2013 NLCA 67, 2013 NLCA 67

Date: 20131127 Docket: 13/08 Citation: Metal World Inc. v. Pennecon Energy Ltd. , 2013 NLCA 67 IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR COURT OF APPEAL BETWEEN : METAL WORLD INC. APPELLANT AND : PENNECON ENERGY LTD. FIRST RESPONDENT AND : VALE NEWFOUNDLAND AND LABRADOR LIMITED SECOND RESPONDENT Coram: Green C.J.N.L., Welsh and White JJ.A. Court Appealed From: Supreme Court of Newfoundland and Labrador Trial Division (G) 201201G0799 (2013 NLTD(G) 15) Appeal Heard: June 12, 2013 and June 21, 2013 Judgment Rendered: November 27, 2013 Reasons for Judgment by Welsh J.A.

Concurred in by Green C.J.N.L. and White J.A. Counsel for the Appellant: Stephen Fitzgerald Counsel for the First Respondent: Peter O’Flaherty and Judy Manning

Counsel for the Second Respondent: No Appearance Welsh J.A.: [ 1 ] This appeal concerns the process engaged when a mechanics’ lien claim is challenged. The issues relate to the requirement for leave to appeal, affidavit evidence necessary to support a lien claim, allegations of an exaggerated claim, and the setting of a trial date to adjudicate the claim. BACKGROUND [ 2 ] Pennecon Energy Ltd., claiming it was owed money from Metal World Inc., filed a mechanics’ lien against property of Vale Newfoundland and Labrador Limited. This caused Vale to cease making payments to Metal World.

The lien was vacated when Metal World paid the amount of the lien claim, $1,850,000, into court. While the lien against Vale’s property was vacated, the claim of lien remained in effect with the money being held in court. [ 3 ] Metal World then applied for an order for dismissal of Pennecon’s lien claim together with return of the money or, in the alternative, the setting of an early trial date. The judge denied Metal World’s application for both the primary and the alternate relief. ISSUES [ 4 ] At issue in this appeal is whether the applications judge erred in:

(1) Determining that Mr. White acted for Pennecon, not as its agent;

(2) Determining that, on its face, Mr. White’s affidavit satisfied the requirements of section 17(2) of the Act;

(3) Failing to deal with the allegations that Pennecon’s claim was grossly exaggerated; and

(4) Refusing to set a trial date for adjudication of the claim. ANALYSIS Leave to Appeal [ 5 ]

Section 40 of the Mechanics’ Lien Act , RSNL 1990, c. M-3, provides for an appeal to this Court: An appeal lies from an order or decision under this Act to the Court of Appeal. [ 6 ]

Section 43 references the appropriate procedure and specifies that the Rules of the Supreme Court, 1986 apply:

(1) The object of this Act being to enforce liens at the least expense, the procedure shall be as far as possible of a

summary character, having regard to the amount and nature of the liens in question.

(2) Except where otherwise provided by this Act, interlocutory proceedings shall not be permitted without the consent of the court, and then only upon appropriate proof that those proceedings are necessary. …

(4) Unless otherwise provided in this Act, the Rules of the Supreme Court apply to proceedings under this Act. [ 7 ] This is an interlocutory appeal. Rule 57.02(1)(

a) requires leave of the Court before an interlocutory appeal will be heard. The question is whether

section 40 of the Act renders that rule inapplicable. In my view, for the following reasons, it does not. [ 8 ] In Diamond Estate v. Robbins , 2006 NLCA 1 , 253 Nfld. & P.E.I.R. 16, this Court summarized factors to be considered when there is a potential conflict between legislative provisions. While that case dealt with two competing statutes, the analysis applies equally where, as here, the issue arises within a statute and involves application of the rules of court. Mercer J.A., for the Court, referred to statutory

interpretation principles set out by the Supreme Court of Canada: [48] … Fundamental to that analysis is the remedial construction rule expressed in s. 16 of the

