COURT FILE NO.: CV-20-71802 DATE: 2022/02/28

ONTARIO SUPERIOR COURT OF JUSTICE

In the Matter of the Construction Act, R.S.O. 1990, c.C.30

B E T W E E N:

SRK WOODWORKING INC.

J. Postnikoff, for the Plaintiffs

Plaintiffs/Moving Party

- and -

DEVLAN CONSTRUCTION LTD.

R. Kennaley and J. Winter, counsel for the Defendants

Defendants/Responding Party

HEARD: January 26, 2022

ENDORSEMENT

The Honourable Justice R. J. Harper

Issues

[1] Whether the Moving Party, SRK Woodworking Inc. (“SRK”), can amend its pleadings by adding parties who are officers and directors of the Defendant, Devlan Construction Ltd. (“Devlan”), and claim breach of trust within a lien action under the Construction Act, R.S.O. 1990, c. C.30.

Background

[2] On January 13, 2020, a Statement of Claim was issued, wherein SRK was the Plaintiff, and Devlan, Thomas Spence Anderson, and the Hamilton-Wentworth District School Board were the Defendants. The Hamilton-Wentworth District School Board (“HWDSB”) has since been let out of the action.

[3] At the time that the Claim was issued, Thomas Spence Anderson (“Thomas”) was listed as the only officer and director of Devlan.

[4] One of the claims in the Statement of Claim was for breach of trust by Devlan and Thomas.

[5] The Plaintiff subsequently learned that Thomas had died on January 1, 2020, and the new directors of Devlan are Dave Anderson, Andrew Anderson, Deno Godin, and Tony Durigon.

[6] It is asserted in the affidavit in support of this motion that the Plaintiff has a belief that the new directors may be liable for the breach of trust claim alleged against Thomas Spence Anderson.

[7] It is further asserted that the Plaintiff believes that the claims against Dave Anderson, Andrew Anderson, Deno Godin, and Tony Durigon arise out of the same transaction or series of transactions, and that common questions of law or fact may arise in the proceeding.

[8] The Plaintiff submits that adding the new directors and officers will avoid a multiplicity of proceedings.

[9] The Plaintiff’s request to add the parties referred and to join the trust claim with the lien claim is brought pursuant to Rule 5 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, which reads as follows:

Joinder of Claims

5.01 (1) A plaintiff or applicant may in the same proceeding join any claims the plaintiff or applicant has against an opposite party. R.R.O. 1990, Reg. 194, r. 5.01 (1).

(2) A plaintiff or applicant may sue in different capacities and a defendant or respondent may be sued in different capacities in the same proceeding. R.R.O. 1990, Reg. 194, r. 5.01 (2).

(3) Where there is more than one defendant or respondent, it is not necessary for each to have an interest in all the relief claimed or in each claim included in the proceeding. R.R.O. 1990, Reg. 194, r. 5.01 (3).

Joinder of Parties

Multiple Plaintiffs or Applicants

5.02 (1) Two or more persons who are represented by the same lawyer of record may join as plaintiffs or applicants in the same proceeding where,

(a) they assert, whether jointly, severally or in the alternative, any claims to relief arising out of the same transaction or occurrence, or series of transactions or occurrences;

(b) a common question of law or fact may arise in the proceeding; or

(c) it appears that their joining in the same proceeding may promote the convenient administration of justice. R.R.O. 1990, Reg. 194, r. 5.02 (1); O. Reg. 575/07, s. 9.

Multiple Defendants or Respondents

(2) Two or more persons may be joined as defendants or respondents where,

(a) there are asserted against them, whether jointly, severally or in the alternative, any claims to relief arising out of the same transaction or occurrence, or series of transactions or occurrences;

(b) a common question of law or fact may arise in the proceeding;

(c) there is doubt as to the person or persons from whom the plaintiff or applicant is entitled to relief;

(d) damage or loss has been caused to the same plaintiff or applicant by more than one person, whether or not there is any factual connection between the several claims apart from the involvement of the plaintiff or applicant, and there is doubt as to the person or persons from whom the plaintiff or applicant is entitled to relief or the respective amounts for which each may be liable; or

(e) it appears that their being joined in the same proceeding may promote the convenient administration of justice. R.R.O. 1990, Reg. 194, r. 5.02 (2).

Joinder of Necessary Parties

General Rule

5.03 (1) Every person whose presence is necessary to enable the court to adjudicate effectively and completely on the issues in a proceeding shall be joined as a party to the proceeding. R.R.O. 1990, Reg. 194, r. 5.03 (1).

[10] It would appear from a reading of Rule 5 that the request to add the above mentioned individuals as parties may have been successful had it not been for the wording of the Construction Act if it is applicable to this matter and/or its predecessor, the Construction Lien Act, if that statute is applicable to these proceedings.

[11] In order to understand the complexity of the issue, it is necessary to set out some of the more relevant facts and litigation chronology before entering into the legal analysis that is necessary.

Relevant Facts and Litigation Chronology

[12] In the Statement of Claim of the Plaintiff filed in these proceedings, the Plaintiff seeks, in part:

(g) a declaration that all amounts owing to or received by the defendant Devlan Construction Ltd. ("Devlan") on account of the contract price for the improvement to the Property constitute a trust fund for the benefit of the plaintiff together with a declaration that Devlan is the trustee of those funds for the benefit of the plaintiff;

(h) an accounting of all sums received by Devlan from the defendant Hamilton-Wentworth District School Board ("HWDSB") and/or related entities;

(i) damages for breach of trust in the amount of $100,993.69;

[13] The Statement of Claim provided the following material facts to support its claim:

(7.) In or about March of 2019, SRK entered into a contract with Devlan to supply and install millwork at the Ancaster Senior Public School located at the Property. SRK and Devlan agreed that the cost for said work would be $121,333.69, inclusive of taxes.

(8.) The supply and installation of millwork is a construction, erection, or installation on the Property and is an improvement as defined in the Act.

(9.) As of September 6, 2019, Devlan refused entry to SRK to the Property. As a result, SRK was unable to complete the work required under its contract with Devlan.

(10.) Devlan has breached its agreement with SRK by refusing to allow SRK to complete its work.

(11.) SRK had tools left at the Property which Devlan refused to permit SRK to pick up. Devlan did so without any legal authority or justification whatsoever.

(12.) SRK has completed the work which it was permitted to complete as of September 6, 2019.

(13.) SRK has provided Devlan with all invoices with respect to the supply and installation of said material.

(14.) To date, Devlan has paid the sum of $20,340.00 to SRK, and is therefore indebted to SRK in the amount of $100,993.69 for materials and services provided by SRK pursuant to the contract between SRK and Devlan.

(15.) Despite demand, Devlan has failed or refused to pay to SRK the amounts due and owing as described herein, and is in breach of its contract with SRK, for which SRK has suffered damages as described herein.

(16.) All materials supplied by SRK to the Property were incorporated into the improvement and remain incorporated in the improvement.

