



COURT OF APPEAL FOR ONTARIO

CITATION: TRS Components Ltd. v. Devlan Construction Ltd.,
    2015 ONCA 294

DATE: 20150429

DOCKET: M44694 (C59293)

Gillese, van Rensburg and Pardu JJ.A.

In
    the Matter of the

Construction Lien Act
,
    R.S.O. 1990, Chapter C.30, as amended

BETWEEN

TRS Components Ltd.

Plaintiff (Appellant/Responding Party)

and

Devlan
    Construction Ltd.
, the Trustees of Knox

Presbyterian
    Church, Waterloo, Pace Savings &

Credit Union Limited and
    Education Credit Union Limited

Defendants (Respondents/
Moving Party
)

Robert J. Kennaley and Darcia Perry, for the moving
    party

John Margie, for the responding party

Heard: April 2, 2015

On a motion to quash an appeal from the judgment of Justice
    Patrick J. Flynn of the Superior Court of Justice, dated July 30, 2014, with
    reasons reported at 2014 ONSC 4528.

By the Court:

Introduction

[1]

This is a motion to quash an appeal for want of jurisdiction. For the
    reasons that follow, we conclude that, as the judgment under appeal is a
    judgment under the
Construction Lien Act
, R.S.O. 1990, c. C.30 (the
    Act), the proper route for appeal is to the Divisional Court. We are
    exercising our discretion to transfer the appeal to that court pursuant to s.
    110 of the
Courts of Justice Act
, R.S.O. 1990, c. C.43.

Facts

[2]

On October 15, 2010, the appellant TRS Components Ltd. (TRS)
    registered a construction lien in relation to unpaid invoices for labour and
    materials supplied for the construction of a church in Waterloo, Ontario. It
    then commenced an action against the respondent Devlan Construction Ltd.
    (Devlan), seeking to enforce the lien claim under the Act. Devlan delivered a
    statement of defence and counterclaim, in which it alleged that TRSs work was
    incomplete or deficient, and claimed damages for breach of contract and
    negligence. The action was listed for trial and scheduled to be tried for three
    weeks in November 2013.

[3]

Devlan brought a motion to have TRSs claims dismissed as a result of
    its failure to answer undertakings and refusals. On September 6, 2013,
    Parayeski J. ordered that TRSs lien be discharged and its action dismissed.
    The order provided that it was without prejudice to Devlans rights to proceed
    to enforce its counterclaim in the trial herein, and ordered that the
    counterclaim be allowed to proceed andnot be struck from the trial list
    without further Order of [the] Court unless discontinued by Devlan.

[4]

The trial of the counterclaim took place over two days in November 2013
    and continued for four days in June 2014. On July 30, 2014, Flynn J. granted
    judgment on the counterclaim in the sum of $69,432 plus interest.

[5]

TRS appealed the judgment on the counterclaim to this court, perfecting
    its appeal in January 2015. Devlan brought this motion to quash the appeal for
    want of jurisdiction.

Issue on the Motion

[6]

Section 6(1)(b) of the
Courts of Justice Act
provides that an
    appeal lies to the Court of Appeal from a final order of a judge of the Superior
    Court of Justice, except an order from which an appeal lies to the Divisional
    Court under another Act. Section 71(1) of the Act provides that an appeal lies
    to the Divisional Court from a judgment or an order on a motion to oppose
    confirmation of a report under [the] Act.

[7]

Accordingly, the issue is whether Flynn J.s judgment on the
    counterclaim is a judgmentunder the Act
.
If it is, the appeal lies
    to the Divisional Court, and was not properly brought in this court.

Positions of the Parties

[8]

Devlan submits that the judgment under appeal was a judgmentunder [the]
    Act because it was obtained in construction lien proceedings. The Act provides
    that all claims asserted by a party will proceed in the same construction lien
    proceedings. The discharge of the lien and the dismissal of the lien claim did
    not change the character of the proceedings; indeed, the title of proceedings
    remained the same. The matter proceeded on the construction lien track, as
    there was no order transferring the matter to the ordinary track, to be
    determined in accordance with the
Rules of Civil Procedure
, R.R.O.
    1990, Reg. 194 (Rules), instead of the specialized and summary construction
    lien procedure.

