COURT FILE NO.: CV-20-653753
DATE: 2021 05 06
SUPERIOR COURT OF JUSTICE – ONTARIO
IN THE MATTER OF the Construction Act, RSO 1990, c C.30, as amended
RE: CROSSLINX TRANSIT SOLUTIONS CONSTRUCTORS, a general partnership consisting of AECON INFRASTRUCTURE MANAGEMENT INC., DRAGADOS CANADA, INC., ELLISDON CIVIL LTD., and SNC-LAVALIN CONSTRUCTORS (PACIFIC) INC., Contractor
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FORM & BUILD SUPPLY (TORONTO) INC., Lien Claimant
BEFORE: Master Todd Robinson
COUNSEL: B. Westland and A. Grossman, for the contractor (moving party)
W. Chapman, for the lien claimant (responding party)
HEARD: April 21, 2021
REASONS FOR DECISION
[1] Crosslinx Transit Solutions Constructors (“Crosslinx”) seeks orders declaring that two liens preserved by Form & Build Supply (Toronto) Inc. (“Form & Build”) against stations in the Eglinton Crosstown Light Rail Transit (LRT) project are expired and returning the lien bond security posted by Crosslinx to vacate them. Form & Build opposes the motions, requesting a declaration that its liens were preserved in time.
[2] Material facts are not disputed. Form & Build is a sub-subcontractor on the project. Both of its claims for liens were registered 56 days after the stated date of last supply. The sole issue in dispute is operation of the transition provisions in s. 87.3 of the Construction Act, RSO 1990, c C.30 in circumstances where a contract for the improvement is entered into before July 1, 2018, but a lien claimant’s subcontract is entered into after July 1, 2018.
[3] Form & Build argues that s. 87.3 is not intended to apply to subcontracts and that, since both of its subcontracts were entered into after July 1, 2018, it is statutorily entitled to the longer 60-day lien preservation period provided in the current version of the legislation. Crosslinx disagrees, arguing that s. 87.3 operates such that Form & Build is only entitled to the shorter 45-day lien preservation period under the act as it read on June 29, 2018.
[4] For the reasons that follow, I have determined that the intended effect of the language used in s. 87.3 is that the same legislative scheme for rights, obligations, and remedies provided in the Construction Act applies consistently to all persons involved in the same improvement. The purpose of s. 87.3(2) is only to clarify that that date of a subcontract has no relevance in determining which version of the legislation applies to an improvement. By operation of s. 87.3, the Construction Act as it read on June 29, 2018 (i.e., the former Construction Lien Act) continues to apply to the subject improvement, meaning that Form & Build had 45 days from its last supply at each station to preserve its liens. Accordingly, both liens had already expired when Form & Build registered its claims for lien. Crosslinx is entitled to orders declaring both liens expired and returning the security posted to vacate them.
Background
[5] On July 21, 2015, Crosslinx Transit Solutions General Partnership (“ProjectCo”) entered into a Project Agreement to design, build, finance, operate and maintain the Eglinton Crosstown LRT, a public-private-partnership (P3) infrastructure project. As is common in the P3 model in Ontario, concurrent with entering into the Project Agreement, ProjectCo entered into a construction contract with Crosslinx for the design and construction of the LRT system.
[6] In July and February 2019, Crosslinx entered into two subcontracts with 10760919 Canada Inc. operating as Harbels (“Harbels”) to supply formwork and cast-in-place concrete at two of the stations in the LRT system, namely Avenue Station and Leaside Station, respectively.
[7] On December 11, 2020, Form & Build registered separate claims for lien against title to the lands on which Leaside Station and Avenue Station were constructed, in the respective amounts of $18,841.46 and $4,220.55. The liens were only registered against title and were not also given. Form & Build alleges in its claims for lien that it supplied services and materials to Crosslinx at each of the stations, described as “Construction materials supplied from Harbels Construction”. It is undisputed that Form & Build had no contractual privity with Crosslinx, but rather was a supplier to Harbels. Supply of services and materials to both stations is only claimed for October 16, 2020.
