COURT FILE NO.: 26048/12 A1

DATE: 2021-03-23

ONTARIO

SUPERIOR COURT OF JUSTICE

In the matter of the Construction Lien Act. R.S.O. 1990, c. C30

BETWEEN:

984499 ONTARIO INC., OPERATING AS EKARTE GENERAL CONTRACTING Plaintiff

– and –

1159337 ONTARIO LTD. and GARY ULIAS & ASSOCIATES INC. CARRYING ON BUSINESS AS GUPM CONSTRUCTION MANAGERS Defendants

• and –

M.R. WRIGHT AND ASSOCIATES CO. LTD. and LINAS SAPLYS, carrying on business as both AWS ARCHITECTS and ARCHITECTURE AND PLANNING INITIATIVES aka API, SOLE PROPRIETORSHIPS Third Parties

COUNSEL:

Marc A.J. Huneault, Counsel for the Plaintiff

Christine A. Powell, Counsel for the Defendants, 1159337 Ontario Ltd.

David J. Thrasher, Counsel for the Defendant, Gary Ulias & Associates Inc. carrying on business as GUPM Construction Managers

Alison Kuchinsky, Counsel for the Third Party

HEARD: November 23, 2020

RASAIAH J.

REASONS ON MOTION

OVERVIEW

[1] The main action arises from a 2011 project to renovate a hotel in Sault Ste. Marie, Ontario (“the project”).

[2] The plaintiff, 984499 Ontario Inc. operating as Ekarte General Contracting (“Ekarte”), was the general contractor that provided materials and services for the project. When Ekarte was not paid for invoices it had submitted, it registered a construction lien. It did so on November 16, 2012 in the amount of $257,494.24. Thereafter Ekarte issued an action on December 21, 2012.

[3] Ekarte’s statement of claim, as amended, includes a claim for damages for breach of contract, and in the alternative, based on quantum meruit or unjust enrichment, and claims for costs and pre-judgment and post-judgment interest. All claims are related to allegations made by Ekarte concerning the work and materials supplied by Ekarte for the project and all claims are in the amount of $257,494.24, representing the amount of the lien.

[4] The Defendants are 1159337 Ontario Ltd. (“1159”) and Gary Ulias & Associates Inc. carrying on business as GUPM Construction Managers (“GUPM”). 1159 is the owner of the lands and building that were the subject of the project. GUPM was the construction manager on the project.

[5] 1159 filed a statement of defence, a counterclaim against Ekarte, and a crossclaim against GUPM.

[6] 1159’s counterclaim is for damages for breach of contract and/or negligence in the amount of $300,000, costs, and pre-judgment and post-judgment interest. The claims are related to payments made contrary to the contract, unapproved charges, inflated charges, overcharges for site supervision, deficiencies in the work performed, cost to be incurred related to the deficiencies (set-off), and removal of 1159’s tools and equipment (set-off). In its defence, 1159 defends the construction lien claim and its position with respect to same.

[7] 1159’s crossclaim is for damages for breach of contract and/or negligence in the amount of $300,000, contribution and indemnity for amounts it may be found liable to pay to Ekarte, costs, and pre-judgment and post-judgment interest. The claims are related to cost overruns, and alleged failures in performing obligations 1159 states GUPM was to perform.

[8] A third party claim was issued by 1159 on May 21, 2014 against M.R. Wright and Associates Co. Ltd. (“Wright”) and Linas Saplys (“Saplys”), carrying on business both as AWS Architects (“AWS”) and Architecture and Planning Initiatives, aka API (“API”), sole proprietorships.

[9] 1159 states that Saplys carried on business as both AWS and API and was retained to provide architectural consulting and construction management services for the project; that Wright was retained to provide quantity surveying services; and that GUPM and Saplys retained Ekarte to provide site supervision and labour for the project.

[10] 1159 states that it served the third party claim on Saplys, AWS and API on June 12, 2014.

[11] Saplys, AWS and API were noted in default July 7, 2014, twenty-five days after said service. Wright was also noted in default on that date.

[12] No default judgment was sought after Wright and Saplys were noted in default.

[13] Ekarte filed a trial record on or about December 12, 2014 and an affidavit in support of a motion for an order fixing the date, time and place for trial of the action and for the holding of a settlement meeting. The affidavit indicated that examinations for discovery had been held. The order was granted. Pre-trials were held May 12, 2015 and July 20, 2015, adjourned to November 20, 2015. There were other court appearances thereafter, including trial assignment court. No trial date is set for the main action.

[14] Ekarte’s claims against GUPM were discontinued on consent on July 20, 2015. Gareau J. endorsed that 1159 was entitled to continue with its crossclaim against GUPM. GUPM is defending the crossclaim. While not confirmed, 1159’s argument that the claims are inextricably connected suggests that the intention is that it will be tried with the main action.

[15] On the motion, Saplys deposes that he did not receive a copy of the third party claim and did not become aware of its existence until April of 2019, when he received a letter from 1159 enclosing the July 2014 requisition to note Saplys, AWS and API in default. Saplys submits that service of the third party claim was not proper service. Further, Saplys denies carrying on business as AWS and states that he and API have a meritorious defence, which he would have presented had he known about the claim.

[16] Saplys retained counsel to take steps to address the noting in default, on or about October 16, 2019.

[17] Requests were made of 1159 for consent to set aside the default. Consent was not provided.

[18] While preparing the motion to set aside the default, counsel for Saplys discovered that applicable statutory leave had not been sought/granted to 1159 to issue the third party claim.

[19] By motion, Saplys for API seeks leave to bring the motion if leave is required; an order setting aside the noting in default of API; an order staying the third party claim as against API; in the alternative, an order granting API leave to file its statement of defence to the third party claim and in the main action, if any, within 30 days of the date leave is granted to issue the third party claim, if same is granted, and costs (“default motion”).

[20] 1159 by cross-motion, if the default is set aside, seeks to rectify issuance of the third party claim by seeking an order granting leave nunc pro tunc to bring the third party claim, and such further and other relief as this court deems just (“leave motion”).

