COURT FILE NO.: CV-19-619715 & CV-19-619717
DATE: 2021 04 09
SUPERIOR COURT OF JUSTICE – ONTARIO
IN THE MATTER OF the Construction Act, RSO 1990, c C.30, as amended
RE: ATLANTIC CONSTRUCTION GROUP INC., Plaintiff
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2567616 ONTARIO INC., DSG GROUP OF COMPANIES INC., 2605097 ONTARIO LIMITED, 2608109 ONTARIO INC. and ROYAL BANK OF CANADA, Defendants
AND RE: ATLANTIC CONSTRUCTION GROUP INC., Plaintiff
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2567616 ONTARIO INC., 2605097 ONTARIO LIMITED, 2608109 ONTARIO INC. and ROYAL BANK OF CANADA, Defendants
BEFORE: Master Todd Robinson
COUNSEL: J. Margie, agent for counsel for the plaintiff (moving party)
A. Kuchinsky and T. Watson, counsel for the defendant, 2567616 Ontario Inc.
HEARD: January 7, 2021 (by videoconference)
REASONS FOR DECISION
[1] Strict timelines on are imposed by the Construction Act, RSO 1990, c C.30, including non-discretionary deadlines for expiry of liens and abridged timelines for service of pleadings in lien actions. Unlike the prescribed deadlines for lien expiry, the court is afforded statutory discretion to extend pleading service deadlines. These motions deal with the court’s discretion to extend the prescribed 90-day period for service of a statement of claim in a lien action. More specifically, they deal with the impact of a lien claimant’s conscious decision not to serve a statement of claim within that 90-day period.
[2] Atlantic Construction Group Inc. (“Atlantic”) brings motions in both of its two lien actions for orders extending the time for service of its statements of claim, as well as orders validating service or, in the alternative, for substituted service. The underlying actions are brought in respect of Atlantic’s liens against certain units at each of 400 Adelaide Street East, Toronto (the “Adelaide Premises”) and 51 East Liberty Street, Toronto (the “Liberty Premises”), both owned by 2567616 Ontario Inc. (“2567 Ont”). Atlantic’s motions are opposed 2567 Ont. The motions are unopposed by the remaining defendants.
[3] These motions are a close call. On the one hand, Atlantic and its counsel made a conscious decision not to serve the statements of claim, ostensibly for self-serving financial reasons. Efforts to serve were only made after the claims had already expired, apparently prompted by an inquiry about the status of the liens. Nothing further was done. These motions were only brought after Atlantic was put on notice of 2567 Ont’s separate motions to discharge Atlantic’s liens. On the other hand, 2567 Ont was aware of the liens and the lien actions well before moving to discharge the liens. It opposes these motions in reliance on unsubstantiated evidence, a technical position on lack of service, and an argument regarding inexcusability of the delay and prejudice that hinges on ignoring its own complacency and seemingly less than forthright affidavit evidence.
[4] I have reservations about granting the extensions. In my view, Atlantic’s reasons for not pursuing enforcement of its lien rights in a timelier manner were not reasonable in all the circumstances. However, having considered the evidence and the factors applicable on an extension motion in a contextual manner, and in the particular circumstances before me, I have determined that the requested extensions should nevertheless be granted, that further service of the statements of claim on 2567 Ont should be dispensed with, and that service on the remaining defendants should be validated on an unopposed basis. Each of the defendants in both actions shall have 20 days from service of this order to deliver a statement of defence.
Background
[5] On January 22, 2019, Atlantic registered a claim for lien in the amount of $121,875 plus HST against the Adelaide Premises and a claim for lien in the amount of $50,850 plus HST against the Liberty Premises. Atlantic was contracted to perform construction and fit out work for a pharmacy, optometry clinic and medical clinic at each property. Statements of claim and certificates of action in both actions were subsequently issued, with certificates of action registered on title, on May 10, 2019.
[6] It is undisputed that neither statement of claim was served within the 90-day period required by the Construction Act, which expired for both actions on August 8, 2019. Based on the record before me, Atlantic made no efforts to serve either claim until October 2019. That followed inquiries on the status of the liens by Cary Schneider, a lawyer representing 2567 Ont and its principal, Dr. Harmander Gill, in a separate action commenced by 2605097 Ontario Limited and 2608109 Ontario Inc. (other defendants in these proceedings). That separate action involves disputes regarding an alleged joint venture or partnership between the corporations to establish pharmacies, optometry clinics and medical clinics at each of the Adelaide Premises, the Liberty Premises, and a third property at 550 Front Street, Toronto.
