Lessons Learned
1. Contrary to Inesco, a 1986 decision of the Ontario Superior Court, school portables can constitute a lienable improvement in the right circumstances – despite being “inherently impermanent” additions to land.
2. Given modern engineering proficiency, whether a good is permanently affixed to the land is a less-decisive consideration than it used to be – a surprising number of seemingly-permanent goods can now be removed from one location and installed elsewhere. As long as there is a substantial attachment, consideration of the value and utility of the good to the land takes considerably higher priority than it once did.
Construction
The Conseil des écoles catholiques du Centre-Est (“CECCE”) is Ontario’s largest French-language school board, teaching 21,000 students over an area covering more than 35,000 square kilometres, including the city of Ottawa.
In July 2019, CECCE hired Ty Corporation (“TyCorp”) to construct and install 14 school portables (small buildings located on school grounds, installed on a stilt foundation and capable of being relocated, used as classrooms when the capacity of the main school building overflows). Time was of the essence because the original contractor had failed to deliver and now the new school year was only two months away.
TyCorp only managed to complete 10 of the 14 portables. CECCE terminated TyCorp’s contract and partially withheld payment, TyCorp in turn failed to fully pay its subcontractors, and the liens flew.
Litigation
One of the liens was filed by OnPoint Ltd., which had been subcontracted to construct the portables on the grounds of École Paul-Desmarais. A new permanent wing was eventually to be added to the school to accommodate the increase in enrollment, at which time it was intended that the portables would be removed.
CECCE moved for summary judgement against OnPoint, arguing that portables – being merely temporary solutions to fluctuating student populations – are not improvements within the meaning of Ontario’s Construction Act and thus are not eligible to be liened.
OnPoint argued in turn that not only were the portables substantially attached to the land, but that installing portables, which are intended to extend the normal economic life of the land, constitutes capital repair and thus falls within the meaning of an improvement under section 1 of the Construction Act.
Analysis
Whether an object qualifies as an improvement is a delightfully complicated subject filled with counterintuitive conclusions, perhaps illustrated best by the Ontario Court of Appeal’s seminal 2007 decision Kennedy Electric, in which an assembly line constructed to manufacture Ford F-150 trucks was held not to constitute an improvement despite covering 100,000 square feet, weighing 500,000 tons and being connected to the building by nearly 3,000 bolts.
Since then the Act’s definition of an improvement had changed, and with much of the jurisprudence now of questionable applicability, the Court supplemented its analysis with external aids to clarify whether a portable was fish or fowl under the Act, including both textbooks and transcripts of the legislative hearings held during passage of the amendment of the Act.
The Court began its analysis with a nod to Kennedy Electric – which remains good law on the point that whether or not a person is entitled to a lien is to be strictly construed – but found that OnPoint had a right to lien the portables.
The Court focused in particular on the Act’s definition of an improvement as, inter alia, “essential to the normal or intended use of the land”, analogous to the Black’s Law Dictionary definition as “a valuable addition to a property…amounting to more than mere repairs or replacement, costing labor or capital and intended to enhance its value…or adapt it for new or further purposes.”
The portables certainly qualified, the Court observed, being essential to accommodate an increase of student population.
The Court also distinguished previous case law, particularly Inesco, that had seemingly disqualified portables and prefabricated structures from lien entitlement. “If a structure is manufactured with no particular end destination in mind,” the Court wrote, “it is considered a chattel that can be moved around at will. However, lien rights will exist where the structure is manufactured for specific land or in respect of a specific construction project.”
The Court then turned to the consideration of whether a supplied good is a permanent addition to the land on which it’s installed. This, the Court held, is an important factor but not decisive, especially in the context of modern engineering methods that enable a remarkable number of goods to be uninstalled and removed from a site.
Finally, the Court concluded that the heavy-duty nature of a portable’s construction weighed in favour of its status as an improvement, including the need for considerable preparation of the underlying earth, a concrete foundation that is not removed when the portable is relocated, the use of heavy-duty “hurricane anchors” to secure the portable to the foundation, and the wiring of the portable into the school’s electrical system.