A particularly important aspect of the transition process in relation to the Construction Act R.S.O. 1990, Chapter c. C.30 (the Act) relates to the new regulations under the Act. In this article we explain these regulations and their effect.

Specifically, there are four new Regulations (referred to below as the “New Regulations”), as follows:

  1. Regulation 302/18 (Procedures for Actions under Part VIII)
  2. Regulation 303/18 (Forms)
  3. Regulation 304/18 (General)
  4. Regulation 306/18 (Adjudication under Part II.1 of the Act)

Each of these four regulations bears a note regarding when it comes into force. Generally, Regulations 302/18, 303/18 and 304/18 come into force on July 1, 2018, and Regulation 306/18 comes into force on October 1, 2019 (the same day that Part II.1 (Construction Dispute Interim Adjudication) has been proclaimed to come into force. Further details regarding the coming into force of the new regulations are provided below.

Also regarding the coming into force of the New Regulations, although the Construction Lien Act was amended by the Construction Lien Amendment Act, 2017, 2017, c. 24 (the Amendment Act) and not repealed, pursuant to section 88 of the Construction Act, section 15 of O. Reg. 304/18 revoked former Regulation 175 (General), R.R.O. 1990 as of July 1, 2018.

Some commentators have raised a concern regarding the applicability of the New Regulations, and in particular Regulations 302 and 303, to matters arising before July 1, 2018. Given that many procurement processes, contracts, preserved and perfected liens, and lien actions, existed prior to July 1, 2018, the issue as to whether Regulation 175 or Regulations 302, 303 and 304 apply to contracts entered into before that date is clearly a significant one.

The Construction Act

The starting point in respect of the proper interpretation of the Act and the regulations lies, of course, in the Act itself, and specifically Sections 87.3 and 88.

Section 87.3 (Transition), provides that the Act, as it read immediately before July 1, 2018 continues to apply with respect to an improvement if a contract for the improvement was entered into before that day, regardless of when any subcontract under the contract as entered into, a procurement process for the improvement was commenced before that day by the owner of the premises, or the premises is subject to a leasehold interest and the lease was entered into before that day (section 87.3(1)). Examples of the commencement of a procurement process include the making of a request for qualifications, a request for proposals, or a call for tenders (section 87.3(2)).  Prompt payment and adjudication apply in respect of contracts entered into after October 1, 2019, and any subcontracts entered into under those contracts (section 87.3(3)).

Section 88(1) (Regulations) provides the regulation making authority in relation to the Act. It is worth quoting:

The Lieutenant Governor in Council may make regulations respecting any matter necessary or advisable to carry out effectively the intent and purpose of this Act, including regulations,

(a) respecting anything that, under this Act, may or must be prescribed by regulation;

(b) prescribing forms and providing for their use. [Emphasis added]

Accordingly, the regulations must be read consistently with the “intent and purpose” of the Act.

In regards to the applicability of the regulations to contracts entered into before July 1, 2018, therefore, the preferred interpretation is that, in regards to the “giving” of liens to offices of the Crown, the applicable forms, and the publication of certificates and declarations of substantial performance, Regulation 175 remains applicable in circumstances where

(i) a contract was entered into before that day;

(ii) a procurement process for the improvement was commenced before that day by the owner of the premises; or

(iii) a lease was entered into before that day.

The Legislation Act, 2006

 Also significant in considering the regulations is the Legislation Act, 2006, S.O. 2006, c. 21, Schedule F. The relevant general principles of the Legislation Act, 2006 are as follows.

Part III (Regulations) and Part VI (Interpretation) the Legislation Act, 2006 provide, among other things, that:

  1. Unless otherwise provided in a regulation or the Act under which the regulation is made, a regulation comes into force on the day it is filed under Part III (section 22(2)) and becomes “official law” (section 34(2)), and this occurs at the first instant of the day on which it comes into force (section 23(1)).

2. Unless otherwise provided in a regulation or the Act under which the regulation is made, the revocation of a regulation takes effect at the first        instant of the day of revocation (section 23(3)).

3. The repeal of an Act or the revocation of a regulation does not affect the previous operation of the repealed or revoked Act or regulation; does not affect  any right, privilege, obligation, or liability that came into existence under the repealed or revoked Act or regulation; and does not affect a proceeding or remedy in respect of such a right, privilege, obligation or liability (section 51(1)).

4. A proceeding or remedy may be commenced, continued and enforced as if the Act or regulation had not been repealed or revoked (section 51(2)).