(17.) By reason of supplying the materials and services as described above, SRK became and is entitled to a lien on the estate or interest of anyone having any estate, right, title, or interest in the Property, in any holdback fund or other funds payable.

(18.) On October 25, 2019, SRK registered a construction lien in the amount of $100,993.69 against title to the Property in the Land Registry Office for the Land Titles Division of Wentworth (No. 62) as Instrument No. WE1389604.

(19.) There was and is no agreement between SRK and any of the defendants that SRK will not be entitled to a lien on the Property.

(20.) SRK has supplied its services and materials at the request of, with the knowledge, and to the benefit of HWDSB, for which SRK is still owed the amount of $100,993.69.

[14] It is clear from the above pleading that SRK claimed damages for breach of contract and for breach of trust within the lien claim.

[15] With respect to the claim for breach of trust, the Statement of Claim provides the following material facts:

25. Devlan received funds, or will be receiving funds, from HWDSB and/or related entities, the particulars of which are not known to SRK, but are known to Devlan, which funds constitute, or will constitute, trust funds under the Construction Act, as amended, for the benefit of SRK and other sub-contractors and for which Devlan is, or will be, a trustee.

26. Devlan has failed or refused to pay such funds to SRK and, therefore, is in breach of its obligations to SRK as trustee, for which SRK has suffered the damages described herein.

27. At all relevant and material times, Anderson was responsible for the management of the agreement between Devlan and SRK and knew or ought reasonably to have known that the failure of Devlan to pay the amounts owed to SRK as described herein amounted to a breach of trust by Devlan, and Anderson assented to or acquiesced in such conduct and as a result is jointly and severally liable to SRK for the breach of trust.

28. SRK pleads and relies upon the Construction Act, as amended, and in particular Sections 8 and 13 thereof.

[16] Since the Plaintiff was not aware of the death of Thomas, at the time the Statement of Claim was issued, there were no material facts pleaded with respect to the proposed added parties. In the supporting affidavit material filed by the Plaintiff on this motion, there is only the expression that it is believed that the proposed added parties may be liable for the breach of trust of Thomas and that the breach may have arisen out of the same transaction or series of transactions, and that common questions of law or fact may arise in the proceeding.

[17] There is no evidence or even a statement of any deponent that sets out the reasons for such a belief.

[18] Devlan filed a Statement of Defence and a Counterclaim dated February 20, 2020.

[19] The Statement of Defence reads in part:

The Defendant Thomas Spence Anderson ("Anderson”) has passed away and in any event had retired from the business of Devlan and as an officer/director of Devlan long before the subject improvement arose. Anderson had no role whatsoever in relation to the improvement and/or in relation to the flow of funds in relation to same and any allegations to the contrary are denied.

Devlan entered into a written agreement (the "Subcontract") with the plaintiff, SRK Woodworking Inc. (“SRK”), for the supply and installation of millwork (the "Subcontract Work'').

Devlan states that it has paid to SRK, for the Subcontract Work, more than the value of the services and materials supplied by SRK under the Subcontract.

Devlan states that the plaintiff failed and refused to perform the

Subcontract Work in accordance with the Subcontract and that the plaintiff effectively by its conduct repudiated and/or terminated the Subcontract, putting Devlan in a position where it had no choice but to complete the Subcontract Work at its cost.

Devlan states that the Subcontract Work performed by SRK also contained substantial deficiencies.

Devlan states that no further sum is presently due and owing by it to SRK in relation to the Subcontract and states that a balance is owing to it by SRK in that regard.

Further, Devlan states that it has incurred costs in completing the Subcontract Work and correcting deficiencies in a sum estimated in the amount of $120,000.00, further particulars to be provided prior to the commencement of trial.

Devlan states that it is entitled to set-off in the amount of the costs described in paragraph 11, above and for any overpayments against the Subcontract Price against any sum which may be found due and owing to SRK, which sum is not admitted and expressly denied, and rely on the doctrines of legal and equitable set-off in that regard.

Devlan states that the plaintiff has failed to preserve and perfect the claim for lien in accordance with the Construction Act, R.S.O. 1990, c. C.30 as amended.

Devlan states that the damages claimed by the plaintiff are remote, excessive and otherwise not recoverable in law.

[20] There is only one reference to the claim for breach of trust in the Statement of Defence. That reference merely states that:

Anderson had no role whatsoever in relation to the improvement and/or in relation to the flow of funds in relation to same and any allegations to the contrary are denied.

[21] It is also of note that the Defendants’ Counterclaim includes a claim for damages for negligence and unjust enrichment. Nevertheless, the Defendants are asserting on this motion that the Construction Act only permits a lien claim to be joined by a breach of contract claim. Neither the Statement of Defence nor the Counterclaim make any assertion that the Plaintiff could not, as a matter of law, bring a claim for breach of trust within a construction lien claim as it is now asserting in this motion.

[22] Neither party made any reference to or submissions on the transition sections of the Construction Act that came into force on October 1, 2019. These transition provisions are central to any determination as to whether the old Construction Lien Act or the new Construction Act applies to these proceedings.

[23] The property upon which the improvements were procured was owned by the HWDSB at all material times. HWDSB contracted with Devlan for certain improvements to be made to the property on which Ancaster Senior Public School was located. In March 2019, Devlan entered into an agreement with SRK by way of a subcontract for SRK to install millwork on this subject property.

[24] There is no evidence before me on the date that the prime contract was entered into between HWDSB and Devlan. This date is central to the determination of which statute applies.

[25] I accept and adopt the reasoning and analysis of Associate Justice Robinson (then known as Master) in the recent decision in Crosslinx Transit Solutions Constructors v. Form & Build Supply (Toronto) Inc., 2021 ONSC 3396. Commencing at para. 2, Associate Justice Robinson sets out the sole issue before him as follows:

[2] Material facts are not disputed. Form & Build is a sub-subcontractor on the project. Both of its claims for liens were registered 56 days after the stated date of last supply. The sole issue in dispute is operation of the transition provisions in s. 87.3 of the Construction Act, RSO 1990, c C.30 in circumstances where a contract for the improvement is entered into before July 1, 2018, but a lien claimant’s subcontract is entered into after July 1, 2018.

[26] Associate Justice Robinson then reviews the transitional provisions in the Construction Act in order to determine which statute should apply. He stated at para. 4:

[4] For the reasons that follow, I have determined that the intended effect of the language used in s. 87.3 is that the same legislative scheme for rights, obligations, and remedies provided in the Construction Act applies consistently to all persons involved in the same improvement. The purpose of s. 87.3(2) is only to clarify that that date of a subcontract has no relevance in determining which version of the legislation applies to an improvement. By operation of s. 87.3, the Construction Act as it read on June 29, 2018 (i.e., the former Construction Lien Act) continues to apply to the subject improvement, meaning that Form & Build had 45 days from its last supply at each station to preserve its liens. Accordingly, both liens had already expired when Form & Build registered its claims for lien. Crosslinx is entitled to orders declaring both liens expired and returning the security posted to vacate them.

