Ontario Court of Appeal poised to clarify construction lien appeal routes

In Castle Homes Design Inc. v McKenzie, 2026 ONCA 98, the Court of Appeal indicated its intent to resolve a dispute about the appropriate appeal route for construction lien proceedings.

Background

Castle Homes, a construction company, contracted with a homeowner to install a swimming pool and deck at a residential property. A dispute arose and Castle registered a lien and commenced an action to perfect the lien.

Castle missed several court-ordered deadlines and failed to pay cost awards.

The homeowner brought a motion to dismiss the lien action based on Castle’s failures to comply with the Court orders. The homeowner was successful, and the Court dismissed the action, discharged the lien, and awarded costs against Castle, referencing the Rules of Civil Procedure and s. 47 of the Construction Act.

Castle then appealed the dismissal and discharge orders to the Court of Appeal.

The homeowner advised Castle that its appeal should have been brought to the Divisional Court, citing s. 71 of the Construction Act. Castle agreed and sought an extension of time to do so, which the homeowner refused. Castle then brought a motion to transfer the appeal from the Court of Appeal to the Divisional Court, or to extend the time to perfect the appeal in the Court of Appeal.

Law and analysis

While the parties agreed about that interpretation of s. 71, that an appeal of a judgment under the Construction Act lies to the Divisional Court, the Court of Appeal felt differently.

The Court reviewed the case law concerning Construction Act appeal routes and considered whether the appropriate appeal route is determined by the fact that an action is commenced pursuant to the Construction Act, or whether the Court should examine the “substance of the order made”.

On the one hand, the Court in TRS Components v Devlan Construction, 2015 ONCA 294, held that all appeals from Construction Act proceedings are dealt with by the Divisional Court. In TRS, the Court held that appeals of counterclaims (based on breach of contract rather than any provision of the Construction Act) are subject to the Divisional Court appeal route because the judgment was granted in an action commenced under the Construction Act. The Court found that s. 71 applies to any counterclaim, cross-claim, or third party claim unless the action (or part of the action) is removed from the construction lien proceedings.

On the other hand, the Court in Arcamm Electrical Services Ltd. v Avison Young Real Estate Management Services LP, 2024 ONCA 251 held that an appeal from an order granted on a summary judgment motion is properly brought to the Court of Appeal because the “substance of the order made” flowed from the Rules of Civil Procedure rather than any provision of the Construction Act.

The dismissal order in Castle Homes, the Court found, was made pursuant to rules 3.04(4) and 60.12 of the Rules of Civil Procedure, while the order to discharge the construction lien – ancillary to the dismissal order – was made pursuant to s. 47 of the Construction Act.

In analysing the two precedents, the Court held that there is strong public interest in the appeal at hand remaining in the Court of Appeal such that the Court can clarify the appropriate appeal route and resolve the dispute between TRS and Arcamm. Castle’s appeal deadline was 23 February 2026. It remains to be seen how the Court will resolve the apparent conflict in the precedents, but the decision will be of significant importance to the construction bar and industry stakeholders.

If you’re a contractor, consultant, or subcontractor facing tight deadlines or uncertainty around lien rights, we can help you navigate the process with confidence. If you have any questions regarding the information discussed in this article, or for practical, timely guidance on protecting your interests, please contact Dylan Dilks.