Gay Company Limited v. 962332 Ontario Inc: The Meaning of “Registration” under the Construction Act and Land Titles Act

In Gay Company Limited v. 962332 Ontario Inc, 2023 ONSC 6023, the Ontario Superior Court of Justice provided guidance as to what constitutes “registration” under the Construction Act (the “Act”).[1] In particular, the case centered on a dispute regarding the registration of a claim for lien under the Act and an Application to Delete a Construction Lien through the Land Registry Office, with the central question being whether “registration” of these documents had occurred under the Act.

As discussed below, Gay emphasizes the tension often present in the interplay (and sometimes, the disconnect) between the Act, on the one hand, and the procedural steps carried out through the Land Registry Office, on the other. Overlooking the intricacies of the Act, even amidst the conveniences of the Land Registry Office’s registration processes, can have substantial ramifications. Gay also provides a timely reminder as to the importance of precise compliance with the Act and the critical role of certification in the registration process. In that regard, Gay is equally important in highlighting the importance of responsibility of lawyers for their staff as it relates to steps taken under the Act.

Below, we review the guidance provided by the Court, which should be of interest to those practitioners who regularly engage with the Land Registry Office on behalf of clients.

Case Background

On June 30, 2023, the defendant hired Edward Spong, a lawyer, to register a claim for lien against title of a property. However, Spong was in the process of winding up his practice and contacted John Montgomery, another lawyer, for assistance. When Montgomery was unavailable, Spong then entrusted his law clerk with the registration of the claim for lien, despite the fact that the clerk’s expertise was limited to real estate matters.[2] Unlike Spong however, the clerk was a registered Teraview user (the relevant software regarding property) and therefore could actually take the practical steps necessary to register a lien on title.[3]

On July 6, 2023, the clerk met with the defendant’s representative and ultimately registered the claim for lien (the “First Claim for Lien“). However, a typographical error was identified in the name of the lien claimant. In an apparent effort to address this error, the clerk prepared an Application to Delete Construction Lien as a draft under Teraview under the incorrect assumption that the document was necessary to rectify the typographical error in the lien claim, (which assumption was based on the fact that such a process is required in real estate transactions).[4]

The next day, the clerk consulted Spong regarding her intention to register a second Claim for Lien in respect of the same matter (the “Second Claim for Lien“) as well as an Application to Delete Construction Lien in order to clear the title of the erroneous First Claim for Lien. However, Spong disagreed with registering the Application to Delete, and advised that another lawyer taking over the matter should handle it. At the time of this discussion, Spong was unaware that the clerk had already prepared the Application to Delete Construction Lien.[5] Spong agreed with the intent to register the Second Claim for Lien.

Pursuant to Spong’s instructions, the clerk did not prepare an Acknowledgment and Direction for the Application to Delete Construction Lien, and did not present such a document for the defendant’s representative’s signature. However, on the same day (July 7, 2023), the clerk did register the Second Claim for Lien with all of the same details and this time with the corrected lien claimant’s name. Notwithstanding instructions to the contrary, the clerk inadvertently also registered the Application to Delete Construction Lien, but as a separate instrument.[6]

On July 11, 2023, the Land Registry Office pointed out an error in the Second Claim for Lien. The clerk entered the Lien Claimant’s name as “962332 Ontario Inc., trading as Liberty Metal Fabricators”, to which the Land Registry Office requested that she remove “trading as” from the lien claimant’s name in order to effect registration under the Land Titles Act. The clerk then informed the Land Registry Office about the typographical error in the First Claim for Lien, and the erroneous registration of the Application to Delete the First Claim for Lien. The clerk then requested the withdrawal of both documents on July 13, 2023.[7]

Through the process, it does not appear that either the clerk or Spong considered the implications under the Act, but rather appeared to be focused squarely on the process requirements under the Land Titles Act.

On July 13, 2023, Spong had a call with the plaintiff’s counsel, who argued that the First Claim for Lien had been discharged and thus the defendant’s lien rights were forfeited. This appears to be the first time that Spong became aware that the Application to Delete the First Claim for Lien was registered on title notwithstanding instructions not to do so. Spong then notified the clerk about this issue, and on July 17, 2023, the clerk corrected the Second Claim for Lien as instructed by the Land Registry Office.

