Legal Blog: Construction

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).

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.

Construction Owner

Demasi Contracting Inc. v. Farahmand 2025 Ont SCJ

A lien claimant obtained default judgment against the landowner. The claimant sought to establish priority over the existing 1^st mortgagee, arguing that the mortgagee was an “owner” under the Construction Act. The judge dismissed the motion. The judge found that the mortgagee knew about the work being conducted, but the work was not conducted at its request. More importantly, the judge found that s. 78 did not grant priority to the lien claimant over the mortgage.

Adjudication

Integricon Construction Inc. v. Stevens 2025 Ont SCJ

Construction contract called for draws to be made at various milestones. The 2^nd draw was to be made when the foundations were completed and backfilled. The owners refused to pay the full 2^nd draw because their mortgagee had determined that the 2^nd draw resulted in a 25% payment whereas the project was only 15% completed. The contractor left the job, filed a lien, and initiated adjudication. After the adjudicator found in favour of the contractor, the contractor garnished the owners. The owners dredged up the same submissions to the judge that the adjudicator rejected. The judge refused to allow a backdoor attack on the adjudication result and allowed the garnishment to continue.

Conflict

Several remedies come into play in determining the outcome of construction disputes. Normally these remedies play nicely with each other, but sometimes they conflict. One such conflict, between the adjudication remedies under the Construction Act and remedies under a bond indemnification agreement, was dealt with in Westport Insurance v. BDA, a 2024 Ontario Superior Court of Justice decision. The losing party in the decision moved for leave to appeal to the Divisional Court, which was refused in 2025.

Bond Stream

A general contractor retained a subcontractor to provide electrical supply and installation for a project. As part of the subcontract, the sub was obliged to, and did, deliver a performance bond and a labour and material payment bond. Under the bonds, the general was the obligee and the sub was the principal.

Adjudication Priorities

Westport Insurance Corporation v. BDA Inc. 2024 Ont SCJ

After a dispute, a general terminated its sub’s subcontract and claimed against the sub’s surety on the sub’s bonds. The surety advanced payments to the general under a mitigation agreement. The sub subsequently obtained an adjudication determination awarding money to it, which the general paid to its lawyer in trust. The sub and the surety each wanted those funds. The judge decided that the surety had a security interest over the money under its indemnification agreement with the sub and therefore had priority but was not entitled to immediate payment due to ongoing litigation between the parties that could affect the surety’s ultimate entitlement. The court ordered the disputed funds to be paid into court pending the outcome of those proceedings.

Deficient Reasons

Masonry Group Inc. v. Marydel Homes (Beaverton) Inc. 2025 Ont CA

Contractor and owner disagreed over payment for masonry work on a residential subdivision. Owner had paid most of the invoiced amount for work done through 2021; a balance of $193K remained in dispute. A subsequent 2022 contract for work on Lot 121 included a clause stating this balance would be added to the new contract price. Contractor registered a lien for $228K on Lot 121. Owner vacated it by paying security into court and then moved to reduce security. The motion judge reduced the security amount without giving any explanation for doing so. The judge said he would provide more reasons, but did not. The key issue involved interpreting the 2022 contract and the definition of “price” within the Construction Act to determine if the disputed balance was properly included in the lien amount. The court held that the motion judge’s reasons were insufficient, preventing meaningful review. The court set aside the order and remitted the matter to a different judge for re-determination.

Ultimate Limitation

We expect that everybody now knows about the basic limitation period: two years from the date that an aggrieved party (plaintiff) knew or ought to have known about a claim. Because the discovery or deemed discovery may not take place for many years, the basic limitation period, depending upon the circumstances, can be almost unlimited.

The discovery principle arises from the law’s reluctance to remove a right of action from a plaintiff before that plaintiff even knows that a right of action exists. For example, if a negligent motorist causes an accident that puts a pedestrian into a coma for two years, it would hardly be fair for the limitation period to eliminate the pedestrian’s right of action before the pedestrian even awakened.

However, when it enacted the Limitations Act, 2002, the legislature also understood that it had to reduce the possibility of a cause of action continuing indefinitely. It did so by way of s. 15(2) of the Act, which established an ultimate limitation period of 15 years. Accordingly, even though the basic limitation period may still be running, after 15 years the ultimate limitation period ends a plaintiff’s right of action for damages. The purpose of the ultimate limitation period is to balance a plaintiff’s right to sue with a defendant’s need for certainty and finality.