The Meaning of “Owner” under the Construction Act: A Review of Dalren Limited v Loadstar Trailers Inc., 2024 ONSC 7144

The recent case of Dalren Limited v Loadstar Trailers, 2024 ONSC 7144 addresses the transition provisions under s. 87.3 of the Construction Act (the “Act”)¹ and serves as useful reminder regarding the definition of “owner” under the Act.

FACTS:

Before December 11, 2017, Loadstar Trailers Inc., (“Loadstar”) and 1978317 Ontario Ltd. (“197”) sought a proposal from Dalren Limited (“Dalren”) to construct a manufacturing facility on a property to be purchased by 197 at Thompson Street in Coburg. In 2017, Dalren presented a preliminary proposal to build the facility at Thompson Street in Coburg.

At the time of negotiations, 197 did not own the Dodge Street property, where the facility was ultimately built. This Dodge Street property was only purchased on February 26, 2021. However, in December 2020, Dalren and 197 entered into a CCDC-14 to build a new facility on Dodge Street, identifying 197 as the Owner. This contract referenced the Dalren Proposal of December 2017 and various documents relating to the initial proposal, including the price adjustments and drawings.

Dalren constructed the facility and provided invoices under the contract. The final invoice ($44,673.74) and holdback invoice ($433,885.17) were both in dispute. Despite being certified as payable by the payment certifier, 197 refused to pay the final and holdback amounts taking the position that Dalren did not submit proper invoices under the Act.

Dalren contends that the prompt payment provisions of the Act require 197 to pay immediately, allowing disputes to be litigated afterward. 197 argues that the prompt payment provisions do not apply because the procurement process began before July 1, 2018.

DECISION:

A key change to the Act in 2019 was the prompt payment provisions which require an owner to pay a proper invoice within 28 days unless the owner gives the contractor a notice of non-payment within 14 days after receiving a proper invoice.

197 did not give Dalren a notice of non-payment. 197 took the position that the prompt payment provisions do not apply arguing that despite the contract not being signed until December 11, 2020, the procurement process began by December 11, 2017. The project remained the same improvement as referenced in Dalren’s 2017 proposal even though the location changed during the procurement process.

While the court was satisfied that the procurement process was for the same improvement despite being on a different location, the court decided that 197 qualified as an “owner” under the Act. The facility was built at Dodge Street at the request of 197, on its behalf and for its direct benefit. According to the court, at the time the improvement was made, 197 had a lienable “interest in the premises”.

KEY TAKE-AWAY:

While steps to appeal this decision are (or will be) underway, parties should send early section 39 requests to owners to clarify procurement processes dates, helping avoid potential disputes under that Act’s transition provisions.

¹ Section 87.3 of the Act provides a transition rule, allowing the former Construction Lien Act to apply to projects that began before July 1, 2018. This applies to instances where the prime contract was executed prior to July 1, 2018, or if a procurement process was commenced by the owner to the premises prior to July 1, 2018. Prior to these amendments, the Act use permissive language to address the owner’s obligations to release the holdback at the end of the holdback period.