On August 1, 2023, the Land Registry Office confirmed that the clerk emailed the Land Registry Office to confirm the withdrawal of the First Claim for Lien and the Application to Delete the First Claim for Lien. On that same day, the Land Registry Office confirmed the withdrawals, and importantly, confirmed the Second Claim for Lien was certified by the Land Registry Office.[8]

The Superior Court’s Decision

The plaintiff brought a motion to have the defendant’s lien discharged on the basis of the registration of the Application to Delete the First Claim for Lien from July 7, 2023 which had been inadvertently submitted to Teraview by Spong’s clerk. In this regard, the plaintiff argued that the integrity of the land title system would be at risk if users cannot rely on registration of such documents.

Meanwhile, the defendant argued that the Application to Delete Construction Lien had not been validly “registered”, and thus, the lien was not actually discharged (and in fact remained valid).[9]

The Court considered several key issues relevant to the construction industry, (1) the definition of “registration” under the Act and the Land Titles Act, (2) whether the defendants correctly registered the Application to Delete Lien Claim in accordance with the definition of registration, and (3) whether the defendant’s lien was discharged pursuant to the Act.

Applicable Legislation

As noted above, the Act makes a number of references to “registration”, but does not actually define it. Since the Act does not define “registration” or articulate a mechanism for registration, the Court instead turned to the Land Titles Act (LTA) and the Land Registry Reform Act (LRRA) to ground its analysis. These statutes specify the criteria, procedures and forms involved in registration on title within Ontario.[10]

Section 78 of the LTA provides detailed information on the process of registering an instrument. Subsection 78(3) reads:

(3) Registration of an instrument is complete when the instrument and its entry in the proper register are certified in the prescribed manner by the land registrar, deputy or assistant deputy land registrar, and the time of receipt of the instrument shall be deemed to be the time of its registration.[11] [emphasis added]

Thus, under s. 78(3) of the LTA, an instrument’s registration is only complete when it has been received and certified. Further, s. 78(2) of the LTA allows for an instrument to be withdrawn before certification is granted.[12]

In addition, s. 23 of the LRRA explicitly prohibits direct electronic registration of documents in the electronic land registration database until the Land Registrar registers the document.[13] In other words, the simple fact that an electronic document is delivered is not sufficient in and of itself to qualify as registration; rather, the Land Registrar must be the party that fulfills this step.

The Court’s Analysis

In this case, the Court examined the relevant legislation with a view to the principles of statutory interpretation, particularly focusing on the meaning of “registration” within the context of the LTA.

The Court reiterated that modern statutory interpretation involves examining the words of an Act and are to be read within their complete context and in their grammatical and ordinary sense harmoniously with the legislative scheme, purpose, and parliamentary intent of the Act.[14]

On this point, the Court relied on the presumption of consistent expression[15] to find that, since the Act did not provide a definition of “registration”, the definition stipulated in the LTA would apply in order to avoid inconsistencies and absurd outcomes. Thus, consistent with the LTA, registration of an instrument under the Act is only complete when that instrument has been certified by the Land Registrar, such that, the Land Registrar has confirmed and accepted the accuracy and compliance of a document or registration process, and importantly, the registration may be withdrawn prior to certification.[16]

In this case, since registration under the LTA required the receipt and certification of the instrument, withdrawal before certification meant that registration was never completed. On this basis, the Court found that the First Claim for Lien and the Application to Delete the First Claim for Lien were withdrawn before certification, and therefore were never registered.[17]

With respect to concerns regarding the integrity of the land title system and potential complications for owners and contractors due to withdrawal of claims for lien, the Court maintained that the registration process was specifically included to ensure the system’s integrity, and emphasized that the Land Registrar plays a gatekeeping role which prevents improper use of the land registry system.[18]

Ultimately, the Court dismissed the motion to discharge the lien, finding that there was no registration of the First Claim for Lien or the Application to Delete of the First Claim for Lien, such that the lien itself could not be discharged as a result.[19] The Court therefore noted that the proper registration of the claim for lien was the registration (which included the step of certification) of the Second Claim for Lien.[20]

Commentary

The case at hand serves as a reminder of several critical lessons with broader applications.

