K. Bannon

Motions were brought to oppose confirmation of a master's interim report under the Construction Lien Act determining the relationship between an owner and a construction firm.

The master concluded the relationship was one of owner and general contractor rather than owner and construction manager, affecting calculation of statutory holdback obligations and priority among lien claimants and mortgagees.

The moving parties argued the master misinterpreted the contract, improperly relied on extrinsic evidence, and incorrectly considered industry standards.

The court held that the master properly found ambiguity created by amendments to a standard form construction management contract and appropriately considered extrinsic evidence and the parties’ conduct in performing the contract.

Finding no reversible error in the contractual interpretation, the court confirmed the master’s interim report.

Following a bifurcated trial where the plaintiff was successful in establishing an owner-contractor relationship, the court determined the costs payable for the first issue.

The court found the plaintiff's offer to settle did not attract substantial indemnity costs as it was served less than seven days before trial.

The court declined to order costs payable from the receiver's reserve fund, finding the receiver unreasonably duplicated the mortgagee's efforts.

Costs were fixed on a partial indemnity scale at $68,421.97, payable by the mortgagees, with payment deferred until the completion of the reference trial.

A reference under the Construction Lien Act required the court to determine whether the contractual relationship between a developer and a construction company was one of owner and construction manager (agent) or owner and general contractor.

The written agreement used a construction management form contract but included amendments allowing the contractor to contract directly with trades and assume risk for cost overruns beyond a specified threshold.

The court found ambiguity in the contract language and admitted extrinsic evidence to interpret the parties’ relationship.

Examining the contractual provisions and the parties’ conduct, including direct contracting with trades and liability for payment and cost overruns, the court concluded the arrangement functioned in substance as a general contracting structure.

Accordingly, the contractor was treated as a general contractor for purposes of determining priorities and holdback obligations under the Construction Lien Act.