Contents
(a) Kingsett Mortgage Corporation v. Mapleview Developments Ltd., 2024 ONSC 6477. 1
(b) Peoples Trust Company et al. v. Vandyk-Backyard Queensview Limited et al., 2024 ONSC 6648. 3
(c) 2708320 Ontario Ltd. cob Viceroy Homes v. Jia Development Inc, 2024 ONSC 1608. 4
(d) Demikon Construction Ltd. v. Oakley Holdings Inc. et al, 2024 ONSC 2151. 6
(e) Accurate General Contracting Ltd. v. 485 Logan Developments Inc, 2025 ONSC 3498. 7
(a) Amendments to Ontario’s Construction Act – Building Ontario For You Act (Bill 216) 11
(a) Kingsett Mortgage Corporation v. Mapleview Developments Ltd., 2024 ONSC 6477
Navjot Mann, Articling Student, Toronto
Mapleview Developments Ltd. (“Mapleview”), along with other parties, was developing a residential townhome project (the “Lands”). KingSett Mortgage Corporation (“KingSett”) provided funding for the servicing, development, and construction of the Lands. In 2019, KingSett registered two mortgages on the title of the Lands, following which funds were advanced between 2019 and 2022 (“2019 Mortgages”). Prior to that, several entities registered construction liens against the Lands, with the first lien registered in 2016.
In 2022, KingSett discharged the 2019 Mortgages, consolidating them under a single mortgage (the “2022 Mortgage”). KingSett’s intention in doing so was, first, to avoid multiple mortgages on title securing the same indebtedness and, second, to include new lands under the 2022 Mortgage as security for a later phase of the project, which was not covered under the 2019 Mortgages. It is noteworthy that at the time and following registration of the 2022 Mortgage, no advances were made by KingSett to Mapleview.
In May 2024, the Ontario Superior Court of Justice (the “Court”) approved a sale agreement and process for the Lands and other property, resulting in the sale of the project. Motion materials were served by the receiver of Mapleview (“Receiver”) for a distribution order approving a distribution of the sale proceeds to KingSett. However, one of the objecting lien claimants filed materials objecting to the proposed distribution, asserting that lien claimants had priority under the Construction Act (the “Act”) for the full extent of their liens.
The central issues before the Court were whether:
- the lien claims had priority over the 2022 Mortgage, resulting in priority of distribution of sale proceeds to lien claimants, or
- the 2022 Mortgage had priority over the liens, except to the extent of deficiency in the holdbacks.
Decision
KingSett had priority over liens, except to the extent of deficiencies in the holdbacks required to be retained by Mapleview under ss. 78(2) and 78(6) of the Act.
2022 Mortgage had priority over liens under s.78(2)
In relying on Bianco v. Deem Management Services Limited, 2021 ONCA 859, J. Cavanagh held that the general intention of s. 78 of the Act is to give priority to lien claimants over mortgages, subject to one of the exceptions set out in s. 78.
The Court upheld the decision made in Bianco, stating that s. 78(2) was a statutory exception to the general rule in s. 78(1) of the Act, according to which liens have priority over mortgages. Relying on the decision in Bianco, J. Cavanagh held that where the statutory requirement in s. 78(2) is satisfied, the effect was “to restrict the priority of the lien claims relating to that improvement solely to any deficiency in the holdback amount, and not over the mortgage generally.” J. Cavanagh then looked at the requirements of s. 78(2) and whether they were met by the 2022 Mortgage. S. 78(2) of the Act requires that the mortgagee takes a mortgage “with the intention to secure the financing of an improvement.” Therefore suggesting, per Bianco, that the intention was to secure the financing ‘following’ the registration of the mortgage. The lien claimants alleged that the 2022 Mortgage failed to meet the requirements of s. 78(2) as it was registered retrospectively to the advances made. Distinguishing the facts in Bianco, the Court rejected the lien claimants’ allegation, deciding that even though the 2022 Mortgage charged additional land, KingSett did not take security for previously unsecured advances, however intended that its advances, that had previously been secured by its 2019 Mortgages, would continue to be secured by the 2022 Mortgage. Thus, the exception in s. 78(2) applied with the result that the 2022 Mortgage had priority over the liens, except to the extent of any deficiency in the holdbacks.
2022 Mortgage had priority over liens under s.78(6)
The lien claimants alleged that the KingSett advances under its 2019 Mortgages were not made “in respect of” the 2022 Mortgage and, therefore, KingSett could not establish that it had priority to the liens under s. 78(6). For KingSett, the 2022 Mortgage was fundamentally a continuation of the 2019 Mortgage which secured and consolidated the loan facilities that were secured under the 2019 Mortgages. According to J. Cavanagh, the 2022 Mortgage was not a new mortgage for which advances were yet to be made. In fact, there was a close connection and link between the advances made pursuant to the 2019 Mortgages and the 2022 Mortgage that was taken from the same mortgagor and secured repayment of the same advances to the same debtor. Accordingly, the advances secured by the 2022 Mortgage were made in respect of the 2022 Mortgage, within the meaning of s. 78(6) of the Act. Further, at the times of the advances secured by the 2022 KingSett Mortgage, there were no preserved or perfected liens against the Lands. Further, there was no evidence that prior to the times when advances were made, KingSett had received written notice of a lien within the meaning of s. 78(6). Therefore, the exception in s. 78(6), granting the 2022 Mortgage priority over lien claims, applied in the circumstances.
