Court File and Parties

COURT FILE NO.: CV-18-00078660-0000 DATE: 2022-01-25

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: 4241258 CANADA INC. (operating as LAURIN GROUP), Plaintiff AND: DIAMOND JUBILEE HOSPITALITY INC. and ROYNAT INC., Defendants

BEFORE: Associate Justice A. Kaufman

COUNSEL: Ronald S. Peterson, Counsel for the Plaintiff, 4241258 CANADA INC. (operating as LAURIN GROUP) Shawn O’Connor, Counsel for the Defendant, Diamond Jubilee Hospitality Inc.

HEARD: November 18, 2021

REASONS FOR DECISION

[1] The plaintiff, a general contractor, supplied labour and materials for the construction of a Best Western Glo Hotel located at 160 Hearst Way in Kanata, Ontario. The defendant, Diamond Jubilee Hospitality (“Diamond”), owns this property. A dispute arose regarding this construction project and on November 18, 2021, the plaintiff registered a lien against the property in the amount of $2,144,150. The plaintiff characterised this amount in its registered claim for lien as owing in respect of “services or materials that have been supplied”.

[2] Diamond moves to pay security into Court in an amount that is less than the full amount of the claim for lien under ss. 44(2) of the Construction Act (the “Act”).[^1] It relies on the plaintiff’s admission given at an examination for discovery, that the “proper claim for lien amount” was $956,598.71. The parties agree that the amount required to be posted for security for costs is an additional $50,000, bringing the total to $1,006,598.71.

[3] The plaintiff opposes the motion and brings a cross-motion for leave to register a certificate of pending litigation (“CPL”). It argues that Diamond should pay at least $1,289,460.59 into Court, plus $50,000 as security for costs.

[4] These motions raise two issues. First, what amount should Diamond pay into Court to vacate the plaintiff’s lien? Second, should the plaintiff be granted leave to register a CPL?

ISSUE ONE – What amount should Diamond pay into Court?

[5] A construction lien gives those who supply services and materials to a construction project the right to subject the property to a charge to secure payment for the services and materials supplied.[^2]

[6] Section 44 of the Act provides a means of removing a lien from title upon security being posted or upon payment into court. Under s. 44(1), a person may move without notice to vacate the registration of the claim for lien upon posting security equivalent to the full amount of the lien plus the statutory amount for security for costs. Diamond brings this motion under s. 44(2) of the Act. This subsection provides that the Court may make an order vacating the registration of a claim for lien, and any certificate of action with respect to that lien, upon the payment into court in an amount that the court determines to be reasonable in the circumstances to satisfy the lien. The Act gives the court broad discretion in determining the amount that appears reasonable in the circumstances.[^3]

[7] The moving party bears the onus of establishing that security in an amount less than the claimed amount of the lien is reasonable in the circumstances. A defendant is entitled to cross-examine a lien claimant and a motions judge is entitled to reduce the lien security if the evidence supporting the calculation of the claim for lien fails to establish a reasonable basis for the amount claimed. The test to be applied on a motion of this type is similar to the test on a summary judgment motion. The court must be satisfied based on the motion materials that there is no reasonable prospect of the plaintiff proving a lien for the amount it has claimed. However, a motion under s. 44 is not a full-fledged summary judgment motion under Rule 20. Motions under s. 44 are not the venue for determining complex issues of contested facts going to the merits of the claim. The defendant must be able to show, on a balance of probabilities, that there is no genuine issue requiring a trial for the Court to be able to conclude that the lien is inflated.[^4]

[8] In determining a reasonable amount to “satisfy the lien”, it is necessary to consider what amount may “legally attract the security afforded by a construction lien”.[^5] The claim must be reflective of the value of the work done on the improvement. It must come within the definition of “services or materials supplied to the improvement”[^6] and is limited to the “amount owing to the lien claimant in relation to the improvement”.[^7] A lien does not lie to recover damages suffered as a result of a tort or breach of contract because these damages do not reflect the "price" of the services and materials supplied to the improvement.[^8]

The parties’ positions

[9] Diamond relies on admissions given at Mr. Laurin’s examination for discovery. Counsel for the plaintiff acknowledged that the “proper lien amount” was $956,598.71. Diamond relies on this admission to permit it to post this amount, plus $50,000 for security for costs.

[10] The plaintiff filed the affidavit of Cliff Quain, its senior project manager, on this motion. Mr. Quain states that the plaintiff’s registered claim for lien, in the amount of $2,144,150 represents the plaintiff’s damages in relation to Diamond’s refusal to pay for services rendered. The amount is said to include:

a. Damages for delays suffered by the plaintiff during the Project, and caused by Diamond;

b. Diamond’s non-payment of $996,647.52 in contract amounts owing to the plaintiff by Diamond in relation to the project; and

c. Diamond’s non-payment of the contractual rate of interest of 7.5%, as related to the outstanding amounts owed.