[7] By email dated August 30, 2019, Mr. Schneider contacted Atlantic’s counsel, Barbara Frederikse, advising her that Mr. Schneider had become aware of Atlantic’s liens against both the Adelaide Premises and the Liberty Premises and seeking information on the status of the liens. On September 11, 2019, after two follow-up emails from Mr. Schneider, Ms. Frederikse provided a response and asked if Mr. Schneider was prepared to accept service of the statements of claim on behalf of 2567 Ont. Mr. Schneider responded that he did not have those instructions.
[8] Nothing further occurred until October 15, 2019, when Cary Schneider wrote to Barbara Frederikse on his own initiative and confirmed that he had received instructions to accept service of the claims. Copies of both statements of claim were thereafter emailed to Mr. Schneider on October 18, 2019. In each of the attached covering letters, Ms. Frederikse specifically requested “a copy of the Statement of Claim endorsed with your original signature on the back page, confirming your acceptance of service of the Statement of Claim on behalf of your client” (emphasis in original).
[9] In response to those emails, on the same day, Mr. Schneider observed that the claims had been issued in May 2019 and requested affidavits of attempted service. Ms. Frederikse’s response confirmed that service had not been attempted “in an effort to keep [Atlantic’s] costs reasonable”. Based on the record before me, no further correspondence was exchanged. Mr. Schneider did not provide endorsed back pages. Neither Ms. Frederikse nor anyone from her office followed up to request or obtain them. Ms. Frederikse’s evidence is that she believed service of the statements of claim to have been accepted by Cary Schneider.
[10] Service of the statements of claim was also made on the remaining defendants. In the case of DSG Group of Companies Inc., 2605097 Ontario Limited, and 2608109 Ontario Inc., Ms. Frederikse emailed a copy of the statements of claim to the lawyer for those parties, who accepted service by endorsing back pages of the claims on October 22, 2019. Royal Bank of Canada (“RBC”) was personally served on October 24, 2019.
[11] Other than Atlantic making a request for information pursuant to s. 39 of the Construction Act to RBC (mentioned in Ms. Frederikse’s affidavit), nothing further happened in either lien action between October 2019 and June 2020, when 2567 Ont moved ex parte to discharge Atlantic’s liens. Atlantic’s reasons for inaction in the period prior to October 2019, as well as the period after October 2019, are squarely at issue in these motions.
Relevant Law
[12] I have previously determined that, pursuant to s. 87.3 of the Construction Act, the provisions of the act as they read on June 29, 2018 continue to apply to the improvements at both the Adelaide Premises and the Liberty Premises and, thereby, to the liens and lien actions arising from those improvements: Atlantic Construction Group Inc. v. 2567616 Ontario Inc., 2020 ONSC 3992 at paras. 5 and 8-9. However, evidence on this motion has raised some questions about the accuracy of that determination, which was made on the basis of 2567 Ont’s ex parte materials in support of its motions to discharge Atlantic’s liens. While there is evidence that construction at both sites commenced in March 2018 pursuant to an oral agreement, there is also evidence that a written contract for at least the Adelaide Premises was entered into in November 2018.
[13] For the purposes of these motions, the distinction between the relevant provisions of current O Reg 302/18 under the Construction Act and the former Construction Lien Act (the “CLA”) are immaterial. I accordingly leave open for another motion or hearing the question of whether the former or current legislation applies. References to the equivalent provisions under each version of the act are included in these reasons.
[14] In a lien action, a statement of claim must be served within 90 days after it is issued, although the time for service of a statement of claim may be extended by the court upon a motion made before or after the expiration of that service period: CLA, s. 53(2); O Reg 302/18, s. 1. These motions were scheduled in September 2020 and ultimately brought in October 2020, more than a year after Atlantic’s claims had expired.
[15] As I have previously held, on a motion to extend the 90-day service period, a contextual approach is required that considers the facts of a particular case, although tolerance for delay and assessment of prejudice in a lien action are viewed through a different lens than in a non-lien action: Petrasso v. Fuller, 2020 ONSC 7915 at paras. 11-12. Although not an exhaustive list, factors to be considered include (a) the length of delay and whether the limitation period has expired, (b) the explanation for the delay both in serving the statement of claim and bringing the motion, and (c) prejudice to the defendant by the delay: Petrasso at para. 13; MGI Construction Corp. v. 2273865 Ontario Inc., 2015 ONSC 4716 (Master) at para. 12.
Analysis
Length of delay
[16] There are two aspects to delay in this case: the delay before serving the statements of claim and delay in bringing these extension motions. Whether the statements of claim have been served at all is disputed. 2567 Ont argues that the claims have never been served, whereas Atlantic argues they were merely late-served on October 18, 2019, when they were sent by email to Cary Schneider. Atlantic accordingly argues that the total service delay is only 71 days beyond the 90-day deadline. Other than the email to Mr. Schneider, there is no evidence of any attempted or actual service of the statements of claim on 2567 Ont.
