Legal Blog: Construction
Section 78(1) of the Construction Act notes that, subject to exceptions (e.g. see ss. 2), liens arising from an improvement have priority over mortgages of the owner’s interests. Section 78(2) gives a lien priority to the extent of the deficiency in any holdbacks the owner is required to maintain. In this case, the owner had two building mortgages. Had the owner only one building mortgage, the lien claimants would have had priority over $x of the deficiency in the holdback. But, because there were two mortgages, the lien claimants argued that they had priority of $x over each mortgage. The judge held that they were limited to $x in aggregate.Continue Reading >
Just because a contract stipulates that a party must obtain insurance does not necessarily mean that the party who has to insure bears the risk of loss. That depends on the interpretation of the contract as a whole. In this case, in which a sub caused a loss to third party neighbours who sued the general contractor and the sub, the owner had to obtain a primary wrap-up liability policy, naming as insureds all contractors and subcontractors. However, since the contract called for the sub to indemnify the general contractor against all of its acts that caused loss to the general contractor, the court held that the sub had to indemnify the general contractor for defence costs, indemnity payments made, and insurance deductibles, regardless who had to obtain insurance.Continue Reading >
Breen v. Lake of Bays (TWP) 2022 Ont CA
Case discusses the legal framework governing construction permits and inspections under the Building Code Act. Under the Act, municipalities owe a duty of care to all who it is reasonable to conclude may be injured by the negligent exercise of its inspection powers. This includes subsequent purchasers of a building constructed for another owner. Once a municipality enacts a bylaw dealing with building permits, the municipality makes a policy decision to enforce the Act and its duties arise. A municipality is liable if the inspector derogates from the standards of an ordinary reasonably prudent inspector. The reasonably prudent inspector is not expected to uncover every latent defect.Continue Reading >
Claimants who have been wronged, by breach of contract, tort, or otherwise, do not want to start a legal action. For good reason! It is costly both in legal fees and the claimant’s time; it is emotionally draining; and it can be unsuccessful. Accordingly, most claimants try to obtain some recompense for their claim without recourse to the courts or arbitration. They wait and wait for that recompense, but, sometimes, it never materialises and the only remaining option is to proceed with a legal action. Unfortunately, some claimants may delay that decision too long and find that their right to commence a proceeding has been lost because of the Limitations Act. You cannot dither forever.Continue Reading >
City Star Roofers v. 216942 Ontario Limited 2022 Ont CA
After a mediation, the parties agreed that the owner could hold back $30,000. It would be released to the contractor after the contactor completed all deficiencies to the satisfaction of the owner’s engineer. The contractor has a specified time to do so and, upon failure, would receive none of the money. The contractor attended to fix deficiencies, but the engineer reported after the due date that the contractor still needed to complete about $10,000 worth of deficiencies. The contractor argued that the remaining deficiencies were only worth about $2,500. The owner kept all of the $30,000. The court held that the mediation terms were not unconscionable and refused relief from forfeiture: the mediation agreement was made with counsel and merely adopted a practical solution to resolving the parties’ dispute. It was not a penalty.Continue Reading >
The prompt payment and adjudication provisions of the Construction Act (“Act“) have now been in effect for a couple of years and we have seen some court cases applying them. If a participant in an adjudication is unhappy with the decision, can that participant do anything about it? This question was answered in SOTA Dental Studio Inc. v. Andrid Group Ltd., a 2022 decision of the Ontario Divisional Court.
The court set out the rationale behind the prompt payment provisions, so concisely that we will simply quote it:
The whole point of these provisions is to require prompt payment to avoid the consequences of disruptions to construction projects of brinksmanship over disputes that arise. The prompt payment provisions are based on similar provisions introduced in the United Kingdom more than a decade ago. They provide for a quick and relatively informal adjudication, by an adjudicator experienced in construction law disputes. The decision is without prejudice to the parties contesting issues between them at the end of the project. It triggers an obligation on the part of the payee to make its payments to its subcontractors, suppliers and workers. Effective implementation of these provisions is intended to reduce terminations (by payors) and work cessations (by payees) in the midst of construction, either of which can cause cascading losses down the construction pyramid. The obligation to pay, and to pay promptly, when ordered to do so, is fundamental to the scheme of the prompt payment provisions.Continue Reading >
Vanguard Legal Magazine’s Article: “Chris Moran — Maple Reinders: Building the Foundation of Trust in Order to Rise”
SNF is proud to partner with and recognize the achievements of Chris Moran and the whole Maple Reinders team.
Read the article here.
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Assume that shareholders concoct a scheme by which they defraud their corporation and take out money that otherwise would have belonged to it. If the corporation subsequently becomes bankrupt, can its trustee in bankruptcy collect the proceeds of the fraud from the fraudulent shareholders? This issue was decided in Ernest & Young Inc. v. Aquino, a 2022 decision of the Ontario Court of Appeal.
The corporation is Bondfield Construction Company Limited (and its affiliate, Forma-Con Construction). We will refer to each under the banner of Bondfield. The fraudster shareholder was John Aquino.
Aquino, who was the directing mind of Bondfield, arranged for a false invoicing scheme by which various suppliers rendered invoices to, and were paid by, Bondfield, but provided no actual services. In doing so, Aquino siphoned off tens of millions of dollars from Bondfield.Continue Reading >
SOTA Dental Studio Inc. v. Andrid Group Ltd. 2022 Ont SCJ (Div Ct)
An adjudicator’s decision may not be appealed, but is made without prejudice to a party’s rights to deal later with the issue in court or in arbitration. Section 13.18(1) of the Construction Act provides that an unhappy party may apply for judicial review, but only with leave of the court. Section 13.18(7) of the Construction Act provides that an application does not stay the requirement to comply with the decision unless the court orders otherwise. In this case, the applicant neither paid the amount the adjudicator ordered, nor attempted to obtain leave for judicial review, nor requested a stay of the decision. It just brought the application. The court dismissed the application without inquiry into the merits noting that prompt payment was integral to the scheme of the Act and that failure to comply with a decision may lead the court to refuse leave and, even with leave, the applicant must first obtain a stay of the decision.Continue Reading >
Section 5(1)(a)(iv) of the Limitations Act, 2022 notes that limitation period does not start to run until, having regard to the injury or damages, “a proceeding would be an appropriate means to remedy it.” Appropriate means legally appropriate, not tactically appropriate. Contractor was attempting to be paid for its ongoing work on condo units and condo manager kept saying that she would take care of it, but needed more time because she was busy. This went on for years – until the manager stated for the first time that, if the unit owners did not pay the condo, then the condo would not pay the contractor. The court found that it was only then that it became legally appropriate to bring a proceeding; until then, because of the manager’s statements, the contractor reasonably believed it would be paid once the manager got around to reviewing the invoices.Continue Reading >