Background
Dalren, a general contractor, submitted a proposal on December 11, 2017 to build a trailer manufacturing facility for Loadstar and its affiliate 197. The initial proposal contemplated construction at Thompson Street in Cobourg, Ontario. After three years of negotiations, the parties executed a contract on December 11, 2020—but the site had changed to Dodge Street. Dalren completed the project and submitted invoices. When a dispute arose over two invoices, the fundamental legal question became which statutory regime governed the payment obligations: Ontario’s former Construction Lien Act or its amended version enacted in 2017 with new prompt payment requirements.
The distinction mattered considerably. Under the new Construction Act’s prompt payment provisions, owners must pay disputed invoices immediately, subject to refund if ultimately found liable. Under the old law, owners could lawfully withhold payment pending dispute resolution. The application hinged on s. 87.3(1)(b), the transitional provision, which allows the former law to apply if “a procurement process for the improvement was commenced before July 1, 2018 by the owner of the premises.”
The Court’s Holding
The Court of Appeal unanimously dismissed Dalren’s appeal and affirmed that the former Construction Lien Act applies. The court held that the 2017 proposal and 2020 contract represent a single “procurement process” for one “improvement”—the manufacturing facility—despite the property location shifting from Thompson Street to Dodge Street. Justice Coroza emphasized that “improvement” is defined by substance and the parties’ understanding, not by a fixed address. The parties continuously negotiated the same project; Dalren used the 2017 proposal terms in 2020; and no material changes resulted from the site shift.
On the second issue, the court rejected Dalren’s argument that 197 could not be “the owner of the premises” because it did not own Dodge Street when the procurement process commenced in 2017. Applying functional analysis, the court held that ownership need only exist at the time the lien could arise—the commencement of construction—not at the time the procurement process began. This reflects the practical reality that procurement often precedes acquisition. 197 purchased Dodge Street before construction started, satisfying the statutory requirement. The court emphasized that the transitional provision aims for consistency: all contracts relating to one improvement must be governed by the same legal regime throughout the project’s lifespan.
Key Takeaways
- Changes in property location during a multi-year procurement do not create a separate “improvement” if the parties continue negotiating substantially the same project.
- Courts examine the substance of the parties’ arrangements and their understanding when determining whether multiple procurement processes relate to the same improvement, not formal specifications.
- For transitional purposes, “owner of the premises” is determined when the lien arises (at construction outset), not when the procurement process begins.
- The transitional provision prioritizes legal consistency for all parties across the entire improvement’s lifespan, from procurement through completion.
Why It Matters
This decision significantly impacts Ontario construction practice by clarifying that lengthy negotiations involving property changes do not trigger the newer, stricter prompt payment obligations. Contractors face a narrower window to establish when a procurement process “commenced,” as courts will look past formal proposals to the substance of ongoing discussions. Owners gain broader protection under the former law’s standards in complex, multi-year projects where site selection evolves. The ruling also reinforces a functional approach to ownership: parties investing in and directing improvements can qualify as “owners” even if they lack registered title when negotiations begin, provided they have an interest before construction starts.