Executive Summary: Key Legal and Evidentiary Issues

• Homeowners failed to comply with a prompt payment order issued under Ontario’s Construction Act following a valid adjudicator’s determination.

• The contractor was entitled to a second draw upon completing a construction milestone, despite homeowners not receiving funds from their bank.

• An attempt to set aside garnishment proceedings was dismissed due to lack of jurisdiction and improper procedural route.

• The adjudicator’s order was binding and enforceable as a court order under s. 13.20 of the Construction Act.

• Claims of contract repudiation and potential double recovery were rejected as irrelevant or unsupported under statutory and case law.

• Judicial review could have been sought but was neither pursued nor stayed, undermining the homeowners' position.

Background and contract terms

Derek Stevens and Ashna Latchmiah hired Integricon Construction Inc. to perform contractor services for the construction of their single-family home. The agreement was governed by a written contract, which included a draw schedule linked to specific construction milestones. Financing for the project was arranged through RBC, and the parties had negotiated the draw schedule to accommodate the bank's requirements. However, the final contract did not make payment conditional upon the bank releasing funds.

The first draw of $170,828.19 was paid, and the contractor completed the foundation and backfilling. Upon completion of this work, Integricon invoiced the homeowners for the second draw of $215,243.53. RBC refused to release the funds, stating that only 15% of the overall project had been completed, whereas their policy required 25%.

Adjudication under the Construction Act

The contractor initiated adjudication under section 13.5 of the Construction Act. The adjudicator, Marcel D. Mongeon, ruled that the contractor was entitled to the second draw based on the clear language of the contract, which required payment upon the completion of specific milestones, not based on RBC’s funding conditions or percentage completion of the overall project. He also found that the invoice, while imperfect, was a proper invoice under the Act.

The adjudicator ordered the homeowners to pay $215,243.53 plus interest. The homeowners failed to comply, and the contractor registered the adjudicator’s decision with the Superior Court and initiated garnishment proceedings. The homeowners’ bank accounts were frozen, and over $130,000 was garnished.

Motion to set aside garnishment

The homeowners brought a motion under Rule 60.08(16) of the Rules of Civil Procedure to stay or set aside the garnishment. They argued that enforcing the adjudicator’s order would be unfair, especially since they alleged Integricon repudiated the contract by ceasing work. They also argued that there was a risk of double recovery if the contractor pursued both garnishment and a construction lien.

Justice Mathai rejected the motion. He held that the adjudicator’s decision was binding and enforceable as a court order unless judicial review was sought and a stay was granted by the Divisional Court. The homeowners had neither pursued a judicial review nor requested a stay. The court emphasized that garnishment is a statutory remedy available to creditors under an enforceable court order, which this was.

Rejection of unfairness and double recovery arguments

The court found no merit in the claim that enforcement would be unfair. It affirmed that the contract required payment upon milestone completion, and the adjudicator had clearly found that the foundation and backfilling milestone was achieved. The claim that the payment order was conditional on continued work was unsubstantiated.

Regarding the risk of double recovery, the court held that the Construction Act permits both adjudication and lien claims to proceed concurrently. Any overlap in amounts could be resolved through appropriate credits in the lien proceeding. The suggestion that the contract had been repudiated did not invalidate prior obligations or rights under the contract, including the second draw payment.

Outcome

The motion to stay or set aside garnishment was dismissed. The court also set aside a prior interim order that had paused enforcement. While the contractor’s request for further enforcement and declaratory relief was denied for procedural reasons, the ruling confirmed that the garnishment process could proceed. The parties were urged to settle costs, failing which submissions would be due by late August and early September 2025.