Interpreting ‘judgment’ in Construction Act appeals: Key takeaways from MGW-Homes Design Inc v. Pasqualino

Introduction

In the recent case of MGW-Homes Design Inc. v. Pasqualino,[1] the Ontario Court of Appeal addressed the novel issue of the correct appeal route for orders related to the enforceability[2] of adjudicators’ determinations under Ontario’s Construction Act (the “Act”). The key question was whether an order vacating a writ of enforcement issued in connection with an adjudicator’s determination qualified as a « judgment » under section 71(1) of the Act, which would determine if the appeal should be heard by the Divisional Court. The Court, reviewing established case law, confirmed that the term « judgment » should be interpreted broadly, and held that the order vacating a writ of enforcement, related to an adjudicator’s determination, qualifies as a « judgment » under section 71(1), falling under the appeal provision of the Act.[3]

In addition to providing clarity on the novel issue of the proper appeal route for judgments involving statutory adjudication, specifically the route of appeal of an order on the enforceability of an adjudication determination (and developing the body of case law on statutory adjudication), the decision in MGW-Homes Design also provides a helpful reminder in respect of:

1. The concurrency in remedies as between the construction lien remedy and statutory adjudication, i.e., the ability to pursue both remedies concurrently with an adjudicator’s determination being binding on the parties on an interim basis until determination of the matter by a court, an arbitration, or a written agreement between the parties is made;
2. The importance, as best practice, of complying with prescribed procedural steps and timelines when pursuing construction-related remedies (claims and/or defences), including in respect of giving required notice and enforcing an adjudicator’s determination, with there being a difference between lien claims and adjudication determinations in terms of strict compliance;[4] and
3. The purpose and objectives of Ontario’s lien legislation in terms of efficiency, both financial and temporal, with the goal of efficiency being facilitated through a specialized procedural regime designed to, among other things, “[deal] with trade claimants that would otherwise be left behind without security if unpaid on a building project.”[5]

Background of the Dispute

MGW-Homes Design Inc. (“MGW”), a contractor, entered into an agreement with Mr. Pasqualino, a homeowner, for renovation work to Mr. Pasqualino’s home. When a dispute arose, MGW registered a lien and issued a Statement of Claim. In response, Mr. Pasqualino paid the lien amount and additional costs into court as security, and filed a Statement of Defence and Counterclaim.

MGW then sought interim adjudication under Part II.1 of the Act, a process introduced in 2019. The adjudicator determined that Mr. Pasqualino was required to pay MGW. Mr. Pasqualino did not pay the required amount under the adjudication determination, and instead sought and was denied leave to judicially review the determination.  The adjudicator’s decision, binding under section 13.15 of the Act, was filed by MGW with the court for enforcement under section 13.20. However, MGW failed to provide notice to Mr. Pasqualino as is required by s. 13.20(3). MGW obtained a writ of enforcement from the court.  Mr. Pasqualino moved (successfully) to vacate the writ of enforcement on the basis that MGW failed to give the required notice. The motion judge found MGW’s failure to notify to be a fatal error, leading to the vacating of the writ, and the motion judge ordered that MGW be barred from taking further enforcement actions and awarded Mr. Pasqualino $5,000 in costs. MGW appealed these decisions.

Key Issues and the Positions of the Parties

While MGW’s appeal raised two substantive arguments with respect to the motion judge’s orders, the preliminary issue for the Court of Appeal was in respect of a jurisdictional question as to whether the appeal was properly before it, or the Divisional Court. The issue turned on whether the order being appealed qualified as a « judgment » under section 71(1) of the Act.

Section 71 is the Act’s only appeal provision. The language of s. 71 states:[6]

71 (1) Except as otherwise provided in this section, an appeal lies to the Divisional Court from a judgment or an order on a motion to oppose confirmation of a report under this Act.

MGW argued that « judgment » under section 71(1) should be interpreted broadly to include the final order in this case. MGW contended that past interpretations of « judgment » have extended to final orders in various contexts, including those not directly related to liens or trusts but still within the Act’s proceedings.[7]

Mr. Pasqualino disagreed, arguing that section 71(1) should be interpreted narrowly as an exception to the usual appeal route. He asserted that adjudications under Part II.1 of the Act follow a distinct procedure compared to other proceedings under the Act. Furthermore, Mr. Pasqualino argued that the adjudication process and the court or arbitration processes are distinct legal proceedings. He maintained that the motion judge’s order should be considered a “final order” affecting a substantive right and, therefore, should be heard by the Court of Appeal.