[21] The Construction Act as it read prior to the amendments in 2018 is applicable to the main action and the third party claim, namely the Construction Lien Act R.S.O. 1990, c. C.30, as amended, in force between July 1, 2011 and December 11, 2017 (“Construction Lien Act”).

[22] There is no contest that the third party claim was issued without leave of the court pursuant to s. 56 of the Construction Lien Act.

[23] Only 1159, and Saplys and API participated on the motions.

ISSUES

[24] 1. Should the noting in default be set aside:

1. pursuant to s. 54(3) of the Construction Lien Act; and/or

2. because it is an abuse of process?

3. Should leave be granted nunc pro tunc to issue the third party claim?

ANALYSIS

Noting in Default

Section 54(3) of the Construction Lien Act

[25] A lien claim is enforceable in an action in the Superior Court of Justice in accordance with the procedure set out in Part VIII of the Construction Lien Act pursuant to s. 50(1) of the Act.

[26] In addition, section 67(3) of the Construction Lien Act, R.S.O. 1990, c. C.30, provides that except where inconsistent with this Act and subject to subsection (2), the Courts of Justice Act and the rules of court apply to pleadings and proceedings under this Act (Rules of Civil Procedure R.R.O. 1990, Reg 194 (“Rules”)).

[27] Section 67(2) of the Construction Lien Act provides that interlocutory steps, other than those provided for in this Act, shall not be taken without the consent of the court obtained upon proof that the steps are necessary or would expedite the resolution of the issues in dispute.

[28] Section 54 of the Construction Lien Act provides procedure for relief against default, and as such, is a step provided for in the Act. Therefore, I find that leave is not required to bring the within default motion itself. Had leave been required, I would have granted it as necessary to assess whether to grant leave to Saplys and API to contest the claim and/or to file a defence to the third party claim as provided for in the Act.

[29] Section 54(2) of the Construction Lien Act provides that where a person against whom a claim is made in a statement of claim, counterclaim, crossclaim or third party claim defaults in the delivery of a defence to that claim, the person against whom the claim is made may be noted in default.

[30] Section 54(3) of the Construction Lien Act, provides that where a third party has been noted in default under subsection (2), the third party shall not be permitted to contest the claim of the person who named the third party or to file a statement of defence except with leave of the court, to be given only where the court is satisfied that there is evidence to support a defence, and where leave is granted, the court (a) may make any order as to costs that it considers appropriate; and (b) may give directions as to the conduct of the action.

[31] Regarding s. 54(3) of the Construction Lien Act, in A1 Equipment Rental Ltd. v. Borkowski 2008 CanLII 13358 (ON SC), Lederer J. wrote:

[51] This seems to suggest that the only question in considering the setting aside of the noting of pleadings closed is whether “there is evidence to support a defence”. This is dealt with in the case of Alcorn & Associates Ltd. v. Ceolin, [1989] O.J. No. 1614. This case deals with a motion for default judgment in a case brought under the Construction Lien Act, 1983 and of particular relevance here, a cross-motion to set aside the noting in default. In this regard, the motions judge observed:

The criteria for setting aside the noting in default are promptness and evidence of a good defence. …

[52] It follows from this case that the promptness demonstrated in bringing a motion to set aside the noting in default remains relevant even where the action is brought under the Construction Lien Act. This is not a circumstance where the Act is inconsistent with the Rules of Civil Procedure (see the reference to the Construction Lien Act, ss. 67(3), para. [28], above).

[53] It does confirm the relevance of two of the three tests applicable to a motion seeking to set aside a default judgment (see para. [33], above), to the setting aside of the noting in default, at least where the action is brought pursuant to the Construction Lien Act. Moreover, having regard to the time it has taken to bring such a motion is just a matter of common sense. If it were not relevant, in theory, one would continue to maintain the right to bring the motion no matter how much time had passed.

[54] In Sinnadurai v. Laredo Construction Inc. (2005), 2005 CanLII 46934 (ON CA), 78 O.R. (3d) 321, [2005] O.J. No. 5429 (Ont. C.A.), the Court stated, at paras. [26] and [27]:

It is interesting to note, on this issue, the recent decision in Janssen-Ortho Inc. v. Novopharm Ltd., 2005 SCC 33, [2005] 1 S.C.R. 776, [2005] S.C.J. No. 64, where LeBel J. refused an application to extend the time of an application for leave to appeal to the Supreme Court of Canada. He stated at p. 778 S.C.R., para. 4:

Time limits should mean something. Valid reasons should be given to explain the delay. Our Court must be flexible and fair. Fairness is owed not only to applicants but also to respondents who may very well be effectively inconvenienced by undue or unexplained delays.

On the facts of this case, I see no error by the motions judge in giving serious consideration to the second part of the test, which requires that the moving party explain the circumstances which led to the default.

[55] The same logic applies. There is no reason why a failure to demonstrate that one has acted promptly once becoming aware of the judgment should not be “given serious consideration” and, where appropriate, lead to a motion to set aside a noting in default being dismissed.

[32] In M.J. Dixon Construction Limited v. Hakim Optical Laboratory Limited, 2009 CanLII 14046 (ON SC), Master Polika wrote:

[39] In conclusion given the provisions of the Construction Lien Act and the Rules of Civil Procedure and the decisions set out above for the reasons set out above I find that on a motion to set aside both a default judgment and the noting in default in this action under the Construction Lien Act the onus is on the moving defendants to satisfy the following three requirements:

(i) they must show they have moved promptly once becoming aware of the default judgment;

(ii) they must show that there is an explanation for the default; and

(iii) they must show that there is evidence to support a defence.

Further if the third condition is satisfied and there is a failure to satisfy either the first or second condition then the court is obligated to consider the potential prejudice to the parties, whether any such prejudice is compensable by appropriate terms and the effect of any order on the overall integrity of the administration of justice.

[33] Rule 19.03(1) of the Rules (applicable by r. 19.09 of the Rules) provides that a noting of default against a third party may be set aside by the court on such terms as are just. Counsel submitted other considerations stemming from case law that dealt with both issues of noting in default and default judgment per r. 19 of the Rules, including behaviour, complexity and value of the claim, intention to defend the claim, and what prevented the defendant from responding in a timely fashion. Rule 19.03 is more general, but not inconsistent.