[27] Associate Justice Robinson expands on his reasoning commencing at para. 17:

[17] In my view, there is no genuine ambiguity in the words of s. 87.3(2) when read in their grammatical and ordinary sense in context of s. 87.3 and the Construction Act as a whole. The subclause begins with “for greater certainty” and proceeds to state that ss. 87.3(1)(a) and (c) apply “regardless of when any subcontract under the contract was entered into.” In my view, the meaning is clear: the subclause clarifies operation of ss. 87.3(1)(a) and (c), stating that they apply regardless of the date of any subcontract. The clarification is specifically limited to ss. 87.3(1)(a) and (c). No words or language suggest any clarification or variance of the preamble to s. 87.3(1) itself, which ties the applicable version of the Act and regulations to “an improvement”, not a “contract” or “subcontract”.

[18] “Improvement” is a broadly defined term in the Construction Act, as follows:

“improvement” means, in respect of any land,

(a) any alteration, addition or capital repair to the land,

(b) any construction, erection or installation on the land, including the installation of industrial, mechanical, electrical or other equipment on the land or on any building, structure or works on the land that is essential to the normal or intended use of the land, building, structure or works, or

(c) the complete or partial demolition or removal of any building, structure or works on the land;

[19] The concept of an “improvement” is central to the legislative scheme of the Construction Act. Notably, Form & Build’s own entitlement to a lien turns on its supply of services and materials to “an improvement for an owner”, which grants it a lien “upon the interest of the owner in the premises improved” for the price of its services and materials: Construction Act, s. 14. Each of “premises”, “owner”, “contractor”, and “subcontractor” are defined with reference to the improvement, as is “supply of services” and “materials”. Although the definition of “contract” does not specifically refer to an improvement, it relies on the defined terms of “owner” and “contractor”, which do. “Subcontract” is also defined with reference to the improvement as “any agreement between the contractor and a subcontractor, or between two or more subcontractors, relating to the supply of services or materials to the improvement and includes any amendment to that agreement.”

[20] Every word in a statute is presumed to make sense and have a specific role to play in advancing the legislative purpose. The court is to avoid a statutory interpretation that renders words superfluous or that renders a legislative provision mere surplusage: Masters v. Cataraqui Region Conservation Authority, 2018 ONSC 7195 at paras. 30-31.

[21] Use of the word “improvement” in the operative preamble of s. 87.3(1) is significant. There is also a third transition condition in s. 87.3(1)(b), not referenced in s. 87.3(2), dealing with the commencement date of a procurement process for the improvement. That clause must also be read harmoniously with the balance of s. 87.3 and the legislation as a whole.

[28] The Court in Crosslinx elaborated further at para. 33:

[33] In my view, an interpretation of s. 87.3 that results in variant lien rights for different persons on the same improvement would require very clear legislative wording to that effect, which is not present in the language of s. 87.3. Since subcontracts represent a portion of the overall prime contract work, it is more consistent with the overall scheme of the Construction Act, including the interrelationship of the various lien, trust and other provisions, for subcontract work to be subject to the same scheme to which performance of that same work is subject at the prime contract level.

[29] Nowhere in any of the material before me is there any reference to the date of the contract between the owner, HWDSB, and the Contractor, Devlan. (the prime contract). Nor is there any evidence that would allow for a determination of when the initial procurement commenced.

[30] For clarity, sections of the new Construction Act relating to prompt payment and adjudication came into force on October 1, 2019. The Act contains the following transition section:

Courts of Justice Act

87.2 In the event of a conflict between this Act and the Courts of Justice Act, this Act prevails to the extent of the conflict. 2017, c. 24, s. 60.

Transition

Continued application of Construction Lien Act and regulations

87.3 (1) This Act and the regulations, as they read on June 29, 2018, continue to apply with respect to an improvement if,

(a) a contract for the improvement was entered into before July 1, 2018;

(b) a procurement process for the improvement was commenced before July 1, 2018 by the owner of the premises; or

(c) in the case of a premises that is subject to a leasehold interest that was first entered into before July 1, 2018, a contract for the improvement was entered into or a procurement process for the improvement was commenced on or after July 1, 2018 and before the day subsection 19 (1) of Schedule 8 to the Restoring Trust, Transparency and Accountability Act, 2018 came into force. 2018, c. 17, Sched. 8, s. 19 (1).

Same

(2) For greater certainty, clauses (1)(a) and (c) apply regardless of when any subcontract under the contract was entered into. 2018, c. 17, Sched. 8, s. 19 (1).

Non-application of Parts I.1 and II.1

(4) Parts I.1 and II.1 do not apply with respect to the following contracts and subcontracts:

1. A contract entered into before the day subsection 11 (1) of the Construction Lien Amendment Act, 2017 came into force.

2. A contract entered into on or after the day subsection 11 (1) of the Construction Lien Amendment Act, 2017 came into force, if a procurement process for the improvement that is the subject of the contract was commenced before that day by the owner of the premises.

3. A subcontract made under a contract referred to in paragraph 1 or 2. 2018, c. 17, Sched. 8, s. 19 (3).

The Legislative Pathway

Jurisdiction of this Court to consider a question of law

[31] Before embarking on any analysis of the interpretation of the Construction Act, a determination of whether this court has jurisdiction to decide this question of law.

[32] Section 70(1) of the Construction Act reads:

Stated case

70 (1) Where in the course of an action a question of law arises, the court may state the question in the form of a stated case for the opinion of the Divisional Court, and the stated case shall thereupon be set down to be heard before the Divisional Court and notice of hearing shall be served by the party setting down the matter upon all parties concerned. R.S.O. 1990, c. C.30, s. 70 (1).

Facts to be set out

(2) The stated case shall set forth those facts material to the determination of the question raised.

[33] Neither party brought to this court’s attention s. 70(1) of the Construction Act. This matter was fully argued before me. Counsel agreed that a decision on this issue is extremely important to the construction bar and the construction industry as a whole. In any event, as this matter is already submitted before this Court, I will deal with the questions of law placed before me. The Construction Act provides that any appeal would go to the Divisional Court.

Issues Within the Statutory Interpretation of the Construction Act.

[34] In order to arrive at a proper analysis of the interpretation of the amendments to the Construction Act, among other things, I will consider the following:

1. Can a breach of trust claim be brought along with a lien claim under the Construction Act when the old prohibition in bringing such a claim was removed from the Construction Act (the former s. 50(1) of the Construction Lien Act)
2. The former permissive section of the Construction Lien Act allowing for breach of contract actions to be joined with lien claims was also removed for the Construction Act. However, the exact same wording was placed into the Regulations passed pursuant to the Construction Act. What is the impact of a former section of an Act being replaced by a Regulation with the same wording?

[35] In Ontario, s. 56 of the Legislation Act, 2006, S.O. 2006 c. 21, Sched. F provides:

56. (1) The repeal, revocation or amendment of an Act or regulation does not imply anything about the previous state of the law or that the Act or regulation was previously in force.