Comments
This case confirms the requirements of the general rule under s. 78 of the Act, granting lien priority over mortgages, and the exceptions applied thereto, specifically in ss. 78(2) and 78(6). As has previously been determined in Bianco, for the exception in s. 78(2) to apply, the intention to finance an improvement must operate prospectively to the registration of the mortgage. The exception continues to apply even where prior mortgages are discharged and consolidated into a single mortgage, provided the new mortgage is registered before the discharge of the previous ones, irrespective if the new mortgage does not replicate the same terms of the previous one. Further, this case reiterates that the wording “made in respect of” in s. 78(6) should be interpreted broadly, however does not extend to mortgages where no advance is made by the mortgagee.
(b) Peoples Trust Company et al. v. Vandyk-Backyard Queensview Limited et al., 2024 ONSC 6648
Amanda Krantz, Articling Student, Toronto
Facts
The defendant, Vandyk-Backyard Queensview Limited (“Vandyk”), developed a condominium project (the “Project”). After completing construction, Vandyk was left with 21 unsold units. To finance these remaining units, Vandyk secured a condominium inventory term loan from the plaintiff, Peoples Trust Company (“Peoples”). Peoples advanced the necessary funds and registered a corresponding mortgage under the term loan. Following the registration of the mortgage, various lien claims were filed against the unsold units. The registration of these lien claims triggered a default under the mortgage agreement with Peoples, as the unpaid debts indicated financial instability and non-compliance with the mortgage terms. This situation led to a legal dispute over the priority of the lien claims versus the mortgage held by Peoples, with Vandyk’s financial difficulties and the subsequent lien claims forming the crux of the issue.
The central issue was whether the lien claims had priority over the mortgage held by Peoples. On the one hand, the lien claimants argued that, despite not taking the necessary legal steps to register their liens on the title of the Project, they deserved an equitable lien and should be given priority. They further contended that Peoples should have conducted additional research to become aware of the lien claims.
On the other hand, Peoples argued that their mortgage, which was properly registered before the lien claims were made, should take priority. They cited Section 78(6) of the Construction Act (the “Act”) and emphasized the lack of notice regarding the lien claims. Peoples maintained that the Act provided clear guidelines for priority of payments, and their mortgage met all the necessary legal requirements to have priority over the unregistered lien claims.
Decision
The Superior Court of Justice (“Court”) held that the Act provided a clear answer to the issue of priority. J. Osborne stated that the plain language of s. 78(6) of the Act provided authority for the finding that Peoples mortgage should have taken priority over the liens given that no liens were preserved or perfected prior to the advance on the mortgage.
As for the lien claimant’s argument for equitable liens, J. Osborne rejected the same, emphasizing that such a lien is unnecessary when a statutory lien regime is in place. Citing Talbot v. Pawelzik, 2005, 4844 (ONSC), J. Osborne noted that equitable liens should not be created when a statutory lien regime already exists, stating this to be contrary to the purpose of the Act. Furthermore, any equitable lien would not have priority over a prior-registered mortgage. Equitable liens arise when imposed by the court and, in any event, s. 93(3) of the Land Titles Act states that a registered mortgage takes precedence over all unregistered interests in the land, including equitable liens.
The court dismissed the lien claimants’ assertion that Peoples should have conducted further research to uncover the lien claims. J. Osborne pointed out that even if additional inquiries had been made, Peoples would not have discovered the liens since they were not registered on title. The lien claimants had not preserved or perfected their liens at the time the mortgage was registered, and Peoples had no written notice of these liens.
Finally, J. Osborne emphasized that Peoples was neither reckless nor willfully blind to the lien claims. Peoples followed the necessary legal steps, including conducting a title search, which was deemed sufficient under the Act. The Act does not require mortgagees to go beyond this to secure priority over unregistered liens.
Comments
The decision underscores several key principles. Firstly, it reaffirms the priority of registered mortgages over unregistered lien claims, emphasizing the importance of timely registration to protect financial interests. The Court’s rejection of equitable liens in favor of statutory lien regimes highlights the necessity of adhering to established legal procedures. Additionally, the decision clarifies that mortgagees are not required to conduct inquiries beyond a title search to secure priority, simplifying the process for lenders. The requirement for a written lien notice before challenging mortgage priority further strengthens the position of registered mortgages. Overall, the case illustrates the critical need for both lien claimants and mortgagees to actively manage and register their interests to ensure they are recognized in priority disputes.
