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Holdback Cases
Demikon Construction Ltd. v. Oakleigh Holdings Inc., 2024 ONSC 6261 (CanLII)
In the case of Demikon Construction Ltd. v. Oakleigh Holdings Inc., the court clarified that owners cannot receive credit for “jumping the rung” of the construction pyramid under Section 28 unless the recipient is a person currently holding a valid lien. The ruling overturned a lower court’s decision, emphasizing that these payments do not automatically reduce the security posted to vacate a lien if they occur after lien rights have expired.
Furthermore, the court highlighted the importance of verifying that funds are actually owed to the subcontractor, specifically when the contractor alleges deficiencies or delays. To avoid legal risks, owners ought to obtain formal acknowledgments or debt assignments rather than relying on moral obligations to pay trades directly. This legal precedent serves as a critical warning for payers to strictly adhere to the statutory requirements of the Construction Act when bypassing contractual privity.
We note that the defendants, Oakleigh and Aurelia, obtained leave to Appeal. The Court of Appeal is hearing the appeal in May 2026, and we will report back with the decision of the Court of Appeal.