2021 ONSC 8182
COURT FILE NO.: CV-19-011
DATE: 2021/12/14
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: 9727868 Canada Inc. c.o.b. as Plug and Play Solutions
Plaintiff/Defendant by Counterclaim
AND
Deltro Electric Ltd., Blakely Robert Thompson, Matthew Andrew McTaggart, Courtney Vale McTaggart, Paul Garrie Storring, Elizabeth Ann Storring, Connie Joy Thompson, Rodney Thomas Hughes, Ralph Harold Armstrong, Ralph Armstrong, Susan Armstrong, Robert Arnold Genereaux, Teri-Louise Hass, Walter Sawron, Sharon Brant, Bank of Montreal, The Bank of Nova Scotia, Audrey Geraldine McCracken, PCL Constructors Canada Inc, The Canada Life Assurance Company, Loyalist Solar LP, Bluearth Renewables Inc. and Ber Ontario Solar GP Inc.
Defendant, Deltro Electric Ltd./Plaintiff by Counterclaim
BEFORE: Justice A. Doyle
COUNSEL: John Sestito, Counsel for the Plaintiff
Michael Mazzuca and Jordan Routliff, Counsel for the Defendant Deltro
HEARD: December 10, 2021 at Napanee via teleconference
ENDORSEMENT
[1] The plaintiff, 9727868 Canada Inc. c.o.b. as Plug and Play Solutions (Plug and Play), contracted with the subcontractor, the defendant Deltro Electric Ltd. (“Deltro”) to supply solar panels in a project. It alleges that it has not been fully paid.
[2] At the time that Plug and Play preserved and perfected their lien filed under the Construction Lien Act, R.S.O. 1990, c. C.30, as amended (the “CLA”); unbeknownst to its general manager, the Plug and Play company was dissolved for failure to pay a fee. This litigation continued with exchange of pleadings and discoveries. The company was revived upon payment of a $200 filing fee and the filing of the appropriate form.
[3] Deltro moves for the following relief:
i. An order declaring the claim for lien filed by Plug and Play has expired pursuant to ss. 31(2), 36(2) and 46(2) of the CLA;
ii. An order discharging the lien and dismissing the lien action pursuant to ss. 46- 47 of the CLA;
iii. An order returning the security posted by Deltro, being the lien bond of Northridge General Insurance Corporation, which was filed and paid into an account of the Superior Court of Justice on or about March 22, 2019, bearing account No. 554142, to “Rousseau Mazzuca LLP in trust”, the lawyers acting for Deltro, pursuant to s. 46(4) of the CLA; and
iv. Costs.
[4] Plug and Play asks the court to exercise its discretion and permit the lien claim to continue as the dissolution of its company was due to an oversight and inadvertence. Plug and Play would be prejudiced if the lien is discharged and the security returned.
[5] For reasons that follow, Deltro’s motion is granted.
Factual Background
[6] On May 8, 2018, Plug and Play entered into a contract with Deltro to supply solar panels, including tie wrapping solar panels leads and install edge protection and PV wiring harnesses on a project known as the Loyalist Solar Project for a price of $768,000 plus HST.
[7] Invoices were provided and Plug and Play alleges that the amount of $445,991.52 with interest, costs and HST is owing.
[8] The lien was registered on March 13, 2019, and the claim was issued on April 12, 2019, all within the timelines required under the CLA. The last day of supply was February 18, 2019.
[9] Plug and Play was incorporated on April 27, 2016. On February 24, 2019, the Plug and Play company was dissolved and was revived on December 10, 2019 upon the general manager filing the appropriate fee and form pursuant to s. 209 of the Canada Business Corporations Act, R.S.C., 1985, c. C-44, (“CBCA”).
[10] Deltro paid money into court by way of a bond as security.
[11] Plug and Play also issued a second claim against Deltro and individual defendants for breach of trust and is attempting to lift the corporate veil.
Deltro’s Position
[12] Under s. 45 of the CLA, the court can declare a lien has expired or the court can dismiss an action and return money or cancel security.
