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Lien master urges better construction contracts

Don Wall
Lien master urges better construction contracts
Charles Wiebe

Ontario’s construction sector has embarked on a long process of digesting the multitude of changes contained in the new Construction Act, but one thing has become immediately clear — those who draft project contracts had better step up their game.

That was the warning from Lien Master Charles Wiebe of the Ontario Superior Court of Justice and construction lawyer Bruce Reynolds, panellists at an Osgoode Professional Development session held in Toronto recently that was intended to walk legal professionals through the transition from the old Construction Lien Act.

The first set of legislative changes in the new act, concerning lien modernization, came into effect July 1 while prompt payment and adjudication provisions will take effect Oct. 1, 2019.

In terms of the transition, the Construction Lien Act will continue to apply if a contract was entered into before July 1 and the owner commenced a procurement process before July 1, among other conditions. Bill 57, passed Dec. 6, clarifies the definition of a procurement process.

Wiebe wrote an overview of the new act for the Dec. 7 session in which he identified the lack of precision in construction contracts as a major issue, particularly their operational date, given the negative outcomes that could be suffered by sloppy stakeholders.

 

The best evidence is a signed contract

— Charles Wiebe

Ontario Superior Court of Justice

 

“The new legislation confers considerable benefits on the contracting community — benefits of prompt payment and the astonishing benefits of adjudication — but with great power comes great responsibility,” said Reynolds. “The entire community is going to have to improve its game in terms of properly documenting contract formation and issuing proper invoices and understanding the notice provisions and using the notice provisions properly, because the access to these benefits in certain respects is predicated upon the delivery of proper notices.”

Reynolds and Osgoode Professional Development program co-chair Sharon Vogel authored the report Striking the Balance: Expert Review of the Construction Lien Act, which contained 101 recommendations, 98 of which were eventually enshrined in the new Construction Act.

Under the new act, the deadline to preserve a lien is extended from 45 days to 60 days. During the transition period there could be major consequences, as explained in one example given, on a motion to vacate a lien valued at over $200,000, given the new security for costs rules have hiked payments from $50,000 to $250,000. If a lien falls under the new version of the act, a petitioner has to post the full amount of the lien plus the lesser of 25 per cent of the face amount of the lien or $250,000.

Wiebe gave numerous examples of muddled contract negotiations and noted sometimes it has been determined there has been no contract entered into at all. During the legislative transition period, he said he expects lawyers will attempt to make cases that there are quasi-contracts in existence.

“What I’ve done, ever since the new act came into effect, I have let it be known to lawyers, if you are in my courtroom, the first thing I will look to is evidence. The best evidence is a signed contract,” said Wiebe.

Geza Banfai of McMillan LLP, who is a co-chair for the Osgoode Professional Development program, observed that a common thread that emerged from presentations was the need for contracting parties to err on the side of caution. He referred to a presentation conducted by Vogel on new procedures for documenting trusts.

“It is a very interesting discussion,” said Banfai.

“There still remains some unknowns and some uncertainties in all this. We are in a period of transition. So operationally, what should people do? The advice this morning has been interesting. From a perspective of preserving your lien rights, if there is any question about the old 45 days or the 60-day period, assume it is 45 days and avoid any controversy.”

Wiebe also commented on new joinder of claims rules, writing, “I am not sure that the drafters thought all this through in making these changes,” on Small Claims Court references, and de novo appeals. The Construction Act says that in appeals of adjudicator decisions, the adjudicator’s written reasons are admissible in court as evidence.

“I fear that the adjudication process at first instance will acquire an element of finality that was not intended, and may indeed undermine the process,” he wrote.

Banfai commented, “That worries Master Wiebe as a fair judge. It is an example of how there are aspects of this legislation that don’t appear in the wording.”

Wiebe’s commentary on the Construction Act (CA) concluded, “The CA…has created challenges that we all need to be mindful to and that may require further statutory amendments.”

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