Interpretation Act and the modern principle enunciated by the Supreme Court of Canada: “The modern principle of statutory

interpretation requires that the words of the legislation be read ‘in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament’: … The modern approach recognizes the multifaceted nature of statutory

interpretation. Textual considerations must be read in concert with legislative intent and established legal norms.” … [49] Accordingly in the

interpretation of s-s. 11(1) of the Limitations Act it is necessary to consider the grammatical and ordinary meaning of the legislative text, the intention or purpose of the legislature, and the consequence of any proposed

interpretation. … In statutory

interpretation there is a presumptive rule of coherence, i.e., that the legislature did not intend to enact inconsistent provisions in statutes dealing with the same subject matter. “As a result, where possible, potentially conflicting legislation is interpreted so that inconsistency or conflict is avoided”. … [50] It follows that where provisions in separate statutes can apply without conflict both will apply … [ 9 ] In the instant case, the presumptive rule of coherence is engaged. The relevant provisions can be interpreted so as to avoid

inconsistency. That is, rule 57.02, requiring leave to appeal an interlocutory decision, can be applied under the Mechanics’ Lien Act without resulting in conflict. The right to an appeal to this Court under

section 40 of the Act may be delayed if leave is not granted to appeal an interlocutory decision, but the right to appeal the final decision, which may include the interlocutory decision issues, is unaffected. [ 10 ] In reaching this conclusion, I am mindful of the language in

section 40 which refers to the appeal of “an order or decision”, a phrase which may be interpreted to include an interlocutory decision. However, section 43(2) indicates the legislative intention to avoid interlocutory proceedings unless necessary. In this Court, such necessity is determined by the application of rule 57.02. [ 11 ] It follows that leave of this Court is required where an interlocutory decision under the Mechanics’ Lien Act is appealed. Factors to be considered in determining whether leave should be granted are set out in rule 57.02(4). In the instant case, the following factors set out in the rule are engaged: … (

b) the Court doubts the correctness of the order in question, (

c) the Court considers that the appeal involves matters of such importance that leave to appeal should be granted, (

d) the Court considers that the nature of the issue is such that any appeal on that issue following final judgment would be of no practical effect; … [ 12 ] On the basis of these factors, considered together, I would grant leave to appeal. The Appeal The Affidavit [ 13 ] Pursuant to section 17(1) of the Mechanics’ Lien Act , a claim for a lien in respect of a “sum claimed as due” may be registered in the registry of deeds.

Section 17(2) imposes the requirement for a supporting affidavit: The claim shall be verified in duplicate by the affidavit of the person claiming the lien, or of his or her agent or assignee who has a personal knowledge of the matters required to be verified, and the affidavit of the agent or assignee shall state that he or she has that knowledge. [ 14 ] Section 3(2) of the Mechanics’ Liens Forms Regulations , CNLR 783/96 , specifies that an affidavit under section 17(2) “shall be in Form 4”.

Form 4 provides, in relevant parts: I, [lien claimant or agent], named in the above (or annexed) claim, swear (or affirm) that the claim is true … . … (Where the affidavit is made by an agent or assignee, a clause must be added to the following effect: I have full knowledge of the facts set forth in the above (or annexed) claim.) [ 15 ] Pennecon provided two affidavits from Jerry White.

The first contains only one paragraph which states: That I am the Chief Financial Officer of Pennecon Energy Ltd. and have full knowledge of the facts set forth in the Claim attached hereto and that the said Claim is true to the best of my knowledge, information and belief. In a subsequent two-paragraph affidavit, Mr. White states: 1. That I, Jerry White, was a director of Pennecon Energy Ltd. on December 6, 2011; 2.

That I continue to be a director of Pennecon Energy Ltd. [ 16 ] The claim of lien, signed by the solicitor for Pennecon, sets out the names and addresses of the relevant parties, specifies the property against which the lien is registered, and states: 1. The amount claimed as due is one million eight hundred forty-three thousand three hundred sixty-four dollars ($1,843,364.00), plus interest at a rate of 2% per month. … 5.

