Diamond Drywall Contracting Inc. v. Elderberry Enterprises Ltd., 2021 ONSC 1068

Court File and Parties

COURT FILE NO.: CV-20-639583 DATE: February 9, 2021

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Diamond Drywall Contracting Inc. v. Elderberry Enterprises Ltd., Leora Herzig, Phillip Faber and Freecliff Investments Ltd.;

BEFORE: MASTER C. WIEBE

COUNSEL: Alexander Hora for the defendants; Roger A. Gosbee for the plaintiff;

HEARD: February 8, 2021.

REASONS FOR DECISION

1On February 8, 2021 the plaintiff brought its motion for an order extending the time for serving the statement of claim to February 15, 2021. Mr. Gosbee served and filed a motion record containing the affidavit of the principal of Diamond Drywall Contracting Inc. (“Diamond”), Devad Steferovic, and a factum.

2On January 18, 2021 I adjourned the defendants’ motion for a declaration that the Diamond lien had expired and an order dismissing this action. I adjourned that motion to February 8, 2021. The defendants relied upon its motion material for its January 18, 2021 motion on February 8, 2021.

3After reading these submissions and hearing oral argument, I decided to grant the Diamond motion and dismiss the defendants’ motion. Here are my reasons.

Explanation for non-service

4The plaintiff’s motion record contains an affidavit sworn by Mr. Steferovic wherein he purports to explain the Diamond non-service of the statement of claim in the last nine to ten months. He stated that in October, November and December, 2019 he was involved “with some issues with other members of my family that resulted in litigation.” He did not particularize these difficulties. He said these difficulties lingered into 2020. He said that, as a result, he could not provide Mr. Gosbee with the retainer monies Mr. Gosbee was seeking to represent Diamond in this matter.

5Nevertheless, Mr. Gosbee’s firm registered the Diamond claim for lien on January 7, 2020 for $44,544, and Mr. Gosbee himself prepared and had issued a Statement of Claim and had a Certificate of Action registered on April 15, 2020. Mr. Steferovic deposed that his problems with his family were compounded in March, 2020 and thereafter by the COVID-19 pandemic and its adverse effects on his business. He did not particularize these adverse effects. In the meantime, Mr. Gosbee, despite being on the record for Diamond, took no steps to serve the Statement of Claim as he was seeking a retainer cheque. Mr. Steferovic admitted that he kept promising Mr. Gosbee the retainer funds and not delivering them.

6Mr. Steferovic then deposed that he resolved his dispute with his family in December, 2020 on terms whereby he acquired “a substantial sum of money.” Then he said that the problem was that he moved, which made it impossible to properly respond to the defendants’ motion on January 18, 2021. He deposed that he was now ready to proceed with this action and has instructed Mr. Gosbee to serve the statement of claim accordingly.

7I find this explanation “borderline.” Mr. Gosbee, having assumed the responsibility of a lawyer of record, should have taken steps to serve the statement of claim in a timely way. Waiting for a retainer cheque, even during the pandemic and its undoubted ravages on sole practitioner legal firms like Mr. Gosbee’s, does not justify this failure. The costs of service should be minimal. Mr. Steferovic in turn should have been more forthright with his lawyer. Had he been, Mr. Gosbee would probably have been goaded to take steps in the circumstances, including this service.

8This situation is very similar to the case in MGI Construction Corp. v. 2273865 Ontario Inc., 2015 ONSC 4715 (Master) where a lawyer of record failed to serve the statement of claim during a transition of the file to new lawyers. Master Albert did not find the transition to be an acceptable explanation for the 18 months of non-service. But in the case before me I am most mindful that we are in the middle of a pandemic. As a result, I am prepared to be more forgiving to Mr. Gosbee and Mr. Steferovic on the issue of the adequacy of their explanation.