[17] I agree with 2567 Ont that emailing the claims did not constitute effective or valid service. Service of an originating process on a lawyer is only effective if the lawyer endorses her/his acceptance of service and the date of acceptance on either the document or a copy of it: Rule 16.03(2) of the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”). A signed endorsement of acceptance is expressly required, and service on a lawyer cannot be said to have been served in a manner authorized by the Rules without it: An-Dell Electric Ltd. v. M.J. Dixon Construction Ltd., [2004] OJ No 4089 (Master) at paras. 6-7.
[18] Accordingly, emailing the statements of claim to Cary Schneider, even with his confirmation that he had instructions to accept service, does not satisfy the requirements of Rule 16.03(2). Although clearly requested by Atlantic’s counsel, signed back pages acknowledging acceptance of service were not provided by Mr. Schneider for either claim. No follow up requests were made to obtain them, even after the email subsequent exchange regarding the date of issuance and whether service had been attempted.
[19] Evidence from Dr. Harmander Gill, who is a director of 2567 Ont, is that Mr. Schneider was never retained to address Atlantic’s claims and had no instructions to accept service. Mr. Schneider has apparently confirmed that he indeed had no such instructions and did not provide the statements of claim to Dr. Gill, which was relayed by way of an answer to a question taken under advisement at Dr. Gill’s cross-examination.
[20] I accept Barbara Frederikse’s reply affidavit evidence that she had no reason to believe that Cary Schneider was not authorized to accept service of the statements of claim nor that Mr. Schneider was not retained with respect to Atlantic’s claims. I am also satisfied that Mr. Schneider never advised Ms. Frederikse that he was not retained with respect to Atlantic’s claims or that he did not have (or no longer had) instructions to accept service. However, the fact remains that Mr. Schneider did not provide the requisite endorsements of acceptance of service, despite the request in Ms. Frederikse’s letters, and no efforts were made to obtain them.
[21] Instructions to accept service may be revoked: Schreiber v. Mulroney, 2007 CanLII 56529 (ON SC), [2007] OJ No 4997 at paras 22-24. Atlantic argues that, in Schreiber, it was a material fact that plaintiff’s counsel was advised by defendant’s counsel that his instructions to accept service had changed and he would no longer be accepting service of the statement of claim. While that is a distinguishing fact from these motions, nothing in Schreiber suggests that such notice is mandatory. Cullity J. held that a lawyer’s statement before receiving the document that s/he has instructions to accept service is not the same as an undertaking to accept service irrespective of what its contents may turn out to be: Schreiber at para. 24. Nothing in the record before me suggests that Cary Schneider was aware that the claims had expired when advising Barbara Frederikse that he had instructions to accept service. His subsequent email noting issuance of the claims on May 10, 2019 and asking for affidavits of attempted service supports that he did not. Mr. Schneider’s lack of awareness that the claims were already expired is material to considering whether he had any obligation to endorse acceptance of service upon becoming aware of that fact. Schreiber supports 2567 Ont’s position that he did not.
[22] Atlantic argues that 2567 Ont is taking advantage of misrepresented authority by its lawyer, and that it would not be equitable to permit 2567 Ont to benefit from that deception. That argument might have more teeth if Atlantic’s counsel had made any effort to obtain formal confirmation of acceptance of service, discussed timing of defences, or shared any of the rationale for not advancing these lien actions (discussed below) with 2567 Ont or its counsel. Atlantic’s position on Mr. Schneider’s professional obligations effectively amounts to an argument that 2567 Ont should be obliged to disprove the effectiveness of Atlantic’s manner of service, which evidently does not comply with Rule 16.03(2). It is not the onus of the served party to disprove valid service; rather, the onus is on the serving party to demonstrate service was valid and effective: Maillis v. Mirage Resorts Inc., 2013 ONSC 1556 at para 25.
[23] I was provided with no case law in which rules of professional conduct were relied upon to interpret or vary express statutory language. In my view, whether Cary Schneider’s emails constitute an agreement between counsel that professionally obliged him “follow through” on his indication that he would accept service is separate from whether the statutory requirements of Rule 16.03(2) were met. They were not. There was accordingly no valid service of the statements of claim on 2567 Ont by email to Cary Schneider on October 18, 2019.
[24] That determination does not prevent validation of service pursuant to Rule 16.08 of the Rules, as sought by Atlantic on these motions, but validation depends first on whether the extensions are granted. For the purposes of assessing delay in serving the statements of claim, it is a relevant factor that Atlantic failed to effect valid service of the claims in any of the various manners of service permitted by the CLA and the Rules prior to these motions being brought. Atlantic made only a single attempt at service in a manner requiring judicial validation to constitute effective service, yet validation was not sought for over a year until these motions were brought.
