Tam Hampson 20/20 Design Inc. v. Kreuger-Naug, 2016 NSSC 217

SUPREME COURT OF Nova Scotia Citation: Tam Hampson 20/20 Design Inc. v. Kreuger-Naug , 2016 NSSC 217 Date: 20160816 Docket: Hfx No. 449369 Registry: Halifax Between: Tam Hampson 20/20 Design Incorporated, a body corporate Plaintiff v. Ann Marie Kreuger-Naug and Jason Gregory Naug Defendants D E C I S I O N Judge: The Honourable Justice Glen G. McDougall Heard: August 3, 2016, in Halifax, Nova Scotia Written Decision: August 16, 2016 Counsel: Matthew Conrad, for the Applicants/Defendants Niall Burke, for the Respondent/Plaintiff G.G.

McDOUGALL J: Introduction [ 1 ] On February 5, 2016, the plaintiff registered a lien against the defendants’ property. The lien was followed on March 21, 2016, by a statement of claim and certificate of lis pendens . The statement of claim was never served on the defendants. The defendants bring this motion to vacate the lien for failure to serve the statement of claim within one month, as required under s. 34(7) of the Builders’ Lien Act , RSNS 1989, c 277 (“ BLA ”).

Background [ 2 ] The defendants, Ann Marie Kreuger-Naug and Jason Naug, entered into a fixed price contract with the plaintiff, Tam Hampson 20/20 Design Incorporated, to renovate the Naugs’ property located at 3561 Leaman Street in Halifax. Tam acted as general contractor and hired subcontractors Paul Yue and Wildwood Cabinets Limited to work on the property. [ 3 ] Although the parties agree that Tam ceased work on the property in December 2015, the condition in which the residence was left is very much in dispute.

According to the plaintiff, the property was left in a good state of repair with only minor work remaining. The defendants say Tam left their home in a state of disrepair with no final permit and substantial work still to be completed. [ 4 ] Dissatisfied with the condition of their home, the Naugs did not pay Tam’s outstanding invoices. Negotiations proved ineffective, and, on February 5, 2016, Tam registered a lien against the property in the amount of $83,441.68.

Ann Marie Kreuger-Naug and Jason Naug were served with a certified copy of the claim for lien on March 3 and March 7, 2016, respectively. [ 5 ] Tam filed a statement of claim and certificate of lis pendens on March 21, 2016. The failure to serve that statement of claim within one month, as required under the BLA , is the basis for this motion by the defendants to vacate the lien.

The Builders’ Lien Act [ 6 ] The BLA governs the registration and enforcement of lien claims against properties in Nova Scotia.

Section 18 allows for the registration of a claim for lien against a property. Following completion or abandonment of a contract, contractors and subcontractors have sixty days within which to register a lien (s. 24(1)). [ 7 ] Once a lien has been registered, s. 24A of the statute requires the lien claimant to give notice of the registration to the subject property owner.

Section 24B provides, however, that a failure to comply with the notice requirement shall be treated as an irregularity and does not nullify a lien. [ 8 ]

Section 26 requires that an action be commenced to realize the claim for lien and a certificate of lis pendens be registered to prevent the expiry of a registered lien. Section 34(7) dictates that the statement of claim to realize a lien “shall be served within one month after it is filed, but the court or judge having power to try the action may extend the time for service thereof.” The statute is silent as to the circumstances in which an extension of time is appropriate. [ 9 ] Finally, s. 29(4) grants a judge the discretion to vacate the registration of a lien: 29

(4) Upon application, the court or judge having jurisdiction to try an action to realize a lien, may allow security for or payment into court of the amount of the claim, and may thereupon order that the registration of the lien be vacated or may vacate the registration upon any other proper ground and a certificate of the order may be registered. [ 10 ] The issue before me is whether to exercise that discretion. The Evidence [ 11 ] The evidence on this motion is both uncontroversial and limited.

It can be summarized as follows. [ 12 ] In January of 2016, David Hampson, the director of the plaintiff, informed Donald Wilson, the recognized agent for the plaintiff, that attempts to collect outstanding funds from the Naugs had been unsuccessful. Mr. Hampson instructed Mr. Wilson, who is a trained lawyer, to prepare and file a claim for lien in the amount of $83,441.68. Mr. Wilson retained a process server to serve each of the Naugs with notice of the lien registration. [ 13 ] The plaintiff’s lien became the third claim registered against the property in connection with the renovations.

