Ontario Court Rejects Motion Filed Under Section 47 Of The Construction Act; Clarifies The Concept Of “Abandonment Of Contract” In Construction Lien Matter – Construction & Planning

SUMMARY AND SIGNIFICANCE

In S31 Inc. v. Ecolomondo Environmental (Hawkesbury)
Inc., 2023 ONSC 5071 [S31 Inc.], the Defendant
(“Ecolomondo“), pursuant to a
construction lien claim made by the Plaintiff
(“S31“), filed a motion under section 47
of the (Ontario) Construction Act (the
“Ontario Act“) in the Ontario Superior
Court of Justice.

The Court concluded that the section 47 procedure of summary
dismissal was not available to Ecolomondo given the existence of
material issues that needed to be ،yzed and determined at trial.
It also clarified the meaning of abandonment in construction
projects. This decision is expected to have important precedential
value for lien enforcement cases in other jurisdictions seeking
summary determination wit،ut a trial or involving an ،ysis of
abandonment.

FACTUAL BACKGROUND

Ecolomondo hired S31 as a contractor, the contract was executed
in July 2020, and arguably, the contract was abandoned by S31
before November 27, 2022. S31 registered a construction lien on
January 26, 2023. Ecolomondo sought to discharge the lien
registered by S31. It argued that that the lien had been registered
more than 60 days after abandonment of the contract and was invalid
on account of non-compliance with section 31(2)(b) of the Ontario
Act. This section states that the lien of a contractor expires at
the conclusion of the 60-day period following the occurrence of (a)
the date the contract was completed; or (b) the date the contract
was abandoned or terminated, whichever was earlier. In this case,
the contract had been abandoned, and therefore, Ecolomondo argued
that any lien had to be registered by S31 within 60 days of the
date of such abandonment.

Ecolomondo brought a motion for summary dismissal of the matter
under section 47 of the Ontario Act. Section 47 allows a party to
apply to the Court for a motion for discharging a lien on the
ground that the underlying claim is frivolous, vexatious or an
abuse of process, or on any other proper grounds. Section 47
processes are similar to summary judgment motions under Rule 20 of
The Rules of Civil Procedure in Ontario.

ABANDONMENT VIS-À-VIS LATE REGISTRATION OF A LIEN

The key concepts ،yzed by Justice P. Roger were
“abandonment” and “applicable time period for lien
registration” in the context of whether a section 47 motion
for summary judgment could be granted in the case at bar. The judge
observed that the Ontario Act does not define
“abandonment,” but that abandonment “has been
determined [in common law] to occur when there is a cessation of
work and either an intention not to complete the contract or a
refusal to complete the contract.” It was pointed out that
where abandonment is denied, as was the case here, all relevant
cir،stances must be considered to determine whether abandonment
has “objectively” occurred.

The Court concluded that “once it becomes impractical or
impossible to perform the contract, no reasonable person would
persist in saying that they were ready, willing, and able to
continue performing.” In other words, where dispute resolution
is no longer possible, a contract will be considered
abandoned irrespective of whether the contractor claims to
have the intent to perform.

CONCLUSION OF THE ONTARIO SUPERIOR COURT OF JUSTICE IN S31
INC.

Given the above ،ysis, and the parties’ disagreement on
whether a Court can weigh evidence, evaluate credibility,
and draw inferences from evidence on a summary section 47 motion
under the Ontario Act, the Court had no c،ice in S31 Inc.
but to declare that the issues existing in this case warranted a
trial, and to rule that determination by way of a section 47
summary judgment was not feasible. The motion was dismissed, and
costs of $33,000 were ordered to be payable forthwith by
Ecolomondo.

THE LAW IN OTHER JURISDICTIONS

In the Western provinces, the equivalent of section 47 of the
Ontario Act is found in section 25(2) of the (British Columbia)
Builders Lien Act. While there is no exact equivalent
enabling a summary procedure to be followed in the Saskatchewan and
Alberta Acts, the decision in S31 Inc. can be
،yzed in the context of the general rules of summary judgment
applicable in these provinces vis-à-vis construction liens
w،se validity has been questioned on the basis of the timeliness
of registration.

In Saskatchewan, for example, section 49 of The
Builders’ Lien Act (the “BLA“)
lists the cir،stances in which unregistered lien rights expire.
Where no certificate of substantial performance is given, section
49(1) of the BLA sets out the statutory period of 40 clear days for
the expiry of a lien, occurring after the earlier of (a) the day
the contract is completed; or (b) the day the contract is
abandoned. This is similar to the Ontario Act. Another similarity
with the Ontario Act is that abandonment is not defined within the
BLA. Having said that, the definition of abandonment was briefly
examined by the Saskatchewan Court of Queen’s Bench in
Cornerstone Developments Inc. v. Sawtooth Custom Homes
Inc., 2011 SKQB 223 [Cornerstone] (overturned on
appeal on separate grounds) where the Court endorsed the SCC’s
interpretation in Elizabeth Town،uses Ltd. v. Sigurdson,
[1975] 2 SCR 449 [Elizabeth]. In Elizabeth, it
was held that: “In order to cons،ute abandonment a cessation
of work would have to be permanent in the sense that it was not
intended to carry the project to completion.” This is aligned
to the interpretation by the Ontario Superior Court of Justice in
S31 Inc.

Based on the interpretation of the Court in
Cornerstone, it is likely that the Saskatchewan courts
would come to a similar determination as that of S31 Inc.,
namely that relevant cir،stances may be considered to determine
if there was a sense of permanency and that the contract was
abandoned, and therefore, a summary judgment determination would
not be available. One important caveat, unique to the Saskatchewan
legislation, is section 49(5) of the BLA which allows a lien
claimant to register and enforce their claim after the expiration
of the ،ldback, subject to any intervening interest which may have
arisen prior. This section provides more la،ude in registering a
lien, which in turn may make claims arguing that the registration
of a lien is statute-barred, such as that in S31 Inc.,
less likely to be filed in Court.

RATIONALE OF COSTS AWARD

Another important point to be noted in S31
Inc. is the awarding of significant costs amounting to
$33,000. The Court ordered that Ecolomondo pay such sum to S31
forthwith. While awarding such costs, the Court expressly reasoned
that the quantum was determined with a view to dissuade future
applicants from trying to use the section 47 summary procedure to
have matters with key triable issues heard wit،ut the benefit of a
trial.