5. If a regulation is revoked and replaced (or an Act is amended):

a. A person authorized to act under the former regulation (or Act) has authority to act under the corresponding provisions, if any, of the new or amended one until another person becomes authorized to do so (section 52(2));

b. Proceedings commenced under the former regulation (or Act) shall be continued under the new or amended one, in conformity with the new or                 amended one as much as possible (section 52(3)); and

c. The procedure established by the new or amended regulation (or Act) shall be followed, with necessary modifications, in proceedings in relation to             matters that happened before the replacement or amendment (section 52(4)).

d. If an Act under which a regulation has been made is amended, the regulation remains in force to the extent that it is authorized by the amended Act (section 52(6)).

6. The power to make regulations includes the power to revoke or replace them from time to time (section 54(1)).

7. The repeal, revocation or amendment of a regulation (or Act) does not imply anything about the previous state of the law or that the regulation (or Act) was previously in force (Section 56(1)), and the amendment of a regulation (or Act) does not imply that the previous state of the law was different (section 56(2)).

8. A reference to an Act or regulation is also a reference to each provision of the Act or regulation (section 58(1)), and a reference in the Legislation Act, 2006 to amendment is also a reference to repeal or revocation (section 1(2).

9.  An Act or regulation shall be interpreted as remedial and shall be given such fair, large and liberal interpretation as best ensures the attainment of its  objects (section 64(1) and (2)).

10. Deviations from a form whose use is required under an Act do not invalidate the form if, a) they do not affect the substance and are unlikely to mislead, and b) the form is organized in substantially the same way as the form whose use is required (section 84).

Application of General Principles

All four new regulations were filed on April 23, 2018, but each contained specific provisions as to when they would come into force (as noted below).

As will be discussed further below, the Amendment Act amended the Construction Lien Act, by adding certain sections and Parts, repealing and substituting (replacing) certain sections, and repealing but not substituting (replacing) certain sections.

The application of the foregoing general principles from the Act and the Legislation Act, 2006 to the regulations includes the observation that, with the exception of Regulation 306/18, and certain sections of Regulation 303/18 and 304/18, the new regulations came into force at the first instant of  July 1, 2018 and Regulation 175, R.R.O 1990, was revoked at the first instant of July 1, 2018; however, as noted above, in relation to its limited subject matter(s), Regulation 175 remains applicable pursuant to section 87.3 of the Act and sections 23(3) and 52(6) of the Legislation Act, 2006. Within this context, and keeping in mind that the Act and the regulations are to be interpreted as remedial and be given such fair, large and liberal interpretation as best ensures the attainment of their objects, consideration of the regulations indicates that the following conclusions may be drawn.

Regulation 302/18 (Procedures for Actions under Part VIII)

Regulation 302/18 came into force on July 1, 2018 (as per section 15 of the regulation).

Regulation 302/18 is a new regulation, into which the procedures for actions under Part VIII were transferred, the Amendment Act having repealed sections 53 through 57 and sections 59 through 61 of the Construction Lien Act.  The intention here was to transfer certain procedural elements of the Act into a regulation so as to render future amendment easier.

As noted above, pursuant to Section 87.3, the Act as it read immediately prior to July 1, 2018 continues to apply with respect to an improvement if a contract for the improvement was entered into before that day, a procurement process for the improvement was commenced before that day by the owner of the premises, or the premises is subject to a leasehold interest and the lease was first entered into before that day.

At the same time, keeping in mind that, pursuant to the section 51 of the Legislation Act, 2006 a reference to an Act or regulation is also a reference to each provision of the Act or regulation, the repeal of sections 53 through 57 and 59 through 61 of the Construction Lien Act does not affect the previous operation of the repealed sections; does not affect any right, privilege, obligation, or liability that came into existence under those sections; and does not affect a proceeding or remedy in respect of such a right, privilege, obligation or liability.  Furthermore, a proceeding or remedy in respect of such a right, obligation or liability may be commenced, continued and enforced as if those sections had not been repealed.

In other words, the effect of section 87.3 of the Act and the provisions of the Legislation Act, 2006 are consistent and mutually supportive.

Acordingly, lien proceedings that existed prior to July 1, 2018 may be continued under sections 53 through 57 and 59 through 61, and these sections will also apply in respect of proceedings in regards to contracts entered into before that date.  Having said this, it is submitted that, in any  event, there are no major differences between the procedures set out in sections 53 through 57 and sections 59 through 61, on the one hand, and Regulation 302/18 on the other.

Regulation 303/18 (Forms)

With the exception of sections 3 (notice(s) of non-payment) and 4 (Table references to notice(s) of non-payment forms), which come into force on October 1, 2019, Regulation 303/18 came into force on July 1, 2018 (as per section 5 of the regulation).

