COURT FILE NO.: CV-18-610660

DATE: 2022 01 24

SUPERIOR COURT OF JUSTICE - ONTARIO

IN THE MATTER OF the Construction Act, RSO 1990, c C.30, as amended

RE: GH ASSET MANAGEMENT SERVICES INC., assignee of J&J PROPERTY SERVICES INC., Plaintiff

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JAN JU LO in her personal capacity and in her capacity as Estate Trustee of the Estate of RENG SONG LO, deceased, GH ASSET MANAGEMENT SERVICES INC. and GREG GOODALE, Defendants

BEFORE: Associate Justice Todd Robinson

COUNSEL: V. De Sousa, for the defendants, Jan Ju Lo in her personal capacity and in her capacity as Estate Trustee of the Estate of Reng Song Lo, deceased (moving parties)

A. Heal, for the plaintiff (responding party)

P. Hancock, for J&J Property Management Services Inc.

HEARD: November 29, 2021 (by videoconference)

REASONS FOR DECISION (Leave for motion to discharge lien and dismiss or stay action)

Overview

[1] Jan Ju Lo intends to bring a motion to discharge the lien of J&J Property Management Services Inc. (“J&J”), return the security posted to vacate the lien, and dismiss or permanently stay this lien action. After this action was commenced, J&J’s lien was assigned to GH Asset Management Services Inc. (“GH Asset”). The proposed motion focuses on GH Asset’s failure to provide timely disclosure of that assignment agreement.

[2] The underlying dispute involves work at an apartment building owned by Mrs. Lo and her late husband, Reng Song Lo. GH Asset was the property manager and entered into a contract with J&J to perform property maintenance and renovation services at the premises. GH Asset purportedly entered that contract as agent for the Los. The Los deny any knowledge or authorization of J&J’s work.

[3] Validity of J&J’s lien and enforceability of the assignment to GH Asset are squarely in dispute in the lien action. In the proposed motion, Mrs. Lo will argue that GH Asset’s delayed disclosure of the assignment gives rise to an abuse of process supporting discharge of the lien and dismissing or permanently staying this action.

[4] The parties disagree over whether leave for Jan Ju Lo’s intended motion is required under the Construction Act, RSO 1990, c C.30 as it read on June 29, 2018 – i.e., the former Construction Lien Act (the “CLA”), which is the version of the act applicable in this lien action. There are three issues to be decided:

(a) Is abuse of process on the basis of delayed disclosure of the assignment a “proper ground” on which to seek relief under s. 47 of the CLA?

(b) Since proposed relief under either Rule 21.01(3)(d) of the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”) or s. 106 of the Courts of Justice Act, RSO 1990, c C.43 (the “CJA”), if granted, would result in a final disposition of GH Asset’s assigned claims, is a motion for relief under those provisions an “interlocutory step” for which leave of the court is required?

(c) If so, is the proposed motion necessary or would it expedite the resolution of the issues in dispute?

[5] I have determined that it is premature to assess the merits of whether Mrs. Lo’s seemingly novel ground supports relief under s. 47 of the CLA. Requiring Mrs. Lo to first demonstrate merit before bringing and arguing the motion would, in my view, amount to importing a leave requirement into s. 47 where one has not been prescribed by the Legislature. Since leave is not required, Mrs. Lo is entitled to move for relief under s. 47.

[6] Relief under Rule 21.01(3)(d) of the Rules and s. 106 of the CJA is not the same. The nature of the relief sought – interlocutory or final – does not determine if a motion is an “interlocutory step” under the CLA. The proposed motion is an “interlocutory step” in the proceeding and, thereby, requires leave of the court to bring. I am not persuaded that a motion is necessary to decide GH Asset’s entitlement to pursue J&J’s assigned claim, but am persuaded that deciding that issue will expedite resolution of issues in dispute in this lien action. I am accordingly granting leave for Mrs. Lo to join relief under Rule 21.01(3)(d) of the Rules and s. 106 of the CJA with her motion under s. 47 of the CLA.

Analysis

[7] Interlocutory steps, other than those provided for in the CLA, first require “consent of the court” to be obtained “upon proof that the steps are necessary or would expedite the resolution of the issues in dispute”: CLA, s. 67(2). As already noted, Jan Ju Lo’s proposed motion has two elements: (i) relief under s. 47 of the CLA, and (ii) relief under statutory provisions outside the CLA, namely under Rule 21.01(3)(d) of the Rules and s. 106 of the CJA.

[8] Section 47 of the CLA provides the court with authority, on motion, to order that a lien be discharged, that the registration of a claim for lien or certificate of action, or both, be vacated, or that an action be dismissed. Such an order may be made “upon any proper ground and subject to any terms and conditions that the court considers appropriate in the circumstances.”