[8] In late December 2020, this motion to declare both liens expired was initially brought on an ex parte basis. I was not satisfied with the materials and adjourned the motion to be brought on notice to Form & Build. Crosslinx thereafter effectively sought to have me reconsider the adjournment by filing further materials. I declined to vary my adjournment order and still required that the motion be brought on notice.
[9] On January 14, 2021, Form & Build’s liens were vacated by order of Master Wiebe upon Crosslinx posting lien bond security into court for each of the liens. The evidence filed on this motion is that Crosslinx was required to vacate all liens by January 15, 2021 prior to a payment certification on January 18, 2021.
Analysis
[10] On July 1, 2018, substantial amendments to the former Construction Lien Act came into force, including changes to lien preservation and perfection deadlines. The amended legislation includes a transition provision in s. 87.3. The parties dispute the effect of the primary transition provisions in ss. 87.3(1) and (2), which state as follows:
Transition Continued application of Construction Lien Act and regulations
87.3 (1) This Act and the regulations, as they read on June 29, 2018, continue to apply with respect to an improvement if,
(a) a contract for the improvement was entered into before July 1, 2018;
(b) a procurement process for the improvement was commenced before July 1, 2018 by the owner of the premises; or
(c) in the case of a premises that is subject to a leasehold interest that was first entered into before July 1, 2018, a contract for the improvement was entered into or a procurement process for the improvement was commenced on or after July 1, 2018 and before the day subsection 19 (1) of Schedule 8 to the Restoring Trust, Transparency and Accountability Act, 2018 came into force.
Same
(2) For greater certainty, clauses (1) (a) and (c) apply regardless of when any subcontract under the contract was entered into.
[11] Crosslinx submits that s. 87.3(1)(a) is operative in this case, and that the prime “contract” was entered into on July 21, 2015. None of that is disputed by Form & Build. Instead, Form & Build argues that s. 87.3(2) is ambiguously worded, and that its intent is to prevent a contractor with a contract prior to July 1, 2018 from benefitting from the amended rights and remedies available under the Construction Act, which are rights and remedies available only to those having contracts and subcontracts entered into on or after July 1, 2018. Form & Build argues that s. 87.3 should only apply to contracts and subcontracts entered into prior to July 1, 2018, and not to contracts or subcontracts entered into after July 1, 2018. Put simply, its position is that contracts and subcontracts on a project, and at least subcontracts, are intended to be governed by the version of the act applicable when they were entered into.
[12] Crosslinx argues that there is no ambiguity in the language in ss. 87.3(1) and (2). Crosslinx submits that the court has previously interpreted s. 87.3 to operate such that act as it read on June 29, 2018 continues to apply to an improvement, and the liens and lien actions arising from the improvement, where the construction contract was signed prior to July 1, 2018. Crosslinx supports its argument by pointing to three decisions: Brock Contracting v. Kozikowski, 2018 ONSC 7618, QH Renovation & Construction Corp v 2460500 Ontario Ltd., 2019 ONSC 3237 (Master), and my own decision in Schindler Elevator Corporation v. Walsh Construction Company of Canada, 2021 ONSC 283 (Master).
[13] Form & Build argues that all three cases are distinguishable on their facts, since none of them deal with the circumstance here, namely a contract entered into prior to July 1, 2018 and a subcontract entered into after that date. Form & Build is correct. Each of the cases cited by Crosslinx is factually distinguishable on that basis. Neither Brock Contracting nor QH Renovation involved a subcontract. Although Schindler did involve a subcontract, that subcontract was entered into well prior to July 1, 2018. Also, the applicable version of the act does not appear to have been disputed in either Brock Contracting or QH Renovation. It was not in Schindler.
[14] Nevertheless, although the cases are factually distinguishable and the transition provisions were not the subject of argument in them, in my view, the general statements made regarding operation of s. 87.3 remain accurate in circumstances where the prime contract was entered prior to the transition date of July 1, 2018 and the relevant subcontract after that date.