[11] Based on Mr. Quain’s affidavit, the plaintiff’s statement in its registration of the claim for lien, to the effect that $2,144,150 was owing in respect of services or materials that have been supplied, is incorrect. Only $996,647.52 is said to be owing to the plaintiff for services and materials provided. The remaining component of the lien claim relates to interest and damages for delays.

Interest is not lienable under the Act

[12] The plaintiff argues that Diamond should pay an additional $302,152.25 into Court for interest. It relies on a 7.5% rate of interest as specified in the contract.

[13] Interest on the amount owed to a supplier of services or materials is not lienable under the Act.[^9] It is one thing to have a right to recover interest under the contract, and quite another to be entitled to a lien on account of interest.

[14] The plaintiff cites Phoenix Assurance v. Bird Construction,[^10] for the proposition that interest on money wrongfully retained should form part of the security paid into court to satisfy its lien. The plaintiff’s reliance on Phoenix Assurance is misplaced. In that case, the Court of Appeal upheld the Master’s decision to award interest to a lien claimant pursuant to the terms of the construction contract. This decision does not stand for the proposition that interest on amounts owed can form the basis of a claim for lien.

[15] The plaintiff argues that the Court should take its delay claim into account and increase the amount of security that must be posted. It argues that certain delay claims are lienable, and that it incurred “stand-by” charges in the amount of $384,272 resulting from Diamond’s actions or omissions. I am not persuaded by these submissions.

[16] It is true that lienable services can include additional expenses that are incurred because the project takes longer than anticipated, such as labour costs, equipment rental and similar costs of remaining on the job. Damages at large, however, such as lost opportunity costs, loss of profits or aggravated damages, are not lienable services.[^11]

[17] The “stand-by” charges referred to in the plaintiff’s factum are characterized in Mr. Quain’s affidavit as expenses incurred to provide undefined “additional management services”. The plaintiff’s factum refers to an expert report served in support of its calculation of damages, but that report was not filed on this motion. The nature of these “management services” are not described, and there is simply no basis in the materials for the Court to find that they relate to amounts owing for “services or materials supplied to the improvement”.

[18] Given the lack of evidence surrounding these “stand-by charges” / “management services”, I cannot conclude that these relate to any valid lien claim.

[19] The defendant has met its onus that security in an amount less than the claimed amount of the lien is reasonable in the circumstances. The plaintiff conceded during examinations for discovery that the “proper claim for lien amount” was $956,598.71. The plaintiff states that the amount was incorrect due to an accounting error and has since revised the amount owing under the contract to $996,647.52. I accept this amount as reasonable in the circumstances to satisfy the lien, to which $50,000 is to be added for security for costs, for a total of $1,046,647.52.

ISSUE TWO – Should the plaintiff obtain leave to register a CPL?

[20] A CPL may be obtained by order of the Court under rule 42.01 of the Rules of Civil Procedure[^12] and section 103 of the Courts of Justice Act.[^13] Its purpose is to warn interested parties that there is a claim against the property.

[21] Where a motion for leave to issue a CPL is brought on notice, as is the case here, the test is the same as on a motion to discharge a certificate of pending litigation.[^14] The party seeking the CPL must demonstrate that its “reasonable claim to the interest in the land claimed” raises triable issues.[^15] Moreover, pursuant to Rule 42.01(2), the moving party must include a claim for a CPL in the originating process or in the pleading that commences the proceeding.

[22] I am dismissing the plaintiff’s motion for leave to issue a CPL for two reasons. First, its claim for an interest in land does not raise triable issues; and second, it has not complied with Rule 42.01(2)’s mandatory requirements.

No reasonable claim to an interest in land

[23] The plaintiff contends that by virtue of its construction lien, it has an interest in Diamond’s land, thereby entitling it to a CPL. I do not accept this submission. The Act is a complete code which prescribes lien rights, obligations and procedure.[^16] The plaintiff’s only interest in Diamond’s land is that conferred to it by the Construction Act, and nothing more.

[24] A construction lien is a purely statutory remedy. The Act abrogates the Common Law to the extent that it creates a charge upon the owner’s lands which is unknown to the Common Law, and would not exist but for the Act.[^17]

[25] In Rafat General Contractors v. 1015737 Ontario Ltd.,[^18] the plaintiff supplied labour and materials on a construction project but did not register a claim for lien in the requisite time. The plaintiff commenced an action to recover amounts allegedly owed, and brought a motion for a certificate of pending litigation against the owner with respect to the same lands against which it could have registered a claim for lien. In denying the plaintiff’s motion, Justice J.R. Sproat held that it would subvert the statutory scheme to permit contractors who do not comply with the Act’s statutory requirements to obtain a certificate of pending litigation. Because the plaintiff failed to preserve its lien, any interest it had in the owner’s land had expired. Implicit in this judgment is that a lien claimant has no separate or distinct interest in land from that which is conferred by the Act.