[36] The mere fact of an amendment is not necessarily significant. Professor Ruth Sullivan stated the following in Sullivan on the Construction of Statutes (5th ed.) at p. 592 to 593:

The chief drawback to the use of legislative evolution, whether prior or subsequent is that it is often difficult to distinguish amendments that are meant to clarify or conform the law from amendments that are meant to change it. Because of this default, the technique of tracing legislative evolution must be used with caution. . .

[After examining the decision of the Supreme Court of Canada in R. v. Multiform Manufacturing Ltd., [1990] SCJ No. 83, [1990] 2 S.C.,R. 624]. … When changes in the wording of a provision can plausibly be explained in more than one way, the court must look to other considerations to resolve the interpretive problem.

[37] In R. v. Tenny, 2015 ONSC 1471, Ellies J. reviewed the modern principle of statutory interpretation. Ellies J. stated at para. 30:

[30] The modern principle of statutory interpretation was adopted by the Supreme Court of Canada in Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, another case in which the court looked beyond the plain meaning of the text of a statute in order discern its true meaning. another case in which the court looked beyond the plain meaning of the text of a statute in order discern its true meaning.

[31] In Rizzo, the issue was whether employees terminated by virtue of their employer’s bankruptcy were entitled to the same termination and severance pay under the Employment Standards Act, R.S.O. 1980, c. 137 (“ESA”), to which employees were entitled where their employment was terminated by their solvent employer. The Supreme Court disagreed with the ruling of the Ontario Court of Appeal that the language of the ESA limited such payments to situations in which the employment relationship was terminated by the employer, not by an act of law. Writing on behalf of the Court, Iacobucci J. held, at para. 23, that the Court of Appeal had relied too much on the plain meaning of the words of the provisions in question and, in so doing, had failed to “pay sufficient attention to the scheme of the ESA, its object or the intention of the legislature; nor was the context of the words in issue appropriately recognized.” Thus, by applying the modern principle of statutory interpretation, the Supreme Court concluded that employees whose employment was terminated by virtue of the bankruptcy of their employer were entitled to the same termination and severance payments as that to which other employees were entitled, even where the text of the legislation might indicate otherwise.

[38] The challenge for courts interpreting statutes is determining the scheme, objective or intention of the legislature. In Central Supply Co. (1972) Ltd. v. Modern Tile Supply Co. Ltd., 55 O.R. (3d) 783 (C.A.), the Court of Appeal for Ontario commented on the purpose of the former Construction Lien Act. The Court stated at para. 15:

[15] The purpose of the definition of "improvement", as set out in the Report of the Attorney General's Advisory Committee on the Draft Construction Lien Act (Toronto: Ministry of the Attorney General (Ont.), 1982), was "to protect those who contribute their services or materials towards the making of an improvement to a premises". The report also stressed that while the definition of "improvement" was a broad one, it was drafted to make it clear that the lien created by the Act applied "only in the case of the construction and building repair industries".

[16] In determining whether the remedies in Part II and III of the Act should receive a synchronized interpretation, it is useful to consider the following guidance from E.A. Driedger, in his classic text, Construction of Statutes, 2nd ed. (Toronto: Butterworths, 1983), where he wrote, at p. 87, that the words of an Act should be read "harmoniously within the scheme of the Act". This was amplified by Prof. Ruth Sullivan in Driedger on the Construction of Statutes, 3rd ed. (Toronto: Butterworths, 1994), at p. 176, as follows:

Governing principle. It is presumed that the provisions of legislation are meant to work together both logically and teleologically, as parts of a functioning whole. The parts are presumed to fit together logically to form a rational, internally consistent framework; and because the framework has a purpose the parts are also presumed to work together dynamically, each contributing something toward accomplishing the intended goal.

[17] The Construction Lien Act is designed to protect those who provide services or materials to a particular improvement or project, by requiring a contractor or subcontractor receiving payment under the contract to pay first those who provided services or materials on that project. Funds received by the contractor or subcontractor on account of the contract constitute a trust fund for the benefit of those who have supplied services or materials to the improvement by virtue of s. 8(1) of the Act. Failure to pay those suppliers who are owed money may constitute a breach of trust for which the directors or officers of a corporate contractor may be personally liable under s. 13.

[18] Although liens and trusts represent discrete remedies under the Act, the scheme and purpose of the Act argue for a consistent approach between Parts II and III of the Act. The similarity in wording between s. 8(1), which delineates when a trust arises under Part II, and in ss. 14 and 15, which outline when a lien is created under Part III, also supports a consistent requirement in both that there be an identifiable improvement before either a lien or trust is established. Under s. 8(1), a trust arises for the benefit of those who have supplied services or materials to an improvement. Similarly, ss. 14(1) and 15 require that before a lien arises, there must be services or materials supplied "to an improvement".

[39] In 2017, the Construction Lien Act was amended and renamed the Construction Act, which had various and assorted revisions. Some of these revisions, initially, included the removal of sections 55(1) and 50(2) allowed for certain claims to be included and others excluded in a single action.

[40] Section 55(1) of the Construction Lien Act reads:

Accommodating multiple claims

Joinder of claims

55. (1) A plaintiff in an action may join with a lien claim a claim for breach of contract or subcontract. R.S.O. 1990, c. C.30, s. 55 (1).

[41] Section 50(2) of the Construction Lien Act reads:

50. (1) A lien claim is enforceable in an action in the Superior Court of Justice in accordance with the procedure set out in this Part. R.S.O. 1990, c. C.30, s. 50 (1); 2006, c. 19, Sched. C, s. 1 (1).

Trust claim and lien claim not to be joined

(2) A trust claim shall not be joined with a lien claim but may be brought in any court of competent jurisdiction. R.S.O. 1990, c. C.30, s. 50 (2).

[42] Neither s. 50(2) nor s. 55 (1) are set out in any section of the present version of the Construction Act. Section 50(2) was repealed. Section 55(1) was also repealed. However, the Construction Act provides, in a provision of a regulation, that actions for breach of contract may be joined with a lien claim. That regulation is worded exactly the same as former section 55(1).

[43] Section 3(2) of O. Reg 302/18 Procedures for Actions under Part VIII reads:

A plaintiff may, in an action, join a lien claim and a claim for breach of a contract or subcontract.

Transition Sections of the Construction Act

[44] Certain provisions of the relatively new Construction Act came to effect on October 1, 2019. The contract that is the subject of these proceedings was entered into in March of 2019. The dates are important since there are specific transitional provisions that apply to this case.

[45] The new Construction Act put into place three areas of reform that provided for the modernization of lien provisions, the introduction of a prompt payment timeline, and the introduction of an interim and prompt adjudication process. However, the transitional provisions in this legislation provide that:

a.) Construction projects entered into before July 1, 2018 are governed by the pre-amendment Construction Lien Act.

b.) Construction projects entered into between July 1, 2018 and September 30, 2019 are governed by the lien modernization provisions of the new Construction Act, but the prompt payment or adjudication provisions (my emphasis) under Parts I.1 and II.1 do not apply (the subject contract).

c) Construction projects entered into on or after October 1, 2019 are governed by the new Construction Act.

