About this seminar
Natasha Carew, an associate in the advocacy department at Gowling WLG's Toronto office, discusses technical and procedural amendments and whether they align with the recommendations provided in the expert report to the Attorney General.
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Natacha Carew: Good morning everybody. My name's Natasha Carew. I'm an associate in Gowlings advocacy department. I practice construction litigation. My topic is procedural and technical amendments under the Lien Act. I thought to make this a little bit less boring we could play a game that might help you remember and hopefully process some of the revisions, procedurally, and technically. All of you should have this handout. Does everybody have this? If you don't I've got some extras so please feel free to come and grab one. This handout has 3 columns. On the left hand column you've got the Construction Lien Act as it stands today. In the middle column we have the recommendations from the report that was given to the Attorney General about how the experts thought these lien provisions should be amended. Then in the far right column it is blank and those are what? That's Bill 142. So what actually made it into Bill 142. For the purposes of the game I've left that column blank so we can all guess what came into the Bill and what did not. After today's presentation we will email you a completed copy of this chart so that you have an easy reference guide to refer to going forward.
This is how it's going to work. I will review the current section of the Construction Lien Act. I will review the recommendations in the report and then I'm going to ask the question, "Do you think the recommendation was followed?" and the first person to put their hand up will be chosen. That person will get to say whether they think it was followed, or not, and then if they're correct they will get to choose a prize from the front table. If they are incorrect they will be given a prize by me that I deem to be the lowest value prize. Any questions? Good. Okay. No, you guys can't play.
The first section is section 67(1) and (2) of the Construction Lien Act. Section 67(1) is the one that states the procedure in a lien action is to be as far as possible summary in nature and subsection (2) is the section that precludes interlocutory steps in lien actions without the leave of the court. So, currently, under the Lien Act procedures you can't bring a motion without the leave of a court. You can't conduct examinations for discovery without leave of the court. You can't get productions without leave of a court. To do any of those things you have to bring a motion and get a judge to say, or a master, to say, "Yes, you can go ahead and do discovery or bring this motion." The report said that in reality this leave provision is complicating and delaying the very issues that they intend to simplify. That the legal landscape has changed since 1983 when the Act was drafted and now documentary and oral discovery considered a necessary and appropriate step in almost every action so, basically it's always ordered to be allowed to proceed, therefore why have this extra step of having to bring a motion to be allowed to do what you're likely going to be allowed to do anyway. The recommendation in the report was that subsection 67(2) be deleted and that parties be allowed to conduct discovery and motions as a right. Do you think this recommendation was followed in Bill 142?
Natasha: You are correct! So currently, you can come up and choose your prize, so that means we can now, going forward, we can do discovery, both documentary and oral and we can bring motions without going to court to get leave.
Next section. Section 56 of the Lien Act. This is regarding third party claims. Currently you cannot bring a third party claim in a construction lien action without the leave of the court. The recommendation in the report was that this section be deleted and that third party claims be allowed as a right within a construction lien action. Do you think the recommendation was followed?
Natasha: No? You are incorrect. You might actually like this prize but I shall present you golf team. 3 golf …
The recommendation was followed.
Audience: I appeal.
Natasha: Ha ha ha ha. I'll talk about your right to appeal next, actually.
Audience: I got to go to adjudication.
Natasha: It was followed so now construction lien claims will be allowed to have third party actions brought as a right without leave of the court.
The appeal provisions. So currently under section 71(3) of the Lien Act appeals from interlocutory orders are prohibited. Interlocutory orders are temporary orders that don't finally decide the issue in dispute. Right now you can't appeal them. They happened. That's it. You've got to move on. In contrast under Courts of Justice Act, so for most civil procedures, you're allowed to appeal an interlocutory order with leave of the divisional court. So you have to go to the divisional court and say, "May I please appeal this order?" and they'll say yes or no. The idea behind this was that the proceedings in the Lien Act are supposed to be summary in nature so let's not allow a whole bunch of appeals to clog up the system. But in the recommendation report they said that lien actions are becoming increasingly complex and high value and therefore parties should be able to have the opportunity to appeal and interlocutory order in some circumstances. The recommendation was that section 71(3) be amended to allow appeals from interlocutory orders with leave of a judge of the divisional court. Was the recommendation followed?
Natasha: That is correct! You are right. It was followed. The new provision in the Construction Act will mirror the Courts of Justice Act and you will be allowed to appeal interlocutory orders with leave of a judge.
What will he choose? He goes for the golf balls. He wasn't sure but then he felt compelled to take them.
