the sacrifice of a client's rights.

[11] To understand the position advanced by Mattwell, one must take a step back and review what occurred leading up to the filing of 250’s Motions.

[12] On 25 June 2020, an associate lawyer working for Mr. Juriansz wrote a letter to counsel for 250 and counsel for Encompas. The correspondence asked whether the other parties in Court file ending in 7443 would consent to an Order for a Reference. The letter stated “[w]e note that limitation and procedural periods have been suspended in Ontario for the duration of the current state of emergency in Ontario, up to and including September 11, 2020”. As it turns out, the author of the letter, at least by the time that 250 filed its Motions, was mistaken. The two-year time period provided for by section 37 of the CLA was, in fact, running.

[13] It is common ground that counsel for 250 did not reply to that 25 June 2020 correspondence from Mattwell’s counsel.

[14] On 17 July 2020, the same lawyer working for Mr. Juriansz sent another letter to counsel for 250 and counsel for Encompas, requesting a reply to the earlier letter and stating that Mattwell would be forced to proceed with a contested motion for an Order for a Reference if consent was not obtained by July 24th.

[15] On 24 July 2020, a law clerk in the office of counsel for 250 replied by stating that Mr. Mazzuca (counsel for 250) was on vacation but would respond sometime the following week.

[16] On 31 July 2020, the same lawyer working for Mr. Juriansz sent another follow-up message, this time by email, asking for a response at the earliest convenience.

[17] It is common ground that counsel for 250 did not reply to the question of whether 250 would consent to an Order for a Reference. Ultimately, Mattwell brought a Motion for that Order, but it was too late as Mattwell’s lien had, by then, expired by virtue of section 37 of the CLA. In the face of 250’s Motions, Mattwell’s Motion for an Order for a Reference was withdrawn.

[18] In short, Mr. Juriansz argues that counsel for 250 violated the Rules of Professional Conduct set out above. As submitted by Mr. Juriansz, it was a deliberate attempt by counsel for 250 to stall and permit the two-year deadline to pass by and Mattwell’s lien to therefore expire, all unbeknownst to counsel for Mattwell. Consequently, counsel for Mattwell submits that no costs ought to be awarded to 250.

[19] Mr. Goode, new counsel for Encompas, supports the submissions made by Mr. Juriansz and adds the following points. First, under section 46 of the CLA, the Motions filed by 250 could have been brought ex parte, and they were ultimately resolved entirely on consent in terms of the substantive relief being sought, and thus, no costs are appropriate. Second, section 86(1)(b) of the CLA is not applicable here, and thus, the statutory authority being relied upon by counsel for 250 in support of its request for substantial indemnity costs is not relevant. Third and finally, as the Encompas action will continue (unlike the Mattwell action), costs could be reserved in the cause.

[20] Mr. Mazzuca, counsel for 250, submits that he had no duty to respond to the correspondence concerning an Order for a Reference, and besides, such an Order would not have preserved Mattwell’s lien in any event. Mr. Mazzuca emphasizes paragraphs 25 and 26 of 250’s Factum dated September 14, 2020, which paragraphs are set out below.

25. Irrespective, the Divisional Court in Krypton Steel made clear that “a judgment of reference under s. 58(1) is not an ‘order fixing a trial date’ under s. 37(1)”,

“The organization of the process outlined in the Construction Lien Act was reviewed by Master Sandler in the case of Pineau v. Kretschmar Inc.:

If any party (usually, the plaintiff) wants a master to hear the case, (the usual procedure), then this party must obtain a judgment of reference under s. 58(1) of the Act to a Toronto master or case management master…

The form of this judgment of reference is mandated by Ont. Reg. 175, R.R.O. 1990, s. 2(16) and Form 16… Form 16 contains four specific paragraphs, the most important of which provides that “… this action be referred to the master at Toronto… for trial”…

Once the judgment of reference has been obtained, then the party obtaining that judgment (or, in fact, any other party) must make a motion to the court (a master), without notice, to have a date, time and place fixed for the trial of the action. This is a routine motion…

Once this order has been obtained, the party who obtained it (usually the plaintiff) must serve a properly worded notice of trial … This notice of trial is a critical document. The person serving this notice of trial, and all persons served with it are “parties to the action” …

The Master then goes on to confirm the following critical finding:I have previously ruled that a judgment of reference under s. 58 (1) is not an “order fixing a trial date” under s. 37(1) 1. An order under s. 60(1) is required in order to stop the time running.