[34] The contextual and factual situation of the case is important: Intact Insurance Co. v. Kisel, 2015 ONCA 205, para 13.

[35] According to Canada Building Materials Company v. Pitts Construction, 2017 ONSC 5792, the evidence to support a defence, means a meritorious defence. The burden is not to prove that the defence will be successful.

[36] The threshold for setting aside a noting of default is less onerous than setting aside a default judgment (see e.g. Toronto Dominion Bank v. Radiancy Canada Inc., 2006 CanLII 33694 (ON SC), at para. 15).

[37] With respect to explanation for the default, Saplys asserts improper service and/or that he never received a copy of the package containing the third party claim. The first time he became aware of it was on April 8, 2019 when he received a letter from 1159’s counsel, Christine Powell dated April 4, 2019 which enclosed a requisition to note him in default. Saplys states that had he known about the third party claim he would have defended himself and API.

[38] In Hwacheon Machinery v. Synergy Machine Sales Inc., 2020 ONSC 4312, the court wrote in paragraph 21:

Notice is the sine qua non of procedural fairness. If a litigant is unaware of a proceeding, he or she cannot have their proverbial day in court. It is a first-order procedural right: Zeifman Partners Inc. v. Aiello, 2020 ONCA 33 at paras. 47-48; Adams v. Fuda 1987 CarswellOnt 3570, [1987] O.J. No. 1311 (Ont.H.C.), 5 A.C.W.S. (3d) 207 at para. 17. There is not only a plausible explanation for the default under the second test in Mountain View, there is a definitive explanation. On this ground alone, the interests of justice require the relief requested by the defendant Brewer be granted.

In Hwacheon, the court was satisfied that the defendant did not have actual notice of the proceedings through no fault of his own; not due to any evasive action or misconduct on his part. This was enough to set aside the default.

[39] AWS and API are sole proprietorships. Saplys is before the court only for API. With respect to service on sole proprietorships, r. 16.02(1)(n) of the Rules provides that where a document is to be served personally, the service shall be made by leaving a copy of the document with the sole proprietor or with a person at the principal place of business of the sole proprietorship who appears to be in control or management of the place of business.

[40] There is no dispute that the process server did not leave a copy of the package containing the third party claim with Saplys himself.

[41] The affidavit of service indicates that a copy of the third party claim, (and other pleadings), were left at 1282 Cornwall Road, Oakville, Ontario with “Sandra, project manager, a person who appeared to be in care and control of the place of business at 1282 Cornwall Road, Oakville, Ontario” (“Cornwall”). The server identified Sandra by means of verbal acknowledgement. The server does not explain the foundation for his conclusion that Sandra appeared to be in care and control of the place. Further, he does not articulate or identify any information that would assist in concluding the place of business as being that of AWS and/or API.

[42] An email chain regarding service between a litigation assistant/clerk, Jody Hollohan of Soloway Wright LLP, and a Michael Couvrette of Couvrette Process Service of Ottawa, Ontario (“Couvrette”) was filed. The email chain purports to relay information from another, presumably the actual process server (“service email chain”). An invoice from Couvrette was also filed which provides more hearsay information (“Couvrette invoice”). These documents speak to attendances for purposes of effecting service at 610 Ford Drive, Suite 338, Oakville, Ontario (“Ford”), 229 Bennington Gate, Oakville, Ontario (“Bennington”) and 3050 Orleans Road, Unit 54, Mississauga, Ontario (“Orleans”).

[43] Saplys deposes that at no time was Sandra in care and control of API’s place of business or acting as a project manager. Saplys initially stated that Sandra may have been a temporary or part-time employee of API in 2014. 1159 was advised of this by a letter from his counsel in November of 2019. Regarding the location of service, Saplys states that Cornwall was not API’s principal place of business. It was the place of business for a separate and unrelated entity.

[44] As to “Sandra”, 1159 submits it was likely Sandra Reece who, according to her May 26, 2020 Linkedin profile, classified herself as a “development coordinator” (not project manager) for API from May 2012 to July 2014. I observed that the profile did not indicate whether she was part-time or full-time or temporary employee.

[45] After reviewing a Linkedin profile for Sandra filed by 1159, Saplys recalled that Sandra Reece worked for API Development Consultants Inc. in and around 2014, though not as a project manager. His recollection is that her primary role was as an executive assistant. Saplys has also stated she was never an employee of API. Saplys had a few business interests at the time from other documents filed by 1159, including API Development Consultants Inc. I am not concerned with his confusion regarding her employment on the basis of the number of business interests he had, the passage of time and his lack of records for API.

[46] The Linkedin profile for Sandra Reece did not note her position as executive assistant, although an email filed by 1159 that they received from Sandra Reece in 2012 notes her position as executive assistant and development coordinator with the Cornwall address and not a project manager.

[47] At the very least, I am satisfied there is enough to establish that Sandra Reece was an employee and/or doing work for API and as Saplys states, she was not a project manager.

[48] I considered that if Sandra Reece worked for API from May 2012 to July 2014 as she reports, it can be reasonably concluded that she stopped working for API within a short period after the service, anywhere from 24 to 54 days.

[49] 1159 filed business name and corporate profile reports that show some addresses held out for Saplys, AWS and/or API. 1159 also filed correspondence with similar letterheads and footers with addresses different from some of the reports (including the “contracts” between 1159, API, AWS and GUPM), and some other correspondence with similar but different email addresses. Corporate profile records for other corporations Saplys had an interest in at the time were also filed.

[50] With the service email chain and Couvrette invoice, 1159 identified information that arose with respect to service at the various addresses they searched and/or had to serve the third party claim. I observed that 1159 ultimately decided it was simply satisfied to leave one copy of the package containing the third party claim at Cornwall with “Sandra” and to leave it at that.

[51] Based on the service email chain and the Couvrette invoice, it is clear to me that trying to figure out how and where to serve the documents on Saplys, API and AWS was a known issue to the litigation assistant dealing with same on behalf of counsel for 1159 at the time.

[52] 1159 submits that the documents/information contained in its filings, makes it clear that API and AWS were connected, that Cornwall was a proper address for service and that it was proper to serve Sandra. I respectfully disagree. It is not clear. In my view, the documents and information filed raise and ought to have raised questions regarding how to properly serve the documents, who was in control of what and when and where the principal place of business of each was located.