The labour, materials and equipment were supplied to the parties identified as the Owner and Contractor [Metal World] for the purposes of addressing issues raised in a Non Conformance Report which required work to be performed on steel relating to the Process Buildings contract performed by the Lien Claimant in Long Harbour, Newfoundland and Labrador. The last day that the said work was performed was November 10, 2011. [ 17 ] The applications judge found that Mr. White’s affidavits satisfied the requirements of section 17(2) of the Act (2013 NLTD(G) 15): [32] Mr.

White is a Director of [Pennecon] and signed his affidavit as its Chief Financial Officer. Under the circumstances I am satisfied that Mr. White signed his affidavit as [Pennecon], the person claiming the lien, and not as an agent or assignee of [Pennecon]. As such, it was not necessary for him to expressly state that he had personal knowledge of the claim within the meaning of subsection

17(2) of the Act. (Emphasis added.) Was the affidavit that of Pennecon or its agent? [18] Metal World appealed the applications judge’s decision that Mr. White was not signing his affidavit as Pennecon’s agent, but asthe person claiming the lien. It is unnecessary to decide this issue for purposes of the appeal. Mr. White’s affidavit uses the additionallanguage that applies when the affiant is an agent as opposed to the lien claimant. That is, Mr.

White swears not only that the claim istrue (the language applicable where the affidavit is endorsed by the lien claimant), but also, that he has full knowledge of the facts setforth in the claim (the additional information required for an agent’s affidavit). [19] Accordingly, even if, as Metal World submits, Mr. White signed as Pennecon’s agent, the affidavit contained the necessarylanguage. There is, however, a further related issue; that is, the effect, if any, of the phrase, “to the best of my knowledge, informationand belief”, which is not included in the form, but was added in Mr. White’s affidavit.

Use of “to the best of my knowledge, information and belief” in the affidavit [20] Before addressing that issue, some comment on the

interpretation of section 17(2) of the Act and Form 4 is apposite. First, on aplain reading of section 17(2), it is clear from the punctuation that references to requiring an affiant to have personal knowledge of thematters to be verified and a statement to that effect in the affidavit apply only where it is the affidavit of an agent or assignee. Thelegislation presumes that the lien claimant has the requisite knowledge to verify the claim. The purpose of the additional clauses is toensure that, in verifying the claim, the agent or assignee has the necessary knowledge.

In addition to a plain reading of the provision, thisinterpretation is supported by a legislative amendment that was made to the punctuation. The earlier version stated that, “The claim …shall be verified by the affidavit of the claimant, or of his agent or assignee, having full knowledge of the matters required to be verified,…”. The current version removes the comma after “assignee” with the result that the subsequent clause applies only to the agent orassignee. [21] Second, there is a difference in language between the Act and the form.

The Act uses the phrase “personal knowledge” whilethe form uses “full knowledge”. It would be desirable to have the language of the form mirror that of the Act. However, applyingprinciples of statutory

interpretation, it must be assumed that the two terms are synonymous in this context and that a person swearingthat he has full knowledge means that he has personal knowledge of the matters required to be verified. Mr. White’s affidavit uses thelanguage of the form, full knowledge, as mandated by the regulations. [22] Finally, section 17(2) of the Act states that the claim “shall be verified” by affidavit. Form 4, mandated by the regulations,requires the affiant to state that “the claim is true”.

Reading these together, the conclusion follows that “verified” means verification ofthe claim as true. [23] In this case, Mr. White, having stated that he had full knowledge of the facts, did not swear simply that “the claim is true”. Rather, he swore that it “is true to the best of my knowledge, information and belief”. There is no reference in either the Act or the formto the phrase, “to the best of my knowledge, information and belief”.

The question, then, is whether the addition of those words in Mr.White’s affidavit affects or changes the meaning of his statement that “the said Claim is true”. [24] Ordinarily, the phrase, “to the best of my knowledge, information and belief”, is used where the affiant may be lacking direct orcomplete knowledge and, therefore, cannot attest unequivocally to the contents of the affidavit. (See, for example, Seaward SeafoodsCo. v. Resource Developers Ltd. (1988), (NL SC), 70 Nfld. & P.E.I.R. 242 (NLTD), at paragraphs 9 to 11.) In theinstant case, Mr.