[13] Deltro is entitled to rely on the limitation periods under the CLA as Plug and Play was dissolved at the time it purported to preserve and perfect its lien.
[14] Plug and Play’s lien rights expired on April 4, 2019, eight months prior to the revival of the Plug and Play company.
[15] It would not prejudice Plug and Play as they can continue this action with respect to quantum merit pursuant to s. 38 of the CLA. In addition, it can continue its second action based on a breach of trust.
[16] If the court grants their motion, then under the Construction Act which replaced the CLA in 2019, the parties can consider consolidating the two actions to save time and expense. The two actions have the same facts and involve the same contract.
Plug and Play’s Position
[17] Due to a minor technical and inadvertent slip attributed to a missed fee payment, Plug and Play was automatically dissolved on February 24, 2019, pursuant to s. 212(1)(iii) of the CBCA.
[18] Stephen Daynes, the general manager of Plug and Play, is visually impaired and has been diagnosed as being “legally blind”. As he did not have an assistant at the time to assist him with administrative tasks and the organization of the business affairs, he relied on other employees to assist him in reading and dealing with daily correspondence.
[19] Mr. Daynes only hired his assistant in June 2019 which postdates the perfection of the lien.
[20] In September 2019, Mr. Daynes was verbally told by a colleague that Plug and Play had been dissolved. Upon becoming aware of the dissolution, he immediately contacted Canada Revenue Agency (CRA) and paid the $200 fee on September 24, 2019, and completed and filed Form 15 Articles of Revival which was sent in October 2019. He received the Articles of Revival on December 10, 2019.
[21] Plug and Play was unaware of the legal implications of the said dissolution. It relied on the Form 15 Articles of Revival which states that: “A revived corporation is restored as if it had never been dissolved” and did not believe that the dissolution and revival of the corporation had any bearing on the CLA action.
[22] Although the trust claim will continue, the onus in that action is higher and more financial disclosure from Deltro would have to be obtained. This action would continue on quantum merit but the protection of the lien and the bond would end and it would not be protected which is the whole remedial intention of the CLA. The legislation aims to not “leave anyone behind” since funds flow from the top down and sub subcontractors have no contract with the owner or the general contractor. The security posted protects it.
[23] On the other hand, Mr. Daynes was able to ensure that the preservation and perfection of the lien was ostensibly completed within the timelines of the CLA. Deltro was aware of the lien, filed the bond, exchanged pleadings and participated in discoveries. The dissolution was only in effect for a few months.
[24] The court should consider fairness, prejudice as well as equity and that there was no prejudice to the defendants as it was aware of the claim and participated in the action. These equitable principles are available when dealing with statutory limitations.
Analysis
Introduction
[25] Firstly, the scheme of the CLA is to protect the labourers, suppliers, subcontractors and sub subcontractors. As the money flows from top down, the CLA permits these individuals or companies who are involved in a construction site some protection by allowing them to file a lien as they do not have a contract with the owner of the property nor the general contractor.
[26] The statutory framework provides that pursuant to s. 31(2) of the CLA, there are timelines for preserving and perfecting a lien:
(2) Subject to subsection (4), the lien of a contractor,
(a) for services or materials supplied to an improvement on or before the date certified or declared to be the date of the substantial performance of the contract, expires at the conclusion of the forty-five-day period next following the occurrence of the earlier of,
(i) the date on which a copy of the certificate or declaration of the substantial performance of the contract is published as provided in section 32, and
(ii) the date the contract is completed or abandoned; and
(b) for services or materials supplied to the improvement where there is no certification or declaration of the substantial performance of the contract, or for services or materials supplied to the improvement after the date certified or declared to be the date of substantial performance, expires at the conclusion of the forty-five-day period next following the occurrence of the earlier of,
(i) the date the contract is completed, and
(ii) the date the contract is abandoned. R.S.O. 1990, c. C.30, s. 31 (2).