[53] In respect of the two letters submitted to be the contracts for the project, the first has only API on the letterhead with the Ford address, includes a phone number and an “API international” email in the footer. The second includes both API and AWS in the letterhead, with the Ford address, same phone number and same email in the footer. The font for the letterhead for each of API and AWS does not appear the same and the date on the second document is less than two weeks before the first. The second does not note Saplys as the owner of AWS, only the project architect.

[54] The AWS general review report filed has different styled letterhead than the second contract document referred to above; and has the Ford address, same telephone number, but a different email address for Saplys. The contact on it appears to be Saplys, however, he is not noted as an owner of AWS on this document either. A different project architect is noted and credited as having prepared the report. The email from Sandra Reece who sent and attached this general review report is listed as “Executive Assistant/Development Co-Ordinator” with API, not project manager. The email shows the Cornwall address for API, a different phone number from the contract documents, and it can be seen that she sent it from a different email address than that listed for AWS and/or API on the contract documents. Sandra is not identified as an employee of AWS anywhere in this email. The AWS general report was attached to Sandra’s email. Saplys states that he never operated as AWS, and API stopped operating sometime in 2013 and closed in 2014. He does not have his records to confirm, given the time that has passed since it closed. He states they are likely lost now.

[55] In terms of documents that could potentially identify the registrants and the registered place of business and/or addresses for service, the record includes a Business Names Act registration report for API. It notes the registrant as Saplys, and the address for service and principal place of business of API as being the Ford address which is a UPS store. The record also includes a report for AWS. It reports Saplys as the registrant and an address for service as the Bennington address. These reports were generated August 7^th, 2013.

[56] The record also includes corporation profile reports for other corporations that Saplys had an interest in at the time of service showing Cornwall as the address for same. The reports were for Saplys Architects Inc., incorporated October 15, 2012, and API Development Consultants Inc., incorporated October 16, 2012, noting both as having their registered offices at 1282 Cornwall Road, Unit 338, Oakville Ontario, as at May 21^st, 2014. This information coincides with Saplys’ evidence that Cornwall was the place of business for unrelated separate entities in which he has an interest.

[57] Saplys states that AWS is and was an architectural practice run by Andrzej W. Szyplinski (“Andrew”). From 2010 to 2013, Saplys worked for AWS while he completed the Ontario Association of Architects’ post-licensing requirements to obtain his Architect Certificate of Practice. The business names report Saplys relies on shows Andrew as the registrant for AWS and notes the registration as having been completed February of 2020. The Ontario Association of Architects profile shows AWS as being the active practice of Andrew. It does not provide a commencement date for the practice.

[58] Andrew’s Linkedin profile shows him as the owner of AWS and does not provide any dates of commencement of ownership. There is no explanation in the record to rectify the business name report that shows Saplys as the registrant beyond Saplys indicating that he was the manager at the time and he worked for AWS while he was completing the Ontario Association of Architects’ post-licensing requirements to obtain his certificate of practice. Finally, I did note the style of clause of an unrelated case involving Saplys filed by 1159 purports to name Saplys as operating AWS, but the body of the case does not shed any light on the issue of ownership of AWS. The second case does not refer to Saplys as operating AWS, only API.

[59] Saplys deposes that Ford address was the address for API. He states that 1159 could have left a copy of the package there and/or mailed a copy to him at this address. I have no evidence indicating that the UPS store in question does not provide mailbox services for mail and packages for businesses and/or would not have notified a mailbox holder of mail and/or packages that arrive for the holder. In the service email chain, the information is that the UPS store employee refused to provide any information. In the Couvrette invoice the information is that the UPS employee allegedly would not confirm that Saplys had a mailbox rented there. Even if the foregoing were true, there is no evidence indicating whether the process server would have been prohibited in any way from leaving a copy there or whether he tried to leave one or whether the employee refused to receive a copy. Further, 1159 did not satisfy me that one cannot have a UPS store mailbox for a business address and/or that service can never be affected in this manner an acceptable form of service: Strong Foundation Inc. v. City of Toronto and ABCO One Corporation, 2014 ONSC 1043 and MBNA Canada Bank v. Luciani, 2011 ONSC 6347.

[60] In respect of Bennington, Saplys deposes that Bennington is his personal residence. He indicates that he was not at Bennington when the process server attended there. There is no evidence that suggests he was. Saplys states that he learned of this attendance for the first time through the motion materials. There is no evidence to contradict this. I also observed that the information from the process server to Couvrette in the service email chain to the litigation assistant is not the same as in the Couvrette invoice. It transforms without explanation. The information in the service email chain was that an adult Caucasian female in her 40s to 50s answered the door at Bennington who advised that she was the ex-wife; that she sees him (Saplys) rarely; and that the address was not his mailing address. Mailing address and residential address can be different. The invoice states that Bennington was the residence of the ex-wife and she does not know his whereabouts. The actual process server is not one of the authors of the service email chain or the Couvrette invoice.

[61] As for the Orleans address, Saplys deposed that he never lived at this address, nor was this a business address he used for API. There is no evidence that contradicts this.

[62] The Ekarte corporate profile report filed by 1159 has Orleans listed as an address for Kristina A. Saplys (Saplys’ ex-wife). This evidence is not useful on the issue of service, nor does it cause me to question Saplys statement that he was not aware of the existence of the third party claim until April of 2019. First, there is no acceptable evidence confirming where the ex-wife lived at the material time. The female described as answering the door at Orleans is claimed to have stated that she did not know Saplys. The service email chain does not place this female as the same female at Bennington who identified herself as the ex-wife. Further, this corporate profile does not identify when that registration information was entered, and I observed that Ekarte was recorded as incorporated in 1992. The last recorded document for the corporate profile is indicated as a CIA Annual return for 2009 Form 1C recorded May 25, 2010. I have no evidence as to who filed the Form 1C.