White swore that he had full knowledge of the facts underpinning the claim. Accordingly, the additional words, “to thebest of my knowledge, information and belief”, may be characterized as superfluous. That is, assuming Mr. White had, as he attested,full knowledge regarding the claim and was verifying it as true on that basis, I would, in the circumstances, accept the affidavit, on itsface, as adequate to satisfy section 17(2) of the Act. That said, I would caution that, in an affidavit under this section, reference to “to thebest of my knowledge, information and belief” is to be avoided.

That language serves no valid purpose, and it is inconsistent with bestpractice to include it in an affidavit of either a lien claimant or an agent. [25] The conclusion follows that the affidavit was, on its face, adequate to satisfy the requirements of the Act. It is necessary, then,to proceed to Metal World’s challenge to the claim for lien on other grounds. Exaggeration of the Lien Claim [26] Metal World submits that the applications judge erred by refusing to vacate the lien on the basis that Mr. White’s affidavit didnot comply with the procedural or substantive requirements of the Act.

Regarding the latter, Metal World, based on its affidavit, allegesthat Mr. White’s affidavit did not meet the requirement that the claim be verified as true because Pennecon’s claim was grosslyexaggerated, causing serious prejudice to Metal World. Assessment of this submission requires consideration of the manner in which thehearing proceeded, together with procedural decisions made by the judge. [27] Section 26(2) of the Act provides authority for the registration of a lien to be vacated: Upon application, the court may (

a) allow security for or payment into court of the amount of the claim … and order that the registration of the claim for lien and theregistration of the certificate of action be vacated; (

b) upon another appropriate ground, order that the registration of the claim for lien and the registration of the certificate of action be

vacated; or (

c) upon appropriate grounds, dismiss the action. [28] In an application to vacate a lien claim, section 36(9) of the Act authorizes a party to seek directions as to relevant matters,including cross-examination of a lien claimant or agent: A party to an action under this Act or another interested person may apply to the court for directions as to pleadings, production or othermatters relating to the action, including the cross-examination of a lien claimant or his or her agent or assignee on his or her affidavitverifying the claim. [29] Accordingly, an affidavit which, on its face, satisfies the requirements of section 17(2) of the Act, may, nonetheless, bechallenged, and may form the basis for vacating the lien claim.

In this case, Metal World filed an affidavit in response to Pennecon’sand sought to cross-examine Mr.White on his affidavit. [30] Metal World’s affidavit was sworn by Ivan Butler, president and chief executive officer of Metal World. His affidavit containsspecific information alleging significant problems with Pennecon’s invoicing of work that the company did for Metal World. Mr.

Butlerstates in his affidavit that he and his staff spent “hundreds of hours to analyze [Pennecon’s] documentation” (paragraph 33), and that, inNovember 2011, Metal World advised Pennecon in writing that it had serious issues regarding invoices and wanted to review these priorto making payments. Pennecon rejected the proposed suspension of payments and registered the claim for lien. Mr. Butler’s affidavitalleges patterns of irregularity in Pennecon’s invoicing: 12. My investigation of the invoicing received from [Pennecon] firstly revealed the following types of patterns of invoice irregularity: (

a) Anomalous and inconsistent equipment charges; (

b) Gross overcharges for simple, small tasks; (

c) Charges for work indicating chronological impossibility; (

d) Inconsistent charges for identical types of work; and, (

e) No correlation between equipment rentals and labour time consumed. The affidavit goes on to provide detailed examples of the above allegations. The examples indicate irregularities and anomalies that, ifcorrect, would significantly reduce the amount owed by Metal World to Pennecon. Pennecon did not respond to Mr. Butler’s affidavit. [31] The minimal information in Pennecon’s affidavit stands in contrast to the detailed affidavit provided by Metal World. Pennecon has, for example, not indicated the basis on which the amount of $1,843,364 was determined.

The opportunity for MetalWorld to cross-examine on the affidavit could have, for example, shed light on Mr. White’s foundation for stating that he had “fullknowledge” and why he used the language “to the best of my knowledge, information and belief”. Questions could have been put to Mr.White to elicit his response to Metal World’s allegations regarding the reliability of Pennecon’s invoicing system. [32] Nonetheless, the applications judge dismissed Metal World’s request to cross-examine Mr. White: [48] Turning now to [Metal World’s] alternate prayer for relief, that I order the cross-examination of Mr.