[27] Section 35(2) reads:
(2) A lien that has been preserved expires unless it is perfected prior to the end of the forty-five-day period next following the last day, under section 31, on which the lien could have been preserved. R.S.O. 1990, c. C.30, s. 36 (2).
[28] This court is being asked to declare the expiry of the lien claim pursuant to ss. 46- 47 of the CLA which reads as follows:
- (1) Where a perfected lien that attaches to the premises has expired under section 37, the court, upon the motion of any person, shall declare that the lien has expired and shall make an order dismissing the action to enforce that lien and vacating the registration of a claim for lien and the certificate of action in respect of that action. R.S.O. 1990, c. C.30, s. 46 (1).
(2) Where a perfected lien that does not attach to the premises has expired under section 37, the court, upon the motion of any person, shall declare that the lien has expired and shall make an order dismissing the action to realize upon that lien. R.S.O. 1990, c. C.30, s. 46 (2).
(3) A motion under subsection (1) or (2) may be brought without notice, but no order as to costs in the action may be made upon the motion unless notice of that motion was given to the person against whom the order for costs is sought. R.S.O. 1990, c. C.30, s. 46 (3).
(4) Where an action is dismissed under subsection (1) or (2), the court shall order that,
(a) any amount that has been paid into court under section 44 in respect of that action be returned to the person who paid the amount into court; and
(b) any security that has been posted under section 44 in respect of that action be cancelled. R.S.O. 1990, c. C.30, s. 46 (4).
- (1) Upon motion, the court may,
(a) order the discharge of a lien;
(b) order that the registration of,
(i) a claim for lien, or
(ii) a certificate of action,
or both, be vacated;
(c) declare, where written notice of a lien has been given, that the lien has expired, or that the written notice of the lien shall no longer bind the person to whom it was given; or
(d) dismiss an action,
upon any proper ground and subject to any terms and conditions that the court considers appropriate in the circumstances. R.S.O. 1990, c. C.30, s. 47 (1).
[29] It is undisputed that at the time that the lien was preserved and perfected by Plug and Play, the company was dissolved.
[30] The issue for this court is whether it has discretion to permit the lien to stand and allow the lien claim to continue.
[31] Sections 209(4)- (5) of the CBCA reads:
(4) Subject to any reasonable terms that may be imposed by the Director, to the rights acquired by any person after its dissolution and to any changes to the internal affairs of the corporation or other body corporate after its dissolution, the revived corporation is, in the same manner and to the same extent as if it had not been dissolved,
(a) restored to its previous position in law, including the restoration of any rights and privileges whether arising before its dissolution or after its dissolution and before its revival; and
(b) liable for the obligations that it would have had if it had not been dissolved whether they arise before its dissolution or after its dissolution and before its revival.
(5) Any legal action respecting the affairs of a revived corporation taken between the time of its dissolution and its revival is valid and effective.
Decision
[32] Here the lien was registered within 45 days from the last day of supply, i.e. on March 13, 2019, well within the timelines required under the CLA.
[33] However, the president of Plug and Play was unaware that the company had been officially dissolved on February 24, 2019 which was approximately three weeks before the lien was registered.
[34] The second timeline requirement is that pursuant to s. 31(2) of the CLA, the lien must be perfected within 45 days. Again, this was done within the timeline as the claim was issued on April 12, 2019, and Plug and Play would have had until May 26, 2019, to issue a claim.
[35] I find that since Plug and Play was formally dissolved at the time it preserved and perfected the lien, it was not a legal entity entitled to do so. Therefore, Plug and Play did not comply with the required timelines set out in the CLA. In accordance with s. 212(4) of the CBCA, the company ceases to exist once it has been dissolved.
[36] As stated in para. 9 of Glencoe Insulation Co. Limited v. 3170497 Canada Inc., 2003 CarswellOnt 6310, the dissolution of a company does not render the company non-existent, but rather it is in a state of legal limbo capable of restoration by Articles of Revival which will restore for all purposes nunc pro tunc save for rights acquired by any person in the interim. See: Zangelo Investments Ltd. v. Glasford State Inc. (1988), 1988 CanLII 4532 (ON CA), 63 O.R. (2d) 542 (C.A.).
