) ) 984499 ONTARIO INC. operating as EKARTE GENERAL CONTRACTING Plaintiff – v. –, 2013 ONSC 4500

CITATION : 984499 Ont. Inc. v. 1159337 Ont. Inc. et al., 2013 ONSC 4500 COURT FILE NO.: 26048/12 DATE:2013-07-02 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: ) ) 984499 ONTARIO INC. operating as EKARTE GENERAL CONTRACTING Plaintiff – and – 1159337 ONTARIO LTD. and GARY ULIAS & ASSOCIATES INC. carrying on business as GUPM CONSTRUCTION MANAGERS Defendants ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Brendan D. Bowles as agent for M. Carter, Counsel for the Plaintiff Christine A. Powell, Counsel for the Defendants ) ) ) HEARD: June 6, 2013 WHALEN, j.

REASONS ON MOTION [ 1 ] The plaintiff is a general contractor that provided materials and services for a hotel renovation project in Sault Ste. Marie. The defendant numbered company is the owner of the lands and building on which the project was conducted and the defendant Gary Ulias & Associates Inc. is the owner’s personal representative and construction manager on the project. [ 2 ] When the plaintiff was not paid for invoices it had submitted, it registered a Construction Lien Claim on November 16, 2012 for the amount of $257,494.24.

By my order of December 21, 2012 the Lien was vacated from title when 11593337 Ontario Ltd. paid $357,494.24 into court as security (the amount required by the Act and Rules). [ 3 ] To preserve the lien, the plaintiff must “perfect” it by commencing an action to enforce within a defined 45-day period: Construction Lien Act , R.S.O. 1990, c. C.30, ss. 31 , 34 and 36 . (“the Act ”) [ 4 ] S. 36 of the Act provides: What liens may be perfected 36.

(1) A lien may not be perfected unless it is preserved. R.S.O. 1990, c. C.30, s. 36(1) .

Expiry of preserved lien

(2) A lien that has been preserved expires unless it is perfected prior to the end of the forty-five-day period next following the last day, under

section 31, on which the lien could have been preserved. R.S.O. 1990, R.S.O. 1990, c. C.30, s. 36(2) . How lien perfected

(3) A lien claimant perfects the lien claimant’s preserved lien, (

a) where the lien attaches to the premises, when the lien claimant commences an action to enforce the lien and, except where an order to vacate the registration of the lien is made, the lien claimant registers a certificate of action in the prescribed form on the title of the premises; or (

b) where the lien does not attach to the premises, when the lien claimant commences an action to enforce the lien. R.S.O. 1990, c. C.30, s. 36 (3) . (emphasis added) [ 5 ]

Section 50 of the Act further provides: Lien claim enforceable in action 50.

(1) A lien claim is enforceable in an action in the Superior Court of Justice in accordance with the procedure set out in this Part. R.S.O. 1990, c. C.30, s. 50 (1) ; 2006, c. 19 , Sched. C, s. 1 (1). Trust claim and lien claim not to be joined

(2) A trust claim shall not be joined with a lien claim but may be brought in any court of competent jurisdiction. R.S.O. 1990, c. C.30, s. 50 (2) . [ 6 ] There is no dispute with the procedural aspects of the lien registration, payment into court and resulting vacating of the lien. The question is whether an ensuing Statement of Claim is sufficient to effectively perfect and therefore preserve the lien.

If it is, there is no dispute that it was filed within the 45-day limit. [ 7 ] On December 21, 2012, the same day the vacating order issued, the plaintiff issued a Statement of Claim that was properly served on the defendants. The Statement of Claim was not styled “In the matter of the Construction Lien Act…”, as is usual. The prayer for relief sought: (

a) damages “arising from breach of contract currently estimated in the sum of $257,494.24”; (

b) alternatively compensation in the same amount on the basis of quantum meruit ; (

c) in the further alternative compensation and/or restitution in the same amount for unjust enrichment; (

d) prejudgment interest; (

e) costs, and; (

f) HST as applicable. [ 8 ] The Statement of Claim then went on to describe the parties, the project, the work done, invoicing and the alleged failure to pay some invoices. Paragraphs 19 and 20 asserted the right to compensation on the basis of unjust enrichment and quantum meruit , then paragraph 21 stated: 21. The Plaintiff puts the Defendant 1159337 Ontario Ltd. on notice that it has not been paid and pleads that it is entitled to the protection of and reliance upon the trust provisions of the Construction Lien Act of Ontario. [ 9 ] An “Information for Court Use” form was issued and served along with the Statement of Claim. Rule 14.03(4.1) prescribes

and mandates this one-page form, which is to be filed at the same time. The form described the nature of the proceeding as an “action”(as opposed to an application or class action); indicated that it was not a simplified proceeding pursuant to Rule 76, and; stated that it wasa “Construction lien”. In so stating, the form asked the claimant to “Select the one item that best describes the nature of the main claimin the proceeding.” The underlining is part of the form. The form offers 24 options with a tick-box beside each. In this case, only the“Construction Lien” option was checked.