(c) 2708320 Ontario Ltd. cob Viceroy Homes v. Jia Development Inc, 2024 ONSC 1608
Amalia Silberman, Articling Student, Toronto
The recent decision of the Superior Court of Justice (Court) in 2708320 Ontario Ltd. cob Viceroy Homes v. Jia Development Inc, 2024 ONSC 1608, highlights lawyers’ duties when dealing with construction lien cases that are deemed vexatious, frivolous, and/or an abuse of process. These include an ongoing duty to take appropriate measures if a lien claim is later found to be baseless and their exposure to costs thereof where they had knowledge, were reckless, or were willfully blind to the baselessness of such a claim at the time of its preservation or perfection.
CB Bridal Path Inc. (“Bridal Path”) and Jia Development (“Jia”) purchased land at 2425 Bayview Avenue, Toronto, Ontario, intending to develop luxury townhomes. On March 9, 2022, Jia and Bridal path contracted Viceroy Homes (“Viceroy”) to construct 66,000 square feet of living space, priced at $20,000,000, with an expected completion within eight months of the agreement’s execution.
On April 22, 2022, Viceroy provided Jia and Bridal Path with an invoice summarizing costs to date, totaling $3,310,000. Jia and Bridle Path refused payment. On April 27, 2022, Viceroy registered a construction lien with Fogler Rubinoff LLP for $3,740,300, claiming this amount as the total value of work performed from March 1, 2022, to April 8, 2022. The lien was perfected on July 7, 2022, through the filing of a statement of claim.
Throughout the proceedings, Viceroy was uncooperative, failing to produce requested documents or engage with opposing parties. On August 25, 2022, during cross-examination, Viceroy admitted to fraudulent claims in the lien, including listing materials that were never delivered to the site and using budget estimates instead of actual cost information. Despite admitting to the falsity of its claims, Viceroy continued to act unprofessionally and disregarded advice from Fogler Rubinoff LLP.
Pursuant to s. 47 of the Act, Jia and Bridal path brought a motion to discharge the lien on the grounds that it was frivolous, vexatious and/or an abuse of process.
J. Wiebe addressed a key issue in the Court’s decision, relating to the test for liability for costs under the old Construction Lien Act, Section 86(1)(b)(i).
In the first issue, J. Wiebe dismissed the lien, finding that Viceroy’s claim was frivolous, vexatious and/or an abuse of process. However, the Court had to determine the appropriate standard for assessing cost liability for the representing lawyers.
Pursuant to s. 86(1)(b)(i) of the Act, a court may order costs against a person who represented a party to the action, application or motion, where it is clear that person knowingly participated in the preservation or perfection of a lien, or represented a party at the trial of an action where it is clear that the claim for a lien is without foundation, is frivolous, vexatious or an abuse of process, or is for a willfully exaggerated amount, or that the lien has expired.
J. Wiebe determined that the legal test under s. 86(1)(b)(i) for lawyers to be found accountable for costs is the lawyers’ actual knowledge of the baselessness of the claim or were reckless and/or willfully blind to that fact, at the time the construction lien was preserved and perfected. If no such knowledge existed at the time, lawyers have an ongoing duty to take appropriate measures if the lien is later found to be baseless.
In interpreting the leading case Brian T. Fletcher Construction Co. Ltd. v. 1707583 Ontario Inc., 2009 81402 (ONSC), J. Wiebe concluded that legal representatives must act in bad faith or with improper purpose and must have the ‘subjective’ knowledge of a claim’s baselessness for them to be held accountable within the meaning of s. 86(1)(b)(i). J. Wiebe draws a moral equivalent of recklessness and willful blindness with actual knowledge, thereby confirming Section 86(1)(b)(i) encompasses reckless and willfully blind conduct.
The Court concluded that Fogler Rubinoff LLP met the standard of care in this case and was not held liable for costs.
Comments
This decision emphasizes the lawyers’ role as gatekeepers in the judicial process. When a lawyer’s knowledge reaches a “clear probability” that a claim is baseless, their duty shifts to the court and other affected parties.
The decision also serves as a stark reminder of the importance of ensuring that construction liens are credible and legally justified, underscoring the necessity of due diligence when preserving or perfecting a lien, and placing increased responsibility on lawyers to ensure the validity of lien claims and encourage settlements to mitigate cost consequences. While zealous advocacy for a client is essential, it must be balanced with the duty to act ethically, with integrity, and in a manner that upholds the administration of justice.
(d) Demikon Construction Ltd. v. Oakley Holdings Inc. et al, 2024 ONSC 2151
Mark Ibrahim, Articling Student, Toronto
The decision in Demikon serves as a cautionary precedent for developers considering bypassing the construction pyramid by making direct payments to subcontractors. While s. 28 of the Construction Act (the “Act”) permits owners to receive credit for such payments, this provision must be exercised with diligence and precision. Owners must ensure that all statutory conditions are satisfied and that payments are made with full awareness of the legal requirements and limitations imposed by s. 28 of the Act.
