



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
    appellants 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 plaintiffs 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 courts
    decision in
310 Waste
. The two cases were similar in that it was not
    beyond the plaintiffs 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
    respondents defence to the appellants 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 courts 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 courts 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.


