Using The
Construction Lien Act:
Presentation to the
Ontario Electrical League – GTA West Chapter
Chad Kopach
416-593-2985
[email protected]
Collection in Construction
 Important Contractual Provisions
 Construction Lien Act
 Lien Action vs Regular Action
 Breach of Trust Remedy
 Upcoming Additions to the Act
 Prompt Payment
 Adjudication
Contractual Provisions
 Offer/Acceptance/Consideration
 Written Contracts
 Usually, but not always
 PO/Invoice
 Canadian Construction Documents Committee (CCDC)
 (“Pay When Paid” Clause in Subcontracts)
 (“Dispute Resolution” Clause)
 (“All Changes In Writing” Clause)
Important “CCDC” Terms
 Out of Scope Work
 Only paid if agreed to in writing in advance
 Dispute Resolution
 Negotiation, Mediation, Arbitration
 Notice, failing which deemed agreement
 Schedule
 How established? How extended (and compensated)?
The “Regular” Action Procedure
 Statement of Claim
 Set out the relationship between the plaintiff and defendant
 Describe work done and balance outstanding
 Non-payment as breach of contract
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Statement of Defence
Exchange Documents
Discovery
Mediation
Trial (if not Small Claims - $250k floor?)
The Lien Proceeding
 Lien is a charge against all holdbacks required
to be retained, and all amounts owed in respect
of furnishing services and materials
 Right to sell owner’s property if not paid
 May be entitled to priority over mortgages
 Strict time limit – Generally speaking; 45** days
from date of last supply to “Preserve”
 Fixing Deficient Work Does Not Count
Preservation
 Register a claim for lien – info req’d by lawyer
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property description (municipal address at least – PIN)
owner’s name
name of person supplied to
dates of first and last supply
total contract amount and balance outstanding
description of services/materials supplied
identity of representative “signing off” on the lien claim
Perfection
 Looks like a “regular” action, but intended to be
a speedy procedure
 Issue Statement of Claim
 Claim for money owed as a result of breach of contract
 Name the contracting party and the owner (and mortgagees)
 Must be started within 45** days from the last date to
preserve
 Issue Certificate of Action
 If lien not “bonded off”, issue certificate and register on title
What Work Is Lienable?
 alteration, addition, repair, demolition, removal
of structure
 “where the making of the planned improvement
is not commenced, the supply of a design, plan,
drawing or specification that in itself enhances
the value of the owner’s interest in the land”
 Off Site Manager? one court has said no
 Estimator? one court has said yes
 Fact-specific determination on enhancing value
Practical Effect of the Lien
 $$ stops flowing
 All payers with notice of the lien, either though
delivery of actual notice or deemed notice via
registration, must retain an amount sufficient to
pay the lien (in addition to all other amounts –
i.e. holdbacks)
 Lien stays on until money posted into court (full
amount of the lien plus 25% - max $50k** - for
costs)
The Trust Action
 Owner’s Trust
 Financing Funds are held in trust for the contractor.
 Contractor/Subcontractor’s Trust
 All amounts owing to or received by a contractor (has a
contract with the owner) or subcontractor (everyone else
down the pyramid) on account of a contract or subcontract
price are held in trust for the benefit of the subcontractor and
others who have supplied material or services to the
improvement (i.e. obligations flow down the pyramid).
Trustee’s Obligations
 shall not appropriate or convert any part of the
trust property to its own use or to any use
inconsistent with the trust until all beneficiaries
under the trust have been paid
 No overhead expenses may be paid until all trust
beneficiaries are paid
 No obligation for separate accounts, but there is a separate
notion trust fund for every project in which the contractor is
involved and separate accounting. Co-mingling accounts
makes it hard to defend a breach of trust action.
Who is liable for Breach of Trust?
 Directors, officers of corporations, and anyone
who has effective control of the corporation who
assents to, or acquiesces in, conduct that he or
she knows or reasonably ought to know
amounts to breach of trust
 Who gets named in the claim?
Trust Action – What’s the point?
 Missed the time to lien?
 Not enough holdback funds from owner to go
around (property value tanks, union priority,
equal ranking of all other lien claims)?
 Bankruptcy?
Prompt Payment
 Owner must pay within 28 days of receipt of a
proper invoice from the contractor
 If Owner has basis for not paying in full, must
provide notice as to why paying lesser amount
 Contractor must pay subcontractors within 7
days of receipt of funds from Owner (cascading
7-days-to-pay obligations)
Prompt Payment cont’d
 Pay when paid clauses not outlawed, but new
act will require contractor to give notice to subs
of the payment being withheld, the reason, and
an undertaking to commence a proceeding to
enforce payment
Prompt Payment cont’d
practical considerations and unresolved issues
 Because of tight deadlines, will need
infrastructure in place to evaluate submissions
 What is a “proper invoice”?
 How to square the circle of “prompt payment”
given that the enforcement mechanism (court
action), which is the opposite of “prompt”?
……………..adjudication?
Adjudication
 Speedy mechanism to enforce prompt payment
 Unlike project mediator – not intended to be one
size fits all
 Adjudicator and adjudication process should be
tailored to the issue
 May not require an in-person hearing
Adjudication cont’d
 Will likely be to determine valuation of
work/changes and set-offs
 Also delay issues regarding claims for
compensation
 How about negligence/fee claims for design
professionals?
 Result will be an “interim, binding” decision, that
can be enforced by the courts
Adjudication cont’d
 Following interim, binding decision, can still raise
the issue fresh in litigation
 Lien claims can run parallel to adjudication
 owners may have to pay twice; once on interim basis, and a
second time to post security
 Adjudication is only for one issue at a time; no
stacking of issues unless the parties consent
 will likely lead to cascading adjudications
Adjudication cont’d
 Adjudicators will be screened for qualifications,
and will receive training on procedure
 Will not necessarily have legal training
 Based on recommended timelines, will likely
have a decision within 42 days of notice of
dispute being given
END
Questions?
[email protected]
416 593 2985