On Point Ltd. v CECCE: Court Confirms Portable Classrooms Are Lienable Interests Under Ontario’s Construction Act – Construction & Planning

The Ontario Superior Court of Justice released new guidance on
the meaning of an “improvement” under Ontario’s Construction Act¹ (the
“Act“). In a summary judgment
motion in On Point Ltd. v Conseil des Ecoles Catholiques du
Centre Est et al, 2023 ONSC 1341, the court held that the
construction and installation of portable classrooms was a lienable
improvement to the school lands. This decision will likely impact
future disputes, given the rising trend of modular
construction.

Background

In July 2019 the defendant and moving party, Conseil des Ecoles
Catholiques du Centre (“CECCE“) hired
the co-defendant Ty Corporation (“Ty
Corp“) to construct and install 14 portable
classrooms on the Paul Desmarais school property (the
“school site“).² Portable
classrooms are modular buildings located outside of the official
school building that function as classrooms. CECCE required the
portable classrooms to be ready in advance of the school year in
September.³

Ty Corp in turn hired the plaintiff and responding party,
OnPoint Group Ltd. (“OnPoint“), to build
the portable classrooms.⁴ OnPoint constructed the
portable classrooms offsite, and they were transported by another
contractor to the school site and completed on site. Once
delivered, another contractor placed the portable classrooms on a
temporary foundation, where they would remain until the installer
set them up more permanently.

Ty Corp did not complete all 14 portable classrooms by September
2019 as required by the contract, and CECCE eventually ended the
contract. CECCE hired Multi-Service Restoration and Provision
Construction Management Inc. (“MSR“), an
intervening party in the motion, to construct the remaining
portables. OnPoint was not fully paid by Ty Corp, and registered a
lien on the school site.

CECCE’s position on the motion was that OnPoint’s lien
should be removed because the portable classrooms were not
“improvements” within the meaning of the
Act.

Analysis

The main question on the motion was whether the portable
classrooms were “improvements” under the Act,
thus triggering the availability of lien rights on the school
site.

At the outset, the court determined that this was an appropriate
case for summary judgment. The issue did not require a trial
because the court could rely on the parties’ affidavits,
documentary productions and testimony from examinations for
discovery to make the necessary findings of fact.

Legal framework

The court engaged in a fulsome review of the legislative
framework, historical developments, secondary sources, and relevant
case law.⁵ In doing so the court reaffirmed that whether
or not a person is entitled to a lien should be strictly
construed.⁶ The concept of the lien is rooted in adding
value or utility to the land; the Act permits
subcontractors who supply labour and materials to a property to
bring a lien claim against the owner (a non-contracting party),
provided the work completed meets the definition of
“improvement”.⁷ As demonstrated by the
court’s analysis in this case, summarized below, this
determination is a fact driven exercise.⁸

Are the portable classrooms
“improvements”?

Yes. The court concluded that the portable classrooms are
improvements to the school site and therefore lienable interests
under the Act for the following reasons:

• OnPoint constructed the portables on the school site;




• The final destination of the portables was known to the
  parties, and therefore was a connection to the school site;




• CECCE regularly held back 10% of the funds advanced to Ty Corp;
  and finally,




• The portables enhanced the value and utility of the school
  overall.⁹

The court undertook a detailed analysis of the following four
factors: 1) the intentions of the parties, 2) the construction of
the portable classrooms, 3) the installation of the portable
classrooms and, 4) the building features of the portable
classrooms.

Intentions of the parties: In this case the
parties did not contemplate lien rights in the construction
contract, which made no reference the Act.¹⁰
However, CECCE did retain a 10% holdback from payments to Ty Corp,
albeit not earmarked as statutory holdback. The court inferred from
the fact that CECCE retained holdback that it was operating on the
basis that the portable classrooms were a lienable
supply.¹¹ Additionally, the parties intended for the
portable classrooms to remain on the school site to meet the
fluctuations in student populations, not to be leased or returned
to the contractor or OnPoint.¹² These factors weighed in
favour of finding that the portable classrooms were
improvements.

Construction: While the court acknowledged that
there is an inherent impermanence to portable classrooms because
they are movable, in this case the removal of a portable was not a
simple task because of the way they were built and subsequently
anchored to the land with custom supports (as opposed to on wheels,
for example).¹³ After considering in detail several
features of their construction, the court concluded that this
factor weighed in favour of a finding that a portable classroom was
an improvement.

Installation: The court found that there was a
direct connection between the work performed to install the
portables (i.e., installing cement pillars, placing the portables
on the pillars, arranging for an electrician to connect the
portable to the school’s electrical system, etc.) and enhancing
the utility of the school.¹⁴

Building features: The court observed that the
case law on modular prefabricated structures suggests that the
availability of lien rights turns on the nexus between the
structure and its connection to the specific lands. Essentially,
the court should consider whether a modular structure is a chattel.
A structure is a chattel if it is built with no particular end
destination and can be moved. In contrast, lien rights exist when a
structure is manufactured for specific land and/or a specific
project.¹⁵ Here, there was a sufficient nexus between
the portable classrooms and the specific school site because they
enabled the school to received more students without the expense of
expanding the school building.¹⁶

Unjust enrichment

A secondary issue in the motion was OnPoint’s claim that,
because it was not paid in full, CECCE had been unjustly enriched
to its detriment. The court rejected the unjust enrichment claim,
finding no evidence that CECCE had been enriched. In any event, it
was Ty Corp (general contractor) that owed OnPoint payment under
their subcontract. As there was no privity of contract between
CECCE (owner) and OnPoint (subcontractor), CECCE’s contract
with Ty Corp was a juristic reason for any enrichment. Accordingly,
the court would have rejected OnPoint’s unjust enrichment claim
on that basis.¹⁷

Key Takeaways

Given the rising trend in modular construction, parties to these
construction contracts should be aware that the supply of services
or materials for prefabricated modular structures may give rise to
lien rights on the property on which they are situated. The movable
nature of a prefabricated structure is not determinative; the
availability of lien rights will ultimately depend on if the
structure adds value or utility to the lands.

As OnPoint demonstrates, parties to a construction
contract should carefully consider if the Construction Act
applies to their project, and if the contract as drafted and/or the
parties’ conduct could be interpreted to suggest they are
operating on the basis that the Act applies.

Footnotes

1. RSO 1990, c. C.30, s. 1.

2. On Point Ltd. v. Conseil des Écoles
Catholiques du Centre Est et al., 2023 ONSC 1341
at para 10
[“OnPoint“]

3. OnPoint at paras 10-11.

4. OnPoint at para 12.

5. OnPoint at paras 38-73.

6. OnPoint at para 81; Kennedy Electric
Limited v Dana Canada Corporation, 2007 ONCA 664.

7. OnPoint at para 39.

8. OnPoint at para 41.

9. OnPoint at paras 82, 164.

10. OnPoint at para 98.

11. OnPoint at paras 104, 110.

12. OnPoint at para 100.

13. OnPoint at para 149.

14. OnPoint at paras 152-155.

15. OnPoint at para 156-157.

16. OnPoint at para 158-159.

17. OnPoint at paras 176-180.

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