[9]

TRS contends that, once its lien was discharged and its lien action dismissed,
    the proceedings were no longer governed by the Act, and the judgment obtained
    on Devlans counterclaim was not a judgment under the Act. At trial, no relief,
    remedy or determination was requested by either party under the Act. Neither
    the judgment nor the reasons for judgment refer to the Act. TRS points to the
    fact that certain steps typically required prior to a construction lien trial
    were not taken: Devlan did not deliver a notice of trial as required by s. 60(4)
    of the Act; and no one filed an up-to-date abstract of title showing all
    deleted instruments or execution or bankruptcy searches.

Analysis

[10]

In
    our view, the judgment under appeal is a judgmentunder [the] Act, and is
    subject to appeal to the Divisional Court. We reach this conclusion on the
    following analysis.

[11]

Part
    VIII of the Act provides for a summary procedure for the determination of
    construction lien proceedings. As Carthy J.A. noted in
Teepee Excavation
    & Grading Ltd. v. Niran Construction Ltd
. (2000), 49 O.R. (3d) 612
    (C.A.), at para. 12:

The
Construction Lien Act
serves a specialized purpose
    in a narrow field. A lien claimant may commence an action, provide shelter for
    other claimants, obtain a form of execution before judgment, and proceed to
    trial in summary fashion without production of documents, discovery or other
    interlocutory steps except by leave. A plaintiff may join with a lien claim a
    claim for breach of contract and a defendant may counterclaim in respect of any
    claim against the plaintiff. There may also be cross-claims and third party
    claims. There are no appeals from interlocutory orders.

[12]

The
Courts of Justice Act
and Rules apply to pleadings and proceedings under
    the Act, except to the extent they are inconsistent with the Act: s. 67(3).

[13]

In
    response to an action to enforce a lien, a defendant may assert a counterclaim,
    crossclaim or third party claim. Section 55(2)(a) of the Act provides that a
    defendant in an action may counterclaim against the person who named the
    defendant as a defendant in respect of any claim that the defendant may be
    entitled to make against that person, whether or not that claim is related to
    the making of the improvement. Devlan asserted its counterclaim in the
    construction lien proceedings commenced by TRS. It did not seek the enforcement
    of a lien; rather, it claimed damages for breach of contract and negligence.

[14]

Under
    s. 51 of the Act, the court hearing the action has broad authority to try the
    action, including anycounterclaim, and to do everything necessary to finally
    dispose of it. In accordance with these provisions, Devlans counterclaim, which
    was asserted in response to TRSs lien claim, proceeded within the lien action,
    to be tried and disposed of within that action.

[15]

Both
    parties refer to a decision of this court,
Villa Verde L.M. Masonry Ltd. v.
    Pier One Masonry Inc
. (2001), 54 O.R. (3d) 76 (C.A.), with respect to the
    interpretation of judgment as used in s. 71(1) of the Act. In that case, the respondent
    had obtained judgment on a trust claim asserted under Part II of the Act. Subsection
    50(2) prohibits the joinder of a trust claim with a lien claim, so the trust
    claims were asserted in a separate action, although tried at the same time as
    the related construction lien action. This court held that the judgment
    determining the trust claim was a judgment under the Act for the purpose of s.
    71(1). Rosenberg J.A. stated, at para. 7, I can see no basis for giving the
    word judgment a restrictive meaning so that it relates only to a judgment on
    a lien claim. There is nothing in the
Construction Lien Act
that
    suggests such an unusual interpretation.

[16]

TRS
    contends that
Villa Verde
stands for the proposition that it is the
    substantive claim in the action that determines the route of appeal, and not
    the fact that the proceedings were commenced under the Act.

[17]

We
    do not agree that
Villa Verde
should be interpreted in this narrow
    fashion. The only issue in that case was the route of appeal of a judgment in a
    proceeding involving a trust claim brought under Part II of the Act, which was
    tried at the same time as a lien claim brought under Part III. Because the
    judgment involved substantive claims under the Act, it resulted from a
    proceeding under the Act. While the court observed, at para. 1, that an appeal
    involving only proceedings under the [Act] is to be brought in the Divisional
    Court, the case did not address the full scope of proceedings under the Act.
    In particular,
Villa Verde
did not address whether a judgment on a
    counterclaim in a lien action is a judgment in a proceeding under the Act.

