1475707 Ontario Inc. Operating as Action Electric Construction and Maintenance v. Foran

1475707 Ontario Inc. Operating as Action Electric Construction and Maintenance v. Foran Collection Decisions of the Court of Appeal Date 2014-11-24 Neutral citation 2014 ONCA 830 Docket numbers C58635 Judges MacFarland, Jean Louise; LaForme, Harry Smith; Lauwers, Peter D. Subject Civil Decision Content COURT OF APPEAL FOR ONTARIO CITATION: 1475707 Ontario Inc. Operating as Action Electric Construction and Maintenance v. Foran, 2014 ONCA 830 DATE: 20141124 DOCKET: C58635 MacFarland, LaForme and Lauwers JJ.A. IN THE MATTER OF THE Construction Lien Act, R.S.O. 1990, c. C-30, as amended BETWEEN 1475707 Ontario Inc. Operating as Action Electric Construction and Maintenance Plaintiff (Respondent) and David Foran Defendant (Appellant) Mark Abradjian and Renata Kis, for the appellant, David Foran David Thompson, for the respondent, 1475707 Ontario Inc. Heard: October 9, 2014 On appeal from the order of the Divisional Court (Justices Gladys I. Pardu and Joseph M.W. Donohue, Justice P. Theodore Matlow dissenting), dated November 5, 2013, with reasons reported at 2013 ONSC 6882, 117 O.R. (3d) 772, allowing an appeal from the order of Justice Linda M. Walters of the Superior Court of Justice, dated January 3, 2013. MacFarland J.A.: [1] This is an appeal, brought with leave, from the order of the Divisional Court which set aside the order of the motion judge vacating and discharging a claim for lien and Certificate of Action. [2] This appeal raises an interesting question concerning the interplay between s. 37(1) of the Construction Lien Act, R.S.O. 1990, c. C-30 (the “CLA”) and rules 2.01 and 48.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. THE FACTS [3] The facts in this case are not in dispute. In its statement of claim, the respondent alleged it was owed money for construction work performed on the appellant’s property. A claim for lien was registered on March 20, 2009, and the lien was perfected by issuance of the statement of claim and registration of the Certificate of Action on May 11, 2009. [4] The appellant served a statement of defence and counterclaim. Sometime after receiving this, on April 28, 2011, the respondent set the action down for trial. At that time, it had not yet filed any defence to the counterclaim. The counter staff could quite properly have refused to set the matter down – pleadings were neither closed, nor had the defendant by counterclaim been noted in default at that time. However, the trial record was accepted and the matter set down for trial. On October 16, 2012, the respondent served its defence to counterclaim. PROCEEDINGS BELOW Motion Judge [5] In January, 2013, the appellant moved to discharge and vacate the claim for lien and Certificate of Action on the basis that the lien had expired under s. 37(1) of the CLA. [6] The appellant argued that the action was improperly set down for trial when pleadings were not yet closed. He said that rule 2.01(1) may not be used in these circumstances to excuse imperfect compliance with the requirements for setting an action down for trial, because to do so would have the effect of extending the two-year limitation period set out in s. 37(1) of the CLA. [7] The respondent argued that the fact that it set the action down for trial before filing a defence to counterclaim was merely an irregularity which could be cured by rule 2.01. It submitted that the action was in fact set down for trial before the expiration of the limitation period. [8] The motion judge determined that setting the matter down for trial while pleadings were still open was not just an irregularity. She held that to relieve against such an irregularity would in effect extend the time limits under s. 37(1) of the CLA. In this regard she relied on decision of Quinn J. in Ravenda Homes Ltd. v. 1372708 Ontario Inc., 2010 ONSC 881, 90 C.L.R. (3d) 250. [9] She concluded that the court did not have discretion to extend the limitation period. She discharged the lien and vacated the Certificate of Action, and ordered that the matter continue as an ordinary action. Divisional Court [10] The respondent appealed to the Divisional Court and succeeded before a divided court. [11] In reasons by Pardu J. (as she then was), a majority of the court concluded there was no reason why the motion judge could not have granted leave to the respondent to file an amended trial record containing the missing statement of defence to counterclaim. The lien claim need not have been struck when the trial record was originally filed within the two-year limit. [12] The court observed in its reasons: [10] This was not a case of abuse by the