White pursuant tosubsection 36(9) of the Act. While [Pennecon] did not seriously challenge this request I am not prepared to grant an order to this effectat the present time. There is no evidence before me to suggest that [Pennecon] will not provide Mr. White for discovery when requestedto do so. While [Pennecon] expressed a preference to first discover the principal of [Metal World], Mr. Butler, (and this has occurred)there is nothing to suggest that an Order is necessary to ensure [Pennecon’s] compliance. … [33] In refusing Metal World’s request to cross-examine Mr.

White on his affidavit, the applications judge based his decision on theassumption that the appropriate procedure was to undertake discoveries in preparation for a trial of the action. He directed his attentionsimply to Mr. White’s participation in that process. [34] In assessing this approach, I begin with a consideration of the object of mechanics’ lien legislation. Section 43(1) of the Actprovides: The object of this Act being to enforce liens at the least expense, the procedure shall be as far as possible of a

summary character, havingregard to the amount and nature of the liens in question. [35] This objective must be considered in light of the rationale underlying the statutory right to register a lien claim. In NorthernElectric Company Limited v. The Manufacturers Life Insurance Company, (SCC), [1977] 2 S.C.R. 762, at page 773,Laskin C.J.C., for the majority, noted parenthetically that the object of mechanics’ lien legislation is “to offer protection to persons doingwork or providing services or furnishing materials in respect of any building or improvement”. However, in Noranda Exploration Co.Ltd. v.

Sigurdson, (SCC), [1976] 1 S.C.R. 296, Spence J., for the majority, included potential prejudice to the personagainst whom the lien is registered, and accepted that “the mechanics’ lien statutes enacted in the various provinces of Canada havealways contained this protection of the owner as well as protection of the labourer and material-men” (page 302).

It is for this reasonthat, to obtain the benefit provided by the Act, the claimant is required to verify the claim as true. [36] Pennecon submits that the question of prejudice is addressed in section 19(1) of the Act and is not a factor to be consideredunless there is non-compliance with the provisions specified in that section.

Section 19(1) provides: Substantial compliance with sections 17, 18 and 30 is sufficient, and a claim for lien is not invalidated because of failure to comply withthe requirements of those sections unless, in the opinion of the judge, the owner, contractor or subcontractor, mortgagee or other person

is prejudiced by that claim, and then only to the extent to which he or she is prejudiced. [37] A review of sections 17, 18 and 30 of the Act leads to the conclusion that section 19(1) is directed to prejudice that may arise inthe particular context of strict compliance with the procedural aspects of registering a lien.

Section 17 sets out the facts to be specified ina lien claim and the requirement for a verifying affidavit;

section 18 provides for a lien claim against multiple properties or persons; andsection 30 sets out the particular procedure for enforcing a lien claim through the Trial Division. [38] Clearly,

section 19 is concerned with ensuring that, subject to prejudice to another person, failure to comply strictly with theprocedural requirements of the Act will not defeat a lien claim. However, applying the Noranda Exploration decision, this does not leadto the conclusion that prejudice cannot be considered in other contexts. [39] An example is found in a case such as this appeal.

Where Pennecon’s affidavit is, on its face, compliant with the requirementsof the Act, but is challenged by an affidavit submitted by Metal World, further information from Pennecon, either by an affidavit inresponse or by cross-examination of Mr. White, is reasonably necessary to avoid potential prejudice to Metal World arising from what isalleged to be a significantly exaggerated and substantial claim. [40] Exaggeration of a lien claim may result in the claim being vacated due to prejudice to the party against whom the claim ismade.

