Legal Blog

Improvement Again

We reported on Kennedy Electric Limited v. Dana Canada Inc. (see newsletter of July 2006) regarding improvements to an assembly line. The Ontario Court of Appeal has now rendered its decision on the appeal. If you recall, the case dealt with the attempt of a subcontractor, who had moved an assembly line, to lien the project. Whether the sub’s work was lienable depended on whether the contractor provided work to the improvement or, in essence, just dealt with chattels that were being supplied to the improvement, but were not part of the land and building themselves.

The trial judge decided, in his wisdom, that the work the sub performed was work that was not integrated into the building; it was merely work that could be portable from building to building. The Divisional Court by a 2-1 majority upheld the trial decision. The Court of Appeal unanimously upheld the Divisional Court and dismissed the appeal.

Why

Appeal courts can reverse on an error of law. The standard of review is one of correctness (i.e. if the appeal court disagrees with the decision in law, it can overrule).

The standard of review on a question of fact or a question of mixed fact and law is very different. In these situations, an appeal court can overrule only if the trial judge made a palpable and overriding error. For example, assume that, on a key issue, the trial judge stated that the facts were one way and, on the record, not only was there no evidence to support that finding, there was ample evidence to the contrary. In that scenario, the trial judge would have made both a palpable error and one that was sufficiently important that it would have affected the ultimate decision in the case. In this situation, an appeal court can overturn a trial decision.

Conversely, assume that the trial judge hears the evidence, prefers the evidence of one party to those of the other, and, based on that evidence, finds facts on which he or she bases a decision. Since there was evidence to support those findings of facts, an appeal court cannot overturn the decision based on the facts alone, even if the appeal court would have found the facts differently. Since the trial judge sees and hears the witnesses give evidence, the appeal court must defer to the trial judge’s findings of facts.

In Kennedy Electric, the Court of Appeal stated, “the finding of portability is a finding of fact and therefore on appellate review subject to a standard of palpable and overriding error. I do not agree that the trial judge committed (a) palpable and overriding error in making this finding. There was evidence to support the finding. The assembly line had been built and disassembled before being transported to St. Marys for installation. The assembly line could be readily disconnected from the addition to the plant with no damage to the plant or its services. Moreover, Dana had a history of moving assembly lines from one plant to another. While a different judge may have come to another conclusion on the issue of portability, I am satisfied that it was open to the trial judge to reach the conclusion that he did.”

Upshot 

Whether a sub can lien a project regarding work on an assembly line is a question of fact. As the court stated, “Each case will depend on its facts. In most cases, the installation or repair of machinery used in a business operated in a building, particularly where the machinery is portable, will not give rise to lien rights under the C.L.A. On the other hand, where machinery is installed in a building for the use of a business and is completely and permanently integrated into the building, a lien claim will arise. However, based on the findings of fact made by the trial judge in this case, it was open for him to find that no lien claim arose.”

Since the sub did not have the right to lien, then, when the general went bankrupt, the sub had no priority for its work. The secured creditors received any money that ultimately was paid from the general’s estate and the sub received nothing.