Other options available included “Construction Law (other than construction lien)”, “ContractLaw”, and “Trusts, fiduciary duty”. [10] The parties agree that the law requires a generous and liberal

interpretation of the lien claimant’s form of pleading. SeeClarkson Co. v. Ace Lumber, (SCC), 1963 CarswellOnt 28 (S.C.C.); C.M. & D. Drilling & Tunnelling Inc. v. McNallyConstruction Inc., 2008 CarswellOnt 1261 (S.C.J.); 1610898 Ontario Inc. v. Dinardo, 2006 CarswellOnt 1495 (S.C.J.). [11] The defendants’ position is that the lien was not preserved because it was not perfected by commencing an action to enforcethe lien against the amount paid into court. The prayer for relief in the Statement of Claim did not claim enforcement of the lien andenforcement was not mentioned anywhere else in the document.

Nor did it mention the lien claim registered on title, the vacating order,the monies paid into court or perfection of the lien. The only mention of the Construction Lien Act in the entire pleading was inparagraph 21 where the plaintiff gave “notice that it has not been paid and pleads that it is entitled to the protection of and reliance uponthe trust provisions of the Construction Lien Act of Ontario”. [12] The defendants submitted that the plaintiff in fact “clearly and specifically” claimed its remedy under the trust provisions ofthe Act.

Section 50(2) of the Act specifically prohibits the joining of a trust claim with a claim to enforce a lien. The defendants arguedthat the plaintiff had elected to pursue a trust claim and was therefore foreclosed from enforcing the lien, which it had not claimed in anyevent. Therefore, the registered lien had not been preserved by the necessary perfection process, with the result that the monies in courtshould be returned and the claim for lien discharged: See Salter Farrow Pilon Architects Inc. v. Thunder Bay Regional Hospital, [2006]O.J.

No. 4715 (SCJ) at para. 86. [13] Defendants’ counsel further submitted that the Statement of Claim could not be ignored when interpreting the pleading or theplaintiff’s intent. The meaning and intention of the pleading must be found within the document itself. While a generous and liberalreading of the Statement of Claim was appropriate in order to determine the claimant’s intent, the entire document must be interpretedeven-handedly, as a whole, and not selectively.

Specifically, a narrow reading of paragraph 21 should not be taken in order to minimizethe reference to a trust claim, while interpreting the rest of the document broadly to find that enforcement of the lien was intended. Thedefendants observed that plaintiff’s failure to make any mention of the lien was ultimately fatal. [14] Plaintiff’s counsel admitted the extreme inadequacies of the Statement of Claim as an effective pleading, but emphasized thecontextual importance of the Information for Court Use form, pointing out that it was mandatory and very pointed. It was not anafterthought.

Noting the sole characterization of the action as a construction lien among all the other possible choices in the form, hesubmitted that “the only rational conclusion was that the action was one to enforce a lien”. [15] While acknowledging the reference to a construction lien trust claim in paragraph 21 of the Statement of Claim, plaintiff’scounsel suggested that that paragraph was itself seriously deficient in pleading because it was ambiguous.

The court was directed toconstruction lien precedents, where the shortcomings in the Statement of Claim before the court were apparent both in respect of a claimto enforce the lien and a trust claim: See Duncan Glaholt, “Construction Claims”, Bullen & Leake & Jacob’s, Canadian Precedents ofPleadings (Toronto: Carswell, 2090), precedents 9 and 12. [16] The issue before the court is a very narrow one. It is a difficult question, however, because of the glaring deficiencies in theStatement of Claim from whatever perspective, lien enforcement or trust remedy.

While it is a pleading, I conclude that it is seriouslyincomplete and lacking in respect of either remedy. [17] I agree that I must take the Information for Court Use form as part of the pleading process. That form is not withoutsignificance because it focuses the pleading party on the nature of the proceeding, which in turn narrows the types of remedies that mightbe available. If the plaintiff was asserting a trust remedy, why did it not select one of the other options on the form, such as trusts orconstruction (other than a construction lien)?

Also, I conclude that I must have regard for both the Information of Use form and theStatement of Claim in the context of what had already occurred as a matter of record, namely the filing and registration of a Claim forLien followed by a payment into court and a vacating order. This was a relatively new court file and not very large or complex. [18] There is no doubt that paragraph 21 of the Statement of Claim muddied the water. Yet I agree that it did not clearly assert atrust. There was no statement or declaration that a trust existed or its source of funding.

The only payments indicated in the Statement ofClaim were those allegedly due to the plaintiff as a result of invoices submitted and not paid. In effect, paragraph 21 stated theplaintiff’s awareness of Construction Lien Act trust provisions and gave notice of entitlement to the protection of those provisionswithout clearly asserting the nature or basis for such a claim. If the plaintiff attempted to claim a trust in the course of an enforcementtrial, it would have been denied because it had elected the other remedy.