[46] The subcontract between Devlan and SRK was entered into in March 2019. There is no way for me to determine when the prime contract between Devlan and HWDSB, or the procurement for the construction contract occurred, on the evidence before me. This existence or non-existence of evidence to make a determination of when the prime contract or initial procurement commenced is important in making a determination of what statute or part of a statute is applicable.

[47] Given the transition sections of the Construction Act, if the prime contract was entered into before July 1, 2018, the pre-amendment Construction Lien Act would apply. In that case, s. 50(2) of that Act would be operative and that section prohibits the joinder of lien claims with trust claims. As there is no evidence before me to make the determination of the commencement date of the prime contract, the only inference that I can draw is that it must have been entered into on or before the date of the contract between Devlan and SRK.

[48] On the evidence before me, if the prime contract date is March 2019, the transition section set out at para. 45 (b) above would be operative. That would mean that the Prompt Payment sections and the Prompt Adjudication sections would not apply to the contract. However, the remaining sections of the Construction Act would apply.

[49] For the purposes of this motion, s. 50(2) of the old Construction Lien Act would no longer be a part of the Construction Act. The old prohibition of joinder of lien and trust actions would be eliminated. However, the permissive section of joining lien claims and breach of contract claims would be removed from the statute and placed in the regulations pursuant to the statute.

[50] After navigating through the transition sections of the Construction Act, the question remains the same: what is the impact of removing the prohibition of lien/trust claims and relegating the permissive section of allowing Lien/Breach of Contracts claims to a regulation?

[51] My first observation is that it is no longer possible to argue that the prompt payment and adjudicative schemes in the new Construction Act rule out the possibility to join lien/trust claims since the streamlined processes of prompt payment and prompt adjudication are not amenable to a joined lien/trust action. The argument that is advanced, in that regard, is that a trust claim that could become a complex part of the litigation would slow everything down and that is contrary to the scheme of the new legislation.

[52] What is the impact of removal of the prohibition section [s.50(2)] and inclusion of the permissive section [s.55(1)] in a regulation?

[53] The essence of that argument made by Devlan is the principle of statutory interpretation often referred to as the expression expressio unius est exclusio alterius (“to express one is to exclude others”).

[54] The moving party, SRK, takes the position that since the former prohibition to join trust claims with lien claims no longer exists in the statute, the legislature intended that such joinder was permissible.

[55] Devlan takes the position that for a trust claim to be able to be joined with a lien claim, there needs to be a permissive enabling section of the Act or the regulations promulgated pursuant to the Act, as has been done with regulation 3(2).

[56] Devlan and SRK are essentially asking the court to apply the legal principle of statutory interpretation: expressio unius est exclusio alterius. This rule of statutory interpretation provides that the expression of one or more things of a particular class may be regarded as impliedly excluding others.

[57] In R. v. Boyle, 2019 ONCJ 11, the court commented beginning at para. 15:

The principle of statutory interpretation known as “expressio unius est exclusio alterius” does not support the defendant’s position

[15] This principle of interpretation is more easily understood, for those who do not understand Latin, by the English term of “implied exclusion”, as expressed by Professor Ruth Sullivan in her text “Sullivan on the Construction of Statutes” (6th edn., 2014, LexisNexis). As Professor Sullivan writes at page 248, an implied exclusion argument lies whenever there is reason to believe that if the legislature had meant to include a particular thing within its legislation, it would have included that thing expressly. This expectation results in the conclusion that the failure to mention the thing becomes grounds for inferring that it was deliberately excluded.

[16] Professor Sullivan writes at page 248:

The force of the implication depends on the strength and legitimacy of the expectation of express reference. The better the reason for anticipating express reference to a thing, the more telling the silence of the legislature.

[17] The particular form of the implied exclusion argument relied on by the defendant is called by Professor Sullivan “failure to follow an established pattern”. The defendant submits that because service of the application record for a s. 278.4 hearing for the production of third party records is expressly provided for in s. 278.3(5), and there is no such provision for an application to determine the admissibility of evidence of other sexual activity under s. 276(2), Parliament must have intended that the latter application records not be served on the complainant.

[18] One way in which the implied exclusion argument may be rebutted is by offering an alternative explanation of why Parliament expressly mentioned something in one section and excluded it in another. (Sullivan, p. 255) In my view, there is such an alternative explanation in this case.

[24] The principle of implied exclusion must be used with care. As Newcombe J. wrote for the Supreme Court of Canada in Turgeon v. Dominion Bank, [1930] S.C.R. 67:

The maxim, expressio unius est exclusio alterius, enunciates a principle which has its application in the construction of statutes and written instruments, and no doubt it has its uses when it aids to discover the intention; but, as has been said, while it is often a valuable servant, it is a dangerous master to follow. Much depends upon the context. One has to realize that a general rule of interpretation is not always in the mind of a draughtsman; that accidents occur; that there may be inadvertence; that sometimes unnecessary expressions are introduced, ex abundanti cautela, by way of least resistance, to satisfy an insistent interest, without any thought of limiting the general provision; and so the axiom is held not to be of universal application.

[25] Professor P.-A. Coté wrote, in his text The Interpretation of Legislation in Canada, 3d edition (Cowansville: Les Ēditions Yvon Blais Inc., 1991) at page 337:

A contrario, especially in the form expressio unius est exclusio alterius, is widely used. But of all the interpretive arguments it is among those which must be used with the utmost caution. The courts have often declared it an unreliable tool, and … it is frequently rejected.

Principles of statutory interpretation lead to the conclusion that the complainant must be given the application record

[27] The Ontario Court of Appeal recently summarized some essential principles of statutory interpretation. In R. v. Stipo, 2019 ONCA 3, Watt J. wrote at paragraphs 175 to 179:

175 It is well settled that statutory interpretation cannot be founded on the wording of the legislation alone. Instead, the approach is that advocated by Elmer Driedger in his Construction of Statutes (2nd ed, 1983):

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.

See, Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559, at para. 26; Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, at para. 21; Wilson v. British Columbia (Superintendent of Motor Vehicles), 2015 SCC 47, [2015] 3 S.C.R. 300, at para. 18.

176 This preferred approach recognizes the significant role that context must play when courts construe the written words of a statute. No statutory provision is an island in itself. Its words take their colour from their surroundings: Bell ExpressVu, at para. 27. All issues of statutory interpretation involve the fundamental question of what Parliament intended. To discover what Parliament intended, we look at the words of the provision, informed by its history, context and purpose: R. v. Mabior, 2012 SCC 47, [2012] 2 S.C.R. 584, at para. 20.