[15] Language used in s. 87.3, including defined terms, must be closely reviewed in a proper interpretation of its provisions. Legislative words are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the legislative scheme, the object of the legislation, and legislative intent: Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42 at para 26. The text, context and purpose of a provision must be considered, although those three elements are not entirely separate and at times will overlap: Copthorne Holdings Ltd. v. Canada, 2011 SCC 63 at para. 87.
[16] I begin with Form & Build’s position that there is ambiguity in s. 87.3(2). For there to be an ambiguity, the words of a provision must be reasonably capable of more than one meaning. By necessity, the entire context of the provision must be considered before determining if it is reasonably capable of multiple interpretations. Only when genuine ambiguity arises between two or more plausible readings, each equally in accordance with the intentions of the statute, do courts need to resort to external interpretive aids: Bell ExpressVu Limited Partnership, supra at para. 29.
[17] In my view, there is no genuine ambiguity in the words of s. 87.3(2) when read in their grammatical and ordinary sense in context of s. 87.3 and the Construction Act as a whole. The subclause begins with “for greater certainty” and proceeds to state that ss. 87.3(1)(a) and (c) apply “regardless of when any subcontract under the contract was entered into.” In my view, the meaning is clear: the subclause clarifies operation of ss. 87.3(1)(a) and (c), stating that they apply regardless of the date of any subcontract. The clarification is specifically limited to ss. 87.3(1)(a) and (c). No words or language suggest any clarification or variance of the preamble to s. 87.3(1) itself, which ties the applicable version of the act and regulations to “an improvement”, not a “contract” or “subcontract”.
[18] “Improvement” is a broadly defined term in the Construction Act, as follows:
“improvement” means, 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;
[19] The concept of an “improvement” is central to the legislative scheme of the Construction Act. Notably, Form & Build’s own entitlement to a lien turns on its supply of services and materials to “an improvement for an owner”, which grants it a lien “upon the interest of the owner in the premises improved” for the price of its services and materials: Construction Act, s. 14. Each of “premises”, “owner”, “contractor”, and “subcontractor” are defined with reference to the improvement, as is “supply of services” and “materials”. Although the definition of “contract” does not specifically refer to an improvement, it relies on the defined terms of “owner” and “contractor”, which do. “Subcontract” is also defined with reference to the improvement 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 and includes any amendment to that agreement.”
[20] Every word in a statute is presumed to make sense and have a specific role to play in advancing the legislative purpose. The court is to avoid a statutory interpretation that renders words superfluous or that renders a legislative provision mere surplusage: Masters v. Cataraqui Region Conservation Authority, 2018 ONSC 7195 at paras. 30-31.
[21] Use of the word “improvement” in the operative preamble of s. 87.3(1) is significant. There is also a third transition condition in s. 87.3(1)(b), not referenced in s. 87.3(2), dealing with the commencement date of a procurement process for the improvement. That clause must also be read harmoniously with the balance of s. 87.3 and the legislation as a whole.
[22] During oral submissions, Form & Build was unable to adequately explain how s. 87.3(1)(b) operates if Form & Build’s interpretation is accepted. Neither “contract” nor “subcontract” are terms used in s. 87.3(1)(b). If I accept Form & Build’s interpretation that the date of the contract or subcontract governs the version of the act applicable to it, then commencement of a procurement process prior to July 1, 2018 would seem to become superfluous in assessing the applicable version of the act and regulations.
[23] In my view, properly interpreted, s. 87.3 provides that a single legislative scheme applies to the entirety of “an improvement”. All rights, obligations and remedies of all persons involved in that improvement are governed commonly and consistently by the same version of the act and regulations. That consistent application of the act and regulations is reasonably achieved by reference to the date of the procurement process for the improvement, where there is one, or a prime contract. Although the additional transition provisions in ss. 87.3(3) and (4) were not argued (since neither the municipal interest exemption nor application of prompt payment and adjudication are at issue), both of those transition provisions appear consistent with such an interpretation.
