S31 Inc. v. Ecolomondo Environmental (Hawkesbury) Inc., 2023 ONSC 5071

Court File No.: CV-23-00000023-0000

ONTARIO SUPERIOR COURT OF JUSTICE

S3I INC.

Plaintiff

v.

ECOLOMONDO ENVIRONMENTAL (HAWKESBURY) INC.

Defendant

R E A S O N S F O R D E C I S I O N

BEFORE THE HONOURABLE JUSTICE P. ROGER

on Tuesday, August 29, 2023, at L’ORIGINAL, Ontario

APPEARANCES:

S. Gaudrau Counsel for the Plaintiff G. Cullwick Counsel for the Defendant

TUESDAY, August 29, 2023

R E A S O N S F O R D E C I S I O N

ROGER, J. (Orally):

The defendant, Ecolomondo Environmental (Hawkesbury) Inc., brings a motion seeking to discharge a construction lien registered by the plaintiff, S3i Inc. The motion is brought under section 47 of the Construction Act. It alleges that S3i failed to register the lien within the permitted time.

Section 31(2)(b) of the Construction Act is applicable. It provides that the lien of a contractor expires at the conclusion of the 60-day period next following the occurrence of the earlier of, the date the contract was completed, and the date the contract was abandoned or terminated. In this case, the contract was not completed. While initially the defendant also argued termination, at the time of the motion, the defendant only argued that the contract was abandoned prior to the 60-day period before the lien was registered. The lien was registered on January 26th, 2023, and the defendant argues that the contract was abandoned before November 27th, 2022.

The Construction Act does not define abandonment, but this has been determined to occur when there is a cessation of work and either an intention not to complete the contract or a refusal to complete the contract. As indicated by the Divisional Court in Scepter Industries, 2019 ONSC 7515, subjective abandonment by the lien claimant is obviously sufficient to establish abandonment. However, when abandonment is denied by the lien claimant, as is the case here, all relevant circumstances may be considered to determine whether a contract was abandoned. Indeed, once it becomes impractical or impossible to perform the contract, no reasonable person would persist in saying that they were ready, willing, and able to continue performing. This is another way of saying that where the parties have reached an impasse in their discussions aimed at resolving their conflict, the contract will be considered to have been abandoned. Further, also as indicated in Scepter, although considering both the subjective intentions of the parties and the objective relevant circumstances, the focus should still be on the contractor as it is necessary that the lien claimant be the person to abandon the contract.

The test on a motion under section 47 of the Construction Act is whether there is a triable issue in respect of any of the basis on which discharge of the lien is sought. The parties disagree whether the expanded powers available on a motion for summary judgment are also available on a section 47 motion, ie. whether on a section 47 motion the court can weigh the evidence, evaluate the credibility of the deponents, and draw reasonable inferences from the evidence, which are now available at rule 20 of the Rules of Civil Procedure.

There is no question that the underlying test is articulated in Beaver Materials Handling Co. Ltd. v. Hejna, 2005 ONC 23127. In that decision, Justice Shaughnessy summarized the applicable law at paragraph 24 of his decision.

Since 2005, when Beaver Materials was released, rule 20 has been amended, and the Supreme Court of Canada released the Hryniak v. Mauldin, 2014 SCC 7 decision on the interpretation of rule 20. Similarly to rule 20, the Construction Act and its predecessor, the Construction Lien Act, are to be interpreted in a way that facilitates a summary and inexpensive remedy.

I was referred to two decisions of this court that support the argument of the defendant that a judge on a section 47 motion may weigh the evidence: 1140676 Ontario Inc., 2021 ONSC 143 and Lazi Ventures Inc., 2022 ONSC 3111. However, I was also referred to three decisions providing that the enhanced powers of rule 20 are not available on a motion under section 47.

R & V Construction, 2020 ONSC 3111 is a decision of the Divisional Court. On different facts, because the Master in that decision proceeded as if the motion was a motion for summary judgment, the Divisional Court states at paragraph 61 that the enhanced powers are not available. R & V was followed in Built By Engineers, 2023 ONSC 2969, and earlier in Maple Quest Development, 2020 ONSC 4308, another Divisional Court decision.

I can see an argument that the interpretation of the Construction Act, particularly of section 47, could evolve to reflect the current realities of civil litigation. On the other hand, the Construction Act was always meant to provide a summary and inexpensive remedy such that I can also see why a section 47 motion should not incorporate assessing credibility, weighing evidence, and drawing inferences, when this can be conducted at a construction trial.

Overall, I agree that the enhanced powers available at rule 20 of the Rules of Civil Procedure are not available at a section 47 motion under the Construction Act. Although an analogous test is used at rule 20 and section 47, these are procedurally different motions. Furthermore, I am unable to distinguish the decision of the Divisional Court in Maple Quest, where this point was in issue and clearly decided.

