Court File and Parties
Court File No.: CV-23-710573-00CL and CV-23-709180 Date: 2025-11-14 Ontario Superior Court of Justice (Commercial List)
Re: MCAP Financial Corporation, Applicant -and- Vandyk-The Buckingham North - Grand Central Limited and John Vandyk, Respondents
AND RE: Kingsett Mortgage Corporation and Dorr Capital Corporation, Applicants -and- Vandyk - Uptowns Limited, Vandyk - Heart Lake Limited, 2402871 Ontario Inc., Vandyk - The Ravine Limited and Vandyk - Lakeview- DXE-West Limited, Respondents
Before: FL Myers J
Counsel:
- Roger Gillott and David Rosenblat, counsel, for the Receiver, KSV Restructuring Inc.
- Wojtek Jaskiewicz and Hayden Trbizan, Counsel, for PCL Constructors Canada Inc.
- Kenneth W. Movat, counsel for Kohn Partnership Architects Incorporated and Aquila Project Solutions Ltd.
Heard: November 13, 2025
Endorsement
[1] This endorsement applies to motions brought in these two proceedings yesterday and today by PCL Constructors Canada Inc., Kohn Partnership Architects Incorporated, and Aquila Project Solutions Ltd.
[2] In each case lien claimants seek orders protecting their lien claims from being dismissed by operation of ss. 37 and 46 of the Construction Act, RSO 1990 c C.30 due to the claims not being set down for trial within two years of being commenced.
[3] The lien claims have not been set down for trial yet because they have been stayed by the orders that commenced the receiverships.
Insolvency Principles and Creditor Priority
[4] Insolvency proceedings always carry the risk that some creditors will not be paid. The usual measure of insolvency is that a debtor's liabilities exceed the realizable value of its assets. If that is so, then the proceeds to be realized by the liquidation of the debtor's assets will, by definition, be insufficient to pay all its accrued liabilities in full.
[5] Uncertainty as to the amount of proceeds expected to be realized in a proceeding has several effects. Highest priority claims typically can be expected to be paid or payable. While creditors with high priority claims may commence the proceedings, if they are not at practical risk of going unpaid, usually little time is spent dealing with them. Their claims will accrue interest and costs as the proceeding advances. Unless their claims are likely to go unpaid by the available assets, there is usually little prejudice to high priority claimants by simply waiting.
[6] At the other end of the priority ladder, some creditors will clearly be out of the money. They really have no cognizable financial interest in the proceedings, therefore. If they will not be paid anything no matter what available choices are made, they have little standing to be heard.
[7] In the middle are creditors who may be paid some amount depending on the outcome. They are often referred to as the creditors at the "plimsoll line." Their claims are typically prejudiced by delay and additional costs. Maximizing recovery increases these creditors' realization and decreases the impact of the insolvency on them.
[8] Creditors at the plimsoll line often have the most at stake in considering the balance of costs and outcomes when issues are brought before the court.
[9] As a result of uncertainty of the final value of future asset realization by the receiver or other court officer, it is usually considered a better approach to defer assessing the validity and quantum of creditors' claims until the final proceeds available for distribution are known. By waiting, the parties can identify claims that are out of the money and need not participate further. The parties and the court can identify which creditors are affected by the outcome and which are at the plimsoll line.
[10] Waiting saves time and money for all by avoiding the cost of proving claims that have no value in any event. It also avoids challenges by creditors against other creditors whose claims are higher on the priority ladder. If it can be shown that, due to the amount of funds available for distribution, a potential challenge will not result in the challenger obtaining any funds even if successful, lengthy and costly internecine litigation can be avoided.
Lien Claims in Insolvency
[11] Lien claimants occupy an unusual space in an insolvency. The priority of liens and trusts under the Construction Act can survive bankruptcy. Under s. 78 of the Construction Act, liens may take priority over pre-existing mortgages in some circumstances. So, to some extent, liens are at or near the top of the priority ladder.
[12] Proving liens, and especially quantifying them, can be expensive. There are different elements that may also affect the insolvency proceedings in different ways. For example, holdbacks and trusts may have higher priority than other lien claims in some circumstance. There may be cases where a project whose owner is insolvent may nevertheless be built-out by an insolvency officer to maximize proceeds. It may be necessary in such cases to identify priority payables such as lien claims to ensure that the project can proceed.
[13] It is not clear to me that lien claims automatically must or should be consigned to the "wait and see" pile in every insolvency proceeding. There are cases where the identification of holdbacks or other priorities may be both necessary and not that difficult.
Statutory Intent and the Construction Act
[14] In addition, there is a competing public policy. The Construction Act provides for liens to be dealt with expeditiously where possible. Lien claims need to be brought and registered quickly. Then, s. 37 provides that they must be set down for trial or ordered to trial within two years.
[15] Other recent amendments to the statute provide for real time processes to resolve liens claims on an interim basis to protect projects from being shut down and to try to keep money moving to trades people who need to be paid.