To the extent that a question has arisen with regards to whether the old forms of the new forms should be used in respect of contracts entered into before July 1, 2018, as noted above the old forms, as they read immediately before that day, should continue to be utilized.  This is because, in respect of the coming into force of Regulation 303/18, section 87.3 of the Act under which Regulation 303/18 is made “provides otherwise” in relation to contracts entered into before July 1, 2018 (as per sections 23(3) and 52(6) of the Legislation Act, 2006). Regarding contracts entered into after July 1, 2018, as of the first instant of July 1, 2018 Regulation 303/18 replaced the forms that were previously part of revoked Regulation 175, R.R.O. 1990. As such, the new forms should be utilized from July 1, 2018 onwards in regards to contracts entered into after that date.

In any event, pursuant to Section 84 of the Legislation Act, 2006, even if the new forms were to be treated as applicable to contracts entered into before July 1, 2018, deviations from the new forms will not invalidate the form if, a) they do not affect the substance and are unlikely to mislead, and b) the form is organized in substantially the same way as the form whose use is required.

Regulation 304/18 (General)

Regulation 304/18, contains the following provision regarding its coming into force:

Commencement

  1. (1)  Subject to subsections (2) and (3), this Regulation comes into force on the later of the day subsection 2 (2) of the Construction Lien Amendment Act, 2017 comes into force and the day this Regulation is filed. [July 1, 2018][square bracketed content added]

(2)  Section 4 [which relates to the electronic delivery of notices of non-payment] comes into force on the later of the day section 7 of the Construction Lien Amendment Act, 2017 comes into force and the day this Regulation is filed. [October 1, 2019] [square bracketed content added]

(3)  Section 14 [which provides for certain amendments to the regulation] comes into force on the later of the day subsection 11 (1) of the Construction Lien Amendment Act, 2017 comes into force and the day this Regulation is filed. [October 1, 2019] [square bracketed content added]

Regulation 304/18 is, in part (sections 1 and 11) a replacement regulation, and, in part, a new regulation (sections 2-10, 12-16).

Section 1 provides a replacement definition of “construction trade newspaper” while section 11 replaces the former regulation in regards to the “giving” of liens to the Crown (replacing those elements of revoked Regulation 175). The other sections of Regulation 304/18 are new, and address: minimum surety bond limits for Alternative Financing and Procurement Projects; notices of non-payment (a section that comes into force on October 1, 2019); payment of holdback on either an annual or a phased basis; publication of notice(s) of non-payment under section 27.1 (a section that comes into force on October 1, 2019); the publication of certain other notices (sections 8, 9 and 10); the $500,000 threshold for the application of section 85.1 (mandatory surety bonds); the exclusion of nuclear facilities from the Construction Act; amendments to the regulation; revocation of other regulations; and the coming into force of the regulation (as noted above).

To the extent that Regulation 304/18 replaces (sections 1 and 11), it is worth noting that, pursuant to Section 52 of the Legislation Act, 2006:

a. A person authorized to act under the former regulation will have authority to act under the corresponding provisions of the new one (until another person becomes authorized to do so);

b. Proceedings commenced under the former regulation shall be continued under the new regulation, in conformity with the new regulation as much as possible; and

c. The procedure established by the new regulation shall be followed, with necessary modifications, in proceedings in relation to matters that happened before the replacement.

At the same time, to the extent that Regulation 304/18 introduces new regulations (sections 2-10, 12-16), except for those sections that by its express terms come into force on October 1, 2019, it is in force.  Regarding its new subject matter, which relates to new sections of the Construction Act, it should not present transitional difficulties.

Regulation 306/18 (Adjudication under Part II.1 of the Act)

Regulation 306/18 comes into force on October 1, 2019 (as per section 26 of the regulation).

Regulation 306/18 is also a new regulation.  As per its title, it relates only to adjudication, and will come into force contemporaneously with the coming into force of Part II.1 on October 1, 2019.  Again, given its subject matter, Regulation 306/18 should not present transitional difficulties.

Power To Make Regulations Regarding Transitional Matters

To the extent that any residual question exists with relation to the status of the regulations in the transitional process, it is also important to note that section 88(2) of the Act provides that the Lieutenant Governor in Council may make regulations for such transitional matters as Lieutenant Governor in Council considers necessary or advisable in connection with the implementation of the Amendment Act).

Conclusion

As noted above, the new regulations under the Construction Act R.S.O. 1990, Chapter c. C.30 are a particularly important aspect of the transition process.  We hope that this briefing note has been of assistance to the reader in becoming familiarized with the role played by the regulations in the transition process.