In response to the novel Coronavirus COVID-19 (COVID-19) pandemic, and the rise of cases in the province, the Government of Ontario (Ontario) has exercised its powers under the Emergency Management and Civil Protection Act (EMCPA) to suspend the running of limitation periods in the province for the duration of the state of emergency declared in Ontario on March 17, 2020.1 On March 15, 2020, the Superior Court of Justice suspended operations except for urgent matters.2
On March, 20, 2020, Ontario passed O. Reg 73/20 pursuant to section 7.1(2) of the EMCPA (the Regulation). The Regulation temporarily suspends limitation periods under any provision of a statute, regulation, rule, by-law, or order of the Government of Ontario for the duration of the emergency. Further, any provision of any statute, regulation, by-law or order of the government which establishes a period of time for any steps to be taken in any proceeding is suspended for the duration of the emergency, subject to the discretion of the court, tribunal or other decision maker responsible for the proceeding. The Regulation is retroactive to Monday March 16, 2020. The limitation period suspension appears to be absolute as there is no discretion to the court set out in the Regulation, while procedural timelines will be subject to the discretion of decision makers. Practically, this means if a procedural step is not carried out, parties may later face a motion.
On March 24, 2020, Ontario ordered the mandatory closure of all non-essential workplaces starting on 11:59 p.m. on Tuesday March 24, 2020. The construction industry has been deemed an essential business by the province. The following are deemed essential businesses in construction and maintenance:
- Businesses that provide support and maintenance services, including urgent repair, to maintain the safety, security, sanitation and essential operation of institutional, commercial industrial and residential properties and buildings, including, property management services, plumbers, electricians, custodial/janitorial workers, cleaning services, security services, fire safety and sprinkler systems, building systems maintenance and repair technicians and engineers, mechanics, (e.g. HVAC, escalator and elevator technicians), and other service providers who provide similar services.
- Construction projects and services associated with the healthcare sector, including new facilities, expansions, renovations and conversion of spaces that could be repurposed for health care space.
- Construction projects and services required to ensure safe and reliable operations of critical provincial infrastructure, including transit, transportation, energy and justice sectors beyond the day-to-day maintenance.
- Construction work and services, including demolition services, in the industrial, commercial, institutional and residential sectors.
- Construction work and services that supports health and safety environmental rehabilitation projects.3
Meaning that as of now it is business as usual on Ontario’s job sites and for Ontario’s maintenance technicians, subject of course to the public health measures in place more generally.
Impact for construction liens
Parties to construction contracts in Ontario are well aware that the Construction Act (Act), prescribes strict deadlines for the steps to be taken to preserve and perfect construction liens for services rendered or materials supplied to an improvement.
Under Schedule 2 to the Limitations Act, 2002, sections 31 and 36 of the Act are referred to as other limitation periods. Sections 31 and 36 of the Act refer to the timelines for preservation and perfection of construction liens in Ontario. Interestingly, section 37(1) which sets out that a perfected lien expires immediately after the second anniversary of the commencement of the action that perfected the lien, unless an order is made for the trial of the action in which the lien may be enforced, or the lien action is set down for trial is not listed as a limitation period under the schedule. The closing of the courts, and recent notices from the province that individuals are not to attend the court house except for urgent matters, poses a challenge for those who will need to set their matter down for trial. While this may be captured under the second part of the Regulation which suspends any step to be taken in any proceeding for the duration of the emergency, this suspension is not absolute and is subject to the court’s discretion. Which means that a party who does not make efforts in this regard may be faced with a motion once the emergency is over. A party who needs to set a matter down for trial for risk of losing their rights under section 37(1) will probably need to demonstrate that efforts were made between counsel to deal with the reality of not being able to set down for trial during the emergency period.
Practically, lien claimants in Ontario are able to continue to preserve and perfect liens electronically. As of March 23, 2020, litigants are able to issue Certificates of Action (which are then, in lien litigation, registered on title) electronically, and to commence all claims electronically. There may be issues for those lien claimants who are working on a project that requires a delivered notice of lien (where the lien does not attach to property), which may become difficult in the wake of the closure of non-essential businesses throughout Ontario.
For example, under new subsection 34(3.1), if the land is owned by a municipality, the claim for lien may be served by being given to its clerk. While some municipalities have implemented procedures to facilitate the delivery of claims for lien to the clerk electronically, such processes are not equally available across all municipalities in Ontario. More particularly, municipalities may provide various methods for the giving of a copy of a claim for lien by publishing a statement on its website. These methods include sending a copy of the claim for lien by email to a specified email address, or submitting the claim for lien through a specified web portal. Under such circumstances, it is hard to envision why a lien claimant could not electronically deliver a lien to the municipality. As such, in these uncertain times, it is prudent to continue to preserve claims, especially since construction has been deemed an “essential service” by Ontario. For example, where a municipality has not established an electronic means of delivering its notice of lien, and where the municipal office has been shut down, a lien claimant could “deliver” its notice of lien by faxing or emailing copies of the claim for lien to the relevant parties.
There are further problems that will impact the construction industry if parties do not continue to preserve their liens in accordance with the Act. For example, by operation of section 22(1), a payer to a contract or subcontract under which a lien may arise cannot release holdback until “all liens that may be claimed against the holdback have expired or been satisfied, discharged or otherwise provided for under the Act.” As a result of the suspension of the running of the period to preserve and perfect liens under the Act, Owners may be nervous about releasing holdback until the end of the state of the emergency, since potential lien claims will arguably not have expired. The suspension of the deadlines to preserve and perfect liens may provide some relief, but the impact of the extension of the time periods applicable to preserving and perfecting liens creates some uncertainty regarding when it is safe to release holdback which may have an impact on cash flow especially to those trade contractors and suppliers awaiting the release of holdback.
Parties to a construction contact, may face other practical impossibilities, For example, where business operations are closed and the party only keeps paper records of key accounting documents for example, it may become impossible for a claimant to ascertain the amount of their lien. In this regard, it is recommended that parties to construction contracts take pre-emptive steps to ascertain their current state of accounts. There is a further risk to Owner’s whose properties are subject to liens; currently lien matters have not been enumerated as the types of matters which are “urgent” and as such motions to vacate liens or post security for liens will not be heard until the courts re-open. While some lien matters may be deemed urgent (e.g. in the context of bankruptcy or insolvency proceedings) it is likely that Owner’s will not be able to remove liens from title as a result of the court closure unless they can demonstrate to the court that such a matter is urgent. Service of an originating process may also become more difficult in the wake of the closure of non-essential businesses or businesses working shorter hours with limited staff. Ontario has not yet provided litigants with guidance in this regard, though parties may make accommodations to serve by registered mail where practical.
It should be noted that for contracts entered into on or after October 1, 2019 (and for which a procurement process was commenced on or after October 1, 2019), to whom the adjudication and prompt payment provisions in the Act apply, the Authorized Nominating Authority (ODACC) remains fully available to manage adjudications in this regard. ODACC has indicated that it is capable of conducting video-hearings for adjudications.
Dentons’ Construction group is continuing to monitor the impact of the COVID-19 pandemic on the construction sector. If you have any questions regarding to the impact of the Regulation on your construction project, please contact Karen Groulx, Dragana Bukejlovic or any member of Dentons’ Construction group.