Such a remedy is consistent with the nature of the right to register a lien claim which results in one party encumbering another’sproperty before validity of the claim has been judicially determined (Balasingham v. Dolphin Steel Systems Inc., 2008 NBQB 100, 334N.B.R. (2d) 71, at paragraph 12). In Balasingham, Baird J. explained: [11] It is the finding of the court that the claim for Lien should be vacated forthwith for the following reasons:

i) The affidavit supporting the filing of the lien grossly exaggerated the value of materials supplied to the site. The claim and theaffidavit in support of the lien are not accurate. The value of materials supplied to the property was below the amount claimed in the lienas evidenced by paragraphs 19 and 20 of the Applicant’s affidavit. The Applicant states and the court accepts his affidavit evidence, thathe did not approve a steel beam construction, nor did he receive copies of invoices from Dolphin Steel Systems Inc. prior to the lienhaving been filed.

The court notes that despite a request for details confirming the lien amount as evidenced in Exhibit M, attached tothe Applicant’s affidavit, the Respondent failed to provide the documentation; ii) The value of product delivered to the property was $8,928.15, about 15% of the value of the lien claimed. … More importantly, theRespondent is claiming a lien for steel that had not been installed or used in the building. … [15] It is clear in both types of applications [for

summary judgment or to vacate a lien] the affidavit evidence must be clear,unequivocal, and accurate. [16] The court agrees that defective, false, misleading or incomplete affidavits will invalidate a claim and will lead to dismissal. [17] As counsel for the Applicant pointed out, the Respondent has a right to pursue his claim by proceeding with an action. That rightwill not be affected by this order.

If there are facts in dispute, which both counsel have acknowledged there are, that evidence and thosefacts can be more properly decided at a hearing. [18] The court accepts the Applicant’s submission that the Respondent’s affidavit contained misleading or false statements of fact. The court finds that the affidavit is defective. It is the affidavit which forms the foundation of the lien. [41] A similar result obtained in Steininger v. Woodland Home & Building Products, 2003 SKQB 464, [2003] Sask.

R. 245, inwhich Barclay J. vacated the liens on the basis that the amounts claimed were “grossly inaccurate” or “based on estimation only”(paragraph 18). In addition, he noted: [8] The deponent did not identify her relationship with Woodland or as to what steps she took to become informed or how it is thatshe was able to swear an affidavit as to the alleged amounts owing. [42] In Kleenaire Equipment Ltd. v.

Dennis Commercial Properties Ltd., (ON SC), [1970] 3 O.R. 776 (Ont.H.Ct.J.), Osler J. commented: [5] … In my view, one of the purposes of permitting cross-examination on an affidavit of a lien claimant, as was provided for thefirst time by s. 38(10) of the 1968-69 statute, must have been to give the party resisting the claim an opportunity to demonstrate thatnotwithstanding the apparently timely filing of a claim, the actual facts demonstrated clearly that it was out of time or, perhaps, that itwas for an inflated amount. … [43] In the instant case, the details in Mr.

Butler’s affidavit, with no affidavit in response by Pennecon, challenged the validity of thelien particularly as to the amount claimed which, according to Metal World, was grossly exaggerated. While on its face Mr. White’saffidavit complied with section 17(2) of the Act, cross-examination would have provided an opportunity for the Court to consider thevalidity of Metal World’s allegations and for Mr. White to explain the manner in which the amount of the lien claim was determined byPennecon.

It was open to the applications judge to restrict the scope of the cross-examination if necessary to prevent the applicationturning into a trial of Pennecon’s claim against Metal World. To permit cross-examination of Mr.

White would have been consistentwith the object of the Act which is to provide an expeditious, cost-effective procedure for registering or, in appropriate circumstances,vacating a claim for lien, having regard to the amount of the lien which, in the instant case, was substantial. [44] However, the applications judge concluded that Metal World’s allegations, that Pennecon’s lien claim was grossly exaggerated,must be determined by means of discovery and trial procedures.

This conclusion failed to give effect to the object of the Act to providean expeditious procedure for determining whether the lien claim should be vacated. Rather than dealing with the challenge to the lien

claim separately, the judge treated the lien as a component of the adjudication of the sum claimed as due. [ 45 ] The appropriate remedy consequent upon this error by the applications judge is an order that the matter be returned to the Trial Division to permit cross-examination on Mr. White’s affidavit in the context of an application under section 26(2)(b). This would allow the judge to assess Pennecon’s affidavit and Metal World’s allegation that the claim cannot be verified as true because it is grossly exaggerated.

