Executive Summary: Key Legal and Evidentiary Issues

• The central issue was whether the former Construction Lien Act or the amended Construction Act governed a payment dispute over a trailer manufacturing facility built in Cobourg, Ontario.
• Interpretation of the transitional provision, s. 87.3(1)(b), determined whether the prompt payment provisions of the Amended Act entitled Dalren to immediate payment of two disputed invoices.
• Dalren argued that its 2017 proposal for a facility at Thompson Street was not a procurement process "for the improvement" ultimately built at Dodge Street in 2020.
• A second argument was that 197 could not have commenced the procurement process as "the owner of the premises" because it did not acquire Dodge Street until 2021.
• The Court of Appeal held that a change in the project's location did not create a separate improvement, and that ownership is assessed functionally at the time construction begins.
• Consistency across the lifespan of an improvement, from procurement to construction, was identified as the purpose of the transitional provision.

Facts of the case

Dalren Limited, a general contractor, was invited by Loadstar Trailers Inc. and its affiliated company, 1978327 Ontario Ltd. ("197"), to submit a proposal to construct a trailer manufacturing facility for Loadstar. On December 11, 2017, Dalren provided a preliminary proposal to build the facility at premises known as "Thompson Street". Negotiations over the proposal and price delayed matters for the next three years, and on or around December 11, 2020, Dalren and 197 executed a contract to build the facility at a different site, known as "Dodge Street". 197 formally purchased Dodge Street on February 26, 2021. Dalren completed the project and issued 13 invoices, two of which became disputed. Dalren then brought an application under rr. 14.05(3)(d) and (h) of the Rules of Civil Procedure to determine which statutory regime governed: the former Construction Lien Act (the "Former Act") or the Construction Act as amended in 2017 (the "Amended Act"). Under the Amended Act's prompt payment provisions, Dalren would be entitled to immediate payment of the disputed invoices notwithstanding the ongoing dispute; under the Former Act, 197 could lawfully withhold payment until the dispute was resolved. The application judge, Justice Robert Charney of the Superior Court of Justice, held on December 18, 2024 that the Former Act applied and dismissed the application. Dalren appealed.

Statutory provisions at issue

The dispute turned on the transitional provision of the Amended Act, s. 87.3(1)(b), which provides that the Former Act continues to apply "with respect to an improvement if … a procurement process for the improvement was commenced before July 1, 2018 by the owner of the premises". Section 1(4) of the Amended Act defines a procurement process as commencing on the earliest of the making of a request for qualifications, a request for quotation, a request for proposals, or a call for tenders. Also relevant was the statutory definition of "owner" in s. 1(1), which is the same under both Acts and captures any person having an interest in a premises at whose request, and upon whose credit, on whose behalf, with whose privity or consent, or for whose direct benefit, an improvement is made. Dalren conceded that the 2017 request for a proposal was a procurement process within the meaning of the Amended Act, but contested the interpretation of two terms in s. 87.3(1)(b): "for the improvement" and "the owner of the premises".

The court's reasoning and analysis

Writing for a unanimous panel (Coroza, Madsen and Rahman JJ.A.), Coroza J.A. applied a correctness standard, as statutory interpretation raises questions of law. On the first issue, the court rejected Dalren's argument that the 2017 proposal for Thompson Street concerned a different "improvement" from the facility built at Dodge Street. Dalren's reliance on Caledon (Town) v. 2220742 Ont. Ltd., which stated that an "improvement" is tied to land, was found to be misplaced and taken out of context, since that case involved two distinct pond clean-up projects. Here, Dalren participated in the 2017 procurement process, negotiated the 2020 contract using the 2017 proposal terms, and appeared to have built an improvement substantially similar to the 2017 proposal, without identifying any changes resulting from the shift in location. The court emphasized that the purpose of s. 87.3, as recognized in cases such as Crosslinx, is consistency: all contracts respecting one improvement are governed by the same legal regime, anchored to the commencement of the first procurement process. On the second issue, the court held that the application judge correctly found that one need only be an "owner" of the premises at the time a lien could arise, that is, at the outset of construction. Courts take a functional approach, looking to substance over form, and the definition of "owner" is not limited to the legal or registered owner. 197 had an ownership interest in Dodge Street when construction commenced, which sufficed. The court distinguished HVAC Depot, where the entities commencing the procurement processes never owned the premises at all, noting that any timing requirement suggested there was obiter, and found Ravenda Homes not on point because it did not address the temporal element.

Ruling and outcome

The Court of Appeal dismissed Dalren's appeal, confirming that the Former Act governed the dispute and that 197 was not required to pay the disputed invoices until the dispute was resolved. The respondents, Loadstar Trailers Inc. and 1978327 Ontario Ltd., were the successful parties, and the court fixed costs of the appeal payable to them in the agreed-upon sum of $30,000, all-inclusive.