177 It is also a well-established principle of statutory interpretation that the legislature, in this case Parliament, does not intend to produce absurd consequences. Absurdity occurs if the interpretation

i. leads to ridiculous or frivolous consequences;

ii. is extremely unreasonable or inequitable;

iii. is illogical or incoherent;

iv. is incompatible with other provisions or with the object of the enactment; or

v. defeats the purpose of the statute or renders some aspect of it pointless or futile.

See, Rizzo, at para. 27.

The Role of Regulations

[58] Two issues immediately arise:

(i) Can a legislature take a former section of a statute, repeal it, and relegate it to a regulation passed, pursuant to that statute, and have that regulation have the same force and effect?

(ii) If a former section is relegated to a regulation, can it be said that the legislature has expressed one thing by allowing breaches of contract to proceed along with a lien claim and, since there is no regulation providing for the same, it was intended to prohibit a trust claim to be brought within a lien claim?

[59] Counsel could not provide me with any cases that provide deal with whether a section of a statute can be removed from the statute and moved to a regulation and have the same force and effect. Numerous cases have noted that this has been done, however, there is no analysis of the issue.

[60] My starting point is the wording of the section of the Construction Act that enables regulations to be passed. Section 88 sets out the parameters of what regulations are permitted.

[61] Regulations passed pursuant to the Construction Act; section 88 provides:

Regulations

88 (1) The Lieutenant Governor in Council may make regulations respecting any matter necessary or advisable to carry out effectively the intent and purpose of this Act, including regulations,

(a) respecting anything that, under this Act, may or must be prescribed or done by regulation;

(b) prescribing forms and providing for their use;

(c) for the purposes of subsection 1.1 (5), providing for modifications in the application of portions, provisions or regulations listed in that subsection;

(d) governing the registry required to be established under clause 13.3 (1) (c);

(e) governing the setting of fees, costs and charges by the Authorized Nominating Authority under clause 13.3 (2) (a);

(f) for the purposes of section 13.4, prescribing fees for the training and qualification of persons as adjudicators and for the appointment of adjudicators, and requiring their payment;

(g) establishing procedures for the making of complaints against the Authorized Nominating Authority;

(h) governing adjudication procedures;

(i) governing the procedures for requiring a consolidated adjudication under subsection 13.8 (2);

(i.1) governing the determination of fees by the Authorized Nominating Authority under clause 13.10 (2) (b);

(i.2) governing responses for the purposes of section 13.11.1, including specifying the time and manner in which responses must be provided and setting out information they must contain or any other requirements they must meet;

(j) governing procedures that apply if an adjudicator fails to complete an adjudication under Part II.1;

(k) providing that Parts I.1 and II.1 do not apply with respect to the classes of contracts and subcontracts for improvements to land used in connection with a facility referred to in the definition of “nuclear facility” in the Nuclear Safety and Control Act (Canada) that are specified by the regulations.

(l) for the purposes of Part VIII, governing procedures that apply to actions;

(m) exempting public contracts from the application of section 85.1. 2017, c. 24, s. 62 (1-3, 4); 2018, c. 17, Sched. 8, s. 20.

[62] In order to determine if s. 3(2) of the Regulation is a: “matter necessary or advisable to carry out effectively the intent and purpose of the Act”, the intent and purpose of the Act must be determined. Once that is determined, the next step is to determine if the subject matter of the regulation falls within subsection 88(1)(a):

(a) respecting anything that, under this Act, may or must be prescribed or done by regulation.

Is Regulation 3(2) within the parameters of a regulation passed pursuant to the Construction Act?

[63] In A Guide to Making Federal Acts and Regulations - 2nd edition, Privy Council Office, Government of Canada, 2001Docs 235 sets out the pathway and parameters of the making of Regulations and Statutes. It is a helpful outline in order to understand the relationship between Statutes and Regulations. Beginning at p. 8, the Guide states:

Relationship between Acts and Regulations

Although Acts and regulations are made separately, they are linked in several ways:

• Parliament creates Acts and through them authorizes regulations;

• a regulation must strictly conform to the limits established by the Act that authorizes it; and

• most legislative schemes depend on regulations to make them work, so an Act and the regulations should be developed together to ensure a good match.

When developing a proposal for a bill that will authorize regulations, departments should carefully consider:

• who is to have authority to make the regulations;

• which matters are to be dealt with in the bill; and

• which matters are to be dealt with in the regulations.

Ordinarily, the Governor in Council is authorized to make regulations. A rationale for departures from this practice needs to be provided in the relevant Memorandum to Cabinet. Matters of fundamental importance should be dealt with in the bill so that parliamentarians have a chance to consider and debate them [my emphasis]. The bill should establish a framework that limits the scope of regulation-making powers to matters that are best left to subordinate law-making delegates and processes. The following principles should also be observed:

• The power to make regulations must not be drafted in unnecessarily wide terms.

• Certain regulation-making powers are not to be drafted, unless the Memorandum to the Cabinet specifically requests drafting authority for the power and contains reasons justifying the power that is sought. In particular, specific drafting authority is required for powers that:

• substantially affect personal rights and liberties;

• involve important matters of policy or principle;

• amend or add to the enabling Act or other Acts;

• exclude the ordinary jurisdiction of the Courts;

• make regulations having a retroactive effect;

• subdelegate regulation-making authority;

• impose a charge on the public revenue or on the public, other than fees for services;

• set penalties for serious offences.

Acts and regulations are interdependent and should be developed in conjunction with one another. Regulations may be drafted at the same time as the authorizing bill or after, depending on the situation. However, if regulations are an important part of a new legislative scheme, it may be helpful to begin developing draft regulations or at least a summary of the regulations at the same time as the bill to ensure consistency with the framework being established in the bill. When regulations are developed under an existing Act, care must be taken to ensure that they fall within the authority granted by that Act.

Statutory Interpretation

[64] Although the above guideline relates to the relationship between federal statutes and regulations, it is helpful in considering the same relationship in provincial legislation.

[65] I find two of the points in the above guideline to be a significant:

• Matters of fundamental importance should be dealt with in the bill so that parliamentarians have a chance to consider and debate the matter;

• Certain regulation-making powers are not to be drafted, unless the Memorandum to the Cabinet specifically requests drafting authority for the power and contains reasons justifying the power that is sought. In particular, specific drafting authority is required for powers that:

• involve important matters of policy or principle;

• amend or add to the enabling Act or other Acts;

• exclude the ordinary jurisdiction of the Courts;

[66] By taking the former s. 55(1) of the Construction Act, and placing the exact wording in the regulation, while at the same time repealing s. 50(1), the legislature has substantially affected the public’s rights in a very fundamental way. The legislature has added to the enabling provision that allows for certain court actions to be taken. They have done that by regulation and chosen not to continue that enabling action within the legislation. One of the expressed purposes of doing this was to allow for a more flexible approach to any further changes.

[67] I find that there is nothing in s. 88 of the Construction Act that gives the authority to pass by regulation a provision that dictates what actions may be brought.

[68] In my view, this is a matter of fundamental importance and it should be dealt with in the statute.