[63] I noted in the record documents that the address for API, has always been listed by Saplys himself as the Ford address. I observed that there is nothing noted about conversations with Sandra as to the whereabouts of Saplys or the place of business of API or AWS, who may well have at the time been able to advise of same; there are reports of such conversations/inquiries only with the UPS employee at Ford, the woman at Orleans and the women at Bennington.

[64] 1159 suggests that because the corporate profiles filed for Saplys’ other business interests list Cornwall as an address for Saplys as officer, etc., that leaving a copy at Cornwall with an adult would arguably be acceptable. I disagree. If this address is to be classified as useable for personal service at a “residence”, first, there is no evidence that “Sandra” was an adult member of the same household and second, the evidence is that Cornwall was/is a business office, not a residence. Finally, Saplys deposed that he resides at Bennington.

[65] At the end of the day, even if the subject service was found to be proper or acceptable, (which I don’t find it is clear cut on the record before me), I have considered Saplys’ statement that neither Sandra Reece nor any other person every brought the package to his attention after it was served. Contrary to that submitted by 1159, I find that there is satisfactory evidence to support that Saplys may not have received the package containing the third party claim, and whether the service effected was proper does not alter this finding. 1159 chose the method of service. In my view, this record reflects that there were some questions about how and where to service Saplys, AWS and API before the choice was made.

[66] Further, for purposes of this motion, based on the record filed, given the short time period after service that Ms. Reece remained employed by API, I cannot rule out the assertion that she did not give the documents to Saplys.

[67] As for conversations with others, Mr. Springer deposes that Gary Ulias told him during a pre-trial (which by the record would have been sometime in 2015 or after) that Saplys was aware of the litigation in which he was named personally. This evidence is hearsay on an important issue. The statement does not identify the source and/or basis of Mr. Ulias’ statements on this issue which negatively impacts its value. Saplys denies that he was advised by anyone of the third party claim.

[68] The principal of Ekarte, Zenonas Stavskis (“Stavskis”) and Saplys are related. Ekarte’s corporation profile indicates per a report done in August of 2013, its registered office was 2229 Bennington Gate, Oakville, Ontario (the same address noted for AWS from the 2013 business name report for AWS and the same address that Saplys deposes is his personal residence). I noted that Saplys is not denying the relationship or conversations with Stavskis, only that he was not told about the existence of the third party claim by Stavskis or anyone from Ekarte. The evidence 1159 relies on is an excerpt from an examination for discovery in the main action. I noted that in this excerpt, Stavskis indicated that he had not spoken to Saplys in preparation for the examination; had not spoken to him when he commenced the litigation but that he did have a conversation with Saplys about the litigation. When asked about the nature of the conversation Stavskis stated that it was that 1159 owed him money and that he put a lien on the project. There is nothing in the transcript excerpt that indicates that Stavskis had a conversation with Saplys about the existence of a third party claim. In an affidavit of Mr. Carter, Ekarte’s former counsel, filed in support of a motion to set the matter down for trial, Mr. Carter deposed on behalf of Ekarte that he was not aware of any order granted for leave to bring a third party claim. There is no evidence in the record before me that establishes that Stavskis was in fact aware of the third party claim. There is no mention of third party claims in any of the endorsements for the case that were filed in the record.

[69] The fact that Saplys’ children may have worked on the project and/or his ex-wife may be an officer of Ekarte does not lead to the conclusion he was made aware of the third party claim. There is no evidence in the record that any of these individuals were aware of the third party claim.

[70] 1159 would like the court to be suspect of Saplys’ knowledge and further, presumably draw the inference that Saplys had something to do with any of the failed service attempts and/or had knowledge that 1159 was trying to serve him at that time and/or that he knew of the existence of the claim. I am not prepared to do so on the quality of 1159’s evidence, which I find is lacking, as outlined above.

[71] There is no correspondence with or sent to Saplys regarding the third party claim after the purported service until April of 2019. While I am not findings that the foregoing was required, in the context of analyzing Saplys’ assertion as to when he learned of the default, it is true that he was never requested to provide a statement of defence or warned they would be noted in default; or advised that API was noted in default 25 days after service, until April of 2019, almost 5 years later.

[72] In my view, it is and should have been clear that Saplys’ assertion that he was not aware of the existence of the third party claim is an important issue on this motion. The evidence filed by 1159 does not establish that he was or that he willfully and deliberately turned his back on the litigation until it was convenient for him to do otherwise.

[73] Based on the record before me, for purposes of this motion, I am satisfied with Saplys explanation for the default, and his assertion that he was not aware of the third party claim until April of 2019.

[74] After becoming aware of the third party claim in April of 2019, Saplys wrongly assumed that he had time to retain a lawyer. On this point he is forthright and admits this. Saplys deposed that his work keeps him very busy and generally, he does not have much free time as part of his explanation for how quickly he moved to address the default. He ultimately retained counsel in October of 2019, and after 6 months the issue begins to be addressed by his counsel and the motion brought within approximately three months thereafter. The hearing of the motion itself was delayed due to COVID.

[75] As to whether Saplys as a result of being involved in litigation in other cases in the past would have or ought to have been aware of moving to set aside the noting in default sooner, 1159 in its factum states Saplys had been involved in numerous cases, but only provided two cases. I observed that in these two cases, Saplys did not represent himself. I further observed that neither case concerned an issue with respect to setting aside a noting in default or default judgment. This evidence in my view, demonstrated that Saplys was active in participating in and responding to claims made against him or involving himself and API.

[76] I accept Saplys’ explanation for his behavior for the time period prior to retaining his counsel. He is forthright in admitting his error. I am satisfied he may not have appreciated the consequences of the noting of default and that he ought to have moved quicker to seek to set it aside. I don’t find that he failed to demonstrate an intention to defend once he found out about the claim. I am satisfied he would not, by reason of being involved in the two other unrelated cases, have appreciated the issue, given that same did not arise in those cases. Further, I am satisfied that his participation in these other cases can be viewed as supporting his statement that he would have defended the third party claim had he been made aware of it. In the third party claim, 1159 seeks a significant amount against him/API. There are many issues and claims made.