[9] Rule 21.01(3)(d) of the Rules provides that a defendant may move to have an action stayed or dismissed on the ground that “the action is frivolous or vexatious or is otherwise an abuse of the process of the court.” Section 106 of the CJA provides broader authority to stay an action. It authorizes the court, on its own initiative or on motion by any person, to stay any proceeding on such terms as are considered just.

Is the alleged abuse of process a “proper ground” for relief under s. 47?

[10] Motions under s. 47 are procedural steps provided for in the CLA. GH Asset’s arguments on why I should not permit the motion under s. 47 turn largely on whether delayed disclosure of the assignment agreement is a “proper ground” for relief, as required by s. 47.

[11] Jan Ju Lo submits that abuse of process is a “proper ground” under s. 47 of the CLA. She points to the fact that the current amended s. 47 now expressly provides that discharge may be “on the basis that the claim for the lien is frivolous, vexatious or an abuse of process”, arguing it supports the inference that abuse of process is also a proper ground under the former (and applicable) version of s. 47.

[12] GH Asset argues that abuse of process is not a “proper ground” for relief under s. 47, so the motion should not be allowed to proceed. GH Asset submits that the assignment complies with s. 73 of the CLA and has not changed the litigation landscape or the adversarial orientation of the parties. It further submits that the scheme of the CLA discourages this kind of pre-trial attack. Section 47 is argued to provide narrow statutory grounds for discharging liens, such as challenges to one or more of the three core elements to a lien: lienability, timeliness, and quantum. Although “abuse of process” is included in the current s. 47, it was not included in the version of s. 47 applicable to this lien action and should not be “bootstrapped” through the language of “proper ground” to avoid Mrs. Lo having to seek leave under s. 67(2). GH Asset submits that allowing grounds derived from other legislation, such as Rule 21.01(3)(d) of the Rules or s. 106 of the CJA, to fit within s. 47 would take away the “teeth” of the leave requirement in s. 67(2).

[13] Although compelling, my difficulty with GH Asset’s argument is that it triggers a kind of chicken-and-egg conundrum. On the one hand, given the summary nature of lien proceedings, there is a certain logic to Mrs. Lo being required to demonstrate that abuse of process by delayed disclosure of the assignment is a “proper ground” before the motion proceeds. Doing so will avoid unnecessary time and expense that may be contrary to the summary scheme of the CLA. On the other hand, without the benefit of the evidence and other materials on which Mrs. Lo will rely, how can I fairly decide whether delayed disclosure in this case constitutes an abuse of process that is a proper ground for relief?

[14] GH Asset’s submits that allowing s. 47 motions to be brought on any ground is inconsistent with both the policy objectives of the CLA and the language of s. 47 that requires a “proper” ground. I do not wholly disagree, but there is a nuance. In my view, it would be an error to grant relief under s. 47 without first determining that the ground on which relief is sought is “proper” in the context of the policy objectives underlying the scheme of the CLA. A motion lacking proper grounds would be subject to costs consequences under s. 86 of the CLA, which provides the court with broad discretion on costs, including on a substantial indemnity basis.

[15] The proposed abuse of process ground is one that apparently has not previously been relied on to grant relief under s. 47 of the CLA. However, as I held in GTA Restoration Group Inc. v. Baillie, 2020 ONSC 5190, at paras. 44-45, s. 47 has been recognized as being broadly drafted and applicable in many situations. It can be used in a variety of manners to seek discharge of a lien, and many matters properly addressed under s. 47 do not necessarily seek a summary disposition of a lien action on its merits. The requirement in s. 47 is only that relief is granted on a “proper” ground. In my view, it is immaterial that the same ground may also support relief under Rule 21.01(3)(d) of the Rules or s. 106 of the CJA. Consideration of novel grounds should not be foreclosed simply because there is no case law addressing them.

[16] Moreover, there is no equivalent language in s. 47 to the “consent of the court” requirement in s. 67(2). Requiring a moving party to first demonstrate that a proposed ground on which it intends to rely is a “proper ground” before proceeding with a s. 47 motion would amount to a de facto leave requirement. If the Legislature intended that precondition, then language to that effect could have been expressly included in s. 47, as was done in s. 67(2).

[17] In my view, GH Asset’s position that abuse of process by delayed disclosure of the assignment is not a proper ground for relief under s. 47 is a defence on the motion, not a roadblock to Jan Ju Lo bringing it. Whether or not Mrs. Lo’s position constitutes a “proper” ground for a discharge order is a matter best determined on the motion itself.

[18] For these reasons, Mrs. Lo is entitled to bring her motion for relief under s. 47, regardless of whether I ultimately accept her argument that delayed disclosure of the assignment is an abuse of process supporting discharge of the lien and related relief.

