Hamilton (City) v. Cipriani, [1977] 1 SCR 169

Supreme Court of Canada

Hamilton (City) v. Cipriani, [1977] 1 S.C.R. 169

Date: 1976-02-25

The Corporation of the City of Hamilton (Plaintiff) Appellant;

and

Rodolfo Cipriani and Frank Cipriani, carrying on business under the firm name and style of Continental Haulage and Douglas Haddad (Defendants) Respondents.

1976: February 3, 4, 25.

Present: Laskin C.J. and Judson, Spence, Dickson and Beetz JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Mechanics’ liens—Crown exemptions—Owner—Agreement between municipality and Ontario Water Resources Commission for construction of sewage plant—Financing agreement—Lands not conveyed to Commission in terms of the agreement—Mechanics’ Lien Act, 1968‑69 (Ont.), c. 65 (now R.S.O. 1970, c. 267).

The appellant City intended to enter into a contract with a general contractor for the construction of a secondary sewage plant. Because of financing limitations upon the City, it entered into an agreement with the Ontario Water Resources Commission whereby the Commission undertook to have the plant built, to pay the contractor and to accept repayment from the City over a forty year period. Instead of the Commission becoming owner of the plant and charging the City for its use (the standard arrangement), the agreement provided for ultimate ownership by the city but that in the meantime the City would, at the Commission’s request, transfer to it land upon which the plant would be built, which would be reconveyed when full payment was made. No land was conveyed under the agreement and the City remained the legal and beneficial owner of the land on which construction took place. Certain lien claims were made and properly filed by subcontractors of the general contractor’s excavation subcontractor which had abandoned its contract owing to financial difficulties. The City’s appeal to the Court of Appeal against the judgment declaring that the lien claimants had valid liens against the lands was dismissed.

Held: The appeal should be dismissed.

[Page 170]

The City was and remained the “owner” within s. 1(d) of the Mechanics’ Lien Act, 1968‑69 (Ont.), c.65 (now R.S.O. 1970, c. 267) so as to make the land lienable under s. 5. The work was done at the City’s request and the Act did not appear to impose the limitation that direct dealing was required before such a request could be found. The Commission’s status as an agent of the Crown was irrelevant. It was not involved as owner but was rather acting as the City’s banker.

Marshall Brick Co. v. York Farmers Colonization Co. (1917), 54 S.C.R. 569 distinguished.

APPEAL from a judgment of the Court of Appeal for Ontario[1] dismissing an appeal from the judgment of Sweet Co. Ct. J. declaring that certain land registered in the name of the City of Hamilton was subject to claims of lien.

G.J. Smith, Q.C., and L.J. O’Connor, for the appellant.

D.I. Bristow, Q.C., and D. Cooper, Q.C., for the respondents.

The judgment of the Court was delivered by

THE CHIEF JUSTICE—This appeal is brought here by the City of Hamilton to challenge the findings and conclusions in the Courts below that certain land, registered in the name of the City and upon which a secondary sewage treatment plant for the City was built, was subject to claims of lien arising out of a contract between the Ontario Water Resources Commission and a general contractor, W.A. McDougall Limited, now insolvent, which provided for the construction of the plant. The lien claims were made and properly filed by subcontractors of McDougall’s excavation subcontractor which had abandoned its contract owing to financial difficulties.

The City had proposed to deal directly with McDougall and, indeed, a contract between them had been prepared under which construction was to proceed. Because of limitations upon the City as to the financing of the project, involved in Ontario

[Page 171]

Municipal Board approval, it could not obligate itself directly to McDougall, and it sought the assistance of the Ontario Water Resources Commission which had an interest in the matter under its statutory authority and responsibilities. In the result, the City entered into an agreement with the Commission under which the latter undertook to have the plant built, to pay the contractor and to accept repayment from the City over a forty year period. Instead of the Commission becoming owner of the plant and charging the City for its use (the Commission’s standard arrangement), the agreement provided for ultimate ownership by the City, but that in the meantime the City would, at the Commission’s request, transfer to it land upon which the plant would be built, which would be reconveyed when full payment was made. No land was in fact conveyed under this agreement and, at the material time, so far as these proceedings are concerned, the City remained the legal and beneficial owner of the land upon which construction took place.

The Commission adopted the contract which the City had proposed to execute with McDougall, there being merely a substitution of its name for that of the City as the party liable for the construction. There was, in addition, a provision included that the Public Works Creditors Payment Act, 1962-63 (Ont.), c. 121, would apply. This Act was recently repealed but, having been in force when the mechanics’ lien proceedings were taken, an argument was founded on it to which I will refer later in these reasons.

The Ontario Court of Appeal, in reasons delivered by Schroeder J.A., summarized the material findings of fact made by the trial Judge, and I reproduce that Court’s summary as follows:

A. The purpose of the City in its dealings with the Commission was to obtain financial assistance in construction of sewage works for the City and the City accomplished that purpose by contracting with the Commission to have the work done, for which work the City would pay the Commission.