If it had clearly claimed both remedies in the Statement ofClaim, it would have been put to its election. But what should happen when the Statement of Claim does not clearly identifyenforcement or trust? [19] When one looks at the action in its broader context and the steps already taken, it is difficult to think that the plaintiff wasasserting anything but a construction lien and its enforcement. A claim for lien had been successfully registered and monies paid intocourt by the prescribed process.

Why would the plaintiff have taken this avenue then abandoned it without clarifying an alternative withan identifiable basis? The plaintiff appears to have been the general contractor and project supervisor. From the pleading, it was theonly entity to receive payment on the project, and surely it would not claim a trust for monies it had already received or holdbacks inrespect of those amounts. In the normal course, it would ultimately be entitled to holdbacks on the amounts already paid to it andwithout litigation. The question was payment of other amounts that had been invoiced and not paid.

I have difficulty making sense of atrust remedy in the context of the factual allegations made and steps already taken in this case. [20] I also recognize that many of the factual pleadings are quite accurate in the context of the construction lien claimed, including

the identification of the parties, the project, the roles of the parties in the project, the time frame of the work and the amount claimed. The details here are the same as those underlying the lien claimed and registered. The Statement of Claim was also filed within the 45- day time limit, so that if it was an effective pleading the lien would be perfected and its preservation assured.

I conclude that the plaintiff was attempting to perfect and preserve its lien. [ 21 ] The fact of the effectively registered lien claim, the payment of funds into court as security for that lien, the confluence of factual background pleaded with the factual underpinnings of the registered lien claim, the coincidence of the filing of the Statement of Claim with the vacating order and payment into court, and the characterization of the action in the Information for Court Use form all point to an intention to enforce the lien.

The plaintiff contractor was seeking judgment in the amount of the registered lien claim and monies in court; that is, without saying so specifically, it was seeking to enforce the lien. Against these steps and facts, a trust claim is nebulous at best. I conclude that we are dealing with deficient drafting, not lack of intent. [ 22 ] I am also mindful of the question of prejudice. While the defendants would undoubtedly like to have the money they paid into court back, the payment into court was at their option and taken for their own reasons.

If, as I have determined, the plaintiff’s intention was to enforce the lien, then the money would stay in place. But for poor drafting, we would not be here. Indeed, I seriously doubt that experienced counsel would view this as more than inexperienced pleading. It would have been pointless to follow the construction lien path to the point where the amount claimed was secure in court then abandon it. The same contracts and facts will be in dispute in enforcement or trust actions. There was nothing in the facts pleaded (as I read them) to suggest that equity law might be in play.

No fund was identified that could be imposed with a trust. The same basic facts will be in issue however framed in law. Either way, the plaintiff would have to amend its pleading to clarify the nature of the claim. Viewed from this perspective, the defendants are not prejudiced by the plaintiff being permitted or required to amend its Statement of Claim. [ 23 ] As the plaintiff pointed out, S. 6 of the Construction Lien Act contains curative provisions, although not in respect of a Statement of Claim. The form of pleadings, however, is covered by the Rules of Civil Procedure.

Rule 26 deals with the amendment of pleadings and Rule 1.04(1) provides for the liberal construction of the rules to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits. Having concluded that the plaintiff intended to enforce the lien, I further conclude that the plaintiff should be able to repair the pleading so that this matter can proceed as quickly and efficiently as possible. [ 24 ] For all these reasons, the defendants’ motion is denied.

The plaintiff is ordered to file and serve an Amended Statement of Claim within 20 days of the date of the issuing of these Reasons. [ 25 ] At the end of the hearing of the motion, counsel provided me with their briefs on costs for reference when a decision had been made. Each side sought costs if successful and left it to the court’s discretion. The defendants detailed costs ranging from $7,214.73 to $9,429.10 (inclusive of disbursements and tax) depending on whether recovery was on a partial, substantial or full indemnity basis.

The plaintiff proposed partial indemnity costs of $7,507.00 including disbursements and tax. I presume that each party was aware of the other’s brief. I received no request to make submissions in writing so it seems neither side took issue with their opponent’s calculations. There is nothing remarkable or objectionable with the draft bills presented. [ 26 ] However, I am not inclined to award costs to any party. The plaintiff was the cause of the motion. Its drafting of the Statement of Claim was woefully lacking and virtually invited the motion that was brought.

The issue was validly put by the defendants who I really cannot blame for moving as they did. Still, not having been successful, they should not be rewarded by an award of costs. I conclude that justice is done on both sides by ordering that there be no costs. Whalen, J. Released: 2013-07-02 CITATION : 984499 Ont. Inc. v. 1159337 Ont. Inc. et al., 2013 ONSC 4500

ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: 984499 ONTARIO INC. operating as EKARTE GENERAL CONTRACTING - and - 1159337 ONTARIO LTD. and GARY ULIAS & ASSOCIATES INC. carrying on business as GUPM CONSTRUCTION MANAGERS reasons on motion Whalen, J. Released: 2013-07-02