The two prior claims were filed by subcontractors hired by Tam. Wildwood Cabinets filed a lien in the amount of $9,665 on August 12, 2015 followed by a certificate of lis pendens on September 29, 2015. Paul Yue registered a lien in the amount of $6,769.50 on October 2, 2015 and a certificate of lis pendens on November 18, 2015. [ 14 ] After registering the lien, Mr. Wilson advised Mr. Hampson to seek additional counsel to prepare and file the certificate of lis pendens and statement of claim. Mr. Hampson retained Niall Burke, counsel for the plaintiff on this motion, for this purpose. Mr.

Burke filed the documents on March 21, 2016. [ 15 ] According to Mr. Wilson’s affidavit, he received two letters from Matthew Conrad, counsel for the defendants. The first letter was dated March 3, 2016 and the second was April 12, 2016. He forwarded these letters to Mr. Hampson. Mr. Wilson states that he received the letters in his role as registered agent. His affidavit is silent as to whether he reviewed the letters or merely forwarded them. [ 16 ] The April 12, 2016, letter from Mr. Conrad to Mr.

Wilson states, in part: Further to my previous emails dated January 25, 2016 and February 18, 2016, and my fax to you dated March 3, 2016, all of which have gone unanswered, my clients continue to attempt to resolve the matters with the third parties. These parties were hired by your client, performed the work required (to the best of my clients’ knowledge) and should not be involved in this dispute with your client. It is patently unfair that your client continues to ignore our out of court requests while at the same time continuing to file court documents.

In addition to the lien documents filed by your client, it appears your client has filed a Lis Pendens on my clients’ property indicating an action has been filed. It appears from those documents that the action was filed over two weeks ago. Your client has not attempted service to our knowledge. In my clients’ view, there is no point in delaying the matters. If your client is not interested in an out of court resolution, then my clients’ preference is to get this lawsuit started. I am authorized to accept service and will agree to do so by fax or email, whichever is more convenient. [ 17 ] Mr.

Wilson received no further correspondence regarding the matter until he received the motion to vacate the lien on July 7, 2016. [ 18 ] During oral submissions, Mr. Burke addressed his understanding of the scope of his own retainer with respect to the lien action but there is no evidence properly before me on this issue. Nor does the court have the benefit of any evidence from David Hampson or any other officer or employee of the plaintiff company.

Positions of the Parties [ 19 ] The defendants submit that s. 34(7) of the BLA is clear; it requires that a statement of claim “shall” be served within a month of being filed. The language is mandatory, not permissive. In this case, the statement of claim should have been served on the defendants on or before April 21, 2016. The defendants point out that, at the time of this motion, the statement of claim had yet to be served and

there is no motion before me by the plaintiff to extend the time for service. They say that in order for the plaintiff to defeat the motion to vacate, it must provide evidence of a compelling reason for the delay in service. There is no such evidence. [ 20 ] Finally, the defendants note that a decision by this court to vacate the lien does not leave the plaintiff without a remedy.

The plaintiff’s claim will merely lose the special priority as against other lien claimants who may have abided by the strict timelines set out in the BLA . [ 21 ] The plaintiff says that the court should treat its failure to serve the statement of claim as an irregularity that does not warrant an order to vacate the lien.

It notes that there is no suggestion by the defendants that they were unaware of the lien being placed on the property, having each been served with notice of its registration. [ 22 ] The plaintiff argues that failure to serve the statement of claim within the period required by s. 34(7) should be treated in the same manner as a failure to comply with s. 24A which requires the lien claimant to notify a property holder of the registration of a lien.

Section 24B provides that “a failure to comply with s. 24A shall be treated as an irregularity and does not nullify the lien.” The plaintiff questions how a failure to serve a statement of claim within a month can be fatal to a lien claim while a failure to provide notice of the lien itself can be treated as a mere irregularity. Noting that actions under the BLA are brought and tried in this court according to the Nova Scotia Civil Procedure Rules , the plaintiff also relies on Rule 2.02, which reads: 2.02

(1) A failure to comply with these Rules is an irregularity and does not invalidate a proceeding or a step, document, or order in a proceeding.

