COURT FILE NO.: CV-20-639544

DATE: 2020 11 17

SUPERIOR COURT OF JUSTICE - ONTARIO

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

RE: STRADA AGGREGATES INC., Plaintiff

- and -

YSL RESIDENCES INC., YG LIMITED PARTNERSHIP, CRESFORD DEVELOPMENTS INC., COMPUTERSHARE TRUST COMPANY OF CANADA/SOCIETE DE FIDUCIE COMPUTERSHARE DU CANADA, and WESTMOUNT GUARANTEE SERVICES INC., Defendants

BEFORE: Master Todd Robinson

COUNSEL: R. Moubarak and F. Kourangi, for the plaintiff

HEARD: In writing

SUPPLEMENTARY ENDORSEMENT

[1] The plaintiff, Strada Aggregates Inc. (“Strada”), moves without notice for an order that the defendants, YSL Residences Inc. (“YSL”), YG Limited Partnership (“YG”), and Cresford Developments Inc. (“Cresford”), be noted in default and for default judgment as against YSL, YG, and Cresford, jointly and severally, for the full amount of Strada’s claim, being $36,998.86, plus pre-judgment and post-judgment interest and costs of the motion and action.

[2] Strada initially filed this motion to be heard in writing by a judge, but the filing was rejected by civil intake and, since the motion is brought within a lien action governed by the Construction Act, RSO 1990, c C.30, it was directed to the construction lien masters’ office. The relief sought in the notice of motion is within the jurisdiction of a master, so the motion came before me. After reviewing the motion materials, and for reasons outlined in my endorsement dated September 18, 2020, I ordered that certain further evidence regarding service of the statement of claim on YSL, YG, and Cresford be filed and that Strada either proceed on notice to those defendants or else file a factum supporting proceeding without notice in light of the discussion in Casa Manila Inc. v. Iannuccilli, 2018 ONSC 7083. I further directed a brief factum specifically addressing the basis of liability and quantum of all damages claimed as against each of the defendants, particularly YSL.

[3] Strada filed a supplementary motion record, factum and book of authorities on November 5, 2020. I have now had an opportunity to review and consider the supplementary materials and Strada’s legal arguments.

[4] For the reasons that follow, I order that YSL, YG, and Cresford be noted in default, adjourn the default judgment relief as against YG and Cresford to an oral hearing on further notice to those defendants, and dismiss the default judgment relief as against YSL.

Applicable version of the [Construction Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-c30/latest/rso-1990-c-c30.html)

[5] Substantial amendments to the former Construction Lien Act came into force on July 1, 2018, including renaming the statute to the Construction Act. Further amendments came into force on October 1, 2019, adding prompt payment and adjudication provisions. The version of the Construction Act applying to a particular improvement and whether prompt payment and adjudication apply to a contract is governed by the transition provisions in s. 87.3, and bears on matters such as the mandatory timelines for preservation and perfection of liens and procedural requirements in lien actions.

[6] There is limited evidence from Strada relevant to assessing the transition provisions and which version of the Construction Act applies in assessing Strada’s lien and lien action. The only evidence tendered is that Strada entered into its agreement with YG and Cresford on August 7, 2019. YSL is the registered owner of the subject premises, and Strada pleads it is a statutory “owner” pursuant to the Construction Act. There is no evidence on any contractual relationship between YSL and either of YG or Cresford. Since neither YG nor Cresford is pleaded to be a statutory “owner”, it follows that Strada is not a “contractor” and must thereby be a “subcontractor”. The date of a subcontract is not relevant to the transition provisions: s. 87.3(2) of the Construction Act. There is no evidence regarding when a procurement process for the subject improvement commenced or a prime contract for the improvement was entered.