On the other hand, because the affidavits have not been tested, this Court is not in a position to order, as requested by Metal World, that the lien claim be vacated. While Pennecon did not file an affidavit in response to Mr. Butler’s affidavit, the applications judge indicated that Pennecon was, in fact, not objecting to the cross-examination requested by Metal World. The fact that Metal World’s evidence was uncontradicted flows from the applications judge’s decision to refuse the opportunity for cross-examination. In the circumstances, it cannot be assumed, without testing Mr.

White’s affidavit, that Metal World’s allegation would have been accepted by the applications judge. Setting a Trial Date [ 46 ] Metal World also sought an early trial date should the application be unsuccessful in having the money that was paid into court returned. This was refused by the applications judge: [49] Finally, with regard to a trial date I was advised by both parties that at this juncture a trial would be estimated to take two to three weeks. In my view, however, it would be premature to set a trial date at this stage in the proceedings.

Discoveries are not yet complete and the parties have not yet had an opportunity to attempt to resolve noncontentious issues so as to possibly reduce the length of the trial. If it transpires that either party is being dilatory in that process the opposing party can seek the appropriate relief at that time. [ 47 ] Section 36(1) of the Act provides: After (

a) the delivery of the statement of defence, where the plaintiff’s claim is disputed, and upon 4 days’ notice to the other party, either party may apply; or (

b) the time for delivery of defence in a case not referred to in paragraph (a), either party may apply unilaterally to a judge to fix a day for the trial, and the judge shall appoint the time and place of the trial , and the order, signed by the judge, shall form part of the record of the proceedings. (Emphasis added.) [ 48 ] Metal World submits that the judge is required by section 36(1) to set a trial date, and that this position is consistent with the meaning of “shall” as defined in section 11(2) of the

Interpretation Act , RSNL 1990, c. I-19: The word “shall” shall be construed as imperative and the word “may” as permissive and empowering. [ 49 ] In Ruth Sullivan, Sullivan on the Construction of Statutes , 5 th edition (Markham, ON: Lexis Nexis, 2008), at pages 74 to 79, the author discusses the word “shall” as either directory or mandatory. The difference between the two relates to the consequences or effect of non-compliance.

However, as noted by Sullivan at page 75, “shall” is always imperative or binding: If breaching an obligation or requirement imposed by “shall” entails a nullity, the provision is said to be mandatory; if the breach can be fixed or disregarded, the provision is said to be directory. The term “directory” is unfortunate in so far as it implies that “shall” is sometimes not imperative, that it sometimes has the force of a mere suggestion. The confusion is compounded when “mandatory” and “imperative” are used interchangeably – that is, when “mandatory” is used to indicate that a provision is binding or “imperative”.

These are distinct concepts. “Shall” and “must” are always imperative (binding); neither ever confers discretion. But they may or may not be mandatory; that is, breach of a binding obligation or requirement may or may not lead to nullity. … [ 50 ] It is in limited circumstances that legislation makes the setting of a trial date imperative. In those cases, the objective is to signal to the parties and the courts that the matter is to be dealt with as expeditiously as possible. [ 51 ] As discussed above, this requirement underpins applications under the Mechanics’ Lien Act .

However, clearly, the failure of a judge to set a trial date will not result in a nullity. The provision must, therefore, be considered to be “directory”. It remains imperative in the sense that the judge to whom the application is made is required to assess the nature of the application and to order procedures consistent with the objective of the Act. [ 52 ] That said, the requirement to set a trial date must be read in conjunction with the remainder of

section 36. Subsection (4) provides: The court shall (

a) try the action, including set-off and counterclaim, and all questions that arise or that are necessary to be tried in order to completely dispose of the action and to adjust the rights and liabilities of the persons appearing before it or upon whom notice of trial has been served; (

b) take all accounts, make all inquiries, give all directions and do all other things necessary to finally dispose of the action and of all

matters, questions and accounts arising before or at the trial, and to adjust the rights and liabilities of and give all necessary relief to all parties to the action and all persons who have been served with the notice of trial; and (

c) embody the results of the trial in a judgment, which judgment may direct payment immediately by the person primarily liable to pay the amount of the claims and costs as ascertained by the judgment, and execution may be issued immediately. …

