Owner or contractor? Court rules on litigant's status under Construction Act

Defendants argued plaintiff was an owner and not entitled to a lien on the property

Owner or contractor? Court rules on litigant's status under Construction Act

The Ontario Superior Court has ruled that in a situation in which a defendant moves to discharge a plaintiff’s claim for lien against his property subject to their construction agreement, it is required to determine whether the plaintiff is an owner or a contractor within the meaning of the Construction Act. 

In Mahendran v. 9660143 Canada Inc. et al, 2021 ONSC 6678, one of the defendants owned a property, on which the plaintiff entered into a construction agreement to build and supply services and materials for the construction of a house. They also agreed that upon completion, they would sell the house and the plaintiff would be paid for his time, supervision and materials plus a percentage of the profit on the investment. But the defendants failed to pay. The plaintiff then registered a claim for lien against the property, contending that he was a contractor as defined by the Construction Act. The lien claimed for services and materials supplied to the defendants at the property. 

The defendants filed a motion to discharge the claim for lien. They alleged that plaintiff was not a contractor but an owner of the property under the Construction Act and thus, not entitled to a lien. 

In its decision, the Superior Court held that the plaintiff was an owner pursuant to the Construction Act and accordingly, his claim for lien should be discharged. 

The court resolved the matter by relying on the doctrine it pronounced in the case of Cohen v. Brin, 2013 ONSC 1302. In Cohen, the court framed the issue as a question of whether the plaintiff agreed to contribute to the project as a contractor or whether he was a partner of the defendant. The indicia of a partnership include the contribution by the parties of money, property, effort, knowledge, skill or other assets to a common undertaking, a joint property interest and the sharing of profits or losses, the court said. 

Following Cohen, the court rejected the plaintiff’s contention that he was merely a contractor. The agreement provided that upon completion of the construction of the residence, the parties would sell the house and the plaintiff would be paid for services and materials plus a percentage on the investment profit. That provision, the court noted, signified partnership and was therefore inconsistent with the relationship of owner and contractor. 

To further substantiate its finding, the court referred to the transcript of the plaintiff’s cross-examination related to his status. The transcript showed the plaintiff’s statements admitting that there would be profit-sharing if the property was sold and he used his own money to complete the construction work. The transcript clearly demonstrated that the plaintiff was a partner in the construction of the residence and an owner under the Construction Act, the court stressed. 

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