[24] With respect to s. 87.3(1), its purpose is to outline the three circumstances under which an improvement continues to be governed by the former Construction Lien Act. Both ss. 87.3(1)(a) and (c) refer to the date that a contract for the improvement was entered into, with clarification in s. 87.3(2) that the date of any subcontract is immaterial in assessing their operation. It does not suggest nor is s. 87.3(2) properly interpreted to provide that subcontracts entered into on or after July 1, 2018 are governed by a different legislative regime than other contracts or subcontracts for the improvement where conditions provided in s. 87.3(1) have been met.
[25] I am reinforced in my view of s. 87.3 by the conflicts in legislative operation created by variant versions of the act and regulations applying to the same improvement for different contractors and subcontractors. There are many examples. Discussing only a few of them emphasizes the uncertainty and administrative burden to owners, contractors and subcontractors that is created by variant versions of the act and regulations applying to the same improvement.
[26] First, pursuant to s. 26 of the Construction Act, release of holdback is mandated (“shall make payment”) after expiry of the 60-day lien period. Pursuant to s. 26 of the former Construction Lien Act, holdback release is permissive (“may, without jeopardy, make payment”) after expiry of the 45-day lien period. If both provisions apply to the same improvement depending on the specific contractor or subcontractor, many questions arise, such as:
(a) How will a payer know when holdback is properly released if there are variant lien rights in the tiers below it in the construction pyramid? Will payers avoid potential liability by simply retaining holdback in all cases where there may be a post-July 1, 2018 subcontract until expiry of the longer 60-day lien preservation period, unduly slowing the flow of funds on a project and potentially resulting in increased liens?
(b) How will an owner, contractor or subcontractor know if a notice under s. 27.1 of the Construction Act is formally required before withholding payment? No such notice requirement exists under the Construction Lien Act. Will it mean that a payer is obliged to provide a s. 27.1 notice to withhold payment under some contracts or subcontracts, yet the same payer will not be required to do so before withholding payment under other contracts or subcontracts?
[27] Second, pursuant to s. 39 of the Construction Act, a lien claimant, trust claimant, or mortgagee may make a written request for information to be provided by an owner, contractor, subcontractor, landlord, or mortgagee within 21 days. However, the provisions in s. 39 of the former Construction Lien Act are different, and did not include entitlement to request information from a landlord. Notably, s. 39(4.1) of the Construction Act adds seven specific items of required information that must be provided regarding a state of accounts, and s. 39(4.2) adds clarification regarding information required from a mortgagee where mortgage funds have been advanced both for financing the purchase price of the land and for the improvement. Failure to respond to a request for information may result in court sanctions pursuant to s. 39(6) of both versions of the act, including substantial indemnity costs. That possibility of court sanction underscores the importance of clarity for all persons involved in an improvement regarding the extent of required information and, in the case of a landlord, whether there is an applicable statutory requirement to respond to a request at all.
[28] Third, pursuant to s. 19(1) of the Construction Act, a landlord’s interest is subject to a lien to the extent of 10% of the amount of a payment for all or part of the improvement accounted for under the terms of the lease. However, pursuant to s. 19(1) of the Construction Lien Act, a landlord’s interest is subject to a lien only if written notice of the improvement is given to it by the contractor and the landlord fails to give a notice that it assumes no responsibility for the improvement. The two versions of s. 19(1) provide very different bases for landlord liability, both tied to notice of or provision for “the improvement”, not contracts. If the date of a contract or subcontract governs the applicable version of the act, and a leasehold owner has contracted with multiple contractors before and after the July 1, 2018 transition date, it could result in inconsistent bases of liability for the landlord to different claimants for the same improvement.
[29] Fourth, s. 8.1 of the Construction Act mandates that s. 8 trustees comply with certain requirements in respect of Part II trust funds. These include bank account requirements and maintaining detailed accounting records regarding trust funds. None of these requirements were codified in the Construction Lien Act. Based on Form & Build’s interpretation of s. 87.3, a contractor or subcontractor may have mandated trust fund accounting and banking obligations for some subcontractors, but not for others.