Next section. Subsection 52 of the Construction Lien Act. This is the section that says you cannot join a trust claim, a breach of trust claim, with a construction lien claim. You have to have two separate proceedings. The idea behind this was that construction lien claims should be given priority and be allowed to move faster so the trust claim should be kept out of that action. In reality the report found that this provision, which doesn't allow these two claims to go forward in one action, is causing duplication of procedures and causing delay, backlog and additional costs. The recommendation was that subsection 52 be repealed and that breach of trust and construction lien action claims be allowed to proceed in one action. Was the recommendation followed?
You didn't go fast enough. All right, it was you first. Yes?
Natasha: It was followed? Okay, you are correct. So, yay, we can bring breach of trust and construction lien claims in one action. Which I think is good news.
The next section is 58(1). This is the section that allows construction lien parties to bring a motion to a judge to have the entire Construction Lien Act referred to a master or a case management master. The benefits of case management of these actions allow earlier dispute resolution, elimination of delays and backlog, efficiency, information and easier access to the parties, to the courts. In Toronto and Ottawa most construction lien actions are referred to a specialized construction lien master who then takes over the management of these cases and becomes seized of the case and takes over every step in the action including the trial. The recommendation in the report was that lien actions should become subject to mandatory case management in all regions. That would mean that every single lien action across the Province is referred to a specialized lien master to be dealt with and tried. Was the recommendation followed?
Natasha: You are incorrect. It was actually not followed. I think, my feeling is, probably the reason it wasn't followed while being a really great idea is that they realized they likely didn't have the resources to allow for a specialized case management master for every single construction lien motion across the Province. So, there is not mandatory case management. The system of referring construction lien matters to a master in Toronto and Ottawa will continue but in other regions it likely won't.
All right. So Neil kind of ruined this one but we'll see if you guys were paying attention. This is the small claims court. The recommendation was that there were concerns about the cost of pursuing all lien actions in the Superior Court. The recommendation was that small lien claims under $25,000.00 and home renovations claims should be referred to the small claims court. Was the recommendation followed?
Yes. Red jacket.
Natasha: Yes, it was. That is correct. You may choose a prize. So now we can bring lien actions that are small value to the small claims court.
Subsection 54(1) of the Construction Lien Act says that you have to deliver a statement of defense to a lien claim within 20 days. Because the current Construction Lien Act has its own procedural regime you aren't entitled to serve a notice of intent to defend, currently, to extend your time to defend by 10 days. You have to get that defense in within 20 days. This wasn't addressed specifically in the report but I thought it was an important one to bring to your attention. So, do people think that section 54(1) has remained or has been repealed in Bill 142?
Yes. Purple shirt.
Audience: It's remained.
Natasha: It's remained. No. It's repealed. Basically all the procedural sections, with the exception of subsection 58 with referral to a case management master, have been repealed. All these procedures that were currently governed by the Construction Lien Act are now going to be governed by the rules of civil procedure like a normal civil action.
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All right. Next section. Section 6. This is minor irregularities section. It allows the court to cure minor technical irregularities but not errors that cause prejudice to any of the parties in the lien act. So for example, some curable errors might be the name of the owner. So the correct name of the owner or the person who materials or services were supplied to. Minor errors in the legal description of a property or some people in a claim for lien will put the owner's name in the wrong part of the claim for lien statement and whole motions have been brought on this issue to determine if that should invalidate the lien or not. Typically under section 6 that type of error is cured. But there's been some ambiguity about what will be cured and what will not be cured so the recommendation was that failure to correctly name owners, errors in legal description and errors in the placement of the owner name should be curable errors under section 6. That was what was recommended. Was the recommendation followed?
Yes. At the very back there.
Natasha: It was followed. That's correct. They incorporated essentially word for word what the recommendations were. So those types of minor errors will be cured. Yes.
Audience: Quick question. What about the property …
Natasha: If the actual property lien is incorrect as opposed to just a minor error in the legal description?
Audience: Exactly. Is that curable?
Natasha: It's probably not curable. That's something that would cause prejudice. The way section 6, it's quite strictly interpreted right now, and it's only going to be errors that nobody would be confused about. If you get your lien, it's on your property but then there's a minor error in the property description that doesn't cause you to not know if you've been liened or not, it's going to be curable. But if you name the wrong property entirely, or the wrong owner entirely, then it won't be curable because that could cause prejudice to the correct property owner or owner. You can come get a prize if you'd like.