[77] After Saplys retained counsel, the record reflects that counsel sought to address the noting in default, firstly by requesting 1159’s consent to set it aside. On December 2, 2019, 1159’s counsel indicated that 1159 would not consent. Another request was made thereafter in January of 2020, after it was discovered, while preparing the motion to set aside, that leave to bring the third party claim was not granted. This request was not responded to and as a result, Saplys completed and served the motion to set aside the default. While, the motion to set aside the default would still have been required given s. 54(3) of the Construction Lien Act, I considered that taking time to seek consent serves a purpose, to keep preparation and cost at a minimum and as such, taking these steps is not unreasonable. For these reasons, I find the motion was brought within a reasonable time after counsel was retained and the explanation for this time frame, is reasonable.

[78] While I appreciate it was essentially 6 months before Saplys retained counsel to address the default and further time was taken to bring the motion thereafter, on the contextual and factual basis of this case, I am satisfied the total time and/or delays to address the default is not so considerable.

[79] With respect to evidence of a meritorious defence, I find that Saplys has not set out bald allegations of a defence and he has satisfied his burden. There is merit to his defence; and Saplys is not required to establish that his defence will be successful: Canada Building Materials Company v. Pitts Construction, 2017 ONSC 5792.

[80] Saplys deposes specific allegations, including but not limited to the following: Ekarte was to supervise the work on site; all trades were to be directly retained by 1159; API was not responsible for the designs of the project; AWS was responsible for all aspects of architectural services for the project; Saplys was managing AWS and working to obtain his certification through AWS; he did not operate as AWS; he did not own AWS; API was not responsible for the project exceeding its budget; the budget was exceeded as a result of unknown later discovered environmental factors (the building was contaminated with asbestos that wasn’t accounted for in the budget which is not denied in Mr. Springer’s affidavit); once the environmental factors were discovered, the budget was abandoned by 1159; API’s role was to assess the value of the work completed and provide monthly reports to 1159 regarding percentage of work completed; API was not involved in any accounting for the project for keeping the project on budget or for approving payments to Ekarte; all accounting summaries for the project were handled by GUPM; all accounting summaries for the project were approved by 1159; and all accounting summaries for the project were paid directly by 1159 to the trades. Whether or not API’s obligations will be interpreted as one and the same as that of GUPM (1159 not being concerned with who took on what roles), the defence is not limited to responsibility regarding roles, and includes allegations of approvals given by 1159 and environmental factors affecting the project. The record includes Saplys’ sworn evidence as to what he recalls transpired in addition to a proposed statement of defence. The record also contains other documents regarding the project filed by 1159 indicating some steps taken by Saplys. The fact that the contract makes API equally responsible for tasks does not answer the environmental factors issue that may have affected the project.

[81] Whether Saplys will be found to have operated as AWS is, on the motion record, remains a triable issue. The two business names report of AWS’s registration do not end the inquiry for me or lead me, at this stage, to find that Saplys owned and was operating as AWS, as alleged at the material time. Neither does the contract nor the letterhead/letters. AWS is shown in recent reports as owned by another, who Saplys has deposed owned AWS at the time of the project. Saplys deposes he was the manager running AWS as he was completing hours for certification. I am not able to resolve these questions on the record before me.

[82] With respect to potential prejudice to Ekarte and/or GUPM, it is reasonable to infer a delay in getting to a trial will result, and additional costs may be incurred to potentially re-attend at examinations for discovery and/or pre-trial, and that there may be a lengthier trial. With respect to prejudice to 1159 the same prejudice outlined above arises. 1159 relies on the advanced stage of the proceeding, costs and the principle of finality and fairness. However, for the reasons stated above, on this issue, I am not satisfied that their prejudice is greater than that to Saplys who finds himself possibly liable to a $4,000,000 judgment on a claim I have been satisfied he was not aware existed through no fault of his own.

Abuse of Process

[83] In addition to s. 54(3) of the Construction Lien Act, counsel for API and Saplys also submits that the noting in default may be set aside on the basis of the court’s discretion to prevent abuse of process; that parties cannot adversely affect the rights of other parties without following required procedures absent consent or acquiescence: Bentivoglio v Group Brigil Construction, 2016 ONSC 1237, aff’d 2017 ONCA.

[84] Given my decision above, there is no need to decide this issue. However, on the record before me, and not having been provided with a specific explanation for the failure to seek leave, I express that while the improper issuance of the third party claim could have been categorized as an irregularity in the proceeding, the fact remains that 1159 did not seek statutory leave which it was required to seek.

[85] In this case, leave to issue the specific subject third party claim is an issue. In my view, it cannot be said in this case that 1159 would easily have been entitled to leave, which detracts from categorizing the failure as a simple procedural irregularity.

[86] Further, the applicable leave provision in this case does not solely envisage the effect on the plaintiff(s). As set out below in the section dealing with the leave motion, there are other considerations, other considerations that would have been engaged in this case.

[87] The adverse effects to Saplys would be that he would not be entitled to contest a $4,000,000 third party claim, be deemed to admit the allegations, with no opportunity to defend and would potentially become liable to a judgment on a claim that was not properly issued, and of which he was not aware. Saplys satisfied the court, as set out above, that he was not aware of the claim, thus there was never any consent from Saplys and/or acquiescence that would have cured any irregularity of the issuance.

[88] Added to this specific case, are concerns related to service of the third party claim, as I have set out above, which I consider relevant in this context.

[89] If the noting in default is not set aside the result would be an end-run around the governing procedural rules.

[90] For these reasons, this is a factual backdrop, in my view, that would result in an exercise of the court’s jurisdiction and a finding that the default may be set aside on this ground, on the basis that not doing so would affect the integrity of the administration of justice as a misuse of court/statutory procedure.

Leave to Issue the Third Party Claim Nunc Pro Tunc

[91] 1159 submits that the court should rectify the issuance of the third party claim by granting leave to issue it nunc pro tunc. 1159 relies on r. 29.02(1.2) of the Rules and ss. 56 and 57(2) of the Construction Lien Act in its factum. 1159 submits that it is appropriate to grant leave when the matters are inextricably intertwined with the main action and are with respect to contribution and indemnity; where the addition would not delay the action and would prevent a multiplicity of proceedings, and it is both cost effective and efficient.

[92] 1159 states that Ekarte never objected to the issuance of the third party claim, and there would be no prejudice to Ekarte, who has been aware of the third party claim for over seven years.