Is seeking relief under non-CLA provisions an “interlocutory step”?

[19] Jan Ju Lo argues that the proposed motion is not interlocutory in nature because it would finally determine the substantive rights of the parties and bring the action to an end. It is therefore not subject to the leave requirement in s. 67(2) of the CLA. In support of her argument that motions for final orders are not interlocutory steps requiring leave, Mrs. Lo relies on two decisions: GTA General Contractors Ltd. v. 2566213 Ontario Inc., 2019 ONSC 7370 and Unimac-United Management Corp. v Metrolinx, 2016 ONSC 559 (Master).

[20] In GTA General Contractors, the defendant moved for an order declaring liens expired, discharging the liens, and paying out security for the liens posted into court. In addressing the argument that leave under s. 67(2) was required, Kane J. held that the motion was exempt because it was brought under ss. 45 and 47 of the CLA, so was a motion provided for in the CLA. Kane J. nevertheless went on to hold that, since the motion would determine substantive rights if successful, it was not interlocutory in nature and leave under s. 67(2) was not required.

[21] In Unimac, the plaintiff had been ordered to post security for costs, but failed to do so. The defendant then moved for an order dismissing the action under Rule 56.06 of the Rules. Master Wiebe (as he was then titled) accepted the defendant’s argument that s. 67(2) did not apply because the motion to dismiss was a motion for a final order and was thereby not “interlocutory.” He nevertheless went on to consider s. 67(2), finding that the motion was both necessary and would expedite resolution of issues in dispute. My colleague does not appear to have had the benefit of the arguments on “interlocutory step” made before me.

[22] To the extent that either decision supports that motions seeking final orders do not require consent of the court under s. 67(2), or that such motions are not interlocutory, I respectfully disagree. In my view, there is a material distinction between an “interlocutory step” and an interlocutory or final order on a motion.

[23] “Interlocutory” is a word defined in Black’s Law Dictionary in terms of something intervening between the commencement and the end of a lawsuit. In context of a motion, generally speaking, an interlocutory order decides a point or matter, but is not a final determination of disputed triable issues in the proceeding. Conversely, a final order is just that: a final determination on triable issues or the entire litigation.

[24] A “step” in litigation includes more than just motions. For example, since the only express form of discovery provided in the CLA is cross-examination on a claim for lien, case law has consistently held that documentary and oral discoveries in a lien action first require leave of the court under s. 67(2).

[25] It follows that an “interlocutory step” is any step taken in a lien action between the beginning and the end of the proceeding. Under the CLA, as in non-lien actions, that end is presumptively a trial. Trials are not interlocutory since the action ends with a determination at trial, regardless of the outcome. The same is not necessarily true of a motion seeking a final order.

[26] Motions are inherently interlocutory in nature. The type of relief requested does not dictate the nature of the order made. For example, a motion for summary judgment seeks a final determination in an action. If successful, the motion yields a final order. If unsuccessful, the motion may yield only an interlocutory order, with the action continuing to trial. Unlike a trial, there is no certainty that a summary judgment motion will dispose of an action until the motion has been decided. As a step in litigation, the motion for summary judgment is thereby interlocutory, even if the result of the motion may be a final order.

[27] I am reinforced in my view by the obiter comments made by the Divisional Court in R&V Construction Management Inc. v. Baradaran, 2020 ONSC 3111 (DivCt). In that case, the Divisional Court reaffirmed that the powers of a construction lien referee include the full range of powers accorded to a judge under the Rules, such that an associate judge hearing a summary judgment motion in a lien reference may use the enhanced fact finding powers of a judge provided in Rule 20.04(2.1) of the Rules. The Divisional Court expressly acknowledged, at para. 39, that motions for disposition without trial, such as summary judgment, are interlocutory motions requiring consent of the court under s. 67(2), stating as follows:

Motions for disposition without trial are interlocutory motions that are not permitted except with the “consent of the court” under s.67(2): so, the parties may only bring a motion (including a motion for disposition without trial) where they satisfy the test in s.67(2). Where a construction lien master is satisfied that a motion for summary judgment “would expedite the resolution of the issues in dispute”, the master may consent to a motion for summary judgment being brought.

[28] For the above reasons, I find that motions for disposition without trial, namely motions seeking a final order, that are not provided for in the CLA are still “interlocutory steps” to which the leave requirement in s. 67(2) of the CLA applies. Accordingly, Jan Ju Lo’s proposed motion for relief under Rule 21.01(3)(d) of the Rules and s. 106 of the CJA requires “consent of the court” before it may be brought.

Is the non-CLA relief necessary or would it expedite resolution of issues in dispute?