[25] Atlantic argues that these motions were promptly brought upon 2567 Ont raising service as an issue for the first time in September 2020, such that there is no delay. I do not agree. Both statements of claim expired on August 8, 2019. Service of an expired statement of claim is, in my view, a nullity. An extension motion was formally necessary upon expiry of the claims, although may have become practically unnecessary had the defendants delivered statements of defence. That did not happen here.
[26] For these reasons, I do not accept Atlantic’s position that there has been only 71 days of delay. In my view, the relevant delay is approximately 14 months from the time of expiry of the claims to bringing these motions.
Explanation for delay
[27] Atlantic has failed to put forward an acceptable or adequate explanation for the delay in serving the statements of claim and moving to extend the time for service. The most troubling facts in these motions is the conscious decision by Atlantic not to serve the statements of claim and ongoing complacency in advancing the lien actions even after emailing the statements of claim to Cary Schneider and serving the other defendants.
[28] The sole evidence on these motions is from Atlantic’s lawyer at the time, Barbara Frederikse, who acknowledged on cross-examination that no steps were taken after service of the statements of claim until 2567 Ont’s discharge motions. There is no evidence from any representative of Atlantic. In my view, the reasons given by Ms. Frederikse for not serving the claim and not bringing an extension motion sooner are insufficient.
[29] As one reason for not having served the claim, Atlantic relies on Ms. Frederikse having become aware of a dispute between 2567616 Ontario Inc., 2605097 Ontario Limited, 2567 Ont, and Dr. Harmander Gill “shortly before the claims for lien of Atlantic were registered.” Ms. Frederikse suggests that she believed “nothing would get done in the lien actions” until that dispute was resolved. Since the statement of claim in that separate litigation was issued after registration of the liens, it is unclear how or from whom she became aware of the dispute “shortly before” they were registered. I also fail to see how her expectation that there may be a lack of progress in the lien actions because of that separate dispute constitutes a reasonable basis not to serve the claims at all.
[30] Ms. Frederikse also indicates in her affidavit that she believed Atlantic would be paid after resolution of the dispute between the defendants. During cross-examination, Ms. Frederikse confirmed that none of the defendants, including 2567 Ont, told her that Atlantic would be paid once that dispute was resolved. Her evidence is that she derived her opinion solely from her litigation experience. In her words, “it didn’t make a lot of sense, from a litigation perspective, from a cost perspective, for my client to be aggressive on the lien actions when that would not end up with any kind of tangible result for my client other than additional expense.”
[31] Atlantic relies on Corporation of the City of Brantford v. The Guarantee Company of North America, 2017 ONSC 933 (Master), at para. 32, in which Master Pope found that it was logical to hold in abeyance a secondary action that depended on the results of a main action. Atlantic argues that doing so is an efficient use of judicial resources. I do not view the decision in Brantford as having any bearing on this motion. I am not convinced that either of Atlantic’s lien actions genuinely or reasonably depends on any determinations or results in the other litigation. Also, in Brantford, Master Pope was assessing the explanation of overall litigation delay in the context of a motion to set aside a registrar’s dismissal. Overall litigation delay is, in my view, a different kind of delay assessment than assessing delay in serving a claim.
[32] In any event, I find Ms. Frederikse’s explanation questionable. There is no evidence supporting that Ms. Frederikse had any reason to believe that 2567 Ont (or the other defendants) were even aware of the lien actions within the 90-day service period, or at any point prior to Cary Schneider’s initial inquiry about the liens in September 2019. It is thereby unclear on what basis she reasonably believed that the defendants would make payment to Atlantic upon resolution of their internal dispute, since the evidence suggests they did not know they had been sued. Also, nothing in Ms. Frederikse’s evidence supports any active steps being taken to monitor the progress of the separate litigation that she felt would result in payment to Atlantic. I accept that the other litigation may be some explanation for not being “aggressive” in advancing the lien actions. However, in my view, a subjective belief that Atlantic would be paid after resolution of the defendants’ dispute is not an adequate explanation for not serving the statements of claim at all.
[33] Ms. Frederikse’s evidence is also that she believed suspension of Dr. Harmander Gill’s license to practice medicine in May 2019 would impact payment to Atlantic. I see no reason why this should reasonably deter serving the claims. Moreover, there is no evidentiary basis to equate Dr. Gill’s personal financial situation with the financial ability of 2567 Ont to pay a judgment. 2567 Ont is a corporation owing at least three properties. Nothing in the materials supports any reasonable belief of actual or pending insolvency of 2567 Ont prior to October 2019. RBC’s receivership application was not commenced until February 2020, acknowledged by Ms. Frederikse during her cross-examination to have been after “service” on Cary Schneider. RBC’s receivership application and proceedings are accordingly also not a basis for explaining delay in serving the statements of claim.