plaintiff filing a trial record before any pleadings in response had been delivered. Both parties dragged their feet at times. The plaintiff had to bring a motion to compel the defendant to deliver an affidavit of documents and to set a date for his examination under oath. [11] In 310 Waste Ltd. v. Casboro Industries Ltd. (2006), 83 O.R. (3d) 314, [2006] O.J. No. 3817 (C.A.), the court suggested that imperfect compliance with the rules regarding setting an action down for trial may be the better course when faced with a looming s. 37 deadline, implicitly leaving it open that there could be relief granted against irregularities at a later date. [12] Here the plaintiff attempted to file a trial record within two years from the date the statement of claim was issued. There are no particular equities favouring the plaintiff or the defendant other than the possible loss of a lien to the plaintiff and the preservation of the lien against the defendant. [13] We do not agree that a trial record which does not comply with the Rules is necessarily a nullity, as suggested in Ravenda Homes Ltd. v. 1372708 Ontario Inc., [2010] O.J. No. 510, 2010 ONSC 881 (S.C.J.). … [15] With respect, we do not see that granting relief by way of an order permitting filing an amended trial record is necessarily the equivalent of extending the time limit imposed by s. 37 of the Construction Lien Act. Such a conclusion would fly in the face of rule 2.01 which specifically provides that “a failure to comply with the Rules is an irregularity and does not render a … step, document, or order a nullity”. We see no manifest inconsistency between the ability to correct an irregularly filed trial record and the mandatory deadlines imposed by the Construction Lien Act. [13] In dissent, Matlow J. was of the view that s. 37 of the CLA was an “unqualified declaratory provision” and that the Act recognized no allowance for granting relief to those who do not comply with it – no matter the reason for such non-compliance. It does not matter that the non-compliance results from something that may reasonably be characterized as an “irregularity”. He was of the view that the requirement in s. 37(1) of the CLA that an action be set down for trial within the statutory time limit must be interpreted as a requirement that the action be set down correctly, in accordance with the Rules. Further, the motion judge correctly recognized that she had no jurisdiction to grant relief for the plaintiff’s non-compliance with s. 37 of the CLA. No rule, including rule 2.01(1), can or does, retroactively or prospectively, apply so as to remedy non-compliance with s. 37, whether the non-compliance stems from an irregularity or something more. [14] Further, Matlow J. was of the view that the majority had misinterpreted this court’s decision in 310 Waste. The two cases were similar in that it was not beyond the plaintiff’s ability to comply with s. 37, and it could easily have done so and closed pleadings by delivering a defence to counterclaim. The plaintiff chose not to do so and thereby placed compliance out of reach. [15] In the result, the majority allowed the appeal and the order of the motion judge was set aside. THE LEGISLATION [16] This case requires an analysis of the interaction between the Construction Lien Act and the Rules of Civil Procedure. Accordingly, I now set out the relevant statutory provisions. Construction Lien Act, ss. 37 and 67 Expiry of a perfected lien 37(1) A perfected lien expires immediately after the second anniversary of the commencement of the action that perfected the lien, unless one of the following occurs on or before that anniversary: 1. An order is made for the trial of an action in which the lien may be enforced. 2. An action in which the lien may be enforced is set down for trial. … Summary Procedure 67(1) 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. (2) Interlocutory steps, other than those provided for in this Act, shall not be taken without the consent of the court obtained upon proof that the steps are necessary or would expedite the resolution of the issues in dispute. (3) Except where inconsistent with this Act, and subject to subsection (2), the Courts of Justice Act and the rules of court apply to pleadings and proceedings under this Act. Rules of Civil Procedure – rules 2.01, 25.05 and 48.01 2.01(1) A failure to comply with these rules is an irregularity and does not render a proceeding or a step, document or order in a proceeding a nullity, and the court, (a) may grant all necessary amendments or other relief, on such terms as are just, to secure the just determination of the real matters in dispute; or (b) only where and as necessary in