(2) A judge may do any of the following in response to an irregularity: (

a) excuse compliance under Rule 2.03; (

b) permit an amendment or grant other relief to correct the irregularity; (

c) set aside all or part of a proceeding, step, document, or order, if it is necessary to do so in the interest of justice. [ 23 ] Despite not having filed its own motion, the plaintiff asks that I dismiss the defendants’ motion and grant the plaintiff an extension of the time for service.

Disposition [ 24 ] The court will exercise its discretion under s. 29(4) of the BLA to vacate a registered lien only where the moving party overcomes the “significant evidentiary hurdle” of demonstrating that the remedy is “clearly deserved”: WM Fares & Associates Inc v 3035605 Nova Scotia Ltd , 2006 NSCA 120 , [2006] NSJ No 435 at paras 9-10 ). [ 25 ] Although there are no decisions in Nova Scotia considering a failure to comply with s. 34(7) of the BLA , the defendants note that the Ontario Superior Court of Justice has dealt with a failure to serve a statement of claim under similar legislation.

The relevant legislation in Ontario is the Construction Lien Act , RSO 1990, c 30.

Section 53(2) states: 53(2) The statement of claim shall be served within ninety days after it is issued, but the court may, upon a motion made before or after the expiration of that period of time, extend the time for service. [ 26 ] In MGI Construction Corp v 2273865 Ontario Inc , 2015 ONSC 4716 , [2015] OJ No 3904, the plaintiff moved to validate service of the statement of claim or, alternatively, to extend the time within which to serve the statement of claim. [ 27 ] The plaintiff had registered a lien against the defendants’ property on July 4, 2013.

Although an employee of the plaintiff gave evidence that he served the claim in person on August 29, 2013, the court was not satisfied that this had occurred.

This meant the claim had not been served until March 19, 2015, when both parties agreed it had been sent to the defendants by registered and ordinary mail. [ 28 ] In considering whether to extend the time for service until March 19, 2015, Master Albert explained that the moving party must satisfy the court that a compelling reason exists for its failure to comply with the strict statutory limitation period: 15 I find that MGI has not provided a compelling reason for its failure to effect service of the statement of claim within the 90 days required by the Act or at all before March 19, 2015.

Nor has MGI provided a compelling reason for the delay from November 20, 2013 (when the time for service expired) and March 19, 2015 when the statement of claim was served, a period of 16 months. 16 The Act provides a procedural code for construction lien claims, with truncated limitation periods that are intended to expedite the resolution of lien actions.

The reason for this is that the Act bestows rights on a lien claimant that exceed the rights of an ordinary plaintiff in a civil action: the claim is secured by the property (or security posted in lieu of the property) and lien claimants enjoy priorities over other creditors. The trade-off is that lien claims are to proceed expeditiously (see

section 67 of the Act), and many of the procedures permitted in an ordinary action (i.e. as-of-right discoveries, interlocutory motions and appeals from interlocutory decisions) are not permitted, or are only permitted with leave, in a construction lien action. 17 It follows that compliance with the 90 day period within which to serve the statement of claim is required to meet the objective of the Act to achieve an expedited resolution of the claim. While the court has discretion to extend this limitation period, to exercise that discretion, compelling reasons are required.

See also: An-Dell Electric Ltd v MJ Dixon Construction Ltd , [2004] OTC 850, [2004] OJ No 4089 . [ 29 ] The decision in MGI Construction is consistent with the following comments by Duncan W. Glaholt in Conduct of a Lien

Action 2016 , (Toronto: Carswell, 2015) at p 227: The statement of claim must be served within ninety days after it is issued, subject to that period being extended before or after its expiration. Relevant factors in exercising the court’s discretion to extend the time for service are: (

a) the length of the delay and whether the limitations period has expired; (

b) the existence of a compelling reason for the delay; and (

c) prejudice to the defendant. Prejudice may be found in the fact that the owner has to post security to clear title. While it has been held that a court will refuse extending the period only on rare occasions, courts will declare a lien expired for failure to serve the statement of claim in time in the absence of any compelling reasons for the delay . [ Emphasis added ] [ 30 ] As the defendants note, MGI Construction involved a motion by the plaintiff to extend the time for service, not a motion by the defendant to vacate the lien. There is no motion before me by the plaintiff to extend the time for service.