Section 60 is a procedure that is followed in a variety of ways across Ontario. This is the procedure for scheduling a settlement meeting. This is the settlement meeting that is scheduled by order of the court but is then held by the parties and their counsel without a judge present. The settlement meetings have similar objectives to a pre-trial under the regular rules of civil procedure except they occur typically much earlier in a construction lien proceeding. They aren't presided over by a judge. The recommendation in the report was that no changes should be made to section 60 and 61 so we should still allow for these settlement conferences to occur but that there should be a practice direction issued that clarifies the procedure in different regions across Ontario so that there isn't so much confusion about whether or not to go forward with the settlement conference procedure. Was the recommendation followed?
Natasha: It was not followed. They actually ignored this one and they repealed section 60 and 61. Going forward there will be no more settlement conferences in Ontario. At least not mandated by the court. Of course you can always have a settlement conference whenever you wish. But this procedure of getting an order to go get a settlement conference and convene one is not going to occur anymore.
All right. There have been some issues with inconsistencies between the Construction Lien Act and the Registry Act in terms of forms. Under the Construction Lien Act there's very specific terminology about vacating versus discharging a construction lien. Discharging a lien results in the end of your lien rights while vacating simply allows you to post security in court and then continue lien rights against that security but it doesn't end your lien rights. The problem is the Registry Act wasn't really consistent so there used to only be one form and then they changed that and then there was some confusion with the orders that were coming out of the court and some liens were accidentally being discharged when they were intended to be vacated. The recommendation in the report was to have 3 separate forms. One for the release of a lien. One for the discharge of a lien so the end of lien rights. And one for vacating the lien so paying security into court and removing that lien from title. Was the recommendation followed?
Yes. Go ahead.
Natasha: Yes. You are right. By regulation these forms will now be prescribed. You can come and choose a prize.
How am I doing for time, Ted? Okay.
Subsection 32(2). This is the content of a certificate of substantial performance. Currently the certificate must include the name, address for service of the owner and contractor, a short description of the improvement, a description of the premises to which the work was done, the street address and the stakeholders who commented on the expert report suggested that more detailed information should be included in the certificate of substantial performance. They suggested that legal descriptions including property identifier numbers should be included. They also discussed whether various elements of section 39 should be included. So, particulars of labour and material payment bonds and things like that. The ultimate recommendation was that those would be too onerous but that a more detailed description of the property should be given. Was the recommendation followed?
Natasha: Yes. It was. That is correct. So now you have to include the legal description of the property including the property identifier number in your certificate of substantial performance.
Sheltering of liens. So this is the procedure where you have a preserved lien that's been registered and then instead of commencing your own lien action you choose to shelter under an existing lien action and that effectively perfects your lien and continues your lien rights. There was some discussion about whether this section is useful and expert review eventually found that it was effective because it assists with the class action nature of the lien claim and ensures that all of the claims for lien for a single improvement are heard together. Ultimately the report recommended that this section not be revised. Was the recommendation followed?
Natasha: It was followed. I feel like you guys are not batting that well here. Especially since Ted started out the presentation with the 98% of the recommendations have been followed. Ha ha ha ha. It was followed so you can still shelter your lien claims. Sorry. I didn't mean to be mean.
Let's pick a good one then. All right. Vacating lien by payment into court. Currently you can pay money into court to vacate a lien, remove it from title. You do that by paying the amount of the lien into court along with security for costs in the amount of $50,000.00 or 25% of the value of the lien, whichever is lesser. Obviously times have changed and $50,000.00 is not really very much anymore in terms of legal costs of pursuing a lien action. The recommendation was that this should be amended to be 25% or $250,000.00. Was it followed?
Audience: I'll go with yes.
Natasha: You sure? Yes, it was followed. Now when you bond off liens you will have to pay much more money in the range of $250,000.00 or 25%.
Anyway, you guys will have this handout completed and you can refer to it as you move forward these new provisions.
Audience: You skipped one. Can you just tell us yes or no of the written notice of the lien?
Natasha: Oh sorry. Ted told me I wasn't allowed to continue. So the written notices of lien, what they did for those was they prescribed forms, because there's a lot of confusion about when you give a written notice of liens. Actually the really important thing for written notices of lien is right now you can just give a written notice of lien, which effectively starts the lien rights against mortgagees and people like that, but there's no really strict procedure for service of it. The new Act will make it so you have to serve a written notice of lien like an originating process. You'll have to give it by personal service like a statement of claim. Which makes sense because it's actually quite an important document. Then when you remove a written notice of lien there's going to be prescribed forms to do that end. It will hopefully alleviate some of the confusion around written notices.
All right. Thank you very much everybody.