Consequently, when I assess the evidence, I conclude that there are triable issues or genuine issues for trial relating to the timeliness of the construction lien registered by the plaintiff.

The parties entered into a contract in July, 2020. The project was large and lasted years, with significant amounts being billed and paid by the parties. By April and July, 2022, the parties disagreed over a number of invoices of S3i Inc. This resulted in negotiations between the parties over several months. The negotiations ultimately failed in December 2022 and on December 23, 2022, Ecolomondo delivered a notice to arbitrate. S3i registered its claim for lien on January 26th, 2023, and perfected its claim for lien and issued its statement of claim and certificate of action on April 25, 2023.

Ecolomondo argues that the lien was registered out of time. It points out that the work stopped by the end of July or early August, 2022, and that prior to November 27, 2022, the parties objectively maintained an intention not to complete the contract.

The problem with the arguments of the defendant is that many of their factual underpinnings are contradicted.

For example, Mr. Sorella’s evidence that on August 8, 2022, he verbally informed S3i that S3i would not be performing any more work is contradicted by the evidence of S3i. Another example is whether the parties simply agreed to a pause following August 8, 2022, in order to come to some resolution of the invoices and hourly rates issues before resuming the work. This could explain S3i removing its equipment from the site and demobilizing. This could also explain some of the evidence relating to a meeting on August 18, 2022, and some of the evidence relating to that meeting that points to the parties not being “done” with one another, but rather intending to resolve their dispute and to finish the contract.

There are also triable issues whether on August 30th, 2022, Mr. Picard told Mr. Lamarre that S3i was leaving and never coming back. There is no written corroboration of this and this is denied by Mr. Picard.

The triable issues relating to the timeliness of the registration of the lien also arise from a meeting between the parties that occurred on December 7, 2022. An email summarizing this meeting points to an on-going intention by both parties that S3i would come back to complete the thermal insulation work. The content of this email is also in dispute raising other triable issues about this. Even if the email contains a settlement proposal, it is admissible on this motion, not to illustrate the weakness of a party’s case or to show a concession, but to address a possible misrepresentation on this point by the defendant. The public interest of addressing this outweighs any impact on the public interest of encouraging settlements. As an aside, I note that privilege was not asserted on similar discussions occurring before November 27th, 2022.

These are sufficient examples of triable issues as to whether or when the contract was abandoned. They make it impossible to decide whether the contract was abandoned before or after November 27, 2022, without weighing the evidence, evaluating the credibility of the parties, and drawing reasonable inferences from the evidence. It is therefore not necessary to decide whether a partial recording of the December 7, 2022 video conference meeting between the parties is admissible.

Consequently, the defendant’s motion is dismissed.

R E A S O N S F O R D E C I S I O N O N C O S T S

ROGER, J. (Orally):

On the issue of costs, I note that in a construction lien action, costs are provided at section 86 of the Construction Act. Again, costs are in the discretion of the court.

This motion was important to the parties, but it was not a complex motion. The defendant abandoned certain of their arguments and were not successful on their arguments of settlement privilege relating to the December email. The plaintiff was the successful party on this motion.

The defendant’s partial indemnity costs and disbursements total about twenty-eight thousand dollars, while those of the plaintiff total close to fifty thousand dollars. The plaintiff seeks their partial indemnity costs totaling close to fifty thousand dollars, and the defendant argues that these costs are too high, and that they should only be payable if the plaintiff is successful at trial on the issue of the validity of the construction lien.

No offer is applicable to trigger the applicable rule for a higher scale of costs, and partial indemnity is the appropriate scale of costs on this motion. I find the costs of the plaintiff high for a motion of this nature and think that a reasonable amount for partial indemnity costs for this motion that would be within the reasonable expectations of the losing party would be in the range of about thirty-three thousand dollars.

Although the defendant’s suggestion that costs be payable to the plaintiff if they are successful at trial could be the appropriate disposition in some cases, I do not think that it is the appropriate disposition in this case.

In this case, there are several triable issues such that it would have been reasonable not to bring this motion or to abandon the motion earlier. Ordering costs payable forthwith serves a useful purpose, that of discouraging motions, and I do not think that this is a case to deviate from this wise principle. As well, the parties participating in an arbitration creates a level of uncertainty about such an order and also militates against making such an order.

Overall, when I consider the relevant circumstances, what is fair, reasonable, and within the reasonable expectations of the parties is to order that the costs of this motion be payable forthwith and be fixed in the all-inclusive amount of thirty-three thousand dollars payable by the defendant to the plaintiff within the next 60 days, and I know I said “forthwith”, but I am saying 60 days as this is a reasonable amount of time.

An order will issue that the motion is dismissed with costs payable within the next 60 days by the defendant to the plaintiff in the all-inclusive amount of thirty-three thousand dollars.