Law Times

Page 2 June 1, 2015 • Law Times www.lawtimesnews.com NEWS Lien masters subordinate to judges, court finds By Shannon Kari Law Times T he authority of a mas- ter presiding over a ref- erence hearing under the Construction Lien Act is below that of a Superior Court judge, the Ontario Divi- sional Court has concluded. The three-judge panel came to that conclusion in RSG Me- chanical Inc. v. 1398796 Ontario Inc., a long-running dispute over construction liens related to a residential development project in Toronto's west end. The decision means lien mas- ters interpreting the law in this area in Ontario will be bound by the decisions of a single Superior Court judge. It could also have implications for the construc- tion bar in Ontario, especially in Toronto where there are on- going resource problems with a lack of masters available to pre- side over litigation in this area. "The construction bar relies on the specialized skills of the construction lien court," says Anna Esposito, who heads the construction practice at Pallett Valo LLP. "I wouldn't want them to be hamstrung too much in their ability to do the right thing," she says of the construction lien masters. Esposito says it hasn't been uncommon in the past for there to be "seemingly contradictory" decisions on the law in this field between lien masters and Supe- rior Court judges. The decision of the Divi- sional Court in RSG Mechanical stemmed from an appeal of a ruling issued last year by Supe- rior Court Justice Fred Myers. He found now-retired master Julian Polika had "manifestly failed" to interpret the Con- struction Lien Act in accor- dance with its purpose and there were errors in principle with the report he issued in 2013. "That is, the Master interpret- ed the statute to give a key player a skewed incentive favouring the failure of the developer — or at least limiting efforts to save the project in the best interests of all," wrote Myers. Polika also failed to follow a leading judgment on the rights of lien claimants as well as a Divisional Court decision on point, Myers found. "That is, the Master found that he was not bound by the Divisional Court because he be- lieved that he had done a more detailed analysis of the statute and the Divisional Court had not addressed his analysis," wrote Myers. "In so finding, he ignored the fundamental rule of stare decisis or binding precedent on which our legal system is built," he added. A better approach, accord- ing to Myers, would have been to adopt the "good humored per- spective" of a master in Alberta in South Side Woodwork v. R.C. Contracting, a 1989 decision that referenced the "pecking order" of the judiciary. "The judicial pecking order does not permit little peckers to overrule big peckers," wrote My- ers in quoting from that decision. The Divisional Court panel upheld Myers' decision and found he was correct to refuse to confirm the report issued by the master. Antonio Conte, lawyer for the appellant RSG Mechanical, ar- gued that under the statute, a lien master was effectively a judge of the Superior Court. The act states that a judge may "refer the whole action or any part of it for trial" to a lien master once the parties have filed all pleadings. As well, once directed, a master has "all the jurisdiction, powers and authority of the court to try and completely dispose of the ac- tion," according to the statute. Superior Court Justice Thom- as Lederer, writing for the panel, found that the statute outlines the "conduct" of a reference hear- ing. "It does not change the posi- tion of the referee within our ju- dicial structure. The Master con- tinues to have the status and place that comes from being a Master," wrote Lederer with justices Kath- erine Swinton and Alison Harvi- son Young concurring. "He does not for the pur- poses of the reference, obtain the standing of or become a judge. On this basis, he would be bound to follow the decision of a single judge of the Superior Court," wrote Lederer. Polika, who retired in 2013 and now provides arbitration and mediation services, de- clined to discuss the specifics of his decision when contacted by Law Times last week. How- ever, he says there's case law that supports the position that a lien master has concurrent author- ity with a Superior Court judge under the statute. "He may disagree. That is his prerogative," says Polika in refer- ence to the Divisional Court de- cision written by Lederer. Michael Handler, who repre- sented the defendants at the Su- perior Court and the Divisional Court, says the case really ended up being about stare decisis. The master "went against precedent. He attempted to create new law and he did not have authority to do so," says Handler. But Conte says he intends to seek leave to appeal at the Ontar- io Court of Appeal. "The decision erodes what the act was intended to do, which is to give protection to lien claimants," says Conte of the Divisional Court ruling. The interpretation that lien masters are subordinate to a rul- ing of a single Superior Court judge, anywhere in the province, also has significant implications for the construction industry in southern Ontario, he suggests. "Why have a trial in front of a master anymore?" asks Conte. The Divisional Court ruling means contractors "are going to have to be much more careful and not give credit" to develop- ers, he adds. 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