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From the Legal DeskFurther confusing what work is lienableOntario Court of Appeal releasesdecision upholding Kennedy v DanaBy Stephen Tatrallyay, LLBStephen Tatrallyay is a prominent Torontoconstruction lawyer and can be reachedvia e-mail at statrallyay@rogers.com or bycalling (416) 482-5164. He is also a memberof EB’s Editorial Advisory Board.Be careful! It would seem claims for lien are not availableto suppliers of non-construction equipment to a “bricks andmortar” base building—even when its entire purpose is tocontain such equipment and produce something with it.Near the end of September, the Court of Appeal releasedits unanimous decision upholding the majority decisionof Divisional Court in Kennedy Electric v DanaCanada Inc. 1This means that claims for lien are not available to suppliersof non-construction equipment to a “bricks and mortar”base building—even in circumstances where the entire purposeof construction of the base building was to contain suchequipment and produce something with it.In this case, Dana Canada Inc. owned land in St. Mary’s,Ont., as part of its production facility for Ford vehicleslocated there. Dana decided to construct a building on theland in St. Mary’s to house the assembly line for a new line ofpickups. The evidence at trial was that there was not muchinteraction between the building designer and the designerof the assembly line, Rumble Automotive, to determine theconfiguration of both building and assembly line, but that itwas always the intention of all concerned to use the buildingto contain the assembly line.Rumble designed the line and hired Kennedy Electric toactually construct it. The work consisted of the erection andinstallation of more than 100 mezzanine platforms, eachpurpose-designed to hold one or more of the pieces of equipmentnecessary to the assembly line, covering about 100,000sf of the floor of the building, weighing about half a milliontonnes and standing, on average, 20-ft high.The work was in two phases: first, a mock-up of theline had to be built in Rumble’s facilities in Mississauga toensure it actually worked, then the whole thing had to bedismantled by Kennedy, shipped to St. Mary’s by truck andreassembled. It was “attached” to the building by thousandsof mechanical and chemical bolts. To detach the equipmentwould result in the cutting of those bolts and inevitabledamage to the floor.Unfortunately, there was a falling out between Rumbleand Kennedy which resulted in Kennedy allegedly not beingpaid several million dollars and, in turn, not paying someof the subtrades that worked for it. Kennedy and somesubtrades liened the project and started actions to enforcetheir claims. The question of lienability was brought to trialbefore Justice Killeen sitting at London. In a decision renderedlate in 2004, Killeen held that the work in questionwas not lienable.I served as counsel for Kennedy at trial and admit to abias in Kennedy’s favour. Killeen conducted a very thoroughreview of the case law, referring to every case brought to hisattention. He indicated that he was bound by the SupremeCourt of Canada’s 1963 decision in Ace Lumber v ClarksonCo. Ltd., to the effect that, because a Mechanic’s Lien was createdby statute, the legislation should be given a strict determinationof what types of claims could be protected by it.After recognizing that the entire case turned on the definitionof “improvement”, but without really considering themeaning of that word himself, the trial judge turned to thereport of the original committee which drafted the act and,specifically, to their definition of “improvement”:While the definition... is broad, the Committee hasattempted to draft it in such a way that it will be clearthat the lien created by the Act applies only in the caseof the construction and building repair industries.He also cited the Ontario Court of Appeal’s 2001decisionin Central Supply v Modern Tile, where the Court seems tohave approved such an analysis.The only prior Ontario appellate court decision he couldfind supporting that approach was from back in 1952,decided under an earlier act with a totally different definitionof “improvement”. Cases from other provinces, whilegenerally supportive of his approach, were by no meansunanimously so; indeed, the B.C. decisions seem to haverecently begun to go the other way. The judge distinguishedthese on the basis of different wording in the definition of“improvement” in the B.C. Act (notwithstanding that it isactually more restrictive than Ontario’s).Killeen’s expressed reason for rejecting the lien was that,while the machinery was to be bolted to the floor of the plantbuilding—and lines for the layout painted on the floor—itwas admitted that all of the base services were installed by theconstructor of the base building, and that it was outside thescope of Kennedy’s contract to even hook up to them. Thetrial judge was also impressed by evidence that Dana had, onoccasion, disassembled similar systems in other plants, movedthem elsewhere and reassembled them. (In this case, though,there was no evidence of any intention on Dana’s part of doingthis. Indeed, the contract between Dana and Ford specifiedthat the equipment remain in that location to produce thatline of trucks for at least eight years.)The Prime Contract specified that no liens were to betolerated on the project, and must be removed forthwith.Kennedy’s contract was silent on the point, although it didprovide for a 20% holdback until job completion. AlthoughEligible Toronto buildingscan get a cash-back rebateof up to 40% of their costs.Contact the BOMA Toronto CDM Program for detailsINFO NO. 15416-440-0101 www.bomacdm.comBOMA_EB_Oct07.indd 114 • NOVEMBER/DECEMBER 2007 • www. mag.com10/16/07 3:15:46 PM