the interest of justice, may set aside the proceedings or a step, document or order in the proceeding in whole or in part. … 25.05 Pleadings in an action are closed when, (a) the plaintiff has delivered a reply to every defence in the action or the time for delivery or a reply has expired; and (b) every defendant who is in default in delivering a defence in the action has been noted in default. … 48.01 After the close of pleadings, any party to an action or to a counterclaim or crossclaim in the action who is not in default under these rules or an order of the court and who is ready for trial may set the action down for trial, together with any counterclaim or crossclaim. ANALYSIS [17] Simply stated, the issue before this court is whether or not there was compliance with s. 37(1) of the CLA in the circumstances of this case. More specifically, the question is whether rule 2.01 of the Rules may apply to relieve a party from the effects of non-compliance with rule 48.01 in the context of a construction lien action. [18] For the reasons that follow, I conclude that rule 2.01 is applicable in the circumstances. [19] It is clear in this case that when the action was set down for trial, the respondent’s defence to the appellant’s counterclaim had not yet been prepared and was not in the record. Further, the appellant had not noted the respondent in default. The pleadings were therefore still open when the action was set down for trial, contrary to the requirements of rule 48.01. [20] Despite these shortcomings, the action was set down for trial on April 28, 2011, thirteen days before the “second anniversary of the commencement of the action that perfected the lien”, to use the language of s. 37(1) of the CLA. [21] The appellant argues that because the pleadings were still open when the action was set down for trial, the setting down was null and void. He further submits that rule 2.01 cannot be applied to cure this irregularity, as to do so would contravene the requirement in s. 37(1) of the CLA that an action be set down for trial within two years of the perfection of the lien. I cannot agree. [22] As noted earlier, it would have been open to counter staff to refuse to accept the record and to decline to set the matter down, but the fact remains that they did not do so. Had the respondent been notified that its statement of defence to counterclaim was missing, it could easily have drafted a pro forma defence, simply repeating the allegations in the statement of claim, and filed it. There was plenty of time to do so within the two-year deadline imposed by the CLA. [23] In my view, the important fact here is that the respondent did set the action down within the two years and the appellant knew it. There was no “non-compliance” with s. 37(1) as has been argued. The action was set down as that section requires. The fact that the record was irregular for want of a pleading was, in my view, a matter for rule 2.01. [24] Section 67(3) of the CLA expressly provides that the rules of court apply to proceedings under the CLA, except where inconsistent with the CLA. While Rule 48 governs setting a matter down for trial, this rule must be read in conjunction with the more general rule 2.01, which permits the court to grant relief where there has been an irregularity unless it would not be in the interests of justice to do so. The CLA does not address procedural matters such as how to set an action down for trial or when an irregularity in setting a matter down for trial may be cured. The Rules do address these issues, and s. 67(3) of the CLA directs that those rules are to apply unless they conflict with a specific provision of the CLA. In my view, there is no such conflict in the circumstances presented by this case. [25] Section 37(1) of the CLA sets a mandatory two-year deadline for setting construction lien actions down for trial. However, permitting the respondent to amend the trial record and file its defence to counterclaim after the action has been set down does not have the effect of extending that period. The respondent set the matter down for trial well within the two-year period, albeit “irregularly”. That irregularity is curable by use of rule 2.01. [26] Prior to the Divisional Court decision which is the subject of this appeal, other lower court decisions have considered the question of whether or not rule 2.01 may be used to cure an irregularity stemming from imperfect compliance with Rule 48. The courts below have divided on this issue. [27] Both the appellant and Matlow J., dissenting below, rely on Ravenda for the proposition that procedural irregularities in the setting down of an action for trial cannot be cured by recourse to