[7] Since, as discussed below, validity of Strada’s lien is not at issue on this motion, the version of the Construction Act is only relevant to the procedural rules governing timing for pleadings and default proceedings. With the July 1, 2018 amendments, procedural rules in the former Construction Lien Act were relocated to O Reg 302/18 under the Construction Act, with some modifications. However, for this motion, there is no substantive difference between the relevant provisions as they read in the former Construction Lien Act and as they now read in O Reg 302/18. Accordingly, in the absence of evidence that the prime contract for the subject improvement was entered into prior to July 1, 2018, or a procurement process occurred prior to that date, I proceed on the basis that the amended provisions of Construction Act apply.

Noting in default

[8] In both lien and non-lien actions, noting in default is typically done over the counter by requisition to note in default, without the need for a motion. Strada’s evidence is that it was unable to file a requisition to note in default, so relief to note in default was sought in this motion. In my endorsement dated September 18, 2020, I addressed the evidence in Strada’s motion record supporting the requested relief for noting in default, as follows:

Each of YSL, YG LP, and Cresford were served with the statement of claim by registered mail, which is permitted by s. 87 of the Construction Act. However, such service is only permissible to the last known mailing address (a) according to the records of the person sending the document or (b) as stated on the most recently registered instrument identifying the recipient as a person having an interest in the premises. There is no evidence supporting how the addresses at which the statement of claim was served on the defendants were ascertained. For example, there are no corporate profile reports and no recently registered instruments have been filed.

Service by registered mail is further only deemed received on the fifth day following the date on which it is mailed, exclusive of Saturdays and holidays, absent evidence to the contrary: s. 87(2) of the Construction Act. In this case, the statement of claim was mailed on April 15, 2020, in the height of the COVID-19 pandemic when many businesses were shut down. There is no evidence of any attempts to contact YSL, YP LP [sic], or Cresford to demand a defence or any other basis upon which to be satisfied that they have actual notice of the claim, including this motion being brought without notice. Given the extraordinary circumstances of the pandemic, I am not prepared to rely on deemed service in s. 87(2). There must be at least evidence of whether the registered mail was delivered or returned to sender. Accordingly, at a minimum, Canada Post tracking information from the tracking numbers appended to the affidavit of service should be obtained and provided.

For these reasons, I am not prepared to direct that any of YSL, YG LP or Cresford be noted in default absent further evidence as outlined above.

[9] I am satisfied from the supplementary evidence filed that the registered mail packages were successfully delivered to YSL and YG and that the addresses to which they were delivered are the registered addresses for each corporation. However, the Canada Post tracking information for the registered mail package sent to Cresford, while sent to Cresford’s registered address, indicates that Cresford was “not located at the address provided” and that the package was returned to sender. Strada has now re-served the statement of claim on Cresford by personal service on Daniel Casey, the sole director and officer of YSL and Cresford according to the corporate profile reports and the sole listed signatory for YG according to the limited partnership report. Mr. Casey was personally served at the address listed for him on the corporate profile report for Cresford. Strada submits that such service on Mr. Casey is proper service on Cresford.

[10] A lien action must be served within 90 days after it is issued: s. 1(2) of O Reg 302/18. Strada’s lien action was issued the day before the temporary suspension of time periods pursuant to O Reg 73/20 under the Reopening Ontario (A Flexible Response to COVID-19) Act, 2020, SO 2020, c 17 (formerly under the Emergency Management and Civil Protection Act, RSO 1990, c E.9) was lifted for the Construction Act. Accordingly, the deadline for Strada to serve the statement of claim expired in mid-July 2020. An order pursuant to s. 1(3) of O Reg 302/18 is required to extend the time for service as against Cresford.

[11] Strada’s evidence is that its lawyers never received the returned package and only learned of the package being unclaimed on September 28, 2020, when the tracking information was reviewed following my prior endorsement. However, the fact remains that Canada Post reported the package as being undelivered and successfully returned to sender on April 23, 2020. That registered mail tracking information was available to Strada and its counsel. Either could have confirmed that the packaged had not been delivered. Neither apparently did so.

