Case Comment: R&V Construction Management Inc. v. Baradaran

On May 21, 2020, the Ontario Divisional Court released its decision in R&V Construction Management Inc. v. Baradaran, 2020 ONSC 3111. This highly anticipated decision marks the culmination of a roller coaster of litigation with widespread implications concerning the powers of a referee under the Construction Act, procedural fairness, and lawyers’ obligations when acting against self-represented litigants.

Background

In 2016, Manoucher Baradaran (the “Owner”) hired R&V Construction Management Inc. (the “Contractor”) to perform certain repair work and renovations following the flooding of his home. Disputes ultimately arose and the Contractor preserved a Claim for Lien and perfected its claim by commencing an action.

The Contractor moved under section 58 of the Construction Lien Act (as it then was, hereinafter referred to as the “Act”) and obtained both a judgment referring the action to a master for trial, and an order for trial with a master, in accordance with the usual procedure for a lien action in Toronto.

The Owner moved under section 47 of the Act for an order “discharging [the Contractor’s] lien and dismissing the action or, in the alternative, an order reducing lien security.” Importantly, it was this motion and only this motion that was before the master.

At the hearing, the master characterized the motion as a motion for summary judgment and found that she had jurisdiction to use the so-called Enhanced Powers granted to judges on such a motion under Rule 20.04(2.1) of the Rules of Civil Procedure. Under this Rule, the Enhanced Powers allow a judge to weigh the evidence, evaluate the credibility of a deponent and draw any reasonable inference from the evidence, in determining whether summary judgment ought to be granted or not, i.e. whether there is a genuine issue requiring a trial. 

In support of her finding, the master referred to section 58(4) of the Act, which provides as follows:

Powers of master on reference — A master or a case management master to whom a reference has been directed has all the jurisdiction, powers and authority of the court to try and completely dispose of the action and all matters and questions arising in connection with the action, including the giving of leave to amend any pleadings and the giving of directions to a receiver or trustee appointed by the court.

The Owner, who was self-represented at the hearing, took the position that his motion should be granted because the Contractor’s principal had died prior to trial without his evidence being preserved. The Owner argued, accordingly, that his sworn evidence could not be challenged and thus judgment must be granted in his favour.

The Contractor took the position that there was a genuine issue requiring a trial and presented evidence in support of its Claim for Lien being proven.

At the end of the hearing, the master ruled as follows: “My disposition is based on finding that there are no genuine issues for trial. There is the best evidence. R&V has proven a lien claim…”. Judgment was accordingly granted in favour of the Contractor.

Lower Court Decision

The Owner moved to oppose the master’s report. The Superior Court held that the master exceeded her jurisdiction by employing the Enhanced Powers. The motions judge reasoned:

1. In RSG Mechanical Inc. v. 1398796 Ontario Inc., 2015 ONSC 2070 (“RSG Mechanical”), the Divisional Court held that a master “does not, for the purposes of the reference, obtain the standing of or become a judge.” The motions judge found that he was bound by this case.
2. Masters are divided on their jurisdiction to use the Enhanced Powers.
3. The Superior Court has held that “a master does not have the power to weigh evidence, evaluate credibility and draw reasonable inferences from the evidence that is granted to a judge on a summary judgment motion, pursuant to Rule 20.04(2.1).”^[1] The motions judge found that the Divisional Court and Superior Court were accordingly unanimously aligned in finding that masters may not use the Enhanced Powers.
4. There is nothing in the Act to suggest that masters may use the Enhanced Powers.

The Contractor appealed this decision to the Divisional Court.

Divisional Court Decision

Although the appeal was dismissed, the Divisional Court disagreed with the motion judge’s findings in respect of the powers available to a master on reference under the Act.

