The changes to Ontario's construction lien legislation continue to make themselves felt with the Ontario Superior Court's recent decision in Crosslinx Transit Solutions Constructors v. Form & Build Supply (Toronto) Inc. (2021 ONSC 3396) ("Crosslinx"), which interpreted the transition provisions of the Construction Act, R.S.O. 1990, c. C.30. In the Crosslinx case, the Court concluded that the "contract" used to determine whether the old Construction Lien Act or the new Construction Act applies under section 87.3(1)(a) is the prime contract between the owner and the contractor.
On July 1, 2018, significant changes to Ontario's construction lien legislation came into force. Of particular note, and at issue in the Crosslinx case, section 31 of the Act was amended to increase the deadline to preserve a lien from 45 to 60 days and section 36 was amended to increase the timeline to perfect a lien from 45 days to 90 days. However, whether these amended timelines apply depends on the transition provisions set out in section 87.3, which provides:
Continued application of Construction Lien Act and regulations
87.3 (1) This Act and the regulations, as they read on June 29, 2018, continue to apply with respect to an improvement if,
- a contract for the improvement was entered into before July 1, 2018;
- a procurement process for the improvement was commenced before July 1, 2018 by the owner of the premises; or
- in the case of a premises that is subject to a leasehold interest that was first entered into before July 1, 2018, a contract for the improvement was entered into or a procurement process for the improvement was commenced on or after July 1, 2018 and before the day subsection 19 (1) of Schedule 8 to the Restoring Trust, Transparency and Accountability Act, 2018 came into force.
(2) For greater certainty, clauses (1) (a) and (c) apply regardless of when any subcontract under the contract was entered into.
In short, the application of the new provisions revolves around the key date of July 1, 2018.
The Crosslinx Case
Form & Build Supply (Toronto) Inc. (the "Supplier") registered two liens against stations in the Eglinton Crosstown Light Rail Transit project 56 days after the date of last supply (the "Liens"). As such, the Liens were registered too late if the 45 day deadline under the old legislation applied, but were properly preserved if the new 60 day deadline under the Construction Act was applicable.
Crosslinx Transit Solutions Constructors (the "Contractor") entered into a contract for the construction and the design of the Eglinton Crosstown Light Rail Transit project on July 21, 2015 (the procurement process for which commenced even earlier). In February and July of 2019, the Contractor entered into two subcontracts, with a subcontractor who was supplied by the Supplier. The Supplier registered its Liens on December 11, 2020.
The Contractor sought orders declaring that the Liens were expired, and argued that since the prime contract was entered into before July 1, 2018, the old Construction Lien Act provisions applied and the Liens were registered after the 45 day deadline. The Supplier argued that the new provisions applied, taking the position that s. 87.3(2) should be interpreted as saying that the new Construction Act provisions apply to subcontracts entered into after July 1, 2018.
The Court agreed with the Contractor.
The Court observed that s. 87.3(2) is unambiguous: it clearly means, on its grammatical and ordinary sense, that sections 87.3(1)(a) and (c) apply regardless of the date of any subcontract. That is: the determinative date is not the date of the subcontract but the date of the prime "contract for the improvement" (or the date the procurement process was commenced in the case of premises that are subject to a leasehold interest that was first entered into before July 1, 2018).
In reaching this conclusion, the Court considered the definition of "improvement" under the Act, which in turn is at the basis of numerous other definitions such as "premises", "owner", "contractor", "subcontractor", "supply of services" and "materials." The Court found that "s. 87.3 provides that a single legislative scheme applies to the entirety of "an improvement". All rights, obligations and remedies of all persons involved in that improvement are governed commonly and consistently by the same version of the act and regulations. That consistent application of the act and regulations is reasonably achieved by reference to the date of the procurement process for the improvement, where there is one, or a prime contract."
The Court also favoured this position as it avoids four conflicts in legislative operation that would result in different versions of Ontario's lien legislation applied to the same improvement.
First, there would be significant uncertainty and administrative issues if different versions of the Act applied to different subcontracts on the same improvement, as holdback liability, payment dates and notice requirements differ across the different versions of the legislation.
Second, the time frame, entitlement, and substance of information requests also differ depending on the version of the Act that applies.
Third, the new version of s. 19(1) provides a significantly different basis for landlord liability than the old version. If the two versions of the Act applied to the same improvement, then these two different bases of liability would operate in the context of the same improvement.
Fourth, the new Act includes updated requirements for the trustees of Part II trust funds. Again, if the two versions of the Act applied to the same improvement, then different obligations would be owed to different parties on the same improvement in this regard as well.
Given the analysis described above, the Court found that the old Act applied and that the Supplier's Liens had not been preserved. The Court has clarified that the date of a subcontract is not determinative of which version of Ontario's construction lien legislation applies as the date of a subcontract does not factor into the analysis under s. 87.3. Accordingly, attention should be given to the date of the prime contract (or to the other key dates set out in s. 87.3 as applicable) when determining when lien rights expire.
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