[12] Nevertheless, I am mindful of the quantum of the lien and the statutory requirement that, in a lien action, the court is to apply procedures that are, as far as possible, of a summary character taking into account the amount and nature of the liens in question: s. 50(3) of the Construction Act. In this case, I am satisfied from the supplementary evidence filed that YSL, YG and Cresford are operated commonly by the same individual. I have accepted that the April 15, 2020 service on YSL and YG by registered mail was delivered. By virtue of the common director and officer of YSL and signatory for YG, a reasonable inference follows that Cresford, even if not directly served, ought to have had notice of the claim at or around the same time.

[13] Strada’s notice of motion includes relief for “such further and other relief as this Honourable Court may deem just”. In my view, given the particular circumstances of a common principal of YSL, YG, and Cresford, the quantum in dispute, and the statutory requirement that the court should apply summary procedures as far as possible taking into account the amount and nature of Strada’s lien, I am exercising my discretion to extend the time for service on Cresford nunc pro tunc to September 29, 2020, being the date of personal service on Mr. Casey per the affidavit of service included in the supplementary affidavit.

[14] Since I am now satisfied that the statement of claim has been served on each of YSL, YG, and Cresford, I turn to whether those defendants are in default by failing to file defences within the required timeline. Strada incorrectly cites and relies on Rule 18.01 of the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”) as being applicable to the time for delivery of a statement of defence by YSL, YG, and Cresford. The Rules apply to lien actions, except to the extent that they are inconsistent with the Construction Act: s. 50(2) of the Construction Act. In this instance, Rule 18.01 is inconsistent with the Construction Act, which has its own provision regarding the timing of pleadings in s. 2(5) of O Reg 302/18. That section provides that the time for delivering a statement of defence to a lien claim, crossclaim, counterclaim or third party claim shall be 20 days.

[15] Strada’s evidence is that no defences have been served by YSL, YG, or Cresford. The case history confirms that no defences have been filed. I am accordingly satisfied that each of YSL, YG, and Cresford have failed to file their statements of defence with the timelines required by s. 2(5) of O Reg 302/18 under the Construction Act. I thereby order that they be noted in default and direct the registrar to update court records accordingly.

Availability of relief sought

[16] Relief sought in Strada’s notice of motion is limited to personal judgment against YSL, YG, and Cresford for Strada’s claim amount. No relief is sought declaring entitlement to or validity of Strada’s asserted lien. Strada moves for judgment under Rule 19 of the Rules.

[17] Although noting in default is addressed in s. 5 of O Reg 302/18 under the Construction Act, no procedure is provided for obtaining default judgment. As noted above, the Rules apply to lien actions except where inconsistent with the Construction Act. Accordingly, the processes for obtaining default judgment in Rule 19 apply to lien actions, except to the extent of any inconsistency with provisions of the Construction Act.

[18] Strada does not cite reliance on a specific subrule in either its notice of motion or factum. Motions for default judgment are contemplated by the Rules in two instances: (i) where the registrar has declined to sign default judgment, in which case a motion may be brought either to the court for relief outlined in Rule 19.04(1) or to a judge (Rule 19.04(3.1)), and (ii) where a motion is brought to a judge for judgment in respect of any claim for which default judgment has not been signed (Rule 19.05).

[19] In my view, these provisions have some inconsistency with the Construction Act, which expressly affords the court with authority to grant personal judgment in a lien action, but also circumscribes the nature of personal judgment that may be pursued. Section 63 of the Construction Act deals with personal judgment in a lien action, providing as follows:

63 Subject to paragraph 3 of subsection 36 (4) (sheltering), the court may award any lien claimant a personal judgment, whether the claimant proves the lien or not, upon any ground relating to the claim that is disclosed by the evidence against any party to the action for any amount that may be due to the claimant and that the claimant might have recovered in a proceeding against that party.