Rule 2. In Ravenda, Quinn J. explicitly states, albeit in obiter, that Rule 2 cannot be used to cure a defective setting down for trial as, in his opinion, this would amount to an extension of the time limit imposed by s. 37 of the CLA. [28] In Ravenda, the plaintiff lien claimant, after being served with a statement of defence and counterclaim, served a reply and defence to counterclaim. The plaintiff then set the action down for trial, before the two-year deadline, but without waiting for a reply to its defence to counterclaim. The defendant argued that the setting down was a nullity because pleadings remained open for ten days after it received the defence to counterclaim, during which time it could have served its reply to the defence to counterclaim. It claimed that the two-year deadline mandated by s. 37(1) expired during those ten days, and hence the lien had expired. [29] Quinn J. found that replies were not authorized in construction lien actions. Therefore, he held that the pleadings were closed when the defence to counterclaim was served, and the matter was properly set down for trial in time. However, he stated that had he held otherwise, a defective setting down for trial would constitute a nullity that could not be cured by rules 2.01(1) or 3.02. To apply these curative provisions, he said, would amount to extending the time limit mandated by s. 37 of the CLA. The decision of Matlow J. in his dissenting opinion below follows similar reasoning. [30] Pardu J., writing for the majority, rejects that reasoning: [13] We do not agree that a trial record which does not comply with the Rules is necessarily a nullity, as suggested in Ravenda Homes Ltd. v. 1372708 Ontario Inc. [2010] O.J. No. 510, 2010 ONSC 881 (S.C.J.). … [15] With respect, we do not see that granting relief by way of an order permitting filing an amended trial record is necessarily the equivalent of extending the time limit imposed by s. 37 of the Construction Lien Act. Such a conclusion would fly in the face of rule 2.01, which specifically provides that “a failure to comply with the Rules is an irregularity and does not render a … step, document or order a nullity”. We see no manifest inconsistency between the ability to correct an irregularly filed trial record and the mandatory deadlines imposed by the Construction Lien Act. [31] I agree with the majority in the Divisional Court. For the reasons discussed above, I would also reject the conclusion in Ravenda to the effect that rule 2.01 is not available to correct a procedural irregularity in setting a matter down for trial where there may have been irregular compliance with Rule 48. [32] The appellant also relies on Pineau v. Kretschmar Inc. (2004), 37 C.L.R. (3d) 29 (Ont. C.J.), in support of his position that procedural irregularities in setting matters down for trial should not be addressed through Rule 2. In my opinion, his reliance on this case is misplaced. The appellant argues that Pineau provides a precedent for the court’s refusal to regularize a procedural irregularity in setting a matter down for trial. I do not read the case this way. Pineau was concerned with jurisdictional issues. The plaintiff in that case had moved before the Master for a fixed trial date. The court held that absent a direction from a judge pursuant to s. 58(1) of the CLA, the Master was without jurisdiction. That case was about jurisdiction, not procedural irregularities. [33] In other cases, by contrast, courts have held that rule 2.01 may relieve against failure to strictly comply with Rule 48 in construction lien actions. For example, in Beaver Engineering Ltd. v. Swedlove (1994), 111 D.L.R. (4th) 750 (Ont. Div. Ct.), the court held that rules 2.01 and 2.03 should be applied to relieve against non-compliance with Rule 48. [34] At issue in Beaver was the established practice of the Ottawa bar of placing actions on the Trial Ready List without requiring that trial records be served and filed. Actions were considered as set down for trial once they were placed on the Trial Ready List. The motion judge found that this local practice did not comply with rules 48.02(1) and 48.04(1) or with ss. 37 and 46 of the CLA. He found that he had no discretion to extend the two-year period mandated by s. 37 and declared the lien expired. [35] The Divisional Court overturned this decision, finding that in the circumstances, compliance with local practice constituted sufficient compliance with the requirements of the CLA. Furthermore, it was in the interests of justice that any non-compliance with Rule 48 be relieved pursuant to rules 2.01(1)(a) and 2.03. The court therefore concluded that the action was properly set down for trial