Legal Blog: Construction

Contract Interpretation

Brillion Homes Ltd. v. Tony Hayre Management Services Ltd., 2026 BCCA 303

A construction manager claimed against the owner after a project was delayed and invoices remained unpaid. The contract was for a 12-month completion and valued at $220,000, payable at $15,000 per month. The project was delayed for three months and the construction manager stayed for two of those three months and claimed an extra $30,000 for its time. The trial judge held that there was an implied term that the owner was to pay the manager $15,000 per month. The Court of Appeal held that it was not open to the trial judge to imply a term that contradicted the contract, which had a fixed sum of $220,000. The Court of Appeal therefore held that the total amount to which the manager was entitled was $220,000 x 14/54 = $205,333.

Appeal Route – Construction Lien

Castle Homes Design Inc. v. McKenzie, 2026 ONCA 98

Lien claimant appealed the dismissal of its action and a substantial indemnity costs award after missing several court-ordered deadlines. Although it appealed to the Court of Appeal, it later sought to transfer the matter to the Divisional Court or, alternatively, obtain more time to perfect the appeal. The motion judge refused the transfer because conflicting authorities left the proper appeal route unclear. However, the judge granted an extension of time, finding that the interests of justice favoured allowing the appeal to proceed in the Court of Appeal so the Court could clarify the appeal route for construction disputes.

Breach of Construction Act Trust

2493572 Ontario Inc. v. Diamond Luxury Builders Inc. 2026 Ont SCJ

An architectural technologist sued corporate and individual defendants for outstanding project invoices and breach of trust. The defendants counterclaimed for damages, citing construction delays and alleged malicious misrepresentation. The judge allowed the action in part, dismissed the counterclaim, and awarded the plaintiff $33,572.73 in damages. The court found that mortgage financing the defendants’ received was legally impressed with a statutory construction trust and that the defendants breached this trust by failing to produce accounting or bank records to justify expenditures.

Judicial Review

The Construction Act allows for an adjudicator’s decision to be tested by way of judicial review. It does not allow for a new hearing or an appeal of the decision. Aside from lack of jurisdiction or a conflict of interest, the only real attacks available to challenge a decision are to prove (i) that the adjudicator failed to follow the procedures that the Act prescribed and that this failure prejudiced the applicant’s right to a fair hearing, (ii) reasonable apprehension of bias on the part of the adjudicator, or (iii) that the determination was made because of fraud.

We have seen many cases dealing with the availability of judicial review, but the case of Sayers Foods Ltd. v. Gay Company Ltd., a 2026 decision of the Ontario Divisional Court, is the first decision we have seen on the merits.

Priority – Lien v. Mortgage

Terra Bona Developments Ltd. v. Cacoeli, 2026 Ont SC (AJ)

Contractor claimed a lien for unpaid pre-construction consulting services. The mortgagee had refinanced an earlier loan and asserted priority because no construction ever took place. The mortgagee arranged for the land registrar to delete the lien without notice. The associate judge held that the mortgage had priority because it was a purchase-financing mortgage used only to acquire the land (or refinance that acquisition), not to fund any improvement, and therefore fell under s. 78(3) rather than the building mortgage provisions. The associate judge also found the lien deletion invalid, emphasizing that the Construction Act forms a complete code governing lien discharges and cannot be circumvented through land titles applications without a court order or the lien claimant’s consent.

Adjudication Awards

We are getting more and more court decisions regarding adjudication awards. Although the courts could have narrowly interpreted the adjudication and prompt payment provisions of the Construction Act, they have not. Courts have been loath to substitute their opinions for those of the adjudicators. They have confined themselves to the narrow remedies set out in the Act, acting only if an adjudicator’s decision is absurd. They also have done their best to ensure that the awards of adjudicators are paid. We base these conclusions, in part, on the following trilogy of cases: MGW Homes Design Inv v. Pasqualino, a 2024 decision of the Divisional Court, Integricon Construction Inc. v. Steven, a 2025 decision of the Ontario Superior Court of Justice, and Jamrik v. 2688126 Ont. Inc., a 2024 decision of the Ontario Superior Court of Justice (Divisional Court).

Consequential Damages

Belfor (Canada) Inc. v. BC Hardwood Floor Co. Ltd., 2026 BCSC

Contractor sued its subcontractor because of defective flooring. Subcontractor had fixed the deficiencies, but contractor had paid for the owner’s expenses while the floors were being fixed and claimed the cost of those expenses. The sub’s warranty, which included labour and materials, explicitly excluded consequential and out of pocket expenses during the remedial warranty work. Based on the interpretation of the warranty, the contractor’s claim failed.

Judicial Review of Adjudicator’s Decision

Sayers v. Gay Co.  2026 ONSC918 (Div Ct)

Owner sought judicial review of an adjudicator’s prompt payment determination requiring interim payment to contractor, asserting jurisdictional error, procedural unfairness, fraud, improper treatment of delay and set‑off claims, and bias. The court rejected each ground, holding that the adjudicator reasonably applied the Construction Act and the parties’ written contract, which did not provide contractual entitlement to withhold payment for delay. The court emphasized that prompt payment adjudication is intended to ensure the immediate flow of funds despite unresolved disputes, and that complexity or alleged prejudice does not defeat the statutory scheme. As no reviewable error was established under the limited grounds in the Act, the court dismissed the application.

Construction Act #6

We previously notified our readers that major changes to the Construction Act were coming (see January 2025 newsletter), The first amendments were enacted November 24, 2024; the second amendments were enacted November 27, 2025, but the changes for each were only proclaimed in force on January 1, 2026. There are many changes, but we will only discuss the most important of them.

Annual Holdback Release

This is the big one. Previously, holdback would be released 45 days after substantial performance of the prime contract. This was not great for subs working at the beginning of a four-year prime contract (e.g. excavators, piling subs, etc.). Indeed, it was not great for subs working throughout the contract; 10% of their contract money for work they performed was held up for years. Cash flow was severely affected.

The legislature heard their cries of anguish and provided for a mandatory release of holdback annually (s. 26(1)) – assuming the prime contract extends for at least one year.

Flotsam and Jetsam

It is a new year. We thought it appropriate to give some snappy summaries of 2024 runner-up cases that caught our attention but were not the subject of our 2025 newsletters.

Mascia v. Tristar

This is a 2024 decision of the Divisional Court, Ontario Superior Court of Justice.

Dispute

Homeowners retained a contractor to repair their cottage that had severe flood damage. The owners gave a work commencement order to the contractor before the parties ever agreed on a price. Although the contractor gave estimates after the date of the work order, they were just that, estimates. After the contractor had completed much of the remediation work, the owners became upset with the rising cost of the project and fired the contractor. The contractor sued for the value of the work it had completed, including windows that it had paid for and stored and for which the owners had ultimately refused delivery to the project site.