Analysis

In addressing the issues, the Court of Appeal noted that the Act was designed to efficiently manage trade claims in construction projects, ensuring that trade claimants are not left without recourse if unpaid on a building project. This efficiency under the Act is both financial and temporal.[8] The Court further observed that the motion judge recognized that Part II.1 of the Act introduces an adjudication process intended to quickly and efficiently resolve construction disputes, providing a summary process that avoids lengthy court or arbitration proceedings.

The Court rejected Mr. Pasqualino’s argument that section 71(1) of the Act should be narrowly interpreted as an exception to the standard appeal route under the Courts of Justice Act (“CJA”). The Court stated that such a narrow interpretation would undermine the Act’s efficiency and conflict with established case law, which views section 71(1) as a specialized appeal provision taking precedence over general CJA provisions.[9]

The Court also emphasized that past decisions support a broad interpretation of “judgment” under section 71 of the Act.[10] This broad interpretation includes judgments from various proceedings under the Act, such as trust claims[11] and counterclaims.[12] The Court highlighted that the Act’s specialized procedures, including those in Part II.1 for adjudication, are designed to resolve disputes swiftly and efficiently, reflecting the Act’s focus on streamlining dispute resolution in construction cases.

Thus, the Court concluded that an appeal from an order enforcing an adjudicator’s determination falls within the scope of section 71, and therefore should be heard by the Divisional Court.  As a result, the appeal was dismissed.

Key Takeaways

Given the novelty of interim/statutory adjudication under Part II.1 of the Act, there is limited case law on its interpretation. The decision by the Court of Appeal in MGW-Homes provides critical guidance on how courts will interpret the term « judgment » in this context. Specifically, the ruling underscores that appeals stemming from adjudication decisions must be directed to the Divisional Court rather than the Court of Appeal. The case also reinforces the trend towards a broad interpretation of “judgment” under section 71(1) of the Act, affirming that the Act’s appeal provisions take precedence over general appeal procedures.

Should you have any questions, please do not hesitate to reach out to a member of Miller Thomson’s Construction and Infrastructure Group.

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[1] MGW-Homes Design Inc. v. Pasqualino, 2024 ONCA 422.

[2] This case specifically related to an appeal from an order vacating a writ of enforcement issued in connection with an adjudicator’s determination.

[3] In this case, and in light of the (novel) issue of whether the order appealed from constituted a “judgment,” MGW-Homes perfected its appeal in both the Divisional Court pursuant to section 71(1) of the Act and the Court of Appeal pursuant to section 6(1)(b) of the Courts of Justice Act, RSO 1990, c C.43. The Ontario Court of Appeal and the Divisional Court (Ontario Superior Court of Justice) each released a decision on MGW-Homes Design Inc. v. Pasqualino.

[4] The Divisional Court released its own decision in respect of this MGW-Homes matter, under the citation 2024 ONSC 2852, wherein the Divisional Court dealt with the issue of whether MGW’s non-compliance with the Act’s notice requirements after filing the determination with the court meant that the writ of enforcement was void and barred the enforcing party from taking any further steps for enforcement. The Divisional Court found that non-compliance with the notice requirement is not fatal to enforcement of statutory adjudication determination (specifically, that failure to comply with a notice requirement is not fatal to a writ of enforcement).  However, and importantly, the Divisional Court found that while no particular or automatic consequence for failure to give the requisite notice is prescribed for under the Act, remedies for non-compliance with the adjudication provisions are in the court’s discretion, to be exercised judicially in the circumstances of each particular case.

[5] Supra note 1, at para. 22.

[6] Construction Act, RSO 1990, c C.30, s 71.

[7] MGW relying on Villa Verde L.M. Masonry Ltd. V. Pier One Masonry Inc., 2001 CanLII 7060 (ON CA); TRS Components Ltd. v. Devlan Construction Ltd., 2015 ONCA 294 (CanLII).

[8] Teepee Excavation & Grading Ltd. v. Niran Construction Ltd. (2000), 49 O.R. (3d) 612 (C.A.) (not available on CanLII).

[9] Villa Verde L.M. Masonry Ltd. V. Pier One Masonry Inc., 2001 CanLII 7060 (ON CA) at para 9; Bird Construction Co. v. C.S. Yachts Ltd. et al., (1990) 38 O.A.C. 147 (CA), at para 9 (not available on CanLII).

[10] Ibid.

[11] Villa Verde L.M. Masonry Ltd. V. Pier One Masonry Inc., 2001 CanLII 7060 (ON CA).

[12] TRS Components Ltd. v. Devlan Construction Ltd., 2015 ONCA 294 (CanLII).