[16] I am not prepared to find that the desirability to defer the cost of determining claims in receivership proceedings until proceeds are realized necessarily trumps the legislative intent for lien claims to be dealt with expeditiously.
[17] It may be, for example, that there will be little prejudice to the receivership for the stay of proceedings to be lifted so that lien claims can proceed while liquidation or asset realization is still underway. Where the lien claims include high priority aspects, validation and quantification will be required in any event. Absent tangible prejudice to the receivership goals, it is not clear to me that simply asserting that, "it may save money to wait" is necessarily a sufficient basis to ignore or circumvent the statutory requirements of the Construction Act.
Lien Regularization Orders
[18] In KEB Hana as Trustee v. Mizrahi Commercial (THE ONE) LP et al., 2024 ONSC 1678, Osborne J. approved a creative "Lien Regularization Order" to create a parallel lien claim process in a receivership. Doing so let a project move forward while protecting the claims and priorities of lien claimants. Osborne J wrote:
I am also satisfied that my jurisdiction to grant such an order is fair and reasonable since the rights granted to any Lien Claimant are substantively consistent with those granted to such parties under the provincial lien legislation, with the result that they are not prejudiced by the making of this order. In short, they have the same rights as the statutory regime provided under the Construction Act already gives them.
Accordingly, no element of the provincial lien legislation regime is being circumvented or compromised. Rather, it is either being complied with, or is deemed to have been complied with, albeit on a streamlined basis. I am satisfied that compliance with the proposed Lien Regularization Order, which will have the effect of removing the requirement in respect of each lien of obtaining a motion to lift the stay, filing, perfecting and registering that lien and then vacating that lien upon the posting of security, is accretive to maximizing value for the benefit of all stakeholders. Importantly, it is accretive in a way that does not prejudice the rights of any Lien Claimant. It is approved.
[19] The court has the authority to recognize imperfect but bona fide compliance with s. 37 of the Construction Act, using Rule 2.01 (1) of the Rules of Civil Procedure, RRO 1990, Reg 194, to remedy technical non-compliance with Rule 48.03 (1). However, recognition of bona fide efforts to comply with a Rule to meet the intent of statutory prescription is not the same as trying to use the Rules deliberately to avoid an inconvenient statutory prescription thereby undermining the statutory intent. For an example of the former, see: 1475707 Ontario Inc. Operating as Action Electric Construction and Maintenance v. Foran, 2014 ONCA 830.
[20] This view is consistent with the order made by Osborne J. that he found to be consistent with the lien claimants' rights under the statute.
[21] I am hesitant therefore to simply help find a way to avoid what the parties refer to as the "adverse effects" of the limitation period in s. 37 of the Construction Act. Absent paramountcy, the statutory provisions are the law of the land. Statutory words and policy are to be respected.
Form and Substance
[22] On the other hand, there is a risk of form overtaking substance here too. For example, if the lien claims were to be referred to an Associate Judge for trial, s. 37 could be readily satisfied. The AJ could set a trial date and then impose a stay to await the outcome of the receivership.
[23] On November 6, 2025, in one of these receiverships, (unreported decision in CV-23-00709180-00CL) the court held:
The deeming language is required because the lien claimants are unable to comply with the strict requirements of r. 48 for the passing of a trial record when, in most instances, pleadings are not complete, nor should the lien claims be listed for trial at this stage of the receivership proceedings. Examples of the deeming language that has been adopted in other circumstances are found in: 1475707 Ontario Inc. v. Foran 2014 ONCA 830 and MacKenzie Group Inc. v. Hobby Jewellery Ltd. c.o.b. L'Oro Jewellery, Audrey Warner, for the Vaughan Mills Advisory Services Inc..
The purpose of these orders, as counsel has described, is to leave the lien claims on the table for the time being until it is determined whether they are worth pursuing, and if they are pursued, to preserve the parties' respective positions in respect of them. [Emphasis added.]
Determination
[24] As usual, each case needs to be determined on its facts.
[25] On the motions before me, I would not fault the parties for not seeking to lift the stay while realization was under consideration. The assets are complex and even priority recovery may be at risk on at least one of the project sites.
[26] Despite the wording employed, I am satisfied that the orders sought should be made to avoid upcoming dismissal dates under s. 37. I am satisfied that the processes employed are not undermining the policy of the Construction Act.
[27] I would not recommend to counsel however, waiting until the last minute for these types of orders without a good basis in law, supported by evidence, to show that the circumstances discussed by Osborne J. appertain in their cases.
[28] Before trying to creatively deem s. 37 satisfied, I, for one, will be likely to ask in future cases, questions like:
a. Why couldn't the stay have been lifted or a process put in place before the end of the two-year period to better protect lien claimants' rights to the earliest feasible recovery while the receivership proceeds? and
b. How is the process sought consistent with the statutory scheme of the Construction Act?
[29] Orders signed as asked.
FL Myers J
Date: November 14, 2025