Government Clarified Exclusion of Construction Act Deadlines from Emergency Order

By Catherine DiMarco, LL.B., Heal & Co. LLP

In late March, 2020, Ontario’s Governor in Council made an order under section 7.1 of the Emergency Management and Civil Protection Act, suspending limitation periods and procedural time periods retroactive to March 16, 2020, “for the duration of the emergency”.

Thus began a lively debate among construction lawyers as to whether the suspension of limitation periods applied, or not, to the time limits under the Construction Act.

Clarity is critical, particularly where lawyers are concerned, which was well illustrated in the evolution of the Ontario government’s suspension of limitation periods during these challenging COVID-19 times.

A similar Ministerial order in Alberta suspended limitation periods from March 17, 2020, to June 1, 2020, relating to legislation specifically referenced in a schedule to the order. The Alberta Builders Lien Act was not one of the statutes whose limitation periods were suspended.

First and foremost in Ontario was debate about whether the suspension applied to section 31 of the Construction Act, which governs the expiry of liens. Some argued that the suspension did not apply to the deadline to preserve a claim for lien, citing Logger Town Homes v. Sadeghian [2013] O.J. No. 4368 (Div. Ct.), which held that a lien under the (then) Construction Lien Act, is not a claim to which the Limitations Act applies, and reasoning that a deadline to preserve a claim for lien is distinct from the concept of a limitation period.  Others debated whether the suspension applied to the two-year deadline to set a lien action down for trial under s.37 of the Construction Act.

The author’s view was, and remains, that the spirit and intent of the suspension of limitation periods was to alleviate from any immediate time pressures on a party to preserve its rights and remedies. This included the time periods and rights and remedies under the Construction Act. The ability to register claims for lien electronically has been available throughout, but practical difficulties arose for liens that must be given, rather than registered, particularly where, for example, a municipality to whom a claim for lien must be given has not prescribed a process for doing so electronically. It would be contrary to all social distancing directives to require a lien claimant to attend in-person at a municipality to give its lien in order to preserve its rights.

One of the consequences, likely unintended, of the March 20, 2020 order, was that payors of holdback funds had little or no comfort that “all liens that may be claimed against the holdback have expired or been satisfied, discharged, or otherwise provided for under this Act”, requiring them to continue to retain the 10% statutory holdback. The holdback regime, already onerous on modestly-sized suppliers of services or materials, particularly the earlier-in-time suppliers, punished those to whom holdback would otherwise have been due by causing further delay in payment (thankfully the issue has been alleviated in the new Construction Act, which allows for payment of holdback on a yearly or phased basis, if certain conditions are met).

The reluctance on the part of payors to pay the holdback in the face of the uncertainty, while understandable, made matters worse, when taking into account that continued cash flow is even more important during these challenging COVID-19 times.

On April 9, 2020, the Attorney General for Ontario announced that O. Reg. 73/20 would be amended to exclude limitation periods under the Construction Act. These changes came into effect on April 16, 2020. The Ontario government’s decision made perfect sense in the context of the suspension of in-person hearings as of March 17, 2020. Lawyers and the public are strongly discouraged from attending in person at any courthouse. Jury trials are now suspended until September, at the earliest.

Lien claimants are well advised to keep a careful eye on the calendar. Lien rights are not reset, such that a party has 45 or 60 days from April 16, 2020, to preserve its claim for lien.

Instead, a party who had 14 days left to preserve its claim for lien as of March 16, 2020, will likely only have 14 days from April 16, 2020 to preserve its claim for lien, failing which its lien rights may well expire.

There are a range of views on the limitation suspension, and the best course is to seek legal advice on this point.

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Heal & Co.LLP is an experienced law firm specializing in the professional liability defence of construction professionals, including municipal, building and other construction law claims.

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Heal & Co. LLP is a law firm whose members are experienced in the professional liability defense of municipal, building, construction and design claims, and construction law matters more generally.

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