It is at this point that the difference between the definite article (“the”) and the indefinite article (“a”) becomes pertinent.”

Because a judgment of reference is not “the” trial date and “a specific trial date must be set” under s. 60, it “does not on its own demonstrate and is not representative of compliance with the requirements of s. 37(1)”

Krypton Steel Inc. v. Maystar General Contractors Inc., 2018 ONSC 3836, paras 21-23;MBOA, Tab 6; QH Renovation & Construction Corp. v. 2460500 Ontario Ltd., 2019 ONSC 3237, para 16; MBOA, Tab 7

26. A Motion for Reference made under s.58 (1) by Mattwell does not stop the s.37 period and falls short of what is required under s.37. The case of Ionion Construction Inc. v. Christo illustrates that nothing short of setting the action down for trial or an order fixing a date for trial will suffice, even in the face of the representations by a defendant waiving the two-year period.

Ionion Construction Inc. v. Christo, 1991 CarswellOnt 787, 46 C.L.R. 135, paras. 13, 17; MBOA, Tab 8

[21] Mr. Mazzuca submits that these Plaintiffs, Mattwell and Encompas, sat on their claims for far too long. There was massive inactivity in the two files for more than two years, he argues. The CLA’s timelines were the sole responsibility of counsel for the Plaintiffs, argues Mr. Mazzuca, including during the COVID-19 health pandemic (during which period, on the issue of whether statutory time deadlines had been suspended or not, there has been plenty of online material readily available to assist lawyers practising construction law, Mr. Mazzuca submits). And, finally, Mr. Mazzuca highlights that the various authorities filed by Mr. Juriansz, all related to the professional conduct of counsel issue, have nothing to do with the CLA and, in at least one clear instance, according to Mr. Mazzuca, actually support the position of 250. On the latter point, Mr. Mazzuca relies on paragraph 15 of the decision of Justice Nordheimer, when His Honour was then a Justice of the Ontario Superior Court of Justice, in Xpress View Inc. v. Daco Manufacturing Limited, 2002 CarswellOnt 5898, [2002] O.J. No. 4078, 36 C.C.E.L. (3d) 78, which paragraph is set out below.

15 Finally there is the issue of the costs of this motion and the costs thrown away. Normally the costs thrown away would be payable by the defaulting party. However, in this case, I am exercising my discretion not to make such an award. The costs thrown away were incurred as a result of the plaintiff taking advantage of a slip by the defendant's solicitors. This is a practice that is happening with altogether too much frequency. Indeed, this is the second time in a week that I have been faced with such a situation and it is one which I believe should stop. Counsel have obligations to deal with each other fairly and not to take advantage of missteps by opposing counsel. This requirement is reflected in the Rules of Professional Conduct, rule 14 of which, commentary 4, states, in part:

The lawyer should avoid sharp practice, and should not take advantage of or act without fair warning upon slips, irregularities or mistakes on the part of other lawyers not going to the merits or involving the sacrifice of the client's rights.

[22] Mr. Mazzuca focuses on the concluding words “not going to the merits or involving the sacrifice of the client’s rights”. Mr. Mazzuca stresses that he, as counsel for 250, being paid by 250, and having a duty to protect the rights of 250, had no obligation or even an expectation to correct any misapprehension that Mattwell’s lawyers were under about the CLA’s timelines and how they were affected by the COVID-19 health pandemic and the statutory and administrative relief measures announced by the authorities during the crisis.

II. Decision

[23] For the reasons that follow, I agree with Mr. Juriansz and Mr. Goode. There shall be no costs awarded in favour of 250. That decision applies to both Motions in the two related Court files.

[24] Section 46, subsections (1) through (3), of the CLA provided 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. R.S.O. 1990, c. C.30, s. 46 (1);

Idem

(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. R.S.O. 1990, c. C.30, s. 46 (2);

Costs

(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. R.S.O. 1990, c. C.30, s. 46 (3)

[25] Clearly, 250’s Motions could have been brought ex parte, and given the unequivocal strength of the Motions on their merits and the frequency in which the Superior Court of Justice had been hearing simple matters in writing during the COVID-19 health pandemic, I would go further and say that the Motions should have been brought in writing and without notice. If they had been so brought, either no costs or very modest costs would have been granted. Remember that Rule 57.03(3) of the Rules of Civil Procedure, which provision was not derogated from in any way by anything contained in the former CLA, expressly states that there is a presumption that no costs will be ordered on a motion brought without notice.