Length of the delay

9A factor in my decision is the length of the delay in this case. It took Diamond essentially nine months to take steps to get the action underway by having Mr. Gosbee appear in response to the Elderberry motion on January 18, 2021 and then bring its motion on February 8, 2021. This is six months after the expiration of the 90-day service period specified by the Construction Act, R.S.O., c.C.30 (“CLA”). The nine months to get service underway is half the 18 months of service delay in the MGI case that Master Albert found to be unacceptable. While also “borderline,” Diamond’s delay was not egregious.

Prejudice

10I agree with Master Robinson comments in Petrasso v. Fuller, 2020 ONSC 7915 at paragraph 16 about the issue of prejudice. I do not find the existence of the claim for lien itself to be sufficient evidence of the prejudice required to deny the extension of the 90-day service period under CLA section 53(2). To allow the claim for lien to have that effect would limit the discretion of the court in that subsection in a way that gives the 90-day service period the rigidity of the rigid limitation periods for preserving and perfecting liens and setting them down for trial in sections 31, 36 and 37. I do not think the wording of the subsection justifies such a narrow reading of the court’s discretion. There must be evidence of actual prejudice to the defendant in the subject delay, and each case should be viewed on its own facts.

11In the case before me, there was no evidence of actual prejudice to the defendants from the delay in service. The defendants first found out about the Diamond claim for lien on December 16, 2020 when they were closing on a mortgage loan. They were not aware of the claim for lien until that time.

12Mr. Hora argued that a distinguishing feature of Petrasso was that in that case the lien claimant served the claim for lien on the owner within the 90-day service period thereby giving the owner timely notice of the claim for lien and making the extension request more “technical.” That timely notice did not happen in the case before me, although I note that Mr. Steferovic gave text notice to the owner of Diamond’s intention to lien as early as November 12, 2019, according to Mr. Herzig’s affidavit. I do not find that the absence of such formal and timely notice of the claim for lien in this case creates prejudice for the defendants. There was no evidence that the defendants took steps or failed to take steps that adversely affected their interests on account of their ignorance of the claim for lien.

13Also, I note, significantly, that during the delay the two-year limitation period under the Limitations Act, 2002, S.O. did not pass. Therefore, the defendants will be served within that limitation period. This also must be considered.

Costs

14Despite losing these two motions, the defendants merit costs awards in both. These motions were necessitated entirely by the failure of the plaintiff to meet its obligations under CLA section 53(2) and get the statement of claim served in 90 days.

15There was merit to the defendants’ positions in both motions. Diamond’s explanation for its failure to serve was, as I said, “borderline.” There was culpability on both Messrs. Gosbee and Steferovic. It was indeed the defendants’ motion on January 18, 2021 that brought this issue finally to a head. The length of the delay was also “borderline.” What helped significantly was the absence of real prejudice to the defendants from the delay.

16The defendants delivered two costs outlines, one for each motion. The costs outline for the defendants’ motion showed a total of $3,909.60 in partial indemnity costs and $5,416.77 in actual costs. The costs outline for the plaintiff’s motion showed a partial indemnity amount of $2,542.50 and actual costs of $3,616. Mr. Hora argued that the defendants were entitled to the total of the two indemnity totals, namely $6,452.10.

17Mr. Gosbee acknowledged the defendants’ entitlement to costs but argued that the award should only be on the defendants’ motion in the amount of $3,500. He argued that the plaintiff “succeeded” on the plaintiff’s motion and that there should, therefore, be at minimum no costs of that motion.

18There is only some merit to Mr. Gosbee’s argument about the plaintiff’s motion. As I said above, the plaintiff’s motion was close to a failure. It was “borderline.” There was no dispute as to the quantum of these two costs outlines. Therefore, I have decided to award the defendants $5,000 in partial indemnity costs for both motions to be paid by Diamond in 30 days.

19There was an argument as to the timing of payment. Mr. Hora wanted me to make the delivery of the statement of defence contingent on the payment of the costs award. I denied that request.