The Facts, The Facts And The Facts: An Analysis Of The Construction Act’s Transition Provisions

Application of Construction Act transition provisions and "owner" status

The application of the Construction Act's transition provisions, particularly section 87.3, and the definition of “improvement” and "owner," have been central to recent judicial interpretations in Ontario. These provisions are relevant to the determination of whether the former Construction Lien Act, R.S.O. c. C.30 (the Former Construction Act) or the current Construction Act, R.S.O. c. C.30, as amended (the Amended Construction Act) applies to an improvement, significantly impacting rights and obligations, including prompt payment and adjudication.¹ The overarching principle established by courts is that a single legislative scheme should apply consistently to all persons involved in the same improvement.²

In two cases heard by the Superior Court of Ontario, a different conclusion was reached in determining whether or not, for the purpose of determining when a procurement process was commenced, the “owner of the premises” had to have an interest in the land on which the improvement was built, at the time the procurement process was commenced.

The "improvement" and procurement process under section 87.3

Section 87.3(1)(b) of the Construction Act stipulates that the Former Construction Act continues to apply if a procurement process for the improvement was commenced before July 1, 2018, by the owner of the premises.³ The commencement of a procurement process is defined as the earliest of a request for qualifications, quotation, proposals or a call for tenders.⁴

In Dalren Limited v. Loadstar Trailers Inc. (Dalren), the Ontario Court of Appeal affirmed that the procurement process for an improvement can be anchored to an early proposal, even if the proposed location for the improvement changes.⁵ The court found that the location of the proposed improvement was "inchoate until the final decision was made to build it on Dodge Street, but it was one process for one improvement."

Briefly, the facts of the case are as follows: Loadstar Trailers Inc. and its affiliate 1978327 Ontario Ltd. (197), requested a proposal from Dalren Limited (Dalren), a general contractor, for the construction of a manufacturing facility for the use of Loadstar on property to be purchased by 197. The procurement process related to the construction of a building on premises that were yet to be acquired. Dalren's initial proposal (December 11, 2017) was for a "Thompson Street" site, which 197 never purchased. After years of negotiation, the parties executed a contract in December 2020 to build instead at "Dodge Street," which 197 purchased only in February 2021. A dispute arose over unpaid invoices, turning on whether the Former Construction or the Amended Construction Act applied. The Amended Construction Act's prompt payment provisions would require immediate payment despite the dispute, while the Former Construction Act allowed withholding payment. The application judge held the Former Act applied under the transitional provision, s. 87.3(1)(b), because the 2017 proposal was part of the "procurement process" for the improvement, commenced by 197 before July 1, 2018.

Issue 1(a): “For the improvement”

Dalren argued, relying on Caledon (Town) v. 2220742 Ont. Ltd. o/a Bronte Construction,⁶ 2024 ONSC 4555 (Caledon (Town)), that an “improvement” is tied to a specific parcel of land, meaning the 2017 “Thompson Street” proposal could not be the same improvement as the 2020 “Dodge Street” contract. Both the lower court and the Ontario Court of Appeal rejected this argument, finding the determination made by Justice Corbett, speaking for the Divisional Court in Caledon (Town), to be fact specific and holding that Dalren improperly extended Justice Corbett’s observation that an improvement is “tied to land.” In Caledon (Town), the issue was whether a contract for a pond clean-up which contemplated two different pond locations amounted to a single improvement. The court found it did not. The Ontario Court of Appeal in Dalren distinguished this finding noting that in the context of the pond clean-up considered in Caledon (Town), each physical pond location was a distinct project with distinct features and thus represented an individual improvement, despite the fact that one contract governed both improvements. In Dalren, both the lower court and the Ontario Court of Appeal emphasized that Dalren participated in the 2017 procurement process, negotiated the 2020 contract based on the 2017 proposal, and ultimately built a substantially similar facility, identifying no material changes caused by the site relocation. Relying on Crosslinx⁷, 35 Mercer⁸, and DNR Restoration⁹, the Court of Appeal reaffirmed that all contracts relating to the same improvement should be governed by a single statutory regime. The court found nothing in section 87.3 of the Amended Construction Act limiting the 2017 proposal to the Thompson Street site and concluded that the site change did not create a new improvement.

Issue 2: “By the owner of the premises”

Dalren argued that the transitional provision could not apply because 197 did not own “Dodge Street” when the procurement process began in 2017. The Court of Appeal rejected this interpretation as inconsistent with both the purpose of section 87.3 of the Amended Construction Act and the functional method courts take to identifying an “owner.” The court held that “the owner of the premises” refers to the owner of the property where the improvement was ultimately constructed. Requiring 197 to have owned “Dodge Street” in 2017 would be illogical, since the original proposal contemplated a different site. The Ontario Court of Appeal noted that the application judge reflected the practical reality that procurement may and sometimes does precede ownership.

