Lessons Learned
We here at Construction Law Canada are happy to give you the following line to pull out of your back pocket at cocktail parties: “When dispute resolution has reached an impasse a contract will be considered abandoned, whatever the claimed intent of the contractor to perform.”
We also advise you to be very, very careful about lighting money on fire with a section 47 application unless you’re sure the court won’t be required to weigh evidence or evaluate the credibility of a witness.
Construction
This is a case shrouded in mystery. The scene: a large construction project that lasted many years with significant amounts billed and paid. A slowly-evolving dispute over invoices that led to negotiations, arbitration, and acrimony. Let your imagination fill in the rest.
Litigation
Our story begins, then, with an accusation of abandonment. S3i removed its equipment from site, demobilized, and filed a lien. Ecolomondo brought a motion – this motion – claiming that per section 47 of the Construction Act, S3i failed to file the lien in time.
The lien was registered on January 26, 2023, and Ecolomondo argued that the contract was abandoned before November 27, 2022: more than 60 days and thus contrary to section 31(2)(b).
Analysis
Abandonment
Roger J began by observing that the Construction Act does not define abandonment, but that a body of case law has evolved to fill the gap.
Abandonment is now deemed to have occurred when there is a cessation of work and either an intention not to complete the contract or a refusal to complete the contract. Subjective abandonment by the lien claimant is obviously sufficient – an intention by the contractor to abandon – but when abandonment is denied, all relevant circumstances must be considered to determine whether abandonment has objectively occurred.
In fact, the Court noted, objective evidence of abandonment supersedes any claimed subjective intent by the contractor to complete the contract. “Once it becomes impractical or impossible to perform the contract, no reasonable person would persist in saying that they were ready, willing, and able to continue performing.” Where dispute resolution has reached an impasse, in other words, a contract will be considered abandoned, whatever the claimed intent of the contractor to perform.
Section 47 Procedure
Ecolomondo and S3i disagreed about whether a court can weigh evidence, evaluate credibility, and draw inferences from evidence on a summary section 47 motion under the Construction Act, as they now can in a normal summary judgment motion per rule 20 of the Rules of Civil Procedure.
It’s a fascinating discrepancy (perhaps less fascinating for counsel involved in these disputes), and this Court ultimately aligned with the decision in Built By Engineers v Coronation Medical Plaza, another 2023 decision we reviewed here: the enhanced powers available via rule 20 of the Rules of Civil Procedure are not available on a section 47 motion under the Construction Act. Although an analogous test is used by rule 20 and section 47, these are procedurally different motions.
The Court does seem to obliquely suggest that this discrepancy is perhaps one that might be worth eliminating via amendment of the Construction Act, and this carefully-expressed mood also seems to appear in previous judgments discussing the topic. For now, though, the discrepancy remains.
Conclusion
As a consequence, in this case the Court had no choice but to declare the existence of issues requiring a trial. Ecolomondo’s evidence that it informed S3i in August of 2022 that it would not be performing any more work was contradicted by S3i’s own affidavit evidence, which was that the parties only agreed to a pause. Likewise, the parties do not agree about the veracity of the claim that the principal of S3i verbally stated in August that S3i was leaving and not coming back, nor what was said at a December meeting.
And that’s all it takes. Motion dismissed, costs of $33,000 ordered payable forthwith in order to dissuade future applicants from trying to force through section 47 motions containing triable issues.