Facts
Demikon Construction Ltd. (“Plaintiff”) registered a lien in the amount of $5,035,812.66 (“Claim for Lien”) against a condominium project known as the Matchedash Lofts in Orillia, Ontario (“Project”). The Project was owned by Aurelia Limited Partnership and Oakleigh Holdings Inc. (“Defendants”), who brought a motion pursuant to s. 44(5) of the Act for an order partially reducing the security posted by them in the amount of $5,085,812.66 (“Lien Security”).
The Plaintiff was the construction manager for the Project and was responsible for retaining subcontractors to perform necessary work. The Defendants ultimately terminated the contract with the Plaintiff due to alleged delays and deficiencies attributed to the Plaintiff. Following the termination of the contract the lien was registered.
The Defendants contend that direct payments were made in respect of outstanding accounts of many of the Plaintiff’s subcontractors and suppliers (“Direct Subcontractor Payments”), which were included in the claim for lien pursuant to s. 28 of the Act. The latter permits payments by owners to subcontractors having a lien for or on account of any amount owing to that subcontractor for services or materials supplied for the improvement and gives written notice of the payment to the proper payer of that subcontractor. Therefore, deeming such payment to be a payment by the owner, to the proper payer of that subcontractor, but no such payment reduces the amount of the holdback required to be retained.
The Direct Subcontractor Payments totaled $4,276,503.50, which included $2,165,321.14 for payment holdbacks. The Defendants acknowledged that the lien provided credit for Direct Subcontractor Payments totaling $722,278.67 made prior to the registration of the lien. Thus, they were seeking a court order that the lien security be reduced by $3,554,224.83 to reflect the entirety of the Direct Subcontractor Payments which have not been credited. The motions’ judge held that the payment made in this instance can be applied to the security, finding that the payments by the Defendants were made without obligation, pursuant to s. 28.
Decision
The appeal was allowed by the Divisional Court (Court), which found that the motions’ judge had erred in law by misinterpreting the scope of s. 28 of the Act. Specifically, the motions judge improperly broadened the meaning of “person having a lien” to include subcontractors who either did not hold lien rights, or whose liens had expired or been resolved. The Court emphasized a narrow interpretation of s. 28 which is only to be applied to direct payments to individuals or entities who ‘currently’ possess a valid lien for amounts owed in connection with services or materials supplied to an “improvement” as defined under the Act.
The Court clarified that the statutory language “owing to that person” requires a direct connection between the payment and a valid, existing lien. Payments made to subcontractors who do not meet this criterion fall outside of the scope of s. 28 and cannot be used for reducing the lien security.
In its decision, the Court emphasized that s. 28 should not be used to bypass privity of contract unless the recipient of the payment hold an active lien in accordance with the Act.
Comments
The Divisional Court affirms a narrow interpretation of section 28 of the Act. Owners must exercise caution and ensure that payments intended to reduce lien security are made only to those who have ‘preserved’ valid lien rights. As clarified in this appeal, s. 28 payments are unlikely to reduce holdback obligations unless all statutory conditions are strictly met. Owners should remain diligent in identifying which subcontractors have supplied lienable services that give rise to active lien rights, and distinguish these from liens that have expired, been satisfied, or discharged in accordance with the Act.
(e) Accurate General Contracting Ltd. v. 485 Logan Developments Inc, 2025 ONSC 3498
Khalil Mechantaf, Counsel, Toronto
Facts
Accurate General Contracting Ltd. (“Accurate”) entered into a construction contract with 485 Logan Developments Inc. (“Logan”) for a project located at 485 Logan Avenue. The contract outlined the scope of work, timelines, and payment terms. Disputes arose during the course of the project regarding delays, quality of work, and payment issues. Accurate alleged that Logan failed to make timely payments and did not provide necessary approvals, leading to work stoppages and financial strain. Logan countered that Accurate did not meet the required standards and timelines, resulting in the withholding of payments. The parties attempted to resolve the issues through negotiations but were unsuccessful, leading Accurate to register a claim for lien in the amount of $272,689.75 on December 15, 2023, related to work performed on the subject improvement.
Under s. 31(2)(ii) of the Act, Accurate had forty-five days from the date it “completed” or “abandoned” its contract to preserve its lien, namely register a claim for lien.
The dispute arose over whether Accurate preserved its lien within the statutory time limits under the Construction Act, R.S.O. 1990, c. C.30 (“Act”). Logan obtained a court order on January 19, 2024, vacating the Accurate claim for lien using a lien bond in the amount of $340,861.25. Logan also sought an order under s. 47 of the Act, (i) declaring the claim for lien registered by Accurate on the subject improvement expired due to a failure by Accurate to preserve and perfect the lien in time, and (ii) requiring a return of the posted security to Logan and payment of damages of $29,120.06 for the costs of the lien bond and legal expenses.