[93] On the issue of the nature of the third party claim, 1159 submits that Ekarte’s claim is not purely a lien action, and as such ought not to be solely governed by the Construction Lien Act. Guidance should be had under the Rules.

[94] Saplys and API submit that leave should not be granted. Saplys submits r. 29 of the Rules does not apply to the issue and that the court does not have jurisdiction to grant leave nunc pro tunc. Over five years have passed. The limitation period for the claims expired long ago. Further, Saplys states that 1159 does not meet the test for leave under the Construction Lien Act. 1159’s claim is beyond contribution and indemnity. 1159 has not met the burden of establishing no undue prejudice to Ekarte. Further, Saplys and API will be unduly prejudiced in its defence as a result of passage of time and the fact that they did not participate in important steps in the action. Undue delay and complication of the resolution of the lien will arise.

[95] Section 57(2) of the Construction Lien Act sets a discretion of the court to add or join any person as a part to the action at any time, subject to s. 54 which addresses the time for delivery of pleadings, noting in default and the effects of default.

[96] Section 56(1) of the Construction Lien Act states that, the following rules govern third party claims:

1. Subject to paragraph 2, a person against whom a claim is made in a statement of claim, crossclaim, counterclaim or third party claim may join a person who is not a party to the action as third party for the purposes of claiming contribution or indemnity from the third party in respect of that claim.

2. A person may only be joined as a third party with leave of the court upon a motion made with notice to the owner and all persons having subsisting preserved or perfected liens at the time of the motion, but such leave shall not be given unless the court is satisfied that the trial of the third party claim will not,

i. unduly prejudice the ability of the third party or of any lien claimant or defendant to prosecute a claim or conduct a defence, or

ii. unduly delay or complicate the resolution of the lien action

3. The court may give such directions as it considers appropriate in the circumstances in respect of the conduct of third party claims.

[97] Rule 29.02(1.2) of the Rules does not apply. Section 56 of the Construction Lien Act is more restrictive than the provision in Rule 29.01 of the Rules of Civil Procedure: Hobbs Miller Maat Inc. v UPI Inc., 2009 CarswellOnt 2093 (Ont. S.C.J.).

[98] I am not persuaded that the inclusion of other non-lien claims in the statement of claim, counterclaims and/or crossclaims in this case changes the application of the Construction Lien Act as the complete code for this issue. If this was the case, the legislation would have indicated that its procedural rules only applied to lien claims. It does not. In fact, its created procedure includes other non-lien claims. Section 55 permits accommodating multiple claims and joinder of claims in the plaintiff’s action, counterclaims and crossclaims to include other claims with a lien claim as specified. Of note is that s. 55 of the Construction Lien Act is not as restrictive as s. 56 which specifically limits the claims to contribution and indemnity for claims made against the party seeking to add the third party.

[99] I also do not find that the consent dismissal as against GUPM from Ekarte’s claim removed 1159’s claims as against GUPM from the construction lien proceeding so as to attract the Rules of Civil Procedure on this issue because the lien claim is still ongoing and again, crossclaims are contemplated by the act as specified, related to the improvement. Further, there is no order transferring any of the claims in the action to an ordinary track. The cases referred to by 1159 are factually distinguishable because the lien claim in this case is still ongoing.

[100] I have concluded that 1159 does not meet the test for leave under s. 56 of the Construction Lien Act.

[101] The defendants are prohibited from joining third parties for claims that are not strictly claims for contribution and indemnity concerning the claims made against them; separate claims for damages such as contract or tort damages are prohibited: Lomax Realty Development Group Inc. v. New Foundation Development Co-operative Corp. 2016 ONSC 6276.

[102] The claims against 1159 are those made by Ekarte. The nature of Ekarte’s claims are related to allegations made by Ekarte concerning the work and materials supplied by Ekarte for the project and all claims are in the amount of $257,494.24, representing the amount of the lien.

[103] Ekarte’s claim has been examined before by this court, when 1159 challenged the statement of claim. In the reasons of Whalen J. on the nature of the statement of claim, findings exist in essence that Ekarte’s claim really amounted to an attempt to perfect and preserve its lien, and pointed to an intention to enforce the lien with what was then a deficiently drafted claim.

[104] I observed that Ekarte’s claims outside of the lien claim are alternative claims directly related to the improvements that has almost the exact same factual base as the lien claim. Finally, Ekarte who claims it was hired by GUPM was permitted by s. 55 of the Construction Lien Act to add GUPM for breach of contract.

[105] 1159’s third party claim seeks damages for $4,000,000.00 for breach of contract, negligence, breach of warranty and breach of fiduciary duty, in addition to its claims for contribution and indemnity.

[106] The argument that the third party claim is inextricably intertwined with the main action and/or claims made by 1159 against the plaintiff and/or GUPM in my view is problematic. 1159 could have brought a separate action to prosecute claims that were not for contribution and indemnity purposes. It did not. 1159 admits the third party claim is not restricted to contribution and indemnity. Although parts of the third party claim are arguably intertwined with other claims, the third party claim in this case is seeking much more than relief related to contribution and indemnity. It raises many allegations and claims that would not relate to Ekarte’s claims in any way; tort and contract claims seeking up to $4,000,000. Even the claims as against GUPM in the crossclaim are for a much lesser amount, and not all the claims overlap or “duplicate” the third party claims, for example the claim against Saplys for misrepresentation of expertise and knowledge, and again, damages that far exceed that claimed as against Ekarte and GUPM. At this stage, I do not see time savings or cost efficiency. Based on intentions identified by Saplys’ counsel, if leave is granted, pleadings will need to be re-opened including defending the main action, further document productions will be an issue, and further discoveries would be sought. A further pre-trial may be required. The trial would be delayed and lengthened. Accordingly, I cannot conclude that in this case a court would clearly find that it would be illogical or a waste of resources if all the claims were not heard together.

[107] In Romanov Romanov Architects Incorporated v Cardillo Capital Corp. 2018 ONSC 6628 the third party claim consisted of proper contribution and indemnity claims, namely they were related to amounts that may be found liable to be paid to the plaintiff, and the issue of consolidation or joinder was clear. In addition, the moving party in that case was prepared to go to trial without oral or documentary discovery and as such trial would not have been delayed. Also, limitation period issues were not identified as an issue. That is not the case here.

