Construction Act to be Exempt from Suspension of Procedural Time Limits

The Attorney General of Ontario announced on April 9, 2020 that the government would be revising a previous emergency order (O. Reg. 73/20, made under the Emergency Management and Civil Protection Act) in order to exempt the Construction Act from the suspension of limitation and procedural time periods retroactive to March 16, 2020. The suspension will be lifted from the Construction Act on April 16, 2020, in order to give the construction industry time to prepare for the change. Once the suspension is lifted, limitation and procedural time periods will resume with the same amount of time remaining as on March 16, 2020.

Most significantly, this revision will enable the release of holdback payments, which process was unintentionally captured by the emergency order in its original form and which created significant cash flow problems for those in the construction industry (particularly those players further down the construction pyramid). Accordingly, the order will put an end to significant uncertainty for the construction industry and the construction bar alike; as readers will appreciate, this has been a central topic of discussion and debate since the original emergency order came into effect.

Nevertheless, construction industry players would be well advised to carefully consider the legal and practical impacts that may flow from this revision, as well as the intervening period between now and April 16, when the revision comes into effect. From a legal perspective, and to the extent that any litigation or dispute in respect of holdback or limitation periods is ongoing, it will be important for parties to re-evaluate their positions to take into account the revival of these procedural timelines (including the retroactive effect back to March 16, 2020). Given these significant changes, construction industry participants will have to think carefully about their options (e.g. ADR rather than pursuing relief through costly and time-consuming proceedings).

From a commercial perspective, the intervening time between now and April 16, 2020 may still represent a period of significant uncertainty. Given the significant business disruptions caused by the COVID-19 pandemic, a period of six further days without the possibility of holdback release may nevertheless represent serious risk to parties facing cash flow and/or payroll problems. In the circumstances, parties can look for opportunities for compromise while communicating fairly until these issues are resolved.

In these uncertain times, this development represents a welcome – if small – measure of certainty for the construction industry. We caution, however, that the full contents of these amendments remain unknown at this time, and will likely only be known when the amended regulation is finally published on April 16, 2020. Accordingly, the current uncertainty is not fully resolved.

A cautious optimism may therefore be more appropriate, although ‘caution’ remains the watchword until further notice. In the meantime, we recommend speaking to a lawyer so that parties understand the legal and commercial risks of proceeding with any course of action between now and the coming into force of the revisions, as well as after they have come into effect.

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