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Construction - Basics. Jamrik v. 2688126 Ont. Inc.
In Jamrik v. 2688126 Ont. Inc. (Div Court, 2024) the Divisional Court allowed a JR against a Construction Act adjudicator's 'prompt payment' decision that "the contract was not “completed” within the meaning of the Construction Act".
Here the court reviews basics of Construction Act procedures, noting that "payment before judgment" (ie. 'prompt payment') is a rare interlocutory step:(a) The Normal Process for Litigation of Contract Claims
[19] In general, contract claims are civil claims and must be brought by way of ordinary civil action. Some contract claims are within the monetary jurisdiction of the Small Claims Court (currently $35,000 or less). Contract claims not within the jurisdiction of the Small Claims Court are ordinarily brought by way of an “action” in the Superior Court of Justice and are subject to the processes prescribed by the Rules of Civil Procedure.
[20] As a general proposition, a plaintiff in an action is not entitled to “execution before judgment”. That is, until the claim has been disposed of by the court, a plaintiff is not generally entitled to collect on or to secure its claim. Resulting payment delay is addressed by an award of interest; resulting difficulties in collecting a judgment are addressed in a suite of available legal processes, details of which are not material here. The point is this: in the ordinary course, someone suing on a contract is not generally entitled to security or payment before judgment. Orders for interim payment or interim security pending judgment are rare. See Lister & Co.v. Stubbs (1890), 45 Ch. D. 1 (CA); Mills and Mills v. Petrovic et al. (1980), 1980 CanLII 1871 (ON SC), 30 OR (2d) 238 (Ont. HCJ), per Galligan J. (as he then was); Chitel et al. v. Rothbart et al. (1983), 1982 CanLII 1956 (ON CA), 39 OR (2d) 513 (CA) [approving of the availability of Mareva injunctions “under special and limited circumstances” derogating from the general principle against execution before judgment].
(b) Construction Liens and Trusts
[21] Construction liens and construction trusts are exceptional claims that provide a measure of security for certain construction claims prior to judgment. This is a derogation from the general rule against “execution before judgment” and arose in the unique context of the building construction industry. See Teepee Excavation and Grading Ltd. v. Niran Construction Ltd. (2000), 49 OR (3d) 612 (CA); TRS Components Ltd. v. Devlan Construction Ltd., 2015 ONCA 294, para. 11.
[22] Construction liens and construction trusts are not ancient legal claims in the same way that basic contact law can be traced back to early common law. They are a legal innovation dating back to the founding of Washington, D.C., to spur construction of that city (see Kevin Patrick McGuiness, Construction Lien Remedies in Ontario (2nd ed., 1997), chs. 1-4). The premise of this innovation is that the equity in the land to be improved by construction may stand as security for payment, thus encouraging construction firms to work on credit with some assurance that they will be paid for the services and materials they supply to the land. . Manafa v. Tannous
In Manafa v. Tannous (Div Court, 2023) the Divisional Court cited law useful to home renovation and construction cases:[54] The Appellant also argues that the Respondent did not keep proper records and that such records are “necessary for the contractor to establish its entitlement, but are also essential to ensuring that the homeowner understands what she is paying for.” Hugh’s Contracting Ltd. v. Stevens, 2014 BCSC 1904, 77 C.L.R. (4th) 256, at para. 120, rev’d in part on other grounds 2015 BCCA 491, 50 C.L.R. (4th). I accept that statement as a general proposition. ... . Soo Mill & Lumber Company Ltd. v. Pozzebon et al.
In Soo Mill & Lumber Company Ltd. v. Pozzebon et al. (Div Court, 2023) the Divisional Court considered the purpose of the Construction Act (formerly the Construction Lien Act), here in the context of a motion to extend time to commence an appeal:[20] Here, the moving party wishes to file a notice of appeal, on the basis that it has a right to an appeal under the CLA. Soo Mill has raised, at the very least, arguable questions of law or mixed law and fact. This includes the interpretation and application of the statutory trust provision in s. 8 of the Construction Act. Soo Mill also argues that the decision of Gordon J. is inconsistent with the remedial purpose of the Act, as stated by the Court of Appeal in Sunview Doors Limited v. Pappas, 2010 ONCA 198at para. 99:The object of the Act is to prevent unjust enrichment of those higher up in the construction pyramid by ensuring that money paid for an improvement flows down to those at the bottom. In seeking to protect persons on the lower rungs from financial hardship and unfair treatment by those above, the Act is clearly remedial in nature. The remedial nature of the Act also supports a liberal construction so as to enable it to serve its purpose. The purpose of s. 8 is to impress money owing to or received by contractors or subcontractors with a statutory trust, a form of security, to ensure payment of suppliers to the construction industry. . J.D. Strachan Construction Ltd. v. Egan Holdings Inc.
