Overview
The recent Divisional Court case of Demikon Construction Ltd. v. Oakleigh Holdings Inc., 2024 ONSC 6261 establishes that reliance on a direct payment pursuant to s. 28 of the Construction Act, R.S.O. 1990, c. C.30 (the “Act”) is only valid if that payment was made to a person “having a lien”. A person does not ‘have a lien’ if their lien is expired or has otherwise been resolved by the Act. Failing to ensure compliance may not result in such a payment being a proper basis to reduce lien security posted into court.
If a payor wants to avail themselves of direct payments to subcontractors/suppliers under s.28 of the Act, they should consider the following:
- Ensure the payees are persons “having a lien”.
- Provide the required written notice of the payment (or intention to pay) to the proper payor.
- Consider getting the proper payor’s input on the amounts owing to the subcontractor/supplier.
- Where appropriate, obtaining an acknowledgment and direction from the proper payor to make the direct payment.