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Articles
Featured Article, October 2007
Kennedy
Electric Limited v. Dana Canada Corporation,
[2007] O.J.
No. 3657 (C.A.)
© 2007 Matthew
R. Alter,
Borden Ladner
Gervais LLP
On September
27, 2007, the Ontario Court of Appeal dismissed the
lien claimants’ appeal in Kennedy Electric Limited
v. Dana Canada Corporation. The trial judgment in
this case was initially reported in L.U.C. #41. The
trial judge (Justice Killeen) had ruled against the
seven lien claimants (see (2004), 73 O.R. (3d) 530),
finding that the services and materials they
supplied for the installation of an automotive
assembly line within a new industrial building
addition owned by Dana Canada Corporation did not
amount to a lienable “improvement” under the Ontario
Construction Lien Act, R.S.O. 1990, c. C.30.
Three of the lien claimants appealed
Justice Killeen’s ruling to the Ontario Divisional
Court, which dismissed the appeal in a 2:1 decision
released March 14, 2006 (see [2006] O.J. No. 972).
The majority of the Divisional Court (O’Driscoll and
Wilson JJ.) found that the trial judge had applied
the proper law to the facts, as he found them, and
that there was no basis in fact or law to disturb
the trial judgment.
In a lengthy
dissent, Justice Chapnik, of the Divisional Court
found otherwise, concluding that the learned trial
judge had proceeded on a wrong principle and had
misapplied the laws to the facts in reaching the
conclusions he did. Chapnik J.’s summary of some of
the salient facts, however, conflicted with the very
findings of the trial judge that were not challenged
on the appeal. She also questioned the case law
cited by the trial judge in support of his ruling.
The Ontario Court of Appeal, in a judgment written
by Armstrong J.A. (Associate Chief Justice Dennis
O’Connor, and Justice R.J. Juriansz concurring)
unanimously dismissed the appeals of Kennedy
Electric Limited and Cassidy Industrial Contractors
Ltd. The other lien claimants at trial did not join
in the appeal. The Ontario Court of Appeal was
not prepared to interfere with the trial judge’s
finding of facts in the absence of a palpable and
overriding error. In that regard, the Court noted
the Divisional Court’s observation that “the
appellants did not challenge any of the trial
judge’s findings of fact” stating:
In my view, the finding of portability
is a finding of fact and therefore on appellate review subject
to a standard of palpable and overriding error. I do not agree
that the trial judge committed palpable and overriding error in
making this finding. There was evidence to support the
finding. The assembly line had been built and disassembled
before being transported to St. Marys for installation. The
assembly line could be readily disconnected from the addition to
the plant with no damage to the plant or its services.
Moreover, Dana had a history of moving assembly lines from one
plant to another. While a different judge may have come to
another conclusion on the issue of portability, I am satisfied
that it was open to the trial judge to reach the conclusion that
he did.
I also wish to address the dissenting
judge’s observation that the trial judge may well have ignored
important factors tending to show that the P221 project was
viewed by the parties as an integrated whole. I do not agree.
The trial judge’s reasons were thorough. He referred to factors
that both favoured the finding that the building addition and
the assembly line were an integrated project and those that
pointed in the other direction. In the end, he concluded that
the two were not part of a single project. I am satisfied that
this finding was open to him on the evidence.
It is important for readers to recognize
that the trial judgment followed several days of trial and the
examination and cross-examination of eleven witnesses called on
the behalf of the lien claimants, and a couple of witnesses for
the defendants. The trial judge had an opportunity to weigh
that evidence and reserved his decision for more than ten months
before releasing his judgment. Following the trial decision,
the defendant, Rumble Automation Inc., which had the direct
contract with the plant owner, Dana, for the design, build and
installation of the assembly line, and which in turn,
subcontracted with the lien claimants, became a bankrupt. As a
consequence, the subcontractors and suppliers were faced with
the prospect of no commercial recovery of their debt once their
lien rights were extinguished.
On the law, while the Court of Appeal
parted ways, somewhat, with the trial judge’s application of the
Hubert v. Shinder, [1952] O.J. No. 23, [1952] O.W.N. 146 (C.A.)
case, it concludes:
what emerges from the brief reasons of
the Hubert case is that a mechanics’ lien will not arise where
the work and materials have been applied in respect of an
installation that is movable (i.e. portable) and not an integral
part of the building. A movable installation does not improve
the building in which it is located as it does not become a part
of the building.
In a
further cautionary note, the Court of Appeal adds:
I would
hesitate to derive from Hubert the general proposition
articulated by the trial judge. I think it is too broad. Each
case will depend on its facts. In most cases, the installation
or repair of machinery used in a business operated in a
building, particularly where the machinery is portable, will not
give rise to lien rights under the CLA. On the other hand,
where machinery is installed in a building for the use of a
business and is completely and permanently integrated into the
building, a lien claim will arise. However, based on the
findings of fact made by the trial judge in this case, it was
open for him to find that no lien claim arose.
Counsel
involved in the prosecution and defence of lien claims in
Ontario and the other Provinces are well advised to review the
decisions from all three levels of courts in the Kennedy
Electric case. Ultimately, as the Ontario Court of Appeal
points out, the cases on the issue of lienability, while
involving questions of mixed fact and law, are fact-driven.
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