[26] Further, the Motions brought by 250 were resolved entirely on consent, but for the issue of costs, and fairly quickly so. Although what was filed by 250 on the Motions was well-prepared and thorough, no Factum was required. No authorities were required. Very little research was required. Very little time spent was required. Very little person-power at the office of counsel for 250 was required. Whether heard in writing or orally, a simple reference to the CLA, section 37, and a very brief chronology of events would have led even the most inexperienced judge to the inescapable conclusion that both of the Motions had to be granted. Remember that motions that are resolved on consent generally do not attract any costs - The Law of Costs, Second Edition, Volume II, by Mark M. Orkin, a Canada Law Book and Thomson Reuters publication (2018), section 403.1, at page 4-14.2.

[27] Finally, although the above reasons are sufficient to decide the issue of costs, I must add that I am troubled by what occurred here. To be clear, this Court does not have to determine, nor does it intend to determine, whether an actual violation of the Rules of Professional Conduct occurred. Mr. Mazzuca has been professional in his two appearances before me. Nothing herein is meant to impugn the motives of Mr. Mazzuca. Whether what happened here was planned and/or deliberate on the part of 250 or its counsel is not the focus of this Court’s analysis. I simply have to assess whether something about the conduct of counsel for 250 which precipitated the expiration of the two liens in question contributes to this Court’s exercise of discretion to award no costs in favour of 250. There is.

[28] I am certain of these things:

(i) the correspondence from Mattwell’s lawyer dated 25 June 2020, and following, evidenced a fundamental misunderstanding of both (a) the impact of COVID-19 on the time limitations that governed the Mattwell lien action and (b) what it took to comply with section 37 of the CLA, in particular whether the mere obtaining of an Order for a Reference would have been enough to preserve the Mattwell lien;

(ii) that fundamental misunderstanding was, or ought to have been, readily apparent to any lawyer who received and read the said correspondence;

(iii) in the face of that clear misunderstanding, which related to issues totally divorced from the merits of the Statement of Claim, or the Statement of Defence and Crossclaim of Encompas, or the Statement of Defence and Crossclaim of 250, counsel for 250 effectively ignored the said correspondence; and

(iv) replying in a meaningful way to the said correspondence, by at a bare minimum stating 250’s position on the proposed Order for a Reference, but more appropriately correcting one or both of the items that Mattwell’s lawyer had so plainly and fundamentally misunderstood, would have in no way sacrificed 250’s rights.

[29] There is no “right” for a litigant, in this case 250, to, in the middle of an unprecedented health crisis and in the context of a contested construction lien action, have a lien expire through simple and plain inadvertence.

[30] There is indeed a “right” for 250 to, among other things, have the case decided on its merits, including having due regard for the serious issues raised in its own pleading. A proper reply to the said correspondence from Mattwell’s lawyer would have done nothing to erode that right.

[31] Would a proper reply from counsel for 250 have made any difference to what happened? We cannot know for sure, but we can safely conclude, and I so find, that a meaningful reply to the said correspondence from Mattwell’s lawyer would likely have avoided the inadvertent expiration of Mattwell’s lien.

[32] Nevertheless, there ought to have been a prompt and meaningful reply to the said correspondence by counsel for 250. There was not. The result was that the slips went unnoticed, the Mattwell lien accidentally expired by pure operation of statute, and here we are.

[33] I think all of that contributes to this Court’s decision to not award any costs in favour of 250, not only with regard to the Mattwell action but the Encompas one as well.

[34] A moment of digression follows, for illustrative purposes only. Many, many moons ago, there was a federal prosecutor in Timmins, Ontario conducting his very first contested trial in the Provincial Court. The charge was simple possession of a narcotic. There was no dispute about what the substance was, and that element of the offence had nothing to do with the strategy or theory of the defence. Due to inexperience, the prosecutor forgot to tender the Certificate of Analyst from Health Canada. The defence lawyer, very experienced, before indicating that no evidence would be called (because the argument was about knowledge and control), invited the prosecutor to file the Certificate before the decision went to the presiding judge.

[35] That prosecutor was me. I have never forgotten the case or the defence lawyer.

[36] Arguably, what was done in that criminal case was much more than what, at a minimum, should have been done here, in my humble opinion. Although factually very different, the principle is what is important. There is no sacrifice of a client’s rights to correct a simple and clear mistake made by opposing counsel on something that has nothing to do with the merits of the dispute between the parties.

[37] For all of the foregoing reasons, in both actions, there shall be no costs ordered with respect to the Motions brought by 250.

(“Original signed by”)

Conlan J.

Date: October 16, 2020