[26] More recently, in Scepter Industries Ltd. v. Georgian Custom Renovations Inc.,[^19] the Divisional Court rejected a motions judge’s obiter comments that a lien claimant whose lien had expired could obtain a certificate of pending litigation to preserve its interest in the subject property. Justice D.L. Corbett, writing for the Court, held that the Act provided a complete code for securing the price of services and materials provided to an improvement. He concluded that a lien claimant has no interest in land other than its claim for lien.[^20]

[27] Because the Act is a complete code, the plaintiff’s interest in the Diamond’s land is limited to a security interest for the amount owing on the value of the services or materials provided. Neither the Act nor the Common Law confer any interest in land on persons who assert claims for contractual interest or delay damages pursuant to a construction contract.

[28] Moreover, the statutory scheme would be severely undermined if a CPL could be registered in these circumstances. The Act strikes a balance between the builder’s and the owner’s competing interests. Permitting a lien claimant to register a CPL would disturb this balance.

[29] Section 44 of the Act provides owners with a procedure to have liens removed from title pending litigation over the validity of the liens, and thereby enables them to sell or mortgage the property upon providing the builder with adequate security. This statutory benefit would be rendered hollow if a builder could simply register a certificate of pending and hinder an owner’s ability to deal with the property after posting the appropriate security in accordance with the Act. While a certificate of pending litigation creates no interest in land, it is well known that it acts as a cloud upon title and deters purchasers or mortgagees from dealing with the land in question.

[30] Based on the foregoing, I conclude that the plaintiff’s claim for an interest in land does not raise triable issues.

Failure to include a claim for a CPL in the Statement of Claim

[31] There is a second reason why the plaintiff’s claim for a CPL must fail. Rule 42.01(2) explicitly requires that a plaintiff’s claim include a request for a certificate of pending litigation and a legal description of the property at issue in the originating process as a precondition to the issuance of a CPL. Here, the plaintiff’s claim does not comply with these mandatory preconditions and accordingly a CPL cannot be issued.[^21]

DISPOSITION

[32] Diamond’s motion for an order permitting it to post security that is less than the full amount of the lien and for an order vacating the lien upon the payment into Court of $1,046,647.52 is allowed, and the plaintiff’s cross-motion for leave to register a CPL is dismissed.

[33] If the parties are unable to agree on costs of the motion, they may make written submissions limited to a maximum of three pages. Diamond shall deliver its costs submissions by February 25, 2022. The plaintiff shall deliver its responding costs submissions by March 18, 2022. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as amongst themselves.

Alexandre Kaufman Associate Justice Kaufman Date: January 25, 2022

COURT FILE NO.: CV-18-00078660-0000 DATE: 2022-01-25

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 4241258 CANADA INC. (o/a LAURIN GROUP) v. DIAMOND JUBILEE HOSPITALITY INC. et al

BEFORE: Associate Justice A. Kaufman

COUNSEL: Ronald S. Peterson, for the Plaintiff Shawn O’Connor, for the Defendant/Moving Party

REASONS FOR DECISION

Associate Justice A. Kaufman DATE: January 25, 2022

[^1]: R.S.O. 1990 c C.30, as amended. [^2]: Construction Act, s. 14. [^3]: Structform International Ltd. v Ashcroft Homes Construction Inc., 2013 ONSC 4544, at para 11 (Ont. Master) (“Structform”). [^4]: Structform, at para 12. [^5]: Structform, at para 13. [^6]: Construction Act, s. 14. [^7]: Construction Act, s. 17. [^8]: Stucor Construction Ltd. v Brock University, 2001 CarswellOnt 3678, [2001] O.J. No. 4060, 109 A.C.W.S. (3d) 20, 13 C.L.R. (3d) 201, at para 4. [^9]: Construction Act, s. 14(2). [^10]: 1981 CanLII 78 (Ont. C.A.) (“Phoenix Assurance”). [^11]: Structform, at para 14. [^12]: R.R.O. 1990, Reg. 194 (the “Rules”). [^13]: R.S.O. 1990 c. C.43. [^14]: Lawrence Avenue Group Ltd. v Innocan Realty Inc., 1999 CanLII 14793 (ON SC), [1999] O.J. No. 1213 (S.C.J.), leave to appeal dismissed, [1999] O.J. No. 2892, at para. 6 [^15]: G.P.I. Greenfield Pioneer Inc. v Moore, 2002 CanLII 6832, (Ont. C.A.), at para 20. [^16]: R. v 1431633 Ontario Inc., 2010 CarswellOnt 161, 2010 ONSC 266, [2010] O.J. No. 167, 250 C.C.C. (3d) 354, 86 W.C.B. (2d) 256, 92 C.L.R. (3d) 263, at para 40. [^17]: Clarkson Co. Ltd. v Ace Lumber Ltd., 1963 CanLII 4, [1963] SCR 110. [^18]: 2005 CanLII 47733 (Ont. Sup. Ct.). [^19]: 2019 ONSC 7515 (Div. Ct.). [^20]: Ibid., at para 24. [^21]: Sutton Group Professional Realty Inc. v Stone, 2008 CanLII 84103 (Ont. Master), at para 1.