[34] A further argument is made that the cost of effecting service was not warranted given these other issues. I do not see how the cost of effecting service could ever be a valid basis for taking no steps to serve the claim at all. Unless Atlantic intended to abandon both its liens and legal pursuit of its alleged debt, the statements of claim had to be served. Ms. Frederikse’s evidence on expected difficulties that would be encountered by a process server in effecting service on 2567 Ont, purportedly based on her experience, amounts to nothing more than speculation. Her view may have had some foundation if even one attempt had been made to personally serve 2567 Ont.
[35] There is also no adequate explanation for why Cary Schneider’s inquiry in September 2019 suddenly triggered instructions and attempts to serve the statements of claim, and why such efforts were undertaken without considering or seeking extension orders. Based on the evidence before me, it appears that there was no plan or intention to serve the claims at all until Mr. Schneider contacted Ms. Frederikse about the liens. Even after Ms. Frederikse was subjectively satisfied that the expired claims had been served, no further steps were taken to discuss with the defendants the timing of defences or potentially holding the litigation in abeyance on the basis of any of the reasons now argued for not advancing it.
[36] In my view, Atlantic has failed to put forward any adequate or acceptable explanation for its failure to make any efforts to serve the statements of claim within the 90-day service period, or at any point prior to October 2019. Atlantic has similarly failed to adequately explain its failure to move sooner to extend the time for service and seek validation of what ought to have been apparent to Atlantic’s experienced lawyer was a manner of service that did not comply with either the CLA or the Rules.
Prejudice
[37] I have previously held that, consistent with the Court of Appeal’s view for non-lien actions, extension motions in lien actions should be decided on the facts of each case with a focus on whether the defence is prejudiced by the delay: Petrasso, supra at para. 11. In my view, prejudice to a defendant by reason of the plaintiff’s delay in serving the statement of claim is always an important factor in extension motions.
[38] Dr. Harmander Gill’s evidence outlines various items of prejudice purportedly suffered by 2567 Ont by reason of the liens, namely that:
(a) Dr. Gill he has been “actively looking for a while for buyers” to sell the Adelaide Premises and the Liberty Premises, but prospective purchasers or partners have “backed away from the opportunity” by reason of the liens;
(b) contractors declined to be retained to complete the construction work when they learned there are liens;
(c) 2567 Ont has “obviously” been unable to operate any business from the Liberty Premises;
(d) in February 2020, RBC commenced a receivership application against 2567 Ont asserting that 2567 Ont owed in excess of $4 million;
(e) the liens have made it “very difficult” for 2567 Ont to obtain new financing, with new lenders requiring that the liens be removed before loaning to 2567 Ont or only offering loans on disadvantageous terms;
(f) 2567 Ont has not been profitable through the COVID-19 pandemic, unlike most medical clinics;
(g) 2567 Ont had to diminish reserve funds during the pandemic, since it was unable to obtain additional loans and financing like other medical clinics due to Atlantic’s liens; and
(h) 2567 Ont cannot post funds to vacate the liens due to the receivership application and initial business decline due to the pandemic.
[39] These various heads of alleged prejudice are self-serving and unsubstantiated by any cogent evidence. Supporting documentation tendered by 2567 Ont is limited to an email from 2567 Ont’s lawyer stating that the liens have impacted refinancing and several endorsements of Justice Conway in the receivership proceedings. These do not assist in demonstrating prejudice from the liens. The lawyer’s letter constitutes at least double hearsay and is as self-serving as Dr. Gill’s own assertion of financing difficulties, which are entirely unsubstantiated by other evidence. Justice Conway’s endorsements deal with consent amendments to the terms of repayment of 2567 Ont’s indebtedness to RBC. They do not support actual prejudice from the liens or that the liens had or have any material bearing in the receivership application and proceedings.
[40] During oral submissions, I was directed to an email included in the receivership application materials in support of 2567 Ont’s argument that the liens and these lien actions were one of the issues identified by RBC. The specific email, sent by a representative of RBC to Dr. Gill on November 22, 2019, advises that management of the loan facilities had been transferred to Special Loans and Advisory Services due to Atlantic’s liens and lien actions. While I accept that the liens appear to have been one ground relied upon by RBC, the affidavit filed from RBC’s receivership application also identifies other defaults and issues with the various credit facilities issued to 2567 Ont in support of RBC’s receivership application. The affidavit specifically identifies concerns with advances under the loan facilities being improperly used for purposes other than leasehold improvements, failure of Dr. Gill to provide requested information, and concerns about 2567 Ont’s ability to fund the monthly loan payments. RBC’s receivership application was evidently not initiated solely as a result of Atlantic’s liens. They represent only one issue in a broader set of issues with 2567 Ont.