First, the Divisional Court noted that RSG Mechanical does not concern the procedural powers of a referee in a construction lien action. That case involved a master’s decision to not follow superior court precedent. The master on reference had concluded that because it had “all the jurisdiction, powers and authority of the court…” the master had obtained the standing of a Superior Court judge and was accordingly not bound by Superior Court precedent. The Divisional Court, however, held that a master on reference’s report is always reviewable by the Superior Court and as a matter of principle, “precedent binds if it comes from a court that has the power to review the decision of the court applying precedent.” As such, while a reference may give a referee the jurisdiction, powers and authority of a judge, it does not give a referee the standing of a judge. RSG Mechanical accordingly did not apply to this case.

Second, the Divisional Court noted that while there are masters who have concluded that they do not have Enhanced Powers when hearing summary judgment motions,^[2] these masters were not masters on reference. That is, they did not obtain the status of a referee under the Act. In fact, there had been no decision by a master on reference that concluded that referees may not use the Enhanced Powers. The question remained open for the Divisional Court to decide.

Third, the Divisional Court noted that the issue of a referee’s powers under the Act was not at issue in Kieswetter. Rather, Heeney R.S.J.’s dicta in Kieswetter addressed the powers of a master not on reference who may not use the Enhanced Powers on a summary judgment motion. As such, the Divisional Court and the Superior Court were not unanimous in finding that a master may not use the Enhanced Powers, as was found by the motions judge.

Finally, the Divisional Court addressed a master on reference’s authority under the Act to use the Enhanced Powers. The motions judge reasoned that a plain reading of the Act suggested that a “summary trial”, not summary judgment, is the legislative choice of remedy under the Act. The Divisional Court, however, found that this interpretation would fly in the face of forty years of practice under the Act and that motions under Rules 20 and 21 (dispositions without trial, including, summary judgment) “may be brought before a master, if leave is granted, in cases referred to the master for trial under the [Act]”.

In sum, the Divisional Court noted that section 67 of the Act made clear that a construction lien referee’s jurisdiction is not limited to “summary trials” but includes appropriate interlocutory proceedings. The Act requires a summary process, not a summary trial. While summary trials may be a “good solution” in some cases, in others, disposition without a trial, such as by summary judgment, may be the more “summary”, and thus appropriate, solution. Indeed, section 67 of the Act accords a master the power to consent to a summary judgment motion being brought under Rule 20 where such disposition without trial “would expedite the resolution of the issues in dispute”. If the master who gives such consent is a referee, the master on reference has the powers given to him or her under section 58 of the Act, which includes the Enhanced Powers. On the other hand, if the master who consents to hearing a motion for summary judgment is not a referee, then the master’s powers are limited to those given to him or her under the Rules of Civil Procedure.

The motions judge accordingly erred in its holding that the master, as a master on reference, did not have jurisdiction to use the Enhanced Powers on a motion for summary judgment. Notwithstanding, the Divisional Court held that the master nevertheless denied the self-represented Owner procedural fairness in granting judgment to the Contractor.

The Divisional Court found that the master incorrectly described the motion as a motion for summary judgment. A motion under section 47 of the Act is not a motion for summary judgment. It is always a defensive motion and “does not provide a means for the plaintiff to move for judgment.” As such, the Contractor’s response to the Owner’s motion did not put the Owner on notice that judgment could be granted against him, thus denying him procedural fairness when judgment was, in fact, granted against him. Indeed, the Contractor was clear in stating its position that it was only seeking a trial, not judgment.  In sum, the Divisional Court affirmed on the matter of general interest that a master on reference may use the Enhanced Powers in disposing of a summary judgment motion. However, in terms of the merits of specific interest to the parties, the Divisional Court dismissed the Contractor’s appeal on the basis that summary judgment had been granted without a motion by the Contractor and with the Owner having been deprived of procedural fairness on the unique facts of this case.

The Court accordingly remanded the case back to another construction lien master to proceed on its merits.

Implications

The main proposition to come from this case is that a construction lien referee may use the Enhanced Powers when deciding a motion for summary judgment. This decision, however, was decided under the Construction Lien Act (i.e. the Construction Act as it read prior to July 1, 2018), where the list of possible referees under section 58 of the Act only included masters, case management masters and persons agreed on by the parties. Since July 1, 2018, this list has expanded to include deputy judges of the Small Claims Court or the Small Claims Court Administrative Judge, where jurisdiction allows.