Accurate opposed the motion, asserting that it performed work after October 31, 2023, including electrical work, pressure switch repairs, smart switch relocation, and transformer installation, which preserved the lien within the statutory period. In response, Logan contended that Accurate’s alleged post-October 31, 2023, work was either not performed or constituted “bootstrapping” to extend the lien period, maintaining its argument that the lien was expired due to untimely preservation.
Decision
In its decision on June 11, 2025, the Superior Court of Justice, Ontario, (Court) declared Accurate’s lien expired and ordered it vacated. Logan was awarded $9,657 in damages for the costs of the lien bond under s.35(1)2 of the Act, on the ground that it should have known it did not have a valid lien when it registered its claim.
On evidence, the Court found that Logan met its burden of proving there was no triable issue regarding the timeliness of Accurate’s lien preservation, holding that Accurate failed to demonstrate that it performed work after October 31, 2023, that would extend the lien period. In analysing Accurate’s heads of work it relied on for extending the lien period, the Court considered that the alleged works were (i) either not performed, (ii) performed before October 31, 2023, (iii) performed by another contractor, (iv) performance was unsupported by credible evidence, or (v) performance of the work was negligible and did not significantly advance the project, therefore amounting to “bootstrapping”.
Comments
The decision of the Court is a reminder of the quality of the evidence required in support of a claim for lien. As stated by the Court, according to GTA Restoration Group Inc. v. Baillie, 2020 ONSC 5190, both parties must “put their best foot forward” in the evidence to assist the court in making its determination, and the court is entitled to make this assumption.
In reliance on 1442968 Ontario Limited v. Houston Engineering & Drafting Inc., 2008 16187 ONSC, the Court stated that “Bootstrapping”, a process whereby a lien claimant attends on site without authority to do inconsequential work for the purpose of extending the lien preservation period, does not in fact extend that period.
Accurate registered its claim for lien on December 15, 2023. Therefore, the issue is whether there is a triable issue as to whether Accurate “completed” its work after October 31, 2023. Accurate asserts that it did four items of work after October 31, 2023, that meet the test. The Court was not convinced with any of the evidence that the timing of such works creates a triable issue that the Accurate lien was preserved in time. More importantly, the Court’s decision is a reminder to maintain records demonstrating the date when work was done or inspected, the importance to bill for that work, as well as performing work that does not amount to “bootstrapping”. Failing which, it is likely the Court will find no triable issue regarding the timeliness of the lien preservation and that, in fact, the lien has expired.
(f) Kingdom Langley Project Limited Partnership v. WQC Mechanical Ltd., 2025 BCCA 169 (Shimco Lien)
Alexander Maltas, Partner, Vancouver
On May 23, 2025, the British Columbia Court of Appeal released the decision Kingdom Langley Project Limited Partnership v. WQC Mechanical Ltd. (2025 BCCA 169). This case concerns Shimco liens and is noteworthy because it confirmed that this type of lien will not only persist as a separate type of lien from land liens, but also that Shimco liens cannot be simply canceled by posting security under section 24 of the Builders Lien Act, SBC 1997, c.45 (“BLA“). Further implications of this decision will be discussed below.
Facts
This decision was an appeal of an order made in chambers that the respondent, WQC Mechanical Ltd. (“WQC”) was entitled to a proportionate share of the holdback funds retained by the appellant Kingdom Langley Project Limited Partnership (“Kingdom”), the owner and developer of a construction project. Kingdom engaged Metro-Can Construction (TC) Ltd. (“Metro-Can”) as the general contractor for the project under a fixed-price contract. Under this contract, Metro-Can was required to ensure that no liens or CPLs were filed or registered against the property, and was not entitled to payment of the holdback until it had discharged any claims of lien filed by subcontractors and had those claims dismissed or otherwise secured. In accordance with its obligations, Metro-Can filed a petition for an order pursuant to section 24 BLA to cancel a lien from title, upon Metro-Can posting a lien bond in the claimed amount.
Thereafter, WQC filed a builders lien against the land and claimed a lien against the holdback. Metro-Can obtained an order by consent to cancel WQC’s lien against the land pursuant to s. 24 of the BLA, meaning that this lien against the land would be cancelled with the lien bond and there would be no further claims by WQC against the lands relating to said claim of lien (the “Security Order”). The Security Order also provided that the lien bond would stand as security for any claim against the holdback.
At issue before the chambers judge was whether the Security Order canceling WQC’s claim of lien meant that WQC was limited to claiming against the lien bond held by Metro-Can, or whether WQC could still be paid out of the holdback funds. Kingdom argued that the Security Order cancelled WQC’s right to a claim against the holdback because it had given up its in rem claim to the holdback by accepting the lien bond as security pursuant to section 24 of the BLA. The chambers judge refused to accept Kingdom’s argument as the Security Order did not stipulate that a claim against the holdback would be canceled, only a claim against the lands, and this interpretation accorded with the general scheme of the BLA. The judge clarified that the funds would be paid for the holdback itself, rather than WGC having to pursue its share through the lien bond held by Metro-Can.