[41] With respect to lost purchaser opportunities, Dr. Gill’s cross-examination evidence is that about six potential purchasers had dealings with the listing agent, although none of them made any written purchase offers. Like the other heads of alleged prejudice, that evidence is unsubstantiated, and there is no evidence in the record supporting that any purchasers were actually deterred by presence of the liens. By way of answer to undertaking, 2567 Ont confirmed that there was no written record of any potential buyer or partner declining to deal with 2567 Ont because of an existing lien.
[42] Simply put, there is no cogent evidence that any of the alleged prejudice was actually suffered by 2567 Ont (other than RBC bringing the receivership application), or that any such prejudice was caused by the liens. For the purposes of these motions, I am not satisfied that 2567 Ont has suffered any actual prejudice from delay in Atlantic serving the claims or otherwise advancing the lien litigation.
Additional factors
[43] In my view, on the facts of this case, there are two additional factors relevant to assessing if Atlantic’s delay is excusable: 2567 Ont’s conduct following actual notice of the liens and lien actions and the apparent lack of forthrightness in the responding evidence of Dr. Harmander Gill. A plaintiff’s action (or inaction) in serving a claim is typically the primary focus on an extension motion. However, evidence supports that 2567 Ont was aware of the liens and lien actions well prior to moving to discharge them or raising any issue with service. Notwithstanding inadequately explained delay by Atlantic, I cannot ignore that 2567 Ont took no steps to address the liens or existence of the statements of claim, particularly when it has tendered evidence that appears to be less than forthright on 2567 Ont’s knowledge of the liens and lien actions.
[44] Overall, Dr. Gill’s evidence on these motions is convenient and self-serving, appearing in some instances to be cutely incomplete, if not disingenuous. Without going through all of Dr. Gill’s evidence in detail, I note a few examples:
(a) Dr. Gill’s responding affidavit states that he was unaware that the liens had been registered until late August 2019. However, during cross-examination, he acknowledged receipt of letters dated February 4, 2019 from Barbara Frederikse sent to 2567 Ont that confirmed preservation of both liens and made requests for information pursuant to s. 39 of the Construction Act. Dr. Gill’s cross-examination evidence is that he understood these letters were only requests for information, despite the plain language in each letter advising that liens had been registered and the amounts of each lien.
(b) Dr. Gill’s cross-examination evidence is that he did not take the February 2019 letters to a lawyer, despite other evidence supporting that he must ultimately have been the one to provide them to Cary Schneider, although a specific question on that point was refused as privileged.
(c) Dr. Gill’s evidence is that he understood the request in the February 2019 letters requiring information “no later than 21 days from the date of this letter” to mean that he would receive a follow-up after 21 days with clarification regarding what information was requested. In my view, the letters are clear and unambiguous, including an itemization of requested information. Dr. Gill’s purported understanding of the letter and confusion about what was being asked of him is difficult to accept given the language used in the letter. As a medical physician, he is not uneducated. Also, despite his purported confusion, Dr. Gill made no effort to contact Barbara Frederikse to seek any clarification on her letter.
(d) Dr. Gill appears to have significantly downplayed his own role in work at the Adelaide Premises and the Liberty Premises. If nothing else, various WhatsApp text messages in evidence support his fairly active involvement in construction issues, which is inconsistent with Dr. Gill’s evidence that it was the other defendants who contracted and dealt with Atlantic.
(e) In the course of Dr. Gill’s cross-examination, he gave evidence that 2567 Ont had an exclusive listing for sale of the Adelaide Premises and the Liberty Premises, but could not recall when the listing agent was retained. By way of answer to undertaking, 2567 Ont confirmed that there was, in fact, no realter retained to list the Adelaide Premises or the Liberty Premises.
(f) Dr. Gill’s affidavit evidence is that he was not aware that the statement of claims had been issued until they were provided to him by RBC in December 2019. He swears that Cary Schneider was not retained in respect of Atlantic’s claims, never had any discussion about accepting service of the statements of claim with Dr. Gill, was never instructed by Dr. Gill nor authorized to accept service of the statements of claim, and never provided copies of the statements of claim to Dr. Gill. Various questions on cross-examination regarding Dr. Gill’s communications with Mr. Schneider about Atlantic’s liens and the statements of claim were take under advisement and ultimately refused as privileged.