So, does this mean that decision makers in the Small Claims Court may invoke the Enhanced Powers?

While the Divisional Court was careful in crafting its language to ensure that this decision applies to the powers of any construction lien referee, not just a master on reference, it would seem that a referee in the Small Claims Court would still not be able use the Enhanced Powers because such powers are established under Rule 20 of the Rules of Civil Procedure and matters in the small claims court are decided under the Rules of the Small Claims Court, not the Rules of Civil Procedure. Indeed, the Rules of the Small Claims Court do not even contemplate motions for summary judgment. As the Ontario Court of Appeal noted in Riddell v. Apple Canada Inc.:^[3]

In [Van de Vrande v. Butkowski, 2010 ONCA 230], this court held that motions for summary judgment based on principles emanating from r. 20 of the Rules of Civil Procedure are not available under the [Rules of the Small Claims Court]. This holding was based on the court's conclusion… that the failure to provide for summary judgment motions under the Rules of the Small Claims Court was not a gap in those Rules but, rather, a deliberate omission.

Nevertheless, as my colleague Kaleigh Du Vernet and I discussed previously in an episode of Building Insight,^[4] there is some uncertainty regarding the jurisdiction, powers and authority of Deputy Judges or the Small Claims Court Administrative Judge on reference and because this is still a novel issue, only time (and some case law) will be able to provide clarity.

It should also be noted that while summary judgment motions, and thus a referee’s ability to use the Enhanced Powers, are not available under the Rules of the Small Claims Court, decision makers in the Small Claims Court, whether on reference or not, are already accorded a set of broad and flexible powers in order to “hear and determine in a summary way all questions of law and fact and may make such order as is considered just and agreeable to good conscience.”^[5]

In addition, this case highlights the cautious approach members of the Law Society must take when managing a file with self-represented litigants. Some applicable rules under the Rules of Professional Conduct include Rules 7.2-1 and 7.2-9 and Subrule 5.1-2(i). Indeed, it is always prudent for counsel to “urge the unrepresented person to obtain independent legal representation.”^[6]

Finally, this decision may pour some cold water on the concept of “boomerang” summary judgment. Boomerang summary judgment is granted when the moving party (as the name suggests) moves for summary judgment, the non-moving party (as the name suggests) merely responds to the motion and does not bring a cross-motion for judgment itself, yet summary judgment is granted in favour of the non-moving party.

While this case did not in fact deal with summary judgment per se (it dealt with a section 47 motion), its reasoning bears somewhat of a similarity to the Court of Appeal’s recent decision in Drummond v. Cadillac Fairview Corporation Limited (“Drummond”), where the Court held that the lower court’s granting of “boomerang” summary judgment in favour of the non-moving party denied the moving party procedural fairness.^[7] Indeed, like the position taken by the Contractor in this case, the non-moving party in Drummond did not seek judgment, but rather, a trial.^[8] The Court of Appeal held that the moving party in Drummond was denied procedural fairness because inter alia “the motion judge failed to put [the moving party] on notice that he might grant judgment against it and then afford [the moving party] an opportunity to address that litigation risk.^[9]

Neither this case, nor Drummond, should be read as a flat-out rejection of the concept of “boomerang” summary judgment. Both of these cases may be cautiously read as placing an important limitation on the practice, that being procedural fairness. As such, where a non-moving party is faced with a motion for summary judgment and wishes to seek summary judgment as well, the prudent course of action is for the party to formally move for summary judgment in a cross-motion and not wait for the boomerang to be thrown its way.

Conclusion

In R&V Construction Management Inc. v. Baradaran, the Divisional Court has provided some much needed clarity on the powers of a construction lien referee. However, as discussed above, the coming of the new Construction Act has led to a number of novel issues that are yet to be resolved. As such, this decision is likely only among the first of what will likely be a number of important decisions that will be released by courts in the coming years that will shape construction law and interpret the new Act.