Kingdom made the same argument in its appeal, focusing on issues of statutory interpretation, but more broadly submitted that the decision Shimco Metal Erectors Ltd. v. Design Steel Constructors Ltd. (2002 BCSC 238, affirmed 2003 BCCA 193) (“Shimco“) was wrongly decided. Shimco is a seminal decision that created a remedy under the Builders Lien Act, SBC 1997, c.45 (“BLA“) for contractors and others to file a lien against the holdback funds on a project. Kingdom argued that the uncertainty surrounding Shimco liens that has arisen since their inception, not the least of which being how such a lien can be extinguished or discharged, grounds to need to reconsider the Shimco decision.
Some practical concerns with Shimco liens were raised by Kingdom in its arguments on appeal. Kingdom argued that the Shimco’s creation of a separate holdback lien is inconsistent with the purpose of the BLA, because the Shimco lien:
a. fails to give due priority to those who have perfected their section 2 liens in accordance with the procedures of the BLA;
b. is available to a wider class of potential claimants, since it is not subject to the internal limits in section 2; and
c. affords claimants a procedural advantage over claimants pursuing a land lien because the Shimco lien has no clear procedural or notice requirements.
The appellant’s main submission was that that the court in Shimco erred by holding that the BLA created a separate lien against a holdback, as section 2 of the BLA provided for one single lien which attaches to land, materials, improvement, and the holdback fund. Kingdom submitted that if holdback liens are governed by the provisions of the BLA, and section 2 in particular, then there would be unified statutory system for lien processes whereby all liens, not just liens filed against land, would have a statutory mechanism and timeline for filing, discharging and extinguishing.
Both WQC and Metro-Can argued that it was unnecessary to reconsider Shimco because the conclusion reached in that case was not engaged in the instant appeal. They submitted that the question of what WQC may enforce its claim of lien against under the Security Order survives regardless of the existence of a separate Shimco lien. Alternatively, they submitted that Shimco was correctly decided given the language in the BLA. They also pointed out that the construction industry has adapted its practices to accommodate the existence of a separate holdback lien in the more than 20 years since Shimco was decided.
Decision
While the Court agreed that Shimco created difficulties for the construction industry, it did not find any grounds that the decision was wrongly decided should be overruled. The Court acknowledged that Kingdom was not the first to raise the uncertainty engendered by the lack of any statutory mechanism or limits on filing, discharging, and extinguishing the holdback lien. However, the Court found that Kingdom’s request would effectively require the Court to re-write the BLA by inserting words into section 2 that are not there, thereby usurping the role of the legislature. Further, the Court agreed with the argument of WQC and Metro-Can that overturning Shimco would seriously disrupt the construction that has adapted to accommodate the existence of a separate holdback lien in the over 20 years since Shimco was decided.
The Court also decided that section 24 of the BLA only provides for cancellation of land liens through the posting of sufficient security, and Shimco did not establish a means by which a holdback lien may be canceled other than the claim being resolved on the merits. Therefore, posting security in exchange for the cancellation of a land lien under s. 24 has no effect on a claimant’s holdback lien or the right to share pro rata in the holdback. Even where a lien bond posted under s. 24 also provides security for a holdback lien, that security does not in itself cancel the holdback lien.
With respect to the issues on appeal, the Court concluded that the chambers judge made no error in concluding that the Security Order did not cancel the holdback lien, nor did he err in ordering payment of WQC’s undisputed claim for its proportionate share of the holdback from the holdback funds. The source of payment for a proven claim of lien—whether from the holdback or a lien bond—is within the discretion of a chambers judge.
Comments
This decision clearly affirms that, in British Columbia, Shimco liens will persist and must be claimed by way of an action before any holdback funds are paid out. Subject to legislative amendments to the BLA, holdback liens will continue to have no procedural or notice requirements and will remain a source of delay for payment of holdback funds.
Not only are Shimco liens here to stay, but the Court of Appeal suggested that they will be increasingly difficult to discharge. Unlike a land lien, posting security under the s.24 statutory mechanism of the BLA cannot serve to discharge a claimant’s holdback lien. So long as a lien is maintained against the holdback on a project, the owner and/or general contractor on any such project will be unable or unwilling to release any of the holdback funds. Given the amount of time inherent to litigating disputes, significant delays in paying out holdback funds on construction projects are inevitable for the foreseeable future.
The Kingdom decision highlights the tension between providing trade contractors with security through filing liens and ensuring funds flow predictably and quickly through the construction pyramid. Making ot harder or impossible to extinguish Shimco liens by posting security will inevitably mean that payments will be delayed longer pending resolution of lien claims. The issue of delays in payment – a fundamental issue to the construction industry – was the subject or a recent notice posted by the BC Government. On April 25, 2025, the BC Government released an announcement from the Attorney General that she has directed her Ministry to prepare prompt payment legislation, in an effort to address ongoing issues with payment delay in the construction industry. The Attorney General acknowledged that prompt payment legislation has been effective in other jurisdictions, particularly Ontario. We are hopeful that the BC legislature will follow suit and come up with a legislated solution that will better balance the need to provide security for participants, speed up the process for dispute resolution and result in faster payment.