The Court of Appeal noted that section 87.3(1)(b) specifies that the procurement process must be commenced “by the owner of the premises.” However, in reviewing the broad definition of “owner” in s. 1(1), and authorities including Ravenda Homes¹⁰, Phoenix Assurance¹¹, and Parkland Plumbing¹², the Court of Appeal noted that ownership is determined by substance rather than legal title alone.¹³ Citing RSG Mechanical, the court held that the relevant time for assessing ownership is when construction begins, since lien rights do not arise until services or materials are supplied. Since 197 had an ownership interest in Dodge Street before construction commenced, the statutory requirement was satisfied.

Defining and timing "owner" status

A critical aspect of the Dalren decision was the finding that one need only be an "owner" of the premises at the time of construction to qualify as an owner of an improvement for which the procurement process commenced prior to July 1, 2018, under section 87.3(1)(b). The court stated, "It does not matter that 197 was not the registered owner of the Dodge Street property when the procurement process began, or even when the Contract was signed on December 11, 2020. At the time the improvement was made, 197 had a lienable 'interest in the premises' upon which the improvement was made and is an owner under the Amended Act and for the purpose of section 87.3.” This interpretation aligns with the functional approach that construction liens do not arise until materials or services are supplied to the improvement. Therefore, the relevant time for determining "owner" status is the date on which the lien claimant supplied materials or services to an improvement, as held in RSG Mechanical Inc. v. 1398796 Ontario Inc. The court in Dalren applied RSG Mechanical in concluding that 197 became an owner before any lien rights arose, thus satisfying the statutory requirement.

Distinguishing HVAC Depot

In Dalren, the Ontario Court of Appeal distinguished its findings from HVAC Depot & Metal Mfg. v. Global HVAC & Automation Inc. (HVAC Depot). While the lower court in Dalren did not expressly consider Justice McCarthy’s findings in HVAC Depot, the Ontario Court of Appeal held that for the transitional provisions to apply, the entity initiating the procurement process must have actually held a legal or lienable interest in the specific premises at the relevant time. In HVAC Depot, the parties involved in the procurement never acquired an interest in the premises, even a low threshold "interest in premises." In HVAC Depot, Rose Acquisition Corporation, a wholly owned subsidiary of Rose Corporation, had entered into an agreement of purchase and sale to purchase the premises at issue, which premises were eventually acquired by 175 Deerfield Inc., a company incorporated by Rose Corp., to acquire title to the premises. In contrast, in Dalren, while 197 was not the registered owner at the commencement of procurement, it did acquire an ownership interest in the Dodge Street property before construction commenced and before any lien rights arose and was the entity who issued the request for proposal. In Dalren, the Court of Appeal viewed any suggestion in HVAC Depot that ownership must pre-date July 1, 2018, as obiter and unsupported by authority.

Conclusion

The jurisprudence surrounding section 87.3 of the Construction Act emphasizes consistency in the application of the legislative regime to an "improvement." The Dalren decision, upheld by the Court of Appeal, clarifies that the location of a proposed improvement can be inchoate, and the "owner of the premises" for the purpose of triggering the transitional provisions need only have an ownership interest by the time construction begins. This approach, which looks to the substance of the arrangements and the functional timing of lien rights, ensures that the statutory regime applicable to a project is determined by its earliest substantive steps, rather than strict adherence to initial property ownership or specific site details.

The author would like to thank Ira Chandershekar, student-at-law, for her valuable contribution to this article.

Footnotes

^{1. Dalren Limited v. Loadstar Trailers Inc., 2024 ONSC 7144 (CanLII) (Dalren), at para 8; Caledon (Town) v. 2220742 Ont. Ltd. o/a Bronte Construction, 2024 ONSC 4555 (CanLII), at para 9 (Bronte).}

^{2. Crosslinx Transit Solutions Constructors v. Form & Build Supply (Toronto) Inc., 2021 ONSC 3396 (CanLII) at para 4 (Crosslinx);Bronte, supra note 1 at para 27;35 Mercer Limited v. Intact Insurance Company, 2024 ONSC 6466 (CanLII), at para 5 (35 Mercer)}

^{3. Restoring Trust, Transparency and Accountability Act, 2018, S.O. 2018, c. 17, Bill 57 at para 19; Dalren, supra, note 1 at para 28.}

^{4. Dalren, supra note 1, at para 33; Dalren Limited v. Loadstar Trailers Inc., 2026 ONCA 500 (CanLII), at para 28 (Dalren (ONCA)).}

^{5. Dalren, supra note 1 at paras 8 and 31; Dalren (ONCA) ibid at para 28.}

^{6. Caledon (Town) v. 2220742 Ont. Ltd. o/a Bronte Construction, 2024 ONSC 4555 (Caledon).}

^{7. Crosslinx, supra note 2 at paras 23, 30-33.}

^{8. DNR Restoration Inc. v. Trac Developments Inc., 2023 ONSC 1849 at paras 37-38 (CanLII).}

^{9. Ravenda Homes Ltd v. 1372708 Ontario Inc., 2017 ONCA 556 (CanLII).}

^{10. Phoenix Assurance v. Bird Construction, 1984 CanLII 79 (SCC).}

^{11. Parkland Plumbing & Heating Ltd. v. Minaki Lodge Resort, 2002 ONCA 256.}

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