[30] Subcontract work is a portion of the overall work to be performed pursuant to a contract for the improvement. It is inherently connected to, if not dependent on, that contract. It logically follows that the same legislative scheme governing the rights, obligations and remedies under the contract should also govern subcontracts for performance of the same scope of work required by that contract.
[31] Certainty is achieved by such an interpretation, whereas variant lien rights for different lien claimants working on the same improvement would lead to uncertainty, confusion, and inconsistency giving rise to potential or actual unfairness and inequity. Notably, if variant versions of the act and regulations applied to the same improvement, the kinds of conflicts outlined above would create undue administrative burden for all levels of the construction pyramid regarding their statutory rights and obligations vis-à-vis one another, requiring individual assessments and determinations for each contract, subcontract, and lien or trust claimant on an improvement.
[32] I do not agree with Form & Build that there is greater unfairness to trades lower down in the construction pyramid, who may not know when a prime contract was entered into. On the facts of this case, Form & Build supplied services or materials to a high-profile P3 infrastructure project. There is no evidence supporting that Form & Build did not know, or could not reasonably have known, the identity of the owner or contractor or the dates of the Project Agreement and construction contract. In any event, I am not swayed in my determination by the potential for a subcontractor on a different, hypothetical project possibly being unaware of when a prime contract was entered.
[33] In my view, an interpretation of s. 87.3 that results in variant lien rights for different persons on the same improvement would require very clear legislative wording to that effect, which is not present in the language of s. 87.3. Since subcontracts represent a portion of the overall prime contract work, it is more consistent with the overall scheme of the Construction Act, including the interrelationship of the various lien, trust and other provisions, for subcontract work to be subject to the same scheme to which performance of that same work is subject at the prime contract level.
[34] It is undisputed that the relevant contract for the purposes of s. 87.3(1)(a) was entered into on July 21, 2015. Accordingly, for the foregoing reasons, Form & Build’s lien rights continue to be governed by the act as it read on June 29, 2018. Pursuant to s. 31(3) of the former Construction Lien Act, Form & Build’s liens in respect of Leaside Station and Avenue Station expired at the conclusion of the 45-day period following Form & Build’s last supply of services and materials to each of them. For both stations, supply of services and materials is claimed only on October 16, 2020. Having not preserved either of the liens within the 45-day period, the liens had already expired when the claims for lien were registered.
Disposition
[35] I accordingly order as follows:
(a) Form & Build’s liens against each of Leaside Station and Avenue Station are declared expired.
(b) The Accountant of the Superior Court of Justice (the “Accountant”) is hereby directed to deliver up for cancellation the following lien bonds posted by Crosslinx pursuant to the order of Master Wiebe dated January 14, 2021, each receipted by the Accountant in account no. 562405:
(i) lien bond no. 8259-08-63 / 33007-21 / 8259-06-66 / 8252-55-65 in the amount of $23,551.83, posted as security for Form & Build’s lien against Leaside Station; and
(ii) lien bond no. 8259-08-64 / 33008-21 / 8259-06-67 / 8252-55-66 in the amount of $5,275.69, posted as security for Form & Build’s lien against Avenue Station.
(c) This order is effective without further formality.
Costs
[36] Costs outlines have been exchanged. I encourage the parties to settle costs themselves, including Crosslinx’s claim for bonding costs. If they cannot, then Crosslinx shall deliver written costs submissions by May 21, 2021. Form & Build shall deliver responding submissions by June 4, 2021. There shall be no reply submissions. Costs submissions shall not exceed four pages, excluding any offers to settle or case law.
[37] Service of all costs submissions by email is hereby authorized. All costs submissions shall be submitted by email directly to my Assistant Trial Coordinator with a scanned copy of proof of service. Original proof of service need only be filed if the court so directs.
[38] In the absence of receiving written submissions as directed above, the parties shall be deemed to have agreed on costs.
MASTER TODD ROBINSON
DATE: May 6, 2021