[37] Section 209(4) of the CBCA has been interpreted to protect the rights of any persons who have been affected by the dissolution. See: 602533 Ontario Inc. v. Shell Canada Ltd. (1998), 1998 CanLII 1775 (ON CA), 37 O.R. (3d) 504. In that case, the claim had been commenced when the company was dissolved.
[38] It held that the expiry of the statutory limitation period between the dissolution and revival was a post-dissolution right that the defendant had acquired and upon which it could rely to defeat a statute barred claim.
[39] In Glencoe, the subcontractor’s lien had been registered when the company charter had been canceled but the charter later was revived. The Divisional Court dismissed an appeal of the motions judge’s order that the lien be discharged on the grounds that the charter was cancelled at the time its lien was preserved and perfected and it could not be retroactively revived to validate its claim.
[40] Also, in Schultz & Associates Ltd. v. Samet, [1991] CarswellOnt 792, the Divisional Court found that the court has no judicial discretion under ss. 37(1) and 46. Section 46 permits a court to declare that a lien has expired and order the registration of the lien to be vacated. This can occur pursuant to s. 37(1) with a perfected lien where no date has been fixed for trial or where an action has not been set down for trial within two years.
[41] Counsel for Plug and Play argued that the court should on, equitable and fairness grounds, permit the lien to stand as the objective of the CLA is to ensure that small business owners remain protected. Plug and Play is a small business run by Stephen Daynes and the $445,000 plus of non-payment for its work is a considerable sum.
[42] Also, the status of the company was part of the public record.
[43] Plug and Play referred the court to a number of cases which I find are all distinguishable.
[44] In Peixeiro v. Haberman, 1997 CanLII 325 (SCC), 1997 CarswellOnt. 2928 (S.C.C.), the court dealt with the limitation period after a motor vehicle accident as the plaintiff did not know within the limitation period whether the extent of his back injuries met the threshold under the Insurance Act. The court case dealt with the discoverability principle which postpones the commencement of the two-year limitation. This case is not relevant to the discussion here.
[45] In Ordon Estate v. Grail, 1996 CarswellOnt 4056 (C.A.), dealt with separate boating accidents and whether their claims were statute barred. The court dealt with maritime law and found that the defendants were aware of the claim made against them and hence allowed the claim to proceed by exercising its discretion. The Supreme Court at 1998 CanLII 771 (SCC), [1998] 3 S.C.R. 437 dismissed the appeal. The case dealt with the applicable limitation period for fatalities in boating collisions under different legislation and is not helpful here.
[46] In the Supreme Court of Canada decision of Basarsky v. Quinlan 1970 SCR 380 under special circumstances there was a discretionary extension of the limitation period. There was ambiguity created by the existence of two distinct limitation periods in the Canada Shipping Act and the court felt that it should be resolved in favour of the plaintiffs. Again, a discussion of the intricacies of the Shipping Act is not helpful here.
[47] In Teepee Excavation & Grading Ltd. v. Niran Construction Ltd. 2000 CarswellOnt 2335, the Court of Appeal of Ontario was dealing with the question of whether the court has the discretion to permit a claim to continue if the action was not set down for trial within two years of its institution in accordance with s. 46(1) of the CLA.
[48] At para. 24, the court discussed that the purpose of the CLA was to provide an efficient means of dealing with the trade claimants who would be “left behind without security if unpaid on a building project where payments typically flow from above and follow performance”. The court agreed with the master’s exercise of his discretion to dismiss the claim as the proceeding took over four years. The matter had not been set down for trial within 2 years as required by the CLA. It was not a case of a dissolved company.
[49] In JK Associates Corp. v. Arcos Inc. 1997 CarswellOnt 1955, the plaintiff provided engineering services to two separate improvements owned by two separate corporations. The plaintiff did not assert separate claims against the separate property owners.