While the plaintiff may have assumed that a decision on the defendants’ motion to vacate the lien would necessarily involve a determination as to whether an extension of time was appropriate, a separate motion under s. 34(7) of the BLA should have been filed. For the reasons that follow, however, this procedural error is of no consequence. [ 31 ] Like the Ontario Construction Lien Act , the BLA confers rights on a lien claimant in excess of the rights of an ordinary plaintiff in a civil action. These rights come with corresponding obligations, including compliance with strict statutory timelines.

While I decline to adopt the onerous “compelling reason” standard applied in Ontario – where the limitation period for service is three times longer than that provided under the BLA – common sense dictates that a plaintiff who seeks an extension of time for service of a lien action must come armed with a valid reason for the failure to effect service within the timeframe contemplated by s. 34(7) , or relief will be denied. [ 32 ] In other words, a plaintiff who asks the court to exercise its discretion to relieve it of the consequences that ordinarily flow from a failure to comply with the legislation must provide a reason capable of justifying that exercise of discretion.

This burden is not a particularly heavy one. It could be met with evidence of: (1) a failure to serve despite reasonable efforts to track down the defendant, (2) oversight or inadvertence, or (3) illness or other temporary incapacity on the part of the plaintiff or plaintiff’s counsel.

This is not meant to be an exhaustive list. [ 33 ] Although the plaintiff asked the court to consider the prejudice it will suffer if the lien is vacated, the question of whether the failure to comply with s. 34(7) was for a valid reason is a threshold question, much like the question under Civil Procedure Rule 4.04(5) of whether a plaintiff’s failure to serve a notice of action before its expiry was the result of inadvertence.

Rule 4.04(5) allows a judge to renew an expired notice of action more than fourteen months after it was filed only if one of two conditions are met: 4.04(5) A judge may renew an expired notice of action more than fourteen months after the day the notice of action is filed only if the plaintiff satisfies the judge on either of the following: (

a) reasonable efforts were made to notify the defendant of the action by effecting personal service, service could not be effected personally, and the plaintiff will make a motion for a substituted method of giving notice as soon as possible; (

b) inadvertence led to the expiry, the plaintiff will suffer serious prejudice if the proceeding is terminated, and no defendant will suffer serious prejudice that cannot be compensated in costs as a result of the delay in notification. [ 34 ] In Langdale v Register.com, Inc , 2016 NSSC 171 , [2016] NSJ No 263, Campbell J explained that under 4.04(5)(b), issues of prejudice are irrelevant unless inadvertence is established: 33 Unless the plaintiff can establish that inadvertence led to the expiry of the notice, it cannot be renewed. The issues of serious prejudice and costs do not enter into the matter.

Whether inadvertence led to the expiry is a threshold question. [ 35 ] The same reasoning applies to a motion under the BLA for an extension of time for service.

Evidence of the potential prejudice to the parties in the event that the lien is vacated, or the time for service extended, should inform the analysis, but only if the plaintiff has met the threshold of showing a valid reason for the failure to comply with s. 34(7) of the BLA . [ 36 ] The plaintiff in this case has offered no reason -- let alone a valid one -- for its failure to serve the defendants with the statement of claim within one month after it was filed. The court should not be forced to speculate on the reasons for this failure. Nor does the plaintiff engender much sympathy in light of Mr.

Conrad’s efforts to facilitate service on his clients. In the circumstances, the court has little choice but to order the lien be vacated. To do otherwise in the circumstances of this case, would divest s. 34(7) of any consequence or meaning. Conclusion [ 37 ] I allow the motion and grant an order vacating the lien. [ 38 ] The defendants seek costs in the amount of $750, consisting of $250 under the tariff and an additional $500 under s. 41(4) of the BLA : 41(4) Where a lien is discharged or vacated under

Section 29, or where in an action judgment is given in favour of or against a claim for a lien, in addition to the costs of an action, the judge may allow a reasonable amount for costs of drawing and registering the lien or for vacating the registration of the lien. [ 39 ] This amount appears to be reasonable. I award costs to the defendants in the amount of $750 plus disbursements, as agreed or taxed.

McDougall, J.