(a) Amendments to Ontario’s Construction Act – Building Ontario For You Act (Bill 216)
Khalil Mechantaf, Counsel, Toronto
On November 6, 2024, the Building Ontario For You Act (Bill 216) received royal assent, introducing several amendments to the Construction Act (the “Act”) that are poised to affect stakeholders across the construction industry. Bill 216 arises as a result of the Ontario Construction Act Review first undertaken following the amendments last introduced to the Act back in 2019, and contains four key changes relating to mandatory annual release of holdback, broadened adjudication process, prompt payment and deeming proper invoice, as well as the transitional rules. The Bill has received Royal Assent and was enacted as law however has not yet come into effect as the process of developing the necessary regulations were interrupted by the provincial elections. Now that the drafting has resumed, it is expected that proclamation will take place in the early summer of 2025. We address these major changes and several others in the following sections:
i. Deemed lien rights of design professionals – This topic relates to legal rights under the Act, e.g. liens, prompt payment or holdback, of parties working during the pre-construction phase before the commencement of the improvement. Prior to Bill 216, creating a lien over the value of drawings or design services supplied by design professionals was unclear and uncertain. New subsection 14.4 introduces lien rights for design professionals retained by an owner for the supply of a design, plan, drawing or specification for the making of a planned improvement that is not commenced. In the circumstances, design professionals are presumed to have lien rights, unless the owner proves that the value of the owner’s interest in land has not been enhanced by such design services. Owners and public entities previously retaining holdbacks from design professionals may want to review such contractual practice with the enactment of Bill 216, given that such retention give rise to the presumption of lien rights.
ii. Mandatory annual release of holdbacks – New section 26 introduces significant changes to the payout of statutory holdbacks by establishing a new obligation for their annual release. Under the Construction Lien Act, which remain in force for contracts entered before June 30, 2018, the 10% holdback retained by an owner was released 45 days after the completion, or substantial completion, of the contract between the owner and the contractor. Bill 142, which came into effect on July 1, 2018, introduced two alternative approaches to the release of holdback: phased and annual release of holdback. However, very few owners and contractors opted for any of the proposed alternatives. Thus, delays in the payment of holdback persisted. Under the new section 26, owners are required to provide Notice of Annual Release of Holdback (Notice) within 14 days of the anniversary date of the contract. According to the new regime, any lien rights arising from the supply of services of materials included in an annual release notice expire 60 days after the publication of the Notice. The accumulated amount of the holdback must then be paid within 14 days thereof, i.e. within 75 days after the publication of the Notice, unless a lien has been preserved or perfected. Where a lien is indeed preserved or perfected and certain statutory conditions are met, an owner may not pay out the accrued holdback (s.26(4)). Where such circumstances preventing payment cease to exist, the owner must pay out the holdback within 14 days (s.26(7)). This annual payout of accrued holdback applies similarly to subsequent contractors and subcontractors to encourage the flow of funds down the construction pyramid. More importantly, the ability for owners, contractors and subcontractors to refuse payment of holdback by section 27.1 has now been repealed. The challenge with the new system of holdback release that is yet to be clarified is the relationship between the last day of supply and the annual release, the value of services that are caught in such anniversary year, and what lien rights related thereto would have expired. With such lurking uncertainty, we may see contractors and subcontractors apply liens in any event to avoid expiry of their rights which may have significant impact on projects.
iii. Publication of a notice of termination – Prior to Bill 216, contract termination required the publication of a notice of termination (Form 8), without specifying when such notice must be published. New subsection 31(8) requires the owner or contractor to publish a notice of termination within 7 days of the date the contract is terminated. The effect of such notice is set out in new subsection 31(9), which renders its date of publication to be the date of termination of the contract in similar fashion to the publication of a certificate of substantial performance. Accordingly, the counting of the 60 days period to preserve a claim for lien shall run from the date of such publication. The new regime will incentivize owners to publish a notice of termination to trigger the expiration time of lien rights of contractors and subcontractors.
iv. Prompt payment and the content of a “proper invoice” – New subsection 6(1) maintains the requirement of a written bill or other request for payment for services or materials in respect of an improvement, however the content thereof has now been amended requiring information such as, the milestones or line item number in a contract with bill of rates to which the invoice relates, and details of the payor. The changes aim to streamline invoicing across the industry as opposed to the currently odd invoicing format. Pursuing to new subsection 6.1(6), an invoice needs no longer be sent to a specific individual of the owner to whom payment is to be sent, as it now can be sent to an office or department of the same. Failing to meet these requirements is not consequential in that the new subsection 6(2) considers an invoice to be a deemed “proper invoice” in accordance with subsection 6(1), unless no later than seven days after receiving the invoice, the owner notifies the contractor in writing of the deficiency in the contractor’s “proper invoice” and of what is required to address it. It is, therefore, in the interest of owners to “speak up” and notify the contractors against any invoice that fails to meet the new requirements of subsection 6(1).