[20] Case law has held that the personal judgment contemplated by s. 63 is limited to judgment for breach of contract claims properly joined in a lien action: see, for example, Yorkwest Plumbing Supply Inc. v. Nortown Plumbing (1998) Ltd., 2016 ONCA 305 at para. 54; W.S. Nicholls Construction Inc. v. Barton-Malow Canada, Inc., 2019 ONSC 5082 (Master) at para. 25. Section 3(2) of O Reg 302/18 under the Construction Act provides that a plaintiff may, in a lien action, join a lien claim and a claim for breach of contract or subcontract. This provision was formerly s. 55(1) of the Construction Lien Act, which provided that a plaintiff in an action may join with a lien claim a claim for breach of contract or subcontract. I see no substantive difference between the language used in former s. 55(1), under which existing s. 63 case law has been decided, and the slightly modified language used in s. 3(2) of O Reg 302/18.

[21] There are therefore two aspects of inconsistency between the procedures for default judgment in Rule 19 and the Construction Act. First, s. 63 affords “the court” with authority to grant a personal judgment “upon any ground relating to the claim” and “for any amount that may be due to the claimant and that the claimant might have recovered in a proceeding”, which is authority to grant judgment for claims beyond the claims listed in Rule 19.04(1). That means a motion to a judge is not necessarily required to obtain personal judgment for such claims, even though only a judge or s. 58 referee has authority to declare a lien valid under the Construction Act (as distinct from the court’s authority to declare a lien invalid pursuant to various provisions of the Construction Act). Second, default judgment is not properly granted for “any claim” advanced by a lien claimant, since the only additional claim properly joined with a lien claim in a lien action is a claim for breach of contract.

[22] In this case, Strada seeks personal judgment for the unpaid amounts claimed as owing for its supply of aggregates to the subject improvement. Strada pleads that its agreement was with YG and/or Cresford. Strada further pleads that its invoices were sent to YG and/or Cresford, that the invoices have not been paid, that the sum of $36,998.86 plus interest and costs remains owing, and that Strada has suffered those damages as a result of the breach of contract of YG and/or Cresford.

[23] Deemed admissions flow from a noting in default. Strada incorrectly cites and relies on Rule 19.02(1)(a) of the Rules as being applicable. For lien actions, the applicable deeming provision is found in s. 5(5) of O Reg 302/18, which provides that, upon noting in default, a defendant is deemed to admit all allegations of fact in the pleading. Although the language of the two provisions is slightly different, the substantive effect is the same. In this case, each of YSL, YG, and Cresford are deemed to admit the allegations of fact in Strada’s statement of claim.

[24] I am satisfied that Strada’s claims for personal judgment against YG and Cresford as pleaded are claims for breach of contract contemplated by s. 3(2) of O Reg 302/18 and properly joined in this lien action. The situation with YSL is different. Strada’s claim against YSL is pleaded as a subcontractor’s claim against an owner. YSL is pleaded to be the registered owner for the subject premises and a statutory “owner” pursuant to the Construction Act. Strada claims entitlement to a lien upon the estate and interest of YSL for the lien amount, and alleges that YSL has failed to retain holdback as required by the Construction Act.

[25] An owner’s liability to a subcontractor is limited to the holdbacks that the owner was required to retain, and such liability is further limited only to those lien claimants who have proven valid liens against the owner’s interest in the premises: s. 23 of the Construction Act. Subcontractors often assert claims for unjust enrichment against an owner in their lien action, as Strada has done in this action. In particular, Strada asserts a general claim of unjust enrichment against all defendants, including YSL. However, the Divisional Court has recently confirmed that a subcontractor has no claim of unjust enrichment as against an owner: Tremblar Building Supplies Ltd. v. 1839563 Ontario Limited, 2020 ONSC 6302(Div Ct) at para. 18.

[26] In its factum, Strada submits that YG, Cresford and YSL are “essentially one and the same corporation”. Daniel Casey is argued to be the controlling mind and alter ego of each of them, having used the entities as a “shield” for his “fraudulent or improper conduct”. Strada argues that Mr. Casey has sought to rely on the separate legal personalities of the three defendants to “reduce each individual corporation’s exposure to legal liability with respect to the breach of the Agreement, while using the corporations collectively to breach same.” I need not address whether the evidence filed supports such an argument. It is not an argument supported by Strada’s pleading. There is no allegation that YG, Cresford and YSL are completely dominated and controlled by Mr. Casey or being used by him to avoid payment obligations. It is thereby not a “fact” that YSL is deemed to have admitted. Moreover, YSL is not pleaded to have any common relationship with YG or Cresford. Strada’s claim for lien states that services and materials were supplied only to YG and Cresford, not YSL.

