The Construction Lien Act, R.S.O. 1990, c. C.30 (“CLA”) underwent major modifications in 2018, and was renamed the Construction Act, R.S.O. 1990, c. C. 30 (“CA”). The application of the ‘transition rules’ in the CA will determine whether the former CLA continues to apply.
Associate Justice Wiebe (“AJ Wiebe”) had the opportunity to apply the transition rule contained in section 87.3(1)(a) of the CA, in his decision in DNR Restoration Inc. v. Trac Developments Inc., 2023 ONSC 1849, released on March 20th, 2023. This transition rule provides that the CLA and its regulations continue to apply with respect to an improvement if a contract for the improvement was entered into before July 1, 2018.
Facts
The owner, Trac Developments Inc. (“Trac”) hired Wilkinson Construction Services Inc. (“Wilkinson”) on March 23, 2018, to act as construction manager for the construction of a residential condominium at 248-260 High Park Avenue, Toronto.
Trac also contracted directly with DNR Restoration Inc. (“DNR”), on November 1, 2019, to supply and install formwork and rebar caps. There were many delays and on January 10, 2022, DNR submitted a delay claim.
On March 2, 2022, Trac replaced Wilkinson with Clark Construction Management Inc.
DNR registered a claim for lien on September 27, 2022, in the amount of $2,501,259.86 and subsequently reduced it to $860,656. DNR purported to perfect the lien by commencing an action on December 23, 2022.
Trac brought a motion before AJ Wiebe requesting that DNR’s lien be declared expired. Trac alleged that DNR failed to preserve its lien ‘in time’ because the CLA applied such that the lien was required to be preserved within 45 days of completion or abandonment of its contract. AJ Wiebe addressed several important questions, including:
- Which legislation applied in this case; the old CLA or the new CA?; and
- Was the DNR claim for lien registered out of time?
AJ Wiebe determined that the former CLA applied, but he dismissed the motion.
Applying the Transition Rules
Section 87.3(1)(a) states that the CLA continues to apply with respect to an improvement if a contract for the improvement was entered into before July 1, 2018.
The Wilkinson contract was entered into prior to July 1, 2018, but DNR’s contract was entered into after that date. Counsel for DNR tried to argue that the Wilkinson contract was not a “contract for the improvement” because it only concerned the provision of services, not services and materials.
Section 1 of the CA contains several key definitions. “Contract” means a contract between an owner and a “contractor” – which is “a person contracting with or employed directly by the owner or an agent of the owner to supply services or materials to an improvement and includes a joint venture entered into for the purposes of an improvement or improvements”.[1] “Improvement” is defined in broader terms than contract, and includes any “alteration, addition or capital repair to the land,” or “any construction, erection or installation on the land,” or “the complete or partial demolition or removal of any building, structure or works on the land”.[2]
AJ Wiebe confirmed that pure construction managers, who only provide services to an improvement, have lien rights just as other contractors do, so they are also contractors for the purpose of s. 87.3(1)(a).[3]
AJ Wiebe referred to the decision of Crosslinx Transit Solutions Constructors v. Form & Build Supply (Toronto) Inc.[4] where a subcontract was entered into after July 1, 2018, but the prime contract predated July 1, 2018. In this case, Associate justice Robinson (“AJ Robinson”) decided that the date of the prime contract governs which version of the act applies.
Counsel for DNR relied on the Crosslinx decision to support the argument that the concept of improvement in section 87.3(1)(a) is tied to and limited by the concept of a contract. AJ Robinson stated in Crosslinx that, “subcontract work is a portion of the overall work to be performed pursuant to a contract for the improvement. It is inherently connected to, if not dependent on, that contract”.[5]
AJ Wiebe disagreed with DNR’s interpretation of the Crosslinx decision, stating that the concept of improvement is not tied to the concept of contract. Where there are multiple contracts for an improvement and the scope of the individual contracts are narrower than the improvement, the first contract will determine which version of the Act will apply to the improvement.[6]
AJ Wiebe opined that AJ Robinson’s words in Crosslinx were limited to a dispute between a contractor and subcontractor. These words cannot be taken as an overarching interpretation of the transition rules. The intended effect of the language in 87.3 is for the same legislative scheme in the CA to apply consistently to all persons in the same improvement.
Timeliness
AJ Wiebe found that because the earliest contract predated July 1, 2018, all contracts fell under the old CLA. As such, DNR had to preserve its lien on or before 45 days from the date of “completion or abandonment”. The issue was whether DNR abandoned the contract on or before August 13, 2022. DNR denied that it abandoned the Contract and asserted that Trac terminated the contract on August 17, 2022.
AJ Wiebe reiterated the law on abandonment, which occurs “when there is a cessation of work and either an intention not to complete the contract or a refusal to complete the contract” such as when the owner terminates a contract.[7]
Upon evaluating the available evidence, AJ Wiebe found that Trac failed to discharge its burden of proving that there was no triable issue concerning the timeliness of the DNR claim for lien.
Costs
AJ Wiebe awarded no costs to either party. While DNR succeeding on most of the issues argued, it had grossly inflated the lien claim. Trac was justified in bringing the motion, but it pursued triable issues without success.
This decision provides helpful guidance to the construction bar on the proper application of the transition rules in the CA, as well as severing contractual relationships and costs.
[1] Construction Act, R.S.O. 1990, c. C. 30 (“CA”), s. 1 “Contract” and “Contractor”
[2] Construction Act, R.S.O. 1990, c. C. 30 (“CA”), s. 1 “Improvement”
[3] B.I.L.D.O.N. Construction (801) Inc. v. Project 801 Inc., 2011 4169 at paragraph 25; and Marino v. Bay-Walsh Ltd., [2002] O.J. No. 2211 at paragraph 111.
[4] Crosslinx Transit Solutions Constructors v. Form & Build Supply (Toronto) Inc, 2021 ONSC 3396 (CanLII),
[5] Crosslinx Transit Solutions Constructors v. Form & Build Supply (Toronto) Inc., 2021 ONSC 3396 (CanLII), at para 30
[6] DNR Restoration inc. v. Trac Developments Inc., 2023 ONSC 1849, at paras 32-33
[7] Gem in Niagara Homes Inc. v. Dewling et al., 2018 ONSC 3500 (CanLII) at paragraph 27 and 28