January 14, 2016
Recently, opposing counsel failed to serve their issued claim within 90 days of issuance, in accordance with Subsection 53(2) of the Construction Lien Act (the “Act)”. In practice, there are few circumstances where a claim, once issued, does not thereafter get served. The most recent case dealing with Subsection 53(2) is MGI Construction Corp. v. 2273865 Ontario Inc and Frank Bosso (“MGI“).
In MGI, the plaintiff issued its Statement of Claim on August 21, 2013. The Statement of Claim was effectively served on March 19, 2015. The Court, in exercising its discretion, refused to allow the plaintiff to extend the time to serve its Statement of Claim. It was held that since the plaintiff failed to serve the Statement of Claim as required by the Act, the lien claim had expired.
The factors considered by the Court in exercising its discretion were as follows:
a) The length of delay and whether the limitation period has expired;
b) The explanation for the delay in serving the statement of claim and in bringing the motion to extend time: are the reasons compelling? and
c) Is the defendant prejudiced by the delay in serving the statement of claim?
MGI could not provide a compelling reason for the one and a half years delay. In making its decision the Court confirmed that the Act provides a truncated procedural code for construction lien claims that are intended to expedite the resolution of lien actions. The Court stated that “compliance with the 90 day period within which to serve the Statement of Claim is required to meet the objective of the Act to achieve an expedited resolution of the claim.” Thus, pursuant to the Act and the finding in MGI, if a Statement of Claim is not served within 90 days of issuance, subject to the above test, the lien claim will be declared expired. If the Statement of Claim is not served within 90 days of issuance, the Plaintiff should immediately bring a motion to seek relief from the Court that the lien be revived and for an extension of time to serve the Statement of Claim. The Court may grant the relief if the plaintiff brings the motion promptly, provides a compelling reason for the delay, and no prejudice has occurred.
On the issue of prejudice, the Court found that the existence of a lien against the property “that requires the owner to post security to clear title is prejudicial to the defendant”. This concurs with the earlier case of An-Dell Electric Ltd. v. M.J. Dixon Construction Ltd., where the mere vacation of a lien was held to be prejudicial. The Court held that since MGI had not offered to pay the cost of borrowing funds to vacate the lien claim that the defendant was prejudiced. The Court in MGI is effectively implying that, if the lien was vacated, that the plaintiff should – by way of undertaking – agree to pay the cost of borrowing funds to vacate the lien if the plaintiff is ultimately unsuccessful at trial.
What do we take away from this? That you should serve the Statement of Claim as soon as it is issued, so as to avoid any potential Subsection 53(2) issues. If proper service was not affected within the required 90 days, then you should promptly bring a motion to extend the time for delivery of our claim, have a compelling explanation for the delay, and provide an undertaking as to damages if the subject lien was vacated.