(g) Dr. Gill’s evidence seeks to paint an picture of an owner corporation suffering financial hardship by reason of the liens, yet the evidence supports that 2567 Ont has been able to carry on business operations at least at the Adelaide Premises, was able to raise $2.2 million to pay RBC between April and October 2020, and was able to obtain new financing in November 2020, for which a $3 million charge was registered against the Adelaide Premises, the Liberty Premises, and 550 Front Street, Toronto.
[45] Frankly, I am skeptical that Dr. Gill has been forthright in his evidence, particularly about his communications with Cary Schneider and knowledge of the liens and lien actions. Notably, 2567 Ont’s counsel took under advisement a request to provide a list of emails exchanged between Mr. Schneider and Dr. Gill regarding service of the statements of claim, the liens, or the lien actions. A partial response was provided acknowledging only that there were no emails exchanged in September, October or November 2019 regarding service of the statement of claim. Solicitor-client privilege was asserted over any other emails. Although Atlantic did not move on the refusals, I am not convinced that solicitor-client privilege has been validly invoked to prevent disclosure of factual information (as opposed to advice) shared between Mr. Schneider and Dr. Gill regarding the liens and lien actions. Nevertheless, answers given to other questions taken under advisement confirm Mr. Schneider’s advice that he did not receive instructions to accept service of the statements of claim and did not forward the statements of claim to Dr. Gill.
[46] Although it is the evidence before me, it seems highly unusual and even unlikely for a lawyer retained in ongoing litigation to advise counsel in separate litigation that s/he has no instructions to accept service of a statement of claim, later confirm that instructions have been received without any prompt or follow-up from the other counsel, and then, upon receiving the statement of claim, fail to provide it to her/his client. The answer provided that “Mr. Schneider advises that he did not forward any statements of claim to Dr. Gill” does support that the statements of claim were not emailed to Dr. Gill. However, the language used is also precise. It does not say and does not necessarily mean that Mr. Schneider did not otherwise provide the statements of claim to 2567 Ont, directly or indirectly. Mr. Schneider has tendered no sworn evidence himself.
[47] While I accept that Atlantic did not demand defences or pursue any steps in the litigation after “serving” Cary Schneider, the evidence supports that 2567 Ont was reasonably aware of the liens in February 2019. Based on Dr. Gill’s evidence, 2567 Ont was admittedly aware of the liens by August 2019 and the statements of claim by December 2019. Nevertheless, 2567 Ont took no steps to communicate with Atlantic about the liens or lien actions, and took no steps itself to address those liens until bringing its ex parte motions to discharge them in June 2020, nearly a year after admittedly becoming aware of the liens. Even after I adjourned those motions to be brought on notice, 2567 Ont did not raise any issue with expiry or service of the statements of claim until September 2020, after a case conference to schedule 2567 Ont’s discharge motions and after Atlantic’s responding motion materials for those motions had been served.
[48] In my view, 2567 Ont’s complacency about Atlantic’s liens and the apparent lack of forthrightness in Dr. Harmander Gill’s evidence are both relevant factors on this motion. Significantly, the complacency undercuts 2567 Ont’s position that delay regarding the liens has seriously prejudiced it.
Determination on extension
[49] My determination regarding the insufficiency of Atlantic’s explanation for delay is a significant factor in assessing these motions. However, since the approach is contextual, it cannot be viewed in isolation from the other factors discussed above, and is not itself dispositive of the motions.
[50] Although I do not accept Atlantic’s explanation for delay as being reasonable in all the circumstances, on the totality of the evidence, the period of delay is not overly inordinate taking into consideration its overlap with the ongoing pandemic. Combined with the lack of any demonstrable prejudice to 2567 Ont arising from the delay, complacency by 2567 Ont, and my concerns about the lack of forthrightness in Dr. Gill’s evidence, I find this to be an appropriate case to grant the extensions. However, I have admittedly struggled in reaching that determination given the apparently cavalier approach by Atlantic (and its counsel) to the mandatory service requirements of the CLA.
Validating service or substituted service
[51] Leave is required for interlocutory steps not contemplated by the Construction Act, to be obtained on proof that the steps are necessary or would expedite the resolution of the issues in dispute: CLA, s. 67(2); O Reg 302/18, s. 13. Submissions on leave were not made by either party, but I did not require them. In my view, on the facts of this case, the preconditions for leave are met if Atlantic satisfies the requirements for validating service or substituted service as set out in the Rules.
