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Legal Notes: Ontario time limitation suspension could cause industry confusion

John Bleasby
Legal Notes: Ontario time limitation suspension could cause industry confusion

On March 20, 2020, Ontario issued an order under the Emergency Management and Civil Protection Act to provide some relief to civil litigants running up against limitation periods and other procedural time limits due to COVID-19.  The order is retroactive to March 16, 2020 and lasts for the duration of the provincially declared emergency.

Changes to Ontario’s Construction Act affecting timelines for preserving and perfecting liens came into effect in July 2018. If these timelines are not adhered to, liens will expire.  The Act mandates strict timelines regarding liens —construction liens will expire if not “preserved” and “perfected” within the timelines set out therein. To be clear, “preserved” means, registered on title to the subject property, or delivered. “Perfected” means issuing a Statement of Claim and registering a Certificate of Action, if applicable.

The first part of the March 20 order suspends the operation of any provision establishing a limitation period. The second part of the order suspends the time by which steps must be taken in any proceeding, including any intended proceeding.

However, the order may have unintended consequences for the construction industry, say Jill Snelgrove and Anna Esposito of Pallett Vallo LLP.

Snelgrove and Esposito point out that while the timelines established by the Construction Act for preserving a lien is not technically a deadlines by which an aggrieved party has to commence an action, failing which, they lose the right to do so, both section 31 (preservation) and section 36 ( perfection) of the Construction Act  are listed in a schedule to  Ontario’s Limitations Act .

The schedule lists the Acts that contain their own timelines. This may mean that the preservation deadline is considered a limitation period for the purpose of the order.

Further muddying the waters, say Snelgrove and Esposito, is that, “any suspension of time periods pursuant to the second part of the order is subject to the discretion of the Court responsible for the proceeding. Therefore, a Court may later decide that the timeline suspension directed by the order does not apply in the circumstances before it.” . This creates uncertainty, say Snelgrove and Esposito

It is not clear how this new order will apply to construction liens. Snelgrove and Esposito express concern that, if applied to suspend timelines for preservation and perfection, it may cause unintended effects on the flow of funds during construction that often hinge on whether liens have expired.  For example, in order for an owner to make payment of the statutory holdback, all liens that may be claimed against that holdback must have expired, been satisfied, discharged or otherwise dealt with.  All liens expire 60 days from the publication of a certificate of substantial performance unless properly preserved and perfected.  If the order extends the time by which liens can be preserved and perfected, then an Owner will have to add the period of suspension to the 60-day calculation in order to determine when lien rights expire.

Snelgrove and Esposito doubt the province intended to stop or delay payment flow in construction. Practically speaking, however, this may be a consequence if the order applies to lien deadlines. Furthermore, “not being able to determine with certainty that lien rights have expired may delay the distribution of any ‘pot’ of money which has been identified as being available to validly preserved and perfected liens.”

Snelgrove and Esposito strongly recommended that, “liens be preserved and perfected in accordance with the requirements of the Construction Act.  Notwithstanding the fall-out of the COVID-19 pandemic, preserving and perfecting liens is still completely doable.”

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