Executive Summary: Key Legal and Evidentiary Issues

• Whether the plaintiff proved entitlement to a monetary award despite failing to preserve a valid construction lien

• Admissibility and weight of evidence related to breach of contract and abandonment of work

• Application of the Construction Lien Act and its provisions on expired liens and damages

• Consideration of parties' conduct during litigation in determining costs

• Relevance of formal and informal settlement offers in awarding substantial indemnity costs

• Contractual interpretation of pre- and post-judgment interest under Article 5.3 of the parties’ agreement

Background and procedural history

Elembe (LMB) Mechanical Ltd. (“LMB”) initiated a lien action against Two Hundred Inc. (“200”) under Ontario’s Construction Act, seeking payment for mechanical work allegedly completed. LMB claimed an unpaid amount of $260,134.31, later reduced during litigation. 200 counterclaimed, asserting breaches by LMB, including wrongful suspension of work and abandonment of the project.

The trial resulted in a mixed outcome. The court found that LMB was owed $172,740.47 in earned but unpaid contractual amounts. However, the lien was found to be invalid due to being untimely. The court granted judgment in contract to LMB, dismissed 200’s counterclaim, and declared the lien expired. Lien security was ordered returned.

Costs decision

Both parties claimed entitlement to costs. LMB sought $139,061 on a substantial indemnity basis, relying on offers to settle and arguing predominant success. 200 sought partial indemnity or no costs, pointing to findings of LMB's breach and expired lien.

The court acknowledged its broad discretion under section 86 of the Construction Lien Act and applied the cost factors in Rule 57.01(1). It declined to award substantial indemnity, citing adverse findings against LMB, including contract breaches and an invalid lien. LMB’s settlement offers were not found to be compelling enough to justify elevated costs. However, the court agreed that 200’s litigation conduct—including breaching court timetables and failing to deliver documents—did increase LMB’s costs.

Ultimately, LMB was awarded partial indemnity costs of $48,000 plus disbursements of $3,708.60, totaling $51,708.60. The court found this amount reasonable, considering divided success and the respective conduct of both parties.

Pre-judgment interest

LMB sought pre-judgment interest from the date of abandonment or from lien registration. 200 argued no interest should be awarded, as LMB was the breaching party. The court rejected both positions, instead interpreting Article 5.3 of the parties’ contract. It held that the judgment amount was not “due” under the contract before the decision, as LMB’s invoicing did not comply with the agreement. Consequently, interest would only accrue from the date of judgment, as contemplated by the contract.

Final notes

The decision emphasized the importance of conduct, proportionality, and precision in lien actions. While LMB ultimately secured a judgment in contract, its procedural missteps and expired lien materially affected its entitlement to costs and interest. The court concluded by confirming its intent to issue a final report following submission of competing drafts.