[52] With respect to validating service, Rule 16.08 of the Rules permits validation of a manner of service that is not authorized by either the Rules or an order, subject to the court being satisfied (i) that the document came to the notice of the person to be served or (ii) that the manner of service is such that it would have come to that person’s notice, except for the person’s own attempts to evade service. If those conditions are met regarding Atlantic’s email service of the statement of claims, I am satisfied it would expedite resolution of the issues in dispute by avoiding practically unnecessary procedural delay from obliging Atlantic to effect further service.
[53] The difficulty I have with validating service by email to Cary Schneider on October 18, 2019 is that Dr. Gill’s affidavit evidence states unequivocally that Mr. Schneider never provided him with copies of the statements of claim and that Dr. Gill was unaware that the statement of claims had been issued until they were provided to him by RBC in December 2019. As noted above, the answers given to the matter under advisement from Dr. Gill’s cross-examination was that Mr. Schneider did not forward the statements of claim to Dr. Gill. Although I have my doubts, as outlined above, the evidence before me does not support a clear finding that the statement of claim came to the attention of 2567 Ont via Mr. Schneider. Whether it ought to have come to 2567 Ont’s attention is moot, since evidence does not support any determination that 2567 Ont was evading service, which is required for the second basis of validation contemplated by Rule 16.08.
[54] Validation of service on the other defendants in both actions is only required insofar as the claim had expired at the time they were served. Service on DSG Group of Companies Inc., 2605097 Ontario Limited, and 2608109 Ontario Inc. was accepted by counsel for those parties, who endorsed her acceptance on the back page of each claim on October 22, 2019. RBC was personally served with both statements of claim on October 24, 2019. Since those defendants did not oppose the motion, it is appropriate that service of the statements of claim be extended and those otherwise valid manners of service be validated nunc pro tunc.
[55] With respect to substituted service, Rule 16.04(1) of the Rules requires a moving party to satisfy the court that it is impractical to effect prompt service personally or by alternative to personal service pursuant to the Rules. I am satisfied that, if Atlantic demonstrates impracticality to effect proper service on 2567 Ont, it will have satisfied the requirement of necessity such that Atlantic should have the court’s consent to seek substituted service. However, Atlantic has tendered no evidence supporting any impracticality in effecting service on 2567 Ont in accordance with the Construction Act, or else personally or by alternative to personal service in accordance with the Rules. For example, service in accordance with s. 87(1)(b) of the Construction Act or Rule 16.03(6) of the Rules were and remain eminently practical.
[56] Although I am not prepared to validate service on 2567 Ont or grant substituted service, 2567 Ont evidently has actual knowledge of the two claims. In my view, it would be overly technical and artificial to require Atlantic to now effect formal service of the statements of claim. I accordingly dispense with the requirement for service. The deeming provision in Rule 16.04(3) of the Rules operates such that service on 2567 Ont is deemed effective as of the date of my order below.
Disposition
[57] For the foregoing reasons, I order as follows:
(a) The time for Atlantic to serve its statements of claim in each of Court File Nos. CV-19-619715 and CV-19-619717 is hereby extended to the date of this order.
(b) Atlantic’s service of the statement of claim in Court File No. CV-19-619715 as follows is hereby validated nunc pro tunc:
(i) Service on DSG Group of Companies Inc., 2605097 Ontario Limited, and 2608109 Ontario Inc. by acceptance of service by the lawyer for those defendants on October 22, 2019; and
(ii) Personal service on RBC on October 24, 2019.
(c) Atlantic’s service of the statement of claim in Court File No. CV-19-619717 as follows is hereby validated nunc pro tunc:
(i) Service on 2605097 Ontario Limited and 2608109 Ontario Inc. by acceptance of service by the lawyer for those defendants on October 22, 2019; and
(ii) Personal service on RBC on October 24, 2019.
(d) Each of the defendants in Court File Nos. CV-19-619715 and CV-19-619717 shall have 20 days from the date of serving this order to deliver a statement of defence, subject to any agreement between Atlantic and a defendant to extend that time.
(e) Atlantic shall forthwith serve a copy of these reasons on all defendants.
(f) This order is effective without further formality.
Costs
[58] Costs outlines have been exchanged and filed. Since offers to settle had been made, costs submissions could not be made at the hearing. I strongly encourage the parties to settle costs of these motions themselves. However, if the parties cannot agree on costs, then a 30-minute teleconference hearing to make costs submissions may be arranged through my Assistant Trial Coordinator. Each party shall have 10 minutes for substantive submissions and there shall be no more than 5 minutes of reply. Any case law and/or offers to settle relied upon by either party shall be exchanged and filed with my Assistant Trial Coordinator at least five (5) days prior to the hearing.
[59] In the absence of such hearing being booked (although not necessarily heard) within ten (10) days of releasing these reasons, the parties shall be deemed to have agreed on costs.
MASTER TODD ROBINSON
DATE: April 9, 2021