Portable Classrooms Are “Improvements” under the Construction Act

The Ontario Superior Court of Justice has shed new light on the meaning of an “improvement” under the Construction Act. In On Point Ltd. v. Conseil des Écoles Catholiques du Centre Est et al., 2023 ONSC 1341, the court held that portable classrooms are “improvements” within the meaning of the Act and that the construction and installation of the same is a lienable supply.

Background

In July 2019, Conseil des Écoles Catholiques du Centre Est (“CECCE”) contracted Ty Corporation (“Ty Corp”) to supply 14 portable classrooms to one of CECCE’s school properties for the upcoming school year. Ty Corp then subcontracted the construction portion of its work to OnPoint.

OnPoint started to construct the portable classrooms in Vars, Ontario. One of Ty Corp’s other subcontractors then delivered the partially completed classroom portables to site (a secondary school in Stittsville, Ontario). Once delivered, OnPoint completed the roofing, siding, stairs, landing and window casings. Another subcontractor arranged by Ty Corp then moved the completed portable classrooms to their final resting spot.  

By August 13, 2019, it became clear that Ty Corp  was not going to be able to supply all 14 portable classrooms by September 2019, so CECCE ended its contract with Ty Corp and hired Multi-Service Restoration (“MSR”) to build and install the remainder. MSR then partnered with Provision Construction Management Inc. (“PCM”).

OnPoint was not fully paid by Ty Corp and proceeded to preserve and perfect a construction lien against the school property. In response to the lien, CECCE brought a motion for summary judgment on the basis that OnPoint’s supply of portable classrooms was not a lienable supply. Notably, MSR and PCM were permitted to participate in the motion as intervenors.

Analysis

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

The parties’ respective positions were as follows.

Position of CECCE

• This was an appropriate case for summary judgment because the issue could be determined on the record filed by the parties and that motion would dispose of the action in its entirety.
• The jurisprudence supported the position that portable classrooms, which were created as temporary solutions to fluctuating increases of student population, were not improvements within the meaning of the Act.

Position of OnPoint

• There was a genuine issue requiring a trial and material facts were in dispute, particularly in light of CECCE’s failure to admit many facts set out in the Request to Admit, including why CECCE retained a 10% holdback.
• The intent of the Act is to prevent owners of land from receiving benefits of buildings erected and work done on their land at their instance without paying. The portable classrooms were a “capital repair” within the meaning of an improvement. 

Position of MSR and PCM

• A summary judgment should issue finding that the portable classrooms built were "improvements" within the meaning of the Act.
• The portable classrooms installed on CECCE school premises had improved the value and productivity of the land and were substantially attached to the premises on which they were installed.

Legal Framework

The court engaged in a fulsome review of case law and commentary on the meaning of an “improvement” and “lienable supply” under the Act. In doing so, the court reaffirmed that whether or not a person is entitled to a lien should be strictly construed. However, as demonstrated by the court’s analysis, such a determination requires a highly fact-driven analysis.  

In coming to its finding that the portable classrooms were “improvements” and as such a lienable supply, the court undertook a detailed analysis of the following four factors:

1. Intentions of the parties: In this case, the contracts between CECCE and Ty Corp and Ty Corp and OnPoint did not contemplate lien rights and/or holdback or make any reference to the Act whatsoever. However, CECCE did retain 10% from payments to Ty Corp,[1] which the court inferred was indicative of CECCE operating on the basis that it had statutory holdback obligations. Additionally, the court noted that the parties intended for the portable classrooms to remain on CECCE’s property. The intentions of the parties weighed in favour of a finding that the portables are improvements under the Act.

    

2. Construction: While the court acknowledged that the portable classrooms had an “inherent impermanence”, it also noted that removing them was not a simple task. After considering other aspects of their attachment to the lands in question, the court concluded that the construction of the portable classrooms was a factor that weighed in favour of a finding that the portables are improvements under the Act.

    

3. Installation: In the court’s view, the concept of the lien is rooted in adding value or utility to the land. Here, there was a direct connection/attachment between the work performed to construct and erect/install the portables and enhancing the utility of the school.  The portables were partially built on-site and positioned on concrete pads, with servicing done. The installation of the portable classrooms weighed in favour of finding that the portables were improvements under the Act.

    

4. Building features: The court observed that the supply of services or materials will give rise to lien rights where the construction parties and, particularly, the owner considers the subject services or materials necessary for the completion of the project, among other things (i.e., the “nexus test”). Here, the portable classrooms added sufficient utility to the school: they enabled the school to receive further student population without the expense of expanding the school building. The building features of the portable classrooms weighed in favour of a finding that the portables were improvements under the Act.

Key Takeaways

In deciding that OnPoint’s work was lienable, the court did not follow earlier cases that held that the supply of modular homes (Hank’s Plumbing and Gas Fitting Ltd. v. Stanhope Construction Ltd (1978), 18 A.R. 417)) or portable classrooms (Inesco Ltd (Trustee of) Re., 1986 CarswellOnt 1023) was not lienable. Justice Doyle based her decision in part on the definition of "improvement" in s. 1(1) of the Act, which now includes the construction or installation of any equipment that is "essential to the normal or intended use of the land", finding that the classrooms were indeed essential to the normal use of the land in this case.

That part of the definition of “improvement” was added to the Act in the aftermath of the Court of Appeal decision in Kennedy Electric Ltd. v. Rumble Automation Inc, 2007 ONCA 664. This decision appears to be the first to apply that expanded definition to the construction and installation of portable classrooms. This is no doubt a significant development given the rising trend in modular construction. Owners, developers, contractors and suppliers alike would be well advised to carefully consider whether the Act applies to their projects and take the appropriate steps to ensure they are compliant.