v. Commencement of adjudication and jurisdiction of adjudicators – Prior to Bill 216, adjudication was unavailable to determine disputes after contract is “complete”, typically with less than $5,000 left to perform, leaving a wide array of disputes materialising after “completion” outside the realm of adjudication. New subsection 13.5(3) requires an adjudication to commence within 90 days from the date on which the contract is completed, abandoned or terminated, unless the parties to the adjudication agree otherwise, or, in the case of a subcontract, from the earliest of (a) the dates referred to in case of the contract, (b) the date on which the subcontract is certified to be completed, or (c) the date on which the subcontractor last supplies services or materials to the improvement. The current version of subsection 13.5(3) prohibits the commencement of an adjudication after the date the contract or subcontract is completed, unless the parties agree otherwise. Thus, leaving a significant portion of payment disputes outside the realm of interim adjudication. New subsection 13.5(3) is a welcome change since most disputes, such as defects, final accounts, delays, unresolved change orders, likely materialize following completion of the contract or subcontract.
New subsection 13.12(1) allows a party to object to the adjudicator’s jurisdiction to conduct adjudication, or in case the adjudicator has exceeded their jurisdiction. An adjudicator’s jurisdiction is typically defined in the contract or subcontract, which sets out the scope and nature of issues that can be referred to and should be determined by an adjudicator. Indeed, subject to an anticipated new set of regulations, new subsections 13.5(1) and 13.5(2) expand the scope ratione materiae of an adjudicator’s jurisdiction to any matters agreed to by the parties to adjudication. Pursuant to new subsection 13.12.1(2), objections as to whether a matter may be the subject to an adjudication should be made when the party first makes submissions in the adjudication. As for objections that an adjudicator has exceeded their jurisdiction, they should be raised as soon as the matter allegedly beyond the adjudicator’s jurisdiction is raised in the adjudication. Similar provisions are found in other alternative dispute resolution methods, such as ADRIC Rule 2.2.1(a), which requires an objection to the jurisdiction of the Tribunal to be raised in the Answer to the Notice to Arbitrate, i.e. the very first submission the respondent makes in arbitration. The new subsection 13.12(1) is a welcome addition as it promotes fairness in the conduct of adjudication. Again, a party’s failure to object to the jurisdiction of an adjudicator in time is not consequential in that it may still apply to the Divisional Court to set aside an adjudicator’s determination by way of an application for judicial review provided such failure to object is justified (new subsection 13.18(5.1)).
vi. Transitional Rules – Prior to Bill 216, the Act relied on the date of the contract for the application of the changes enacted in 2018 and 2019, creating parallel regulatory frameworks for the industry which remains much in force today. The new transitional rules draw a line in the sand in becoming binding immediately upon Bill 216 coming into force, for both contracts and subcontracts. The transitional rules are particularly important for owners to update their contracts and procurement documents, to avoid these being adversely impacted by the entry into force of Bill 216, specifically in long-term construction contracts.
Other lingering issues that remain to be addressed in the forthcoming regulations include:
a- the definition of contract price, specifically relevant to the requirement of bonding in public contracts with a price of $500,000 or more. An issue arises with contracts that do not provide for a fixed price or at all, such as the CCDC 5B construction management agreement, Cost Plus contracts or even collaborative contracting mechanisms, such as Alliance or Progressive contracting, that do not include a fixed contract price for the determination bonding. It is expected that the Regulations will provide a definition for a price calculation in the absence of an agreed contract price;
b- the joining of trust claims with lien claims;
c- extending the scope of adjudication;
d- creating a database of adjudication decisions for reference
As noted above, the regulations are also expected to determine the type of disputes that can be referred to adjudication which, it is anticipated, will apply in the absence of an agreement in the contract.
Conclusion
Bill 216 is yet to be proclaimed into force. Even then, parties are encouraged to consult the transition rules to see whether the changes apply to the contract or subcontract in question. In the meantime, according to the transition rules of the Act under subsection 87.3, the current provisions of the Act will continue to apply to a contract or subcontract entered on or before June 30, 2018. A notable exception is the annual release of holdbacks addressed under new subsection 87.4, according to which, for contracts entered before the new subsection 26 enters into force, i.e. mandatory annual payment of holdbacks, the first annual release of holdback should occur on the second anniversary of the contract after Bill 216 comes into force.
Bill 216 represents a significant step forward by modernizing prompt payment and adjudication regimes to suit the changing construction landscape. These reforms are designed to foster greater transparency, fairness, and cash flow certainty across all tiers of the construction pyramid.