[69] The reason that fundamental concepts and rights should be the subject matter of a statute is that the pathway to the passing of a statute into law provides for a rigorous process of scrutiny that includes advanced notice, public debate, committee hearings and the opportunity to offer amendments. The passing of regulations is far less rigorous as it most often deals with setting rules to allow for the efficient attainment of the objectives set out in the legislation.

[70] If I am correct in this analysis, s. 3(2) of the Regulation that was passed pursuant to s. 88(1) of the Construction Act should have no legal effect. The ultimate result would be that the Construction Act would not have a permissive section of the statute to allow for either a breach of contract claim or a trust claim to be bought.

[71] However, there is no motion before me to have s. 3(2) of the Regulation declared invalid. I include my analysis, as set out above, for the purpose of adding additional caution to any effort to interpret the Construction Act by using the statutory interpretive principle of expressio unius.

[72] I am left with having to determine the legislative intent.

[73] With respect to statutory interpretation, I refer to s. 64 of the Legislation Act, which reads:

Rule of liberal interpretation

64 (1) An Act shall be interpreted as being remedial and shall be given such fair, large and liberal interpretation as best ensures the attainment of its objects. 2006, c. 21, Sched. F, s. 64 (1).

Same

(2) Subsection (1) also applies to a regulation, in the context of the Act under which it is made and to the extent that the regulation is consistent with that Act. 2006, c. 21, Sched. F, s. 64 (2).

[74] In determining the legislative intent, I refer to the Summary prepared by the Ministry of the Attorney General in Key Changes to the Construction Lien Act (now the Construction Act) - Ministry of the Attorney General https://www.attorneygeneral.jus.gov.on.ca/english/construction_law_in_ontario_chart.php.

[75] The Ministry of the Attorney General explained the amendments to the rules that came into force on July 1, 2018. Regarding Court Procedure, the following information was enumerated:

Court procedures

Court procedures moved to new regulation

All court procedures are set out in Part VIII of the Act.

Part VIII of the Act has been amended to provide for court procedures to be prescribed by regulation. The Courts of Justice Act and the rules of court apply to actions under Part VIII except to the extent that they are inconsistent with the Act and prescribed procedures. The new court procedure regulation under the Act (Procedures for Actions under Part VIII) contains procedural provisions that were removed from the Act in order to enable greater flexibility for future amendments, if necessary. [my emphasis added]

Joinder of lien claims with trust claims

Lien claims cannot be joined with trust claims.

The prohibition on joinder of lien claims and trust claims has been removed. [my emphasis added]

[76] While it does not explicitly state that joinder of lien claims and trust claims are permitted, it states that the prohibition is removed, which could be interpreted as the removal was permissive of joinder.

Legislative Intent

[77] The Construction Act was amended under Bill 142, Construction Lien Amendment Act, 2017, S.O. 2017, c. 24. Prior to the Bill being presented to the Ontario Legislative Assembly, a Report with recommended changes was prepared by experts and stakeholders in the construction industry. This Report, titled Striking the Balance: Expert Review of Ontario’s Construction Lien Act was prepared by Bruce Reynolds and Sharon Vogel of Borden Ladner Gervais http://www.attorneygeneral.jus.gov.on.ca/english/about/pubs/cla_report/#_Toc450127325. Specifically, regarding the joinder of lien claims and trust claims, in Chapter 6: Summary Procedure, Part 3, the Report states:

3.1 Context

The Act’s procedural regime does not apply to breach of trust actions which must proceed in accordance with the Rules of Civil Procedure and the Courts of Justice Act. This is, in part, why a trust claim cannot be included with a lien claim, despite the fact that trust claims and lien claims share in a commonality of parties and factual circumstances. Section 50(2) of the Act provides:

50(2) A trust claim shall not be joined with a lien claim but may be brought in any court of competent jurisdiction.

The prohibition against the joinder of lien and trust claims stems from the Report of the Attorney General’s Advisory Committee on the Draft Construction Lien Act in 1982. At that time, it was decided that the issues in relation to lien claims and trust claims may be very different, and the resolution of lien claims should be the primary concern under the Act.

3.3 Analysis and Recommendations

The removal of the prohibition against joinder of lien and trust claims would make the Act consistent with legislation from the other provinces, where such a prohibition does not exist. It is particularly concerning because the prohibition of joinder can be circumvented by a court order for a trial together or one after another, resulting in unnecessary costs and delays. The very problem this provision seeks to address is exacerbated by the duplication of proceedings it can cause, contributing to the courts’ backlog and costs to the parties. The provision has been heavily criticized by stakeholders, most of whom have suggested its removal, and none of whom proposed its retention. In keeping with the summary procedure provisions of the Act, parties should be able to join lien and trust claims without leave of the court, subject to a motion by any party that opposes the joinder on grounds that the joinder would cause undue prejudice to other lien claimants or parties.

Recommendation

39. The prohibition on joinder of lien claims and trust claims under section 50(2) should be removed from the Act, subject to a motion by any party that opposes joinder on the grounds of undue prejudice to other parties.

[78] The only mention of the removal of this prohibition in the Hansard debates was during a meeting of the Standing Committee on the Legislative Assembly. On November 15, 2017, the Committee heard from different organizations, including the Advocates Society. Christopher Stanek of Gowling WLG, as representative of the Advocates Society, said the following:

Following the introduction of Bill 142 in the summer of 2017, the Advocates’ Society construction law practice group executive held a town hall meeting of our members to discuss Bill 142. Most of the proposed legislative amendments to the Construction Lien Act were very positively received. In particular, the proposed changes that would allow, for the first time, a construction lien action to be litigated in Small Claims Court as well as the removal of the prohibition on breach of trust claims being heard together with lien actions were agreed to be well overdue. https://www.ola.org/en/legislative-business/committees/legislative-assembly/parliament-41/transcripts/committee/transcript-2017-15

[79] What is apparent is that the recommendations of Expert Review for allowing lien and trust claims to be joined without leave, subject to anyone opposing bringing a motion, were not adopted in the Construction Act.

Judicial Interpretation

[80] In the courts, the opposite has been held. This provision has been considered twice by Associate Justice Wiebe of the Superior Court.

[81] In Damasio Drywall v. 2444825 Ontario Limited, 2021 ONSC 8398, Associate Justice Wiebe considered s. 3(2) of O. Reg. 302/18 and held:

[4] Second, there was the issue of O. Reg. 302/18, section 3(2). Ontario Regulation 302/18 is a regulation under the CA. O. Reg. 302/18, section 3(2) is the old CA section 55(1) which allowed the joinder of only “claims for breach of contract or subcontract” to a lien claim. Section 55(1) was interpreted for some time as prohibiting the joinder of claims that were not breach of contract claims to lien claims. That would certainly apply to breach of trust claims.