and the liens had not expired. [36] As these reasons make clear, I agree that Rule 2 may apply to correct irregularities in setting an action down for trial in a construction lien action. However, I have one final comment. In reaching a similar conclusion, the majority of the Divisional Court relied on this court’s decision in 310 Waste Ltd. v. Casboro Industries Ltd. (2006), 83 O.R. (3d) 314, for the proposition that “imperfect compliance with the rules regarding setting a matter down for trial may be the better course when faced with a looming s. 37 deadline, implicitly leaving it open that there could be relief granted against irregularities at a later date”. [37] With respect, I do not think 310 Waste can be read as widely as the Divisional Court has suggested. 310 Waste is a very brief, seven paragraph per curiam endorsement which dealt with a very different issue. The issue before this court in that case was whether the Divisional Court had erred in failing to recognize an authority in the courts to extend the mandatory time requirements of ss. 37 and 46 of the CLA. This court found it was not necessary to decide the question in the circumstances of that case. [38] The facts were as follows: 310 Waste Ltd. and another company perfected their lien. The owner of the subject land then brought a motion to discharge the lien on the basis that the work done was not lienable. The motion judge held that it was, but the landowner appealed to the Divisional Court, which reserved its decision. While the decision remained under reserve, the lien expired because 310 Waste Ltd. had not set the action down for trial. [39] In dismissing the appeal from the order vacating the lien, this court stated: [3] The provisions of ss. 37 and 46 are mandatory. There is no indication of legislative intent that a reserve judgment on the issue of lienability would suspend the operation of these sections. [4] This action would have had to be set down for trial no matter what the result of the appeal relating to lienability. We do not find it necessary to decide whether there ever could be circumstances warranting a judicial relaxation of the mandatory expiration period in s. 37. In our view, the circumstances of this case would not warrant the exercise of such a discretion. [5] This was not a case of impossibility, either legal or practical. On the record before this court, no intervening events over which the appellants lacked control precipitated the expiration of the lien. It was possible for the appellants to attempt to comply with s. 37 by setting the action down. They failed to do so. [40] 310 Waste did not in any way concern the Rules or procedural irregularities. Unlike the present case, the plaintiff had made no attempt to set the action down for trial. The issue before the court was whether or not there might be judicial authority to extend the mandatory time requirements of ss. 37 and 46 of the CLA. The court found it unnecessary to decide that issue, saying instead that even if such a discretion existed, the circumstances of that case would not warrant the exercise of it. 310 Waste was not concerned with “imperfect” compliance with the Rules – it was simply a case where the lien claimant failed to make any effort to set the action down for trial within the two-year period prescribed by s. 37(1) of the CLA. [41] In the present case, the lien claimant took steps which it thought were sufficient to set the lien action down for trial within the time requirements of s. 37(1) of the CLA. The fact that it did so imperfectly is a matter that can be regularized by the application of rule 2.01. This does not, as the appellant claims, “effectively extend the two-year limitation” under s. 37. That deadline was met on the facts of this case when the respondent set the matter down for trial, albeit imperfectly. To hold otherwise would, in my view, be to ignore the clear language of rule 2.01: 2.01(1) A failure to comply with these rules is an irregularity and does not render a proceeding or a step, document or order in a proceeding a nullity, and the court, (a) may grant all necessary amendments or other relief, on such terms as are just, to secure the just determination of the real matters in dispute; or (b) only where and as necessary in the interest of justice, may set aside the proceeding or a step, document or order in the proceeding in whole or in part. [42] For these reasons, I would dismiss the appeal. [43] I would award costs of the appeal to the respondent fixed in the sum of $6,000, all inclusive, the figure to which the parties agreed. Released: November 24, 2014 “JMacF” “J. MacFarland J.A.” “I agree H.S. LaForme J.A.” “I agree P. Lauwers J.A.”