[18]

In
    our view, judgmentunder this Act in s. 71 includes a judgment granted in an
    action commenced and continued under Part VIII of the Act, including any
    counterclaim, crossclaim or third party claim, unless the action or any part of
    the action is removed from the construction lien proceeding, and directed to
    proceed under the Rules.

[19]

This
    interpretation is supported, not only by s. 51 of the Act, referred to above,
    but also by the decision of the High Court of Justice in
Steeplejack
    Services (Sarnia) Ltd. v. Davis
(1990), 43 C.L.R. 66 (Ont. H.C.). That
    case involved the specific provision in the Act that prohibits appeals from
    interlocutory orders (now s. 71(3)(b)). A defendant in a construction lien
    action counterclaimed for goods alleged to have been wrongfully seized. He
    brought a motion for return of the goods, which was dismissed. The defendant
    attempted to appeal, and was confronted with the equivalent of the current s.
    71(3)(b). In quashing the appeal, Austin J. rejected the argument that the
    counterclaim was a separate action outside the construction lien proceedings. He
    stated, at p. 67, that although it is a separate action, by virtue of its
    being brought as a counterclaim in an action under the Act, it is governed by
    the provisions of the Act.

[20]

TRS
    contends that the dismissal of the lien claim removed the counterclaim from the
    construction lien proceedings that were commenced under Part VIII, and from the
    ambit of the Act. We disagree. In our view, where a lien is discharged, the
    court may then order that the remainder of the action proceed on the ordinary
    track. However, unless such an order is made, the trial of the action or any
    part of the action commenced under the Act will proceed under the Act, and will
    result in a judgmentunder [the] Act within the meaning of s. 71(1).

[21]

In
Teepee Excavations
,

the plaintiffs lien claim was dismissed
    as expired, because it was not set down for trial within two years. Under s.
    46(1) of the Act, where the lien has expired, the court is required to dismiss
    the action to enforce that lien. The issue in
Teepee
was whether the
    plaintiffs contract claim could continue under the Act, once its lien claim
    had been dismissed.

[22]

Carthy
    J.A. observed, at paras. 24 and 25:

The broad purpose of the legislation is to provide an efficient
    means of dealing with trade claimants that would otherwise be left behind
    without security if unpaid on a building project where payments typically flow
    from above and follow performance. On a failing or failed project, there may be
    many such claimants. In setting down the rules, the Act does not go so far as
    to restrict claims thereunder to lien claims. Contract claims by the plaintiff
    and counterclaims of any kind are permitted, presumably to avoid duplication of
    proceedings[T]he Act should not be available as a subterfuge for pursuing an
    ordinary action by summary procedure; but where all of the steps have been
    taken and a conclusion reached at a hearing, the court should not dismiss the
    action for lack of a lien claim and thus compel a further proceeding concerning
    the same issue. The same reasoning suggests that the court has available the
    discretion to dismiss or to permit the action to proceed without the lien
    claim, as the circumstances dictate.

All of the arguments against denying a defendant the procedures
    and protections of the usual form of litigation can be answered by the courts
    discretion under s. 47(1)(d) to dismiss the action because the defendant will
    be prejudiced or because little has transpired in the action that would be
    duplicated or by imposing conditions for continuance to assure protection of
    the defendant. The legislature intended more than claims for liens to be
    litigated in lien claim actions and that intention is best served by an
    interpretation of s. 46(1) and s. 47(1)(d) that leaves it to the court to
    monitor the interests of the parties and the procedure to be followed.