[7] I agree that the old explicit prohibition against the joinder of trust claims with lien claims (old section 50(2)) was not returned to the statute. But, in my view, this makes no difference to the result. A trust claim cannot pass the test of O. Reg. 302/18 section 3(2) as that section has been historically interpreted. A trust claim is an entirely different cause of action than a breach of contract claim. While a trust claim derives from a breach of contract claim, it concerns trust rights in project funds. It involves tracing and potential collateral remedies against officers and directors of a corporate trustee. It is a potentially complex claim.

[8] The new CA maintains the mandate in section 50(3) of the new CA that the procedure of a lien action must be “as far as possible of a summary character.” If the Legislature intended to allow trust claims to be joined with lien claims, it should have stated so explicitly, given this mandate and the nature and complexity of a trust claim. It did not. [bold emphasis added]

[82] Associate Justice Wiebe holds that the new Construction Act does not permit breach of trust claims and lien actions to be brought together, as the legislature did not expressly permit so. He adopts his reasoning above in his subsequent decision of 6628842 Canada Inc. v. Topyurek, 2022 ONSC 253 at para. 2:

Improper joinder of trust claim: I advised that I adopt the obiter comments I made in Damasio Drywall Inc. v. 2444825 Ontario Limited, 2021 ONSC 8398, 2021 ONSC8398 wherein I stated that by reinstating the joinder limitation of old Construction Act, R.S.O. 1990, c. C. 30 (“CA”) section 55(1) as O. Reg. 302/18, section 3(2) in the spring of 2019, the Legislature changed its mind and decided to continue to prohibit the joinder of trust claims with lien claims. Therefore, I find that the joinder of the trust claim (including any claim associated with the trust claim such as the accounting) to the lien claim in this case improper. [bold emphasis added]

[83] From a complete reading of the Construction Act as a whole, it is apparent the legislation is designed to provide a scheme that would allow for construction projects to move forward in an organized manner that is efficient, effective and timely. The Act sets out a scheme that provides for clear expectations of conduct between property owners, landlords, contractors and subcontractors.

[84] With respect to disputes between construction project participants, s. 50 of the Construction Act provides:

Procedures

(2) Except to the extent that they are inconsistent with this Act and the procedures prescribed for the purposes of this Part, the Courts of Justice Act and the rules of court apply to actions under this Part. 2017, c. 24, s. 39 (2).

Summary procedure

(3) The procedure in an action shall be as far as possible of a summary character, having regard to the amount and nature of the liens in question. 2017, c. 24, s. 39 (2).

[85] The argument that lien/trust claims are not consistent with the intention of the Construction Act as a whole would be much more persuasive if the parts of the Act that deal with Prompt Payment and Prompt Adjudication applied to the matter that is before me.

[86] The Prompt Payment scheme of the Construction Act sets out statutory deadlines for payments to contractors and subcontractors. The deadlines begin to run from the date of delivery of a “proper invoice”, as defined by s. 6.1 of the Act, by the general contractor to the owner. Once that is done, the Act provides for a payment timetable from the owner and down through the subcontractors. Contracting parties are not allowed to contract out of the payment time lines.

[87] Once the payment timelines are triggered, if an invoice is not paid and an owner disputes the invoice, that owner must issue a Notice of Non-Payment within 14 days for the receipt of a proper invoice setting out the reasons for the dispute. If there is no Notice of Non-Payment issued, the owner is required to pay the invoice in full within 28 days.

[88] If the owner pays the full invoice to the contractor, however, the contractor disputes the invoice of the subcontractor, the contractor must give the subcontractor 35 days after the delivery of the proper invoice to the owner a Notice of Non-Payment to the subcontractor. The similar process then applies to subcontractors of a subcontractor. In the latter case, it must give 42 days Notice of Non-Payment from the payment by the owner to the contractor.

[89] There are other timeline provisions that apply; I set out the above provisions to demonstrate the new Act’s emphasis on a prompt payment timeline scheme that is rapid, and it is also interconnected to the Adjudicative scheme that is set out in the Act.

The Adjudicative Scheme

[90] The Act sets out an interim dispute process that is temporarily binding on the parties to a dispute. The adjudicator’s decisions are binding on the parties until the dispute is determined by a Court. It seems obvious that the Legislature, by creating both the prompt payment scheme and the adjudicative scheme, that it intended to provide an efficient and timely mechanism to resolve construction project disputes during the project.

[91] Given the parameters that are given for the adjudicator’s decision-making authority, it also appears obvious that the adjudicator may be required to make decisions that relate to the interpretation of the construction contract. However, the breach of trust sections of the Construction Act Part II, sections 7 through 13, do not appear to be amenable to such a rapid prompt payment and adjudicative scheme.

[92] The fact that the Prompt Payment and Adjudication schemes do not apply to the matter before me, I find that there is no reason why the trust and lien claims cannot be part of the same action in this case.

[93] It is admitted that the named individuals who are proposed to be added parties are officers and directors of Devlan. It is also admitted that Thomas had nothing to do with the operation of Devlan for years before the contract was entered into between SRK and Devlan. It is unclear on the evidence before me on what dates these proposed added parties were the officers and directors of Devlan. Nevertheless, at this stage I find that Devlan was a party to the subcontract with SRK and any person who was in effective control of a corporation or its relative activities could be liable, whether they were personally a party to the contract or not.

[94] Section 13 of the Construction Act reads:

Liability for breach of trust

By corporation

13 (1) In addition to the persons who are otherwise liable in an action for breach of trust under this Part,

(a) every director or officer of a corporation; and

(b) any person, including an employee or agent of the corporation, who has effective control of a corporation or its relevant activities,

who assents to, or acquiesces in, conduct that he or she knows or reasonably ought to know amounts to breach of trust by the corporation is liable for the breach of trust. R.S.O. 1990, c. C.30, s. 13 (1).

Effective control of corporation

(2) The question of whether a person has effective control of a corporation or its relevant activities is one of fact and in determining this the court may disregard the form of any transaction and the separate corporate existence of any participant. R.S.O. 1990, c. C.30, s. 13 (2).

[95] I find that the proposed added parties could very well be liable and should be added as parties in order to allow the Plaintiff to properly pursue his trust claim, if such a claim can be pursued.

[96] There shall be an order as follows:

1. Adding Dave Anderson, Andrew Anderson, Deno Godin, and Tony Durigon as Defendants in this action.
2. An order amending the Statement of Claim in the form set out in the Plaintiff’s motion attached as Schedule "A" thereto.
3. If costs cannot be agreed upon, counsel the parties may submit written submissions within 30 days. Such submissions shall be no longer than 3 pages. Parties are also to include a summary of their costs.

Justice R. J. Harper

Released: February 28th, 2022

COURT FILE NO.: CV-20-71802 DATE: 2022/02/28 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: SRK WOODWORKING INC. Plaintiff - and – DEVLAN CONSTRUCTION LTD., THOMAS SPENCE ANDERSON, and HAMILTON-WENTWORTH DISTRICT SCHOOL BOARD Defendants REASONS FOR JUDGMENT Released: February 28, 2022