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Construction - Contracts. Prasher Steel Ltd. v. Pre-Eng Contracting Ltd.
In Prasher Steel Ltd. v. Pre-Eng Contracting Ltd. (Div Court, 2024) the Divisional Court considered statutory provisions regarding 'contracts' under the old Construction Lien Act:[28] The CLA treats “contracts” and “subcontracts” differently for the purposes of establishing deadlines for preserving and perfecting lien claims.
[29] The Act defines “contract” as “the contract between the owner and the contractor…” and “subcontract” as “any agreement between the contractor and a subcontractor, or between two or more subcontractors, relating to the supply of services or materials to the improvement…” (s. 1(1)). Pre-Eng was a “contractor” under a “contract” with the “owner” (the School Board), and Prasher was a “subcontractor” under “subcontracts” with Pre-Eng.
[30] Section 15 of the Act provides that “[a] person’s lien arises and takes effect when the person first supplies services or materials to the improvement.” Nothing in this language provides that a lien arises on a subcontract-by-subcontract basis.
[31] Subsection 31(2) governs expiry of liens of “contractors” and is tied to the substantial performance, completion, abandonment, or termination “of the contract”.
[32] Unless preserved in accordance with the Act, the lien rights of a subcontractor expire 45 days after the earlier of:(i) the date on which a copy of the certificate or declaration of the substantial performance of the contract is published, as provided in section 32, and
(ii) the date on which the person last supplies services or materials to the improvement, and
(iii) the date a subcontract is certified to be completed under section 33, where the services or materials were supplied under or in respect of that subcontract…. (s. 31(3)). The word “contract” in subparagraph (i) refers, not to the subcontract under which the subcontractor claim is asserted, but the “contract” between the “contractor” and the “owner” under which the subcontract was let to the subcontractor. No certificate or declaration of substantial performance of the contract bears on the subcontractor claims in this case; paragraph (i) does not apply. Neither the Structural Steel subcontract nor the Miscellaneous Metals subcontract was certified completed under s. 33 of the Act; paragraph (iii) does not apply. Thus, the lien claims of Prasher would have been subject to expiry under paragraph (ii): 45 days after the date on which Prasher last supplied services or materials to the improvement.
[33] Pre-Eng argues that Prasher’s lien rights expired 45 days after the last date of subcontract work or the date of subcontract completion or abandonment, on a subcontract-by-subcontract basis. That argument is in error: that is the test for expiry of a “contractor’s” lien rights under s. 31(2) of the Act; Prasher was a subcontractor and its lien rights are governed by s. 31(3) and not s. 31(2).
[34] Subcontractor lien claims do not expire on a subcontract-by-subcontract basis under s. 31(3)(ii) of the Act: a subcontractor’s lien claims persist until 45 days after last supply “to the improvement” under s. 31(3)(iii). Any owner or contractor wishing to terminate a subcontractor’s lien rights in respect to one of several subcontracts may have recourse to s. 31(3)(iii) of the Act, which would require certification of completion of the subcontract pursuant to s. 33. That was not done in this case. . Caledon (Town) v. 2220742 Ont. Ltd. o/a Bronte Construction
In Caledon (Town) v. 2220742 Ont. Ltd. o/a Bronte Construction (Div Court, 2024) the Divisional Court considered a JR of a Construction Act (CA) adjudication, here regarding transitional provisions.
Here the court considered 'improvements', and their role in the CA concept of 'contract':[31] An “improvement” is defined in the Act as follows:in respect of any land,
(a) any alteration, addition or capital repair to the land,
(b) any construction, erection or installation on the land, including the installation of industrial, mechanical, electrical or other equipment on the land or on any building, structure or works on the land that is essential to the normal or intended use of the land, building, structure or works, or
(c) the complete or partial demolition or removal of any building, structure or works on the land; (emphasis added) [32] First, it should be noted that the concept of an “improvement” is tied to land. The definition is “in respect of any land.” ...
....
[43] Caledon argues that, as a matter of first principles, the default assumption is that a contract is in respect to the same improvement – unless the contract expressly provides otherwise. In making this argument, Caledon does not once refer to the statutory definition of “improvement”. Instead, Caledon relies on s. 2(4) of the Act for the proposition that “[w]here there is no express contractual provision stating that there are multiple improvements, the default assumption of a single improvement applies.” This statement is wrong in law and finds no support in the language of s. 2 of the Act, which reads as follows:Contracts, substantial performance of a contract
When contract substantially performed
(1) For the purposes of this Act, a contract is substantially performed,
(a) when the improvement to be made under that contract or a substantial part thereof is ready for use or is being used for the purposes intended; and
(b) when the improvement to be made under that contract is capable of completion or, where there is a known defect, correction, at a cost of not more than,
(i) 3 per cent of the first $1,000,000 of the contract price,
(ii) 2 per cent of the next $1,000,000 of the contract price, and
(iii) 1 per cent of the balance of the contract price.
Same
(2) For the purposes of this Act, where the improvement or a substantial part thereof is ready for use or is being used for the purposes intended and the owner and the contractor agree not to complete the improvement expeditiously, the price of the services or materials remaining to be supplied and required to complete the improvement shall be deducted from the contract price in determining substantial performance.
Adjudication Amounts
(2.1) For the purposes of this Act, if an adjudicator makes a determination under Part II.1 in relation to a contract before the certification or declaration of the substantial performance of the contract under section 32,
(a) any amount determined by the adjudicator to be payable by a party to the contract shall be added to the contract price in determining substantial performance; and
(b) any amount determined by the adjudicator to have been overpaid by a party to the contract shall be deducted from the contract price in determining substantial performance.
Same
(2.2) Subsection (2.1) ceases to apply if,
(a) the adjudicator’s determination ceases to be binding on the parties to the adjudication under section 3.15; or
(b) the determination of the adjudicator is set aside on judicial review.
When contract deemed completed
(3) For the purposes of this Act, a contract shall be deemed to be completed and services or materials shall be deemed to be last supplied to the improvement when the price of completion, correction of a known defect or last supply is not more than the lesser of,
(a) 1 per cent of the contract price; and
(b) $5,000.
Multiple improvements under a contract
(4) If more than one improvement is to be made under a contract and each of the improvements is to lands that are not contiguous, then, if the contract so provides, each improvement is deemed for the purposes of this section to be under a separate contract. Subsection 2(4) presupposes that more than one improvement may be the subject matter of a contract. It does not state, or imply, that a contract is presumed to be in respect to a single improvement. Nor does it state, or imply, that there is such a presumption unless it is displaced by contract. Unlike all the other subsections of this provision, it does not apply “for the purposes of this Act” but rather “for the purposes of this section” and addresses a particular problem that arises where a contract is in respect to more than one improvement: establishing the date of substantial completion of the contract. In this subsection, the Legislature has provided that substantial completion will arise on an improvement-by-improvement basis if the parties to the contract have so agreed by their contract – and by necessary implication, substantial completion of the contract will be determined by reference to all improvements that are the subject of the contract if the parties have not agreed to the contrary in the contract. The provision does not change or modify the nature of what an “improvement” is under the Act, and it does not provide that “improvement” is co-extensive with “contract”.
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