In a previous article, we discussed the decision in DNR Restoration Inc. v. Trac Development Inc., 2023 ONSC 1849 (“DNR”), where the Court clarified the transition provisions of the Construction Act, which replaced the Construction Lien Act. The Court, reaffirming the decision in Crosslinx Transit Solution Constructors v. Form & Build Supply (Toronto) Inc. 2021 ONSC 3396 (“Crosslinx”), confirmed that one Act is to apply to the entirety of an improvement, and the contracts and subcontracts for that improvement, to ensure consistent rights, obligations, and remedies for parties involved in the same improvement.
In other words, one Act per improvement.
But what happens when a contract is in respect of two improvements governed by different Acts? The Divisional Court answered this question in its recent decision in Caledon (Town) v. 2220742 Ont. Ltd. o/a Bronte Construction, 2024 ONSC 4555.
The short answer is that different Acts can apply to the same contract, if the contract is for two (or more) improvements.
Background and Relevant Facts
The decision centers on the judicial review of an adjudicator’s decision under the Construction Act, focusing on jurisdictional issues relating to the transitional provisions. The central question was whether the adjudicator had jurisdiction over claims arising from a construction contract (the “Contract”) between the Applicant, the Corporation of the Town of Caledon (“Caledon”) and 2220742 Ontario Ltd. o/a Bronte Construction (“Bronte”).
The work in dispute concerned the clean-up of two stormwater ponds, Pond #7 and Pond #14.
Similarly, Caledon issued a Request for Proposals on March 20, 2020, for design, contract administration and site inspection for clean-up work on three different stormwater ponds, including Pond #14. Caledon later entered into a contract with Matrix as a result.
In or around May 2021, Caledon, after issuing a Request for Tenders, entered into the Contract with Bronte for the clean-up of Pond #7 (based on WSP’s design), and Pond #14 (based on Matrix’s design). Bronte performed work under the Contract until it was terminated by Caledon, after which Bronte delivered a Notice of Adjudication seeking payment of approximately $145,000.
In the adjudication, the adjudicator first determined that he had jurisdiction over disputes relating to both Pond #7 and Pond #14, and subsequently awarded $93,445.92 to Bronte with respect to both ponds.
Caledon brought this application for judicial review, seeking to set aside the adjudicator’s determination. Caledon took the position that the Contract was for a single improvement and subject to the Construction Lien Act, which does not provide for adjudication of disputes. Alternatively, Caledon took the position that the earlier version of the Act should apply, if the Contract covers multiple improvements.
In response, Bronte argued that the Contract may cover multiple improvements, and that the latest version of the Act, being the Construction Act which provides for adjudication of disputes, should apply.
The case turned on the Divisional Court’s application of the transition provisions of the Construction Act to the Contract and the improvement(s), and whether, as a result, the adjudicator had correctly determined his own jurisdiction.
Court’s Considerations
Justice Corbett began his analysis by summarizing the transition provision in section 87.3 of the Construction Act into three categories:
The Construction Lien Act applies where a “procurement process for the improvement” was commenced before July 1, 2018;
The Construction Act applies, but Parts I.1 and II.1 (which provide for Prompt Payment and adjudication) do not apply where a “procurement process for the improvement” was commenced on or after July 1, 2018 and before October 1, 2019; and
The Construction Act applies in its entirety where a “procurement process for the improvement” was commenced on or after October 1, 2019.
In other words, adjudication is only available for improvements falling in the third category.
The Court also reiterated the limited grounds available to the Court to set aside an adjudicator’s determination and that “[a]djudicators must be correct in finding a legal basis for their jurisdiction; their findings of fact in connection with their jurisdictional determinations are entitled to deference.”
Justice Corbett grappled with applying these transition provisions to a contract or subcontract that is in respect of more than one improvement. Potential options included applying the earliest or latest applicable version of the Act to the entire contract, or applying different Acts in respect of different improvements.
Relying on the decisions in DNR and Crosslinx, the Court found that the only solution consistent with the intent of the Legislature that one Act apply to the whole improvement was to apply different versions of the Act to contracts in respect of multiple improvements. In the Court’s view, while not perfectly straightforward, there was no insurmountable or great difficulty in applying different versions of the Act to the same contract. The Court’s guidance in avoiding any potential difficulties was to avoid bundling multiple improvements in one contract.
Therefore, given that the procurement process for Pond #7 was commenced between July 1, 2018, and October 1, 2019, the prompt payment and adjudication provisions of the Construction Act did not apply to this improvement. As a result, the Court set aside the portion of the adjudicator’s determination relating to Pond #7, while upholding the balance of the determination relating to Pond #14, reducing the amount awarded in the determination to $11,638.17 plus taxes and interest.
Takeaways
Multiple improvements in a single contract can trigger different versions of the Act: The Court confirmed the intent that one Act is to apply to the entirety of an improvement, and that separate improvements within one contract may fall under different versions of the Construction Act, depending on when the procurement processes began for each improvement.
Adjudicators must correctly apply the law to determine jurisdiction, but their factual findings are entitled to deference: The Court reiterated the limited grounds for judicial review under the Construction Act. It cannot intervene unless specific procedural or jurisdictional errors occur, ensuring that adjudications remain efficient and interim in nature. The Court stepped in to set aside a portion of the adjudicator’s determination where the adjudicator had incorrectly applied the provisions of the Act in determining his own jurisdiction. However, the Court refrained from interfering with the adjudicator’s factual findings.
The Divisional Court’s decision clarifies how the transitional provisions of the Construction Act apply when a contract covers multiple improvements. It highlights the importance of properly categorizing projects to ensure compliance with the relevant version of the Act. The ruling reinforces that bundling multiple improvements in one contract can complicate the application of adjudication provisions, and parties must carefully structure their contracts and procurement processes to avoid such issues.