[29] GH Asset argues that, to satisfy the express requirements of s. 67(2), Mrs. Lo must provide “proof” that the motion is necessary or would expedite resolution of issues. GH Asset asserts that no evidence has been tendered, so there is no proof supporting that Mrs. Lo or the estate of Reng Song Lo have been deprived of any procedural fairness. Since Mrs. Lo has only put forward a factum without tendering any evidence, she thereby cannot satisfy her onus of demonstrating that the motion is necessary or would expedite the resolution of the issues in dispute.

[30] I do not agree that using the word “proof” in s. 67(2) imports a requirement for evidence in all cases. In the circumstances of this case, it is unnecessary for me to assess the merits of Mrs. Lo’s proposed motion to decide whether to grant leave under s. 67(2).

[31] Proving a fact or proposition may be done by evidence. In some circumstances, though, argument may also be used and, in my view, is equally capable of establishing that a fact or proposition is true or should be accepted. When dealing with leave under s. 67(2) (now s. 13 of O Reg 302/18 under the Construction Act), the extent of required “proof” will vary depending on the nature of the requested interlocutory step. In some cases, it may well require substantive affidavit or other evidence. In this case, the proposed interlocutory step deals with the interpretation and legal ramifications of essentially undisputed facts, namely the timeline for assignment of J&J’s claim, GH Asset obtaining and serving its order to continue, and producing the assignment agreement to the defendants. These are circumstances where, in my view, a lack of evidence is not an impediment to assessing whether leave should be granted. Argument on how the proposed motion is necessary or will expedite resolution of issues is sufficient.

[32] Jan Ju Lo argues that the motion is necessary as a matter of procedural justice. Case law requires immediate disclosure of litigation agreements, but that did not occur here. Without assessing the merits of that position, which will be the subject matter of the motion, I do not agree that procedural justice makes the motion necessary. “Necessity” under s. 67(2) is focused on the need for the interlocutory step itself. Nothing precludes Mrs. Lo from making her defence argument at trial that, as a matter of procedural fairness, GH Asset should be denied any recovery for the assigned claim because it delayed in providing notice and disclosure of the assignment. In my view, it is not necessary to address those arguments by way of an interlocutory motion.

[33] I am persuaded, though, that a successful motion will expedite resolution of issues in the lien action by fully disposing of the lien remedy and assigned contract claim. Even if not successful, the motion will likely resolve Mrs. Lo’s defence that GH Asset should be barred from advancing J&J’s assigned claim. I accept GH Asset’s argument that claims between GH Asset and Mrs. Lo (in both of her capacities as a defendant), as well as determining which side owes the other side money, will remain irrespective of whether the proposed motion is brought and succeeds. However, it is relevant that GH Asset is advancing claims against the defendants wearing two hats: first, in its capacity as assignee of J&J’s lien and contract claims (the subject matter of this lien action) and, second, in its own capacity for its own claims (the subject matter of GH Asset’s counterclaim in the related non-lien action, which is also before me in a reference under the Rules).

[34] GH Asset correctly points out that s. 67(2) uses the language “resolution of the issues in dispute”. Even if the lien action is dismissed or stayed, it seems that J&J’s contract claim will have continued relevance in the related non-lien action. The lien remedy will not. Nevertheless, s. 67(2) deals with interlocutory steps in lien actions. I am not convinced that it is consistent with the scheme of the CLA to consider whether the same or similar issues in dispute will remain in other non-lien proceedings. In my view, since s. 67(1) of the CLA directs that procedure in a lien action be as far as possible of a summary character, it follows that, in deciding whether an interlocutory step will expedite the resolution of issues in dispute, the focus should be on resolution of issues in that lien action. To view it otherwise would open the door to tethering resolution of the issues in a summary lien proceeding to other non-lien proceedings that are not subject to the same truncated procedural processes and timelines as lien actions.

[35] Jan Ju Lo’s proposed motion, if successful, would fully and finally resolve J&J’s lien and contract claims in the lien action. Even if the contract claim remains relevant in the non-lien action, a dismissal or permanent stay of the lien proceeding would have the effect of preventing GH Asset from taking further steps to enforce the lien. In these circumstances, I am satisfied the motion, if successful, would expedite resolution of the issues in dispute in this lien action.

Disposition

[36] For the foregoing reasons, Jan Ju Lo may proceed with her intended motion under s. 47 of the CLA, for which leave is not required. I grant leave for Mrs. Lo to join relief in that motion under Rule 21.01(3)(d) of the Rules and s. 106 of the CJA. Costs of this hearing and the related written submissions shall be reserved to be determined with costs of the motion.

ASSOCIATE JUSTICE TODD ROBINSON

DATE: January 24, 2022