B. The City was at all relevant times the registered owner of the lands upon which and in respect of which the work was done.

[Page 172]

C. As at the date of trial the City had neither transferred nor become obligated to transfer any land to the Commission and as a result had a lienable estate or interest in the lands at the relevant time.

D. Even if the Commission became entitled to a transfer of land, since the purpose was to obtain security for the City’s obligations under the agreement the City would still have an estate or interest therein, as would an owner of an equity of redemption, and The Mechanics’ Lien Act, R.S.O. 1970, Chap. 267, would apply to such interest.

E. The work was done at the City’s request and for its direct benefit so as to constitute the City “owner” within the meaning of The Mechanics’ Lien Act, R.S.O. 1970, Chap. 267. The secondary plant was designed and built so as to be operated with the primary plant as one complete unit for a common purpose and, as a result, the primary plant and the lands upon which it is built are enjoyed with the secondary plant and the lands on which it is built pursuant to s. 5(1) of The Mechanics’ Lien Act.

The main contentions of the appellant City were, first, that if there was an owner within the meaning of the Mechanics’ Lien Act, 1968-69 (Ont.), c. 65, it was the Commission which, being an agent of the Crown, was not subject to the Act as it stood at the time of the proceedings herein; second, even if the City had an estate or interest in the affected land it did not come within the definition of “owner” in s. 1(d) because, there being no direct dealing between it and McDougall, it could not be said that the construction was being done at its request; third, this was a case where no right or duty existed to maintain a holdback pursuant to s. 11 because the holdback requirement had to be based on the contract between the City and the Commission, and not only was this a contract to which (by reason of Crown immunity) the Act did not apply but it was not a contract under or by virtue of which a lien could arise, within the meaning of s. 11; and, fourth, the City risked having to pay twice under the judgments below, both to the lien claimants and to the Commission, and this introduced a conflict with s. 9 of the Act which provides that “save as herein otherwise provided, the lien does not attach so as to make the

[Page 173]

owner liable for a greater sum than the sum payable by the owner to the contractor”.

Schroeder J.A. in the Ontario Court of Appeal, looking to the substance of the transactions between the City, the Commission and McDougall, construed the interrelationship as one where the Commission became the general contractor for the City and, as such, proceeded to carry out its contract through another general contractor. In my opinion, this is a proper analysis, recognizing the fact that the Commission was being the City’s banker. The City was and remained the “owner” within s. 1(d) so as to make its land lienable under s. 5, and it is idle formalism to contend that the work was not done at its request. I do not regard Marshall Brick Co. v. York Farmers Colonization Co.[2] as standing in the way of this conclusion. That case turned largely on the words “privity and consent” which were then conjunctive under the statute and they are now disjunctive. If the submission is that direct dealing is required before a request can be found, I am unable to accept such a limitation under the present Mechanics’ Lien Act.

The Commission’s status as an agent of the Crown is irrelevant to the present proceedings; it is not involved as an “owner”, and I do not think that the City can find any comfort in the Public Works Creditors Payment Act which does not oblige a creditor to resort to the Act (with its discretionary power to the Crown as to whether it will pay or not). Admittedly, a creditor can look elsewhere for his recovery, and I see nothing in the contention of alleged prejudice to the Crown when a creditor invokes the Mechanics’ Lien Act. The prejudice alleged appears to be based on the view that the Crown’s property or funds may be affected adversely if the City is allowed to recoup from the Commission any payments made to discharge the liens. This is an unworthy proposition, suggesting that the Crown might be able to settle for less than what is owing the unpaid creditors. At the same

[Page 174]

time, the contention rings strange with the assertion of the City that it may have to pay twice, that is both to the lien claimants and to the Commission. Schroeder J.A. was of opinion that the City would reduce its obligation to the Commission to the extent of its payments, but whether this is so or not, it is not an issue that calls for decision in the present proceedings. The argument on s. 9 of the Act, in so far as it is posited on the likelihood of double payment by the City, is also without merit in the circumstances herein and is not an answer to the valid liens.

It remains only to refer to s. 11, the holdback provision. Counsel for the appellant contending, as already noted, that there was no right or duty to maintain a holdback in this case, submitted in effect that this precluded enforcement of the lien. Counsel for the respondent contended that in the present case it was the City that was “the person primarily liable upon a contract… by virtue of which a lien may arise” within s. 11, and that the obligation thereunder to maintain a holdback does not depend on a fund being available out of which the holdback must be reserved. Whether this contention is correct or not on the facts of this case, I do not think that a valid claim of lien against an owner under s. 5 can be defeated by showing that the owner is not a “person primarily liable” under s. 11 and hence not obliged to maintain a holdback. The right to resort to the owner’s interest in the affected land is the principal remedy; s. 11 provides merely an ancillary resort for realizing the lien claim.

I would dismiss the appeal with costs.

Appeal dismissed with costs.

Solicitor for the respondents: D.I. Bristow, Toronto.

Solicitor for the respondents: D.I. Bristow, Toronto.