[23]

According
    to
Teepee
, when a lien action is dismissed, the court has the discretion
    to determine whether to allow the contract claims to proceed at all, and the
    procedure that will be followed. See also various decisions of Master D.H.
    Sandler, confirming that, where the court allows a contract claim to proceed
    after a lien claim is dismissed, the court may decide whether the Acts
    procedures apply. For instance, in
211417 Ontario Inc. v. Stadia Industries
    Ltd
., 2014 ONSC 3221, 32 C.L.R. (4th) 77, Master Sandler remarked as
    follows, at para. 51:

[I]n such a case, the court could transfer the contract action
    to the Small Claims Court if the claim was under $25,000, or it could direct
    that it proceed as an ordinary Superior Court action but possibly be governed
    by the Rule 76 Simplified Procedure if the claim was between $25,000 and
    $100,000, or it could direct that it proceed as an ordinary action and be
    governed by the general Rules of Civil Procedure without any reference to the
    Simplified Procedure if the claim was in excess of $100,000, or it could even
    direct that the contract claim would continue within the framework of the
    statement of claim in the now-dismissed lien action, with judgment to be given
    pursuant to s. 63, and still to be governed by the procedure under the
    Construction Lien Act, and, in particular, procedural sections 51-63, 67, and
    71.

See also
DCL Management Ltd. v. Zenith Fitness Inc
.,
    2010 ONSC 5915, 97 C.L.R. (3d) 159, at para. 35;
Pineau v. Kretschmar Inc
.
    (2004), 37 C.L.R. (3d) 29 (Ont. S.C.), at para. 82;
Arcon Group Inc. v.
    1371344 Ontario Ltd.
(2004), 36 C.L.R. (3d) 125 (Ont. S.C.), at para. 17; and
986506 Ontario Ltd. v. Pringle
(2003), 30 C.L.R. (3d) 286 (Ont. S.C.),
    at para. 2. These cases contemplate that, when a lien is discharged, and the lien
    action dismissed, the court may make an order to determine whether or not the
    remaining claims will proceed under the Act.

[24]

In
    this case, the action proceeded under the
Acts
regime. When TRS did not provide answers to undertakings, Devlan brought a
    motion, seeking as part of its relief leave to bring the interlocutory motion,
    as required by s. 67 of the Act. When Devlan moved to strike TRSs claim, the
    action was already on the trial list. Parayeski J., in dismissing the lien
    action, ordered that the counterclaim proceed in the trial herein, that is,
    the construction lien

trial that was already scheduled to proceed in
    November. He also ordered that the counterclaim be allowed to proceed, but
    did not order that it would proceed under the Rules. The dismissal of the lien
    claim did not automatically remove the counterclaim from the construction lien
    proceeding; to the contrary, the counterclaim continued in the original
    construction lien action, with the same title of proceedings.

[25]

Finally,
    we turn to TRSs argument that, as certain procedural steps normally taken
    before the trial of a construction lien action were not taken, the matter
    proceeded under the Rules and not under the Act. We agree with Devlan that the failure
    to take certain procedural steps typically required before a construction lien
    trial does not take the matter outside of the construction lien procedure. The
    requirement to deliver a notice of trial is a formality intended to ensure
    notice to the participants at a trial.  In the present case, when the
    construction lien claim was struck, a trial date had already been set, and both
    parties attended at trial. The other two procedural steps referred to by TRS,
    while relevant to a trial of a construction lien claim, would not apply in any
    event to the trial of a counterclaim based on breach of contract and
    negligence, in which no lien rights are asserted.

[26]

It
    is therefore our conclusion that, in the absence of an order directing that the
    proceeding is to continue as an ordinary action, the appeal of a judgment in a
    construction lien proceeding, whether or not in respect of a lien claim, and
    including any counterclaim, is subject to s. 71(1) of the Act. Accordingly, the
    Divisional Court has exclusive jurisdiction over the appeal.

Disposition

[27]

The
    Divisional Court has exclusive jurisdiction over this appeal. In the present
    circumstances, where there was an arguable question on the issue of
    jurisdiction, it is appropriate to transfer the appeal to the Divisional Court
    under s. 110 of the
Courts of Justice Act.
Costs, as agreed between
    the parties, are fixed at $3,000, inclusive of applicable taxes and
    disbursements, in favour of Devlan, the moving party.

Released: April 29, 2015 (E.E.G.)

E.E. Gillese
    J.A.

K. van Rensburg J.A.

G. Pardu J.A.