In J.D. Strachan Construction Ltd. v. Egan Holdings Inc. (Div Ct, 2021) the Divisional Court set out some basics of the construction lien regime:[8] The CLA is remedial legislation, to be given a large and liberal interpretation to secure its objects. On the other hand, the courts have consistently construed the deadlines in the Act strictly. There is good reason for this. Registration of a claim for lien gives notice to all the world of a lien claim. This notice is relied upon by other stakeholders, including lenders, owners, and contractors and subcontractors.
[9] The CLA provides a mechanism by which an owner may establish – for all the world – that there are no liens in respect to a contract after that contract has reached substantial completion: publication of a certificate of substantial completion in accordance with the Act. When this is done, it starts the clock running: a lien claimant has 45 days to register a claim for lien from the date of publication of the certificate of substantial completion.[2] The lien claimant then has a further 45 days to register a certificate of action. Both dates are calculated from the date of publication of the certificate of substantial completion: 45 days for the claim for lien, and a further 45 days (total of 90 days) for the certificate of action.[3]
[10] Where there is no certificate of substantial completion, the same deadlines apply, but calculated from the date on which the claimant last supplied services or materials to the improvement.[4]
[11] In some situations, including the case at bar, two sets of deadlines arise:(a) deadlines for claims respecting goods and services provided to the date of the certificate of substantial completion, which are calculated from the date of publication of the certificate; and
(b) where a claimant supplies services or materials after the date of publication of the certificate of substantial completion, the date of last supply of materials or services to the improvement. The deadline in (a) applies up to claims for services and materials to the date the certificate was published; the deadline in (b) applies to work done after publication of the certificate.[5] . Tremblar Building Supplies Ltd. v. 1839563 Ontario Limited
In Tremblar Building Supplies Ltd. v. 1839563 Ontario Limited (Div Ct, 2020) the Divisional Court reviewed some basics of the Construction Lien Act (now the Construction Act):[11] The Construction Lien Act creates two distinct sets of obligations and remedies relevant to this appeal: the construction lien and the construction trust. These obligations and remedies are in addition to and overlie the contractual rights and obligations between the parties.
[12] This creates three potentially intersecting sets of rights and obligations arising from the same facts. The Construction Lien Act is remedial legislation and provides additional obligations and rights to those provided by the common law. Those additional rights and obligations do not imply the existence of further rights and obligations that do not arise under contract law or the Construction Lien Act.
[13] This case illustrates this point. But for the Construction Lien Act, Tremblar would be restricted to its rights in contract law. It would have no direct recourse against Owner, with which it had no contractual relationship. If it obtained judgment against Contractor and remained unpaid, then it might have recourse against Owner under either the law of debtor/creditor (if Contractor was not bankrupt), or under the Bankruptcy and Insolvency Act (if Contractor was bankrupt). There would be no Construction Lien Act trust remedies. There would be no remedies for unjust enrichment.
[14] The Construction Lien Act creates additional rights and obligations, two of which relate to this appeal. The first is the construction lien. Appellant was entitled to assert this right by registering a construction lien. It would have been entitled to a rateable share of the statutory “holdbacks” Owner was obliged to retain from what it paid to Contractor. This creates security and a direct right of action between Tremblar and Owner, a person with which it has no privity of contract – something created by the Act. The appellant chose not to avail itself of this claim and lost it as a result.
[15] The second relevant regime created by the Act is the construction trust. This is a statutory trust, and it is created by, and limited by, the terms of the Construction Lien Act. The trust runs with contractual obligations, but only in respect to money received or receivable by the trustee in respect to the improvement. Owners do not hold funds in trust for subcontractors. Otherwise, owners would have a positive obligation to ensure that contractors apply their funds properly. Owners do not have that trust obligation under the Act and it would undermine the structure of relations under the Act to find otherwise.
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