[50] The defendant Arcos, argued that the actions could be joined and that each of the lien claims had not been properly perfected and in that case the court does not have discretion to grant relief from noncompliance.
[51] The court declined to join the claims as there were two claims for lien against separate owners of property with respect to separate improvements to different properties.
[52] The plaintiff had failed to perfect the liens as they only instituted one action.
[53] The court characterized the plaintiffs’ actions as one of misjoinder. The court permitted the plaintiff to deliver fresh statements of claim within 21 days to allow them to claim the relief in the first claim for lien against the defendant Arcos and the owner of the premises Ontasian Enterprises Inc. The court also permitted them to claim the relief in the second claim for improvement to the property owned by Ratcliff Holdings and 1132384 Ontario limited, owners of the second property.
[54] At para. 34, the court stated:
The claim for lien is not to be defeated by an inadvertent slip what has not prejudiced another party. (Re: Handley Lumber Ltd.). v. Ples 1971 CanLII 374 (ON SC), [1971] 2 O.R. 628 (Ont.H.C.) I found that there had been no material before the court to indicate that the defendants had been prejudiced by the improper joinder of the claims.
[55] This case is distinguishable from the case at bar as the court was specifically dealing with a misjoinder of two matters involving the same defendant but had omitted to include a property owner.
[56] In A.C. Concrete Forming Ltd. v. Kaplan et. Al. 2019 ONSC 4592, the court declared that the lien had expired pursuant to s. 37(1) of the CLA and had not been set down for trial within two years from the commencement of the action and the amount paid into court as security for the lien action was returned to the defendants. The underlying action would proceed under the ordinary rules.
[57] Since Plug and Play was formally dissolved at the time it preserved and perfected the lien, in the context of CLA and the case law, the court has no discretion in equity to permit the lien action to continue. I am bound by the Divisional Court’s ruling in Glencoe.
[58] It is true that in certain situations the court can exercise its discretion in statute of limitations cases to ensure that prejudice does not fall upon the aggrieved party.
[59] As seen above, the court has discretion in some cases. As well, as is trite law, the law of equity developed in a manner so that if one did not in the past fit within certain straitjacket types of claim, the court of equity could provide a remedy.
[60] Discretion is also discussed in the joinder case ( J.K. Associates ) and the cases where the action took more than two years to proceed to trial (Teepee).
[61] The Court in the Shell case suggested that in some cases the equitable principles are available to extend limitation periods. The court stated:
Whether equitable principles can be applied to save a claim issued outside of a statutory limitation period remains to be seen. For the purposes of this appeal, I accept that they can. That said, I am nonetheless of the view that equitable relief is not warranted in the circumstances of this case.
[62] In the event that I have discretion to allow the lien to survive on equitable grounds, I find that I would not do so in this case because:
I do not accept that the medical issues of the general manager should be an excuse not to keep the company books and records in good standing;
Although the court is sympathetic to Mr. Daynes’ legal blindness in one eye, this does not seem to have deterred him from operating a business and arranging for the preserving and perfecting of a construction lien and general operation of his business;
Even though there is no apparent prejudice to Deltro, I find that the facts in this case are not special circumstances that would require the court to exercise its discretion to allow the lien claim to continue;
Although the CLA is a remedial act permitting suppliers some security for their work, this does not absolve lien claimants from complying with the timelines set out in the CLA; and
Plug and Play will still be in a position to continue the action for quantum meruit and the claim based on breach of trust. Therefore, remedies are still available to Plug and Play.
[63] Accordingly, Deltro’s motion is granted.
[64] I encourage the parties to resolve the issue of costs. If they cannot agree, Deltro may file its two page costs submissions, along with any offers to settle and bill of costs on or before January 7, 2022. Plug and Play may file its two page costs submissions, along with any offers to settle and bill of costs on or before January 21, 2022. Deltro may file a one-page reply submission on or before January 28, 2022.
Justice A. Doyle
Date: December 14, 2021