(9) A party to an action under this Act or another interested person may apply to the court for directions as to pleadings, production or other matters relating to the action, including the cross-examination of a lien claimant or his or her agent or assignee on his or her affidavit verifying the claim. … [ 53 ] In Seabord Construction Limited v. Central Realties Limited (1978), 14 Nfld. & P.E.I.R. 135 (NLCA) , Gushue J.A., for the Court, at paragraph 12, referenced the use of “shall” in

section 38 of the Act (now

section 36), including that “the judge shall fix a time and place of trial” (italics in original). However, this reference was used for the purpose of providing examples of the use of “shall” which Gushue J.A. described as “clear that they are mandatory provisions which must be followed by the lien claimant and by the trial judge” (paragraph 13). [ 54 ] Since the decision in Seabord , the courts have adopted a more nuanced understanding of “shall”, providing for

interpretation of the word as mandatory or directory. Further to this, it should be noted that the requirement to set a date pursuant to

section 36 of the Act and the decision in Seabord Construction predate the adoption of procedures such as discoveries and the certificate of readiness which are intended to improve the efficient operation of the court for the benefit of litigants. Court dates are no longer assigned until the matter is ready to proceed.

Nonetheless, as noted above, where an application is made under section 36(1), it is incumbent on the judge to make any orders necessary and appropriate to ensure that the matter is dealt with expeditiously. [ 55 ] In the instant case, Metal World submits that the matter is straightforward involving only two parties and being a claim for collection of an alleged debt. These factors would influence an assessment by a judge in determining an expeditious procedure to ensure that a trial, if necessary, is held at the earliest date.

Of additional concern in this case is the effect on Metal World where a substantial sum is held in court pending resolution of Pennecon’s claim. As set out above, the lien not having been vacated on the basis that the claim is grossly exaggerated, the court is obliged to act so as to limit delay in having Pennecon’s claim adjudicated.

SUMMARY AND DISPOSITION [ 56 ] The affidavit was, on its face, adequate to satisfy the requirements of the Act.

However, Metal World’s allegation that the lien claim should be vacated on the basis that the claim cannot be verified as true because it was grossly exaggerated was not dealt with in a manner consistent with the objective of the Mechanics’ Lien Act . [ 57 ] The requirement in the Act that the applications judge “shall” set a trial date, while imperative, is directory in nature and must be applied in the context of current procedures with the objective of ensuring an efficient and cost-effective process consistent with the purpose of the Act. [ 58 ] In the result, I would grant leave to appeal and allow the appeal based on the applications judge’s failure to deal with Metal World’s request to have the lien claim vacated on the basis that the claim, being grossly exaggerated, could not be verified as true. [ 59 ] The appropriate remedy is an order that the matter be returned to the Trial Division to permit cross-examination on Mr.

White’s affidavit. That remedy was not sought and, in fact, was rejected as a viable option by Metal World, which was seeking an order vacating the lien claim, a remedy which is not available. Alternatively, Metal World requested that this Court order that the Trial Division fix a date for a trial of the claim.

While this remedy is not available as stated, as discussed above, the court is obliged to act so as to limit delay and to make such orders as are appropriate to ensure that the matter is dealt with expeditiously. [ 60 ] Accordingly, I would order that the matter be returned to the Trial Division to permit cross-examination on Mr. White’s affidavit. Whether Metal World elects to pursue this remedy is a matter within its control.

Alternatively, I would order that the matter be returned to the Trial Division to permit a judge of that Court to make such orders as are appropriate to ensure that the matter is dealt with in a manner consistent with the objects of the Act. I would order that Metal World have its party and party costs in this Court and in the Trial Division. ____________________________________ B. G. Welsh J.A. I Concur: _______________________________ J. D. Green C.J.N.L. I Concur: _______________________________ C. W. White J.A.