[108] With respect to potential prejudice to Ekarte and/or GUPM, it is reasonable to infer a delay in getting to a trial will result, and additional costs may be incurred to potentially re-attend at examinations for discovery and/or pre-trial, and that there may be a lengthier trial. I acknowledge that neither Ekarte nor GUPM have participated on this motion opposing the relief and/or have filed evidence. This does not change the foregoing logistics.

[109] 1159 submits no prejudice to Ekarte and/or GUPM because that the third party claim proceeded without objection of the parties. However, I have not been satisfied that Ekarte considered it as an issue to object to. The affidavit of Mr. Carter filed to set the case down for trial makes reference to Ekarte not being aware of any leave being granted to issue a third party claim. In addition, if Ekarte and/or GUPM knew, it is likely that they knew that notings in default had been obtained within 25 days of the third party claim being issued, making it a non-starter. At the end of the day, the lack of objection by Ekarte and/or GUPM does not change the steps that would likely ensue if leave was granted.

[110] Even if Ekarte and GUPM are not unduly prejudiced, s. 56 contemplates prejudice to the third party. It does not require a finding of undue prejudice to all parties involved. The legislation uses the word “or” with this element and the others. As such, it would be enough if one of the listed parties is unduly prejudiced or one of the other elements is satisfied.

[111] In respect of Saplys and API, many years have passed since the project was concluded and since the third party claim was issued. Saplys has lost documents relevant to his defence of the claim, which also results in inability to contact potential witnesses. 1159’s submits that Saplys is not credible and he should explain in more detail why his records were lost and how he kept his records. With respect, the answer to this will not alter the irreparable effect of this fact; and his statements that the documents are lost are not incredible. The record reflects that the project was a 2011/2012 project, Saplys closed API in 2013 or 2014, Saplys started two new business interests in the year before that, and (I have accepted that) his or API’s potential involvement in the claim did not come to his attention until April of 2019, almost seven years after the project was completed, and almost four years after the expiry of the limitation period.

[112] In addition, Saplys/API have not been able to participate in important steps in the action. Document production was completed. Examinations for discovery were completed. Ekarte filed a trial record on or about December 12, 2014 and an affidavit in support of a motion for an order fixing the date, time and place for trial of the action and for the holding of a settlement meeting. Multiple pre-trials have been held: May 12, 2015 and July 20, 2015, adjourned to November 20, 2015. There were other court appearances, thereafter, including trial assignment court. It appears the only step left was the trial itself.

[113] I am accordingly satisfied that undue prejudice to the ability of Saplys and API to conduct a defence exists.

[114] Even if I was wrong on my analysis of prejudice to Saplys and API, with respect to undue delay and complication of the resolution of the lien action, considering the advanced stage of the proceeding and all the steps identified above that would have to take place if leave was granted I find granting leave would unduly complicate the resolution of the lien action. The case is already over 8 years old.

[115] Under this element, 1159 again submits that the third party claim proceeded without objection of the parties. At the end of the day, the lack of objection by Ekarte and/or GUPM does not change the fact that the resolution of the lien action would be unduly delayed and complicated if leave was granted.

[116] Further, even if 1159 had met the test for leave under s. 56 of the Construction Lien Act not every case that will lend itself to the granting of an order nunc pro tunc. Circumstances alter cases: the facts presented in many cases may not engage the discretion of the court to make such an order, whereas the facts presented in others may invite the exercise of that discretion. In my view, this is a case where the discretion ought not to be exercised.

[117] This is a case in which 1159 is seeking leave well after the expiry of the applicable limitation period, creating a situation where granting such an order has the potential to undermine the limitation period. The statement of claim was issued December 21, 2012, amended July 19, 2013. The latest possible expiry of the limitation period is July 19, 2015. 1159’s motion for leave is dated November 5, 2020, making it well over 5 years since the expiry of the limitation period.

[118] The jurisdiction to issue orders nunc pro tunc is not unlimited: Canadian Imperial Bank of Commerce v Green, 2015 SCC 60. A court has no authority to make a nunc pro tunc order if the party did not seek an order before the relevant limitation period expired: Thistle v. Schumilas, 2020 ONCA 88; and 1186708 Ontario Inc. v. Gerstein, 2017 ONSC 1217. The authority to add a party at any stage of a proceeding does not apply to extend a limitation period, and prejudice advanced by the party seeking to add the party is no longer relevant if a limitation period has expired: Canadian Real Estate Association v American Home Assurance Company, 2013 ONSC 7950, para 12. Even if prejudice to 1159 was relevant, it does not outweigh the consideration that leave is now being sought over 5 years past an expired limitation period and the effects that arise from this as outlined in this decision.

[119] For all these reasons, the request for leave is denied.

[120] As an aside, the submissions of 1159 included that the leave motion was brought out of an abundance of caution. This submission concerned me considering that if 1159 had not served the noting in default as it did in this case and obtained a default judgment that it would ultimately seek to enforce, 1159, in my view could have found itself in a position of having a judgment based on a claim where no leave was obtained to bring it in the first place, which could have been similarly challengeable by Saplys based on the facts of this case. A leave component should not be considered a requirement that can be ignored or seen to be optional when a noting in default is obtained.

[121] Absent leave, the third party claim against Saplys and API should be stayed: Guillaume v. Toronto (City), 2010 ONSC 5045.

[122] I am not persuaded that the court can or should resort to making an order that the third party claim continue and be tried as a separate action following the other claims in light of my findings that Saplys was not aware of the existence of the claim until April of 2019, of undue prejudice to the ability of Saplys and API to conduct a defence.

CONCLUSION

[123] The noting of default as against Saplys and API is set aside.

[124] The request of 1159 for leave to issue the third party claim nunc pro tunc is denied.

[125] The third party claim as against Saplys and API is stayed.

[126] If the parties cannot agree on costs, I will take written submissions of no more than three pages, exclusive of bills of cost and copies of any offers to settle within 30 days.

Rasaiah J.

Released: March 23, 2021