First, it highlights the importance of accuracy in the context of lien registration. It goes without saying that accuracy is of paramount importance in the context of legal documents, but this concern is even more heightened in the context of registering a lien. However, an important consideration which Gay did not consider is section 6 of the Act. This provision allows for the correction of minor defects in a lien claim:

6 (1) No certificate, declaration or claim for lien is invalidated by reason only of a failure to comply strictly with subsection 32 (2), 33 (1) or 34 (5) unless[21], in the opinion of the court, a person has been prejudiced as a result, and then only to the extent of the prejudice suffered;

6 (2) Minor errors or irregularities to which subsection (1) applies include,

(a) a minor error or irregularity in

(i) the name of an owner, a person for whom services or materials were supplied or a payment certifier,

(ii) the legal description of a premises, or

(iii) the address for service; and

(b) including an owner’s name in the wrong portion of a claim for lien

It is unclear why the Court did not discuss this section, as it seemingly encompasses both the first and second errors in registering a lien, both of which arguably constitute a “minor error” under s. 6(2) of the Act.

Second, in light of the legislative gap in defining “registration”, this decision provides parties with a clearer understanding of what constitutes registration of a lien under the Act, and a succinct roadmap for how to effect registration, as well as the critical role of certification in the registration process. The Court’s application of the presumption of consistent expression ensures clarity and consistency, enabling parties to make informed assessments in pursuit of their objectives. As well, parties can better assure themselves of compliance with the correct processes when registering or withdrawing claims for lien under the Act.

Lastly, this case highlights the responsibility of lawyers with respect to the actions of their non-lawyer staff members under the Law Society of Ontario’s Rules of Professional Conduct (“LSO Rules”).[22] A lawyer may delegate routine administrative tasks and the preparation of certain legal documents to non-lawyer staff, such as law clerks or paralegals, so long as these tasks fall within their skill set and expertise.[23] However, the lawyer retains ultimate responsibility, and is required to review the non-lawyer’s work at frequent intervals to ensure the work is completed properly.[24]

In this case, Spong’s responsibilities included assessing the clerk’s competency with respect to drafting a lien. Further, Spong was required to consistently check in with the clerk to ensure the lien registration was done correctly. Considering the clerk’s lack of prior experience in this specific task, and the fact that her experience was limited to real estate, it is arguable in retrospect that this matter ought to have raised some doubt regarding the appropriateness of delegating such a task to the clerk. Additionally, the registration of the lien occurred without Spong’s prior verification of its accuracy, which was inconsistent with a lawyer’s duties under the LSO Rules.

Thus, Gay ultimately emphasizes the crucial balance between delegation and oversight in legal practice, underscoring the lawyer’s paramount responsibility for the actions of their staff.

[1] Gay Company Limited v. 962332 Ontario Inc 2023 ONSC 6023 [Gay]. This case occurred under the Construction Act, rather than its predecessor legislation, the Construction Lien Act.

[2] Ibid at paras 4-7.

[3] By way of further context, Teraview is a portal used to access data in the Government of Ontario’s land records database. It is used by parties to perform searches, create and submit title documents for registration, view and print several instruments, plans, parcel registers and also search for writs of executions, without the need to visit a ServiceOntario office.

< https://www.teraview.ca/en/about-teraview/>

[4] Ibid at paras 7-10.

[5] Ibid at paras 11-13.

[6] Ibid at paras 14-17.

[7] Ibid at paras 18-20.

[8] Ibid at paras 21-24.

[9] Ibid at paras 1-3.

[10] Construction Act, RSO 1990, C 30; Land Titles Act, RSO 1990, c L.5; Land Registry Reform Act, RSO 1990, c. L.4.

[11] Land Titles Act, RSO 1990, c L.5, s 78(3).

[12] Land Titles Act, RSO 1990, c L.5, ss 78(2) and 78(3).

[13] Land Registry Reform Act, RSO 1990, c. L.4, s 23.

[14] Gay, supra note 1 at paras 37 and 38.

[15] The presumption of consistent expression stipulates that legislative language is drafted in such a manner that identical words are intended to hold the same meaning both within a statute and across different statutes (Vavilov, para 44).

[16] Ibid at paras 46-5; the term “certification” is not defined under either piece of legislation; however, in practice, it refers to the process of the Registrar verifying that the lien is compliant with statutory and regulatory requirements.

[17] Ibid at paras 59-60.

[18] Ibid at para 61.

[19] Ibid at para 59.

[20] Ibid at paras 57-60.

[21] Section 32(3) discusses liability for refusal to certify, s. 33(1) discusses certification of a subcontract, and s. 34(5) deals with the content of claim for every lien.

[22] Rules of Professional Conduct [LSO Rules].

[23] LSO Rules, s 6.1, commentary [1].

[24] LSO Rules, s 6.1, commentary [1].

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