Ontario Court Of Appeal Highlights Uncertainty In Construction Lien Appeal Routes

A procedural misstep on a construction lien file can eliminate a contractor's right to recover entirely — and when that dismissal is then appealed through an uncertain route, the contractor may find itself doubly prejudiced.

In Castle Homes Design Inc. v. McKenzie, the Ontario Court of Appeal considered a fundamental question: which court has jurisdiction over construction lien proceedings under the Construction Act and the Courts of Justice Act in Ontario. The Court declined to transfer the appeal but granted an extension of time, citing conflicting appellate authority that created genuine uncertainty regarding the proper appeal route.

For real estate lawyers, title insurers, mortgage lenders, and construction law practitioners in Ontario, the decision underscores the need for caution.

Case at a glance

• Court: Ontario Court of Appeal
• Citation: Castle Homes Design Inc. v. McKenzie, 2026 ONCA 98
• Key issue: Proper appellate route for construction lien proceedings in Ontario
• Decision: Transfer to Divisional Court refused; extension of time granted
• Why it matters: Ongoing uncertainty over the proper appeal route creates procedural risk where parties must choose between competing appellate routes.

Background and Facts

Castle Homes Design Inc. is a construction company that entered into a contract with Deborah McKenzie (also known as Deborah White) to build and install an outdoor swimming pool and deck on her residential property.

The agreement was straightforward in its commercial character: a contractor engaged to improve privately owned real property.

When a dispute arose regarding the work performed under the contract, Castle Homes took the step available to it under Ontario's construction law regime and registered a lien against the property.

Castle Homes then commenced a lien action pursuant to section 50 of the Construction Act, R.S.O. 1990, c. C.30. The lien action was litigated before the Ontario Superior Court of Justice.

It is at the Superior Court level that Castle Homes' procedural difficulties began. The company did not comply with applicable procedural requirements and case management directions, following which the lien action was dismissed.

Case management conferences are not mere formalities — the timetables issued at such conferences are court orders, carrying all the weight and enforceability that attaches to any judicial direction. When a party defaults on those orders, the court is entitled to treat the failure as a fundamental dereliction. The Superior Court did exactly that: the lien action was dismissed as a consequence of Castle Homes' non-compliance.

Faced with a dismissed lien action, Castle Homes sought to appeal. It brought a motion before the Court of Appeal for Ontario raising two distinct forms of relief:

• a transfer of the appeal to the Divisional Court pursuant to section 110 of the Courts of Justice Act, R.S.O. 1990, c. C.43; and
• in the alternative, an extension of time to perfect the appeal before the Court of Appeal.

The named respondents in the proceeding included not only Deborah McKenzie but also the Canadian Imperial Bank of Commerce and CIBC Mortgages Inc., reflecting the mortgagee interests that are routinely implicated in any lien registered against encumbered residential property.

The Legal Issues: Appellate Jurisdiction and Extension of Time

The motion before the Court of Appeal crystallized two discrete legal questions, each with significant implications for construction lien practice in Ontario.

The first issue was whether the appeal of the lien action dismissal order ought to be transferred to the Divisional Court under section 110 of the Courts of Justice Act. This provision grants the Court of Appeal a discretionary power to transfer proceedings between levels of court in appropriate circumstances.

The threshold question — which appellate tribunal has jurisdiction over an appeal from a lien action decided in the Superior Court — has not been answered uniformly by prior decisions of the Court of Appeal itself.

Two lines of authority were in apparent conflict. On one side, TRS Components Ltd. v. Devlan Construction Ltd., 2015 ONCA 294 and Arcamm Electrical Services Ltd. v. Avison Young Real Estate Management Services LP, 2024 ONCA 251 sit as precedents touching on this appellate routing question.

On the other, the decisions in Villa Verde L.M. Masonry Ltd. v. Pier One Masonry Inc. (2001), 54 O.R. (3d) 76 (C.A.), Durall Construction Ltd. v. W.A. McDougall Ltd. (1979), 25 O.R. (2d) 371, and MGW-Homes Design Inc. v. Pasqualino, 2024 ONCA 422 represent a body of jurisprudence that has historically treated the appellate routing of construction lien matters differently.

The Mechanics' Lien Act, R.S.O. 1970, c. 267 — the predecessor legislation to the Construction Act — also formed part of the legal backdrop, given that older precedents were decided under that regime.

The second issue was whether, given this jurisdictional uncertainty, the Court of Appeal should grant Castle Homes an extension of time to perfect its appeal before this Court. The governing standard in such motions requires consideration of the interests of justice, including the prejudice to the responding parties, the strength of the proposed appeal, and whether there is a reasonable explanation for the delay.

The Court's Analysis: Conflicting Authority and Procedural Fairness

The Court of Appeal dismissed the motion to transfer the appeal to the Divisional Court. Rather than treating that disposition as conclusively establishing the proper forum, the decision is more cautiously understood as addressing a procedural motion in the face of competing authorities on appellate route. The reasons indicate that the motion raised unresolved questions about jurisdiction under the Construction Act and the Courts of Justice Act.

On the extension of time motion, the Court granted relief permitting the appeal to proceed on an extended timetable before the Court of Appeal. The Court's reasoning turned on the conflicting precedents at play.

In the Court's own language, the conflicting authorities — specifically identified as the decisions in TRS Components and Arcamm — had "created genuine uncertainty over whether the appeal route under s. 110 of the Courts of Justice Act" was properly available. That genuine uncertainty, in the Court's view, was a material factor militating in favour of relief.

The Court further held that "the interests of justice favoured a modest extension of time." This formulation — drawn directly from the Court's reasons — reflects the well-established principle that where uncertainty about procedure is attributable, not to a party's carelessness but to the state of the law itself, courts may be reluctant to penalize litigants for that uncertainty. The reasons also suggest that further appellate clarification of the apparent conflict in the case law may be required, potentially including consideration by a five-judge panel.

The reasoning in Codina v. Canadian Broadcasting Corporation, 2020 ONCA 116, cited in the decision, reinforces the Court's approach to extensions of time where the interests of justice considerations weigh in favour of permitting an appeal to proceed.

What This Means for Real Estate Practice

For construction law and real estate practitioners, the immediate and practical lesson from Castle Homes is that recent decisions reveal ongoing uncertainty as to which court properly hears such appeals.

Both the Construction Act regime and the appellate routing provisions of the Courts of Justice Act are implicated in this uncertainty. Unless and until the conflict is clarified authoritatively, any lawyer filing a lien appeal faces genuine procedural risk.

Practitioners should obtain prompt jurisdictional advice and review the proper appellate route carefully before commencing or perfecting any lien-related appeal. Relying on one line of authority without careful consideration of competing cases may create avoidable procedural risk.

The case also delivers a firm reminder about the dangers of procedural default in lien proceedings. Castle Homes lost its lien action not on the merits — not because the court determined the pool and deck work was defective or that no amounts were owed — but following non-compliance with procedural requirements and case management directions.

Courts have authority to dismiss proceedings for such defaults, and procedural vigilance is strongly advisable on a lien file given the strict timelines governing lien remedies.