[27] In my view, absent any pleaded contract between Strada and YSL or any pleading of the mutual control and domination now argued, the statement of claim does not support any claim against YSL permitted by s. 3(2) of O Reg 302/18 in addition to claimed holdback liability.

[28] With respect to YSL’s holdback liability, Strada argues that YSL is at least liable for 10% of Strada’s claim of $36,998.86, or $3,699.89. However, determination of YSL’s holdback liability first requires a determination that Strada’s lien is valid. No such declaration has been sought on this motion.

[29] For these reasons, there is no default judgment relief available to Strada as against YSL on the motion as framed and based on the pleadings that YSL is deemed to have admitted. Strada’s motion for default judgment as against YSL is accordingly dismissed.

Should further notice be required on YG and Cresford?

[30] My endorsement dated September 18, 2020 provided Strada with two options: (i) if Strada elected to proceed without notice, then Strada was to provide evidence and argument in a factum that supports proceeding without notice, or (ii) if Strada elected to proceed on notice, then Strada was to obtain a remote hearing date and thereafter serve all motion materials on the defendants with the hearing details provided.

[31] Strada’s factum does not address proceeding without notice. Strada has purported to serve YG, Cresford, and YSL by, on October 20, 2020, mailing a copy of Strada’s motion record to each of them at their registered office addresses, and to Daniel Casey. However, no hearing date was booked per my direction and the notice of motion indicates a hearing during the week of July 27, 2020 (notwithstanding that the motion does not appear to have been filed until September 2020). I do not consider this to be proper notice of a pending motion, particularly when the materials themselves reasonably suggest that the motion may have already been heard prior to service. Neither the supplementary affidavit nor the affidavits of service indicate that my endorsement was served. The supplementary affidavit, factum, and book of authorities were not served. No explanation has been provided for not booking an oral hearing as ordered. Nothing in the materials supports notice to the defendants that the motion was still pending or that the defendants were notified or understood they could still oppose it.

[32] In Casa Manila, supra, at paras. 13-17, Sanfilippo J. outlined the rationale for requiring notice of a motion for default judgment, despite technical rules providing that a defendant is not entitled to notice of any step after being noted in default. I agree with the rationale outlined and see no reason that it should not equally apply in the context of a lien action. As stated by Sanfilippo J., “notice is not a nuisance: it is key to the viability of the default judgment.” Moreover, in this particular case, this motion was brought prior to any noting in default. The defendants were technically entitled to notice of the motion.

[33] I accordingly exercise my discretion to adjourn this motion to an oral hearing and to require that YG and Cresford be properly served with all motion materials not already served together with notice of the pending hearing.

Orders

[34] For the foregoing reasons, I order as follows:

(a) The time for service of the statement of claim on Cresford is hereby extended nunc pro tunc to September 29, 2020.

(b) YSL, YG, and Cresford are hereby noted in default and the registrar is directed to update court records accordingly.

(c) Strada shall forthwith book a date with my Assistant Trial Coordinator for an oral hearing and shall thereafter serve YG and Cresford with a notice of return of motion (including videoconference details provided by the court if the hearing is proceeding remotely), all motion materials that Strada has filed to date not already served, my endorsement dated September 18, 2020, and this supplementary endorsement.

(d) Strada’s motion for default judgment as against YG and Cresford is adjourned to the date booked in accordance with subparagraph (c) above.

(e) Strada’s motion for default judgment as against YSL is dismissed.

(f) This order is effective without further formality.

MASTER TODD ROBINSON

DATE: November 17, 2020