The Construction Lien Act is a technical statute; it gives
rights to persons who have provided goods or services to an
improvement, rights that would not have existed without the Act.
The Act sets out various rules and timelines; follow the rules and
the timelines and you will be able to take advantage of the rights
that the Act gives; fail to do so and your rights may evaporate.
This proposition is demonstrated inDolvin Mechanical
Contractors Ltd. v. Trisura Guarantee Insurance Co.a
2014 decision of the Ontario Superior Court of Justice.
Section 39 of the Act gives every claimant a right to obtain
information, up the construction ladder, regarding contracts that
affect it. For example, a sub has a right to obtain from the owner
the state of accounts between the owner and the general and copies
of all labour and material payment bonds affecting the project.
These are important rights. They alert the claimant to a possible
breach of trust and add a deep pocket to pay money due to the
The general had not been paying the sub. The sub wrote to the
owner, TTC, requesting that TTC pay the sub directly. The sub also
had a brief conversation with TTC. Although there were some
discrepancies regarding the information TTC gave in the
conversation, both parties agreed that TTC always took the position
that, because it did not have a contract with the sub, it would
only deal with the general. All of this took place in the spring of
Realising that it would receive no help from TTC, the sub turned
its attention to the general. The sub issued a section 39 demand
for information from the general, but received no answer. The sub
commenced an action against the general and its principal and,
ultimately in 2012, the sub obtained a judgment against them for
In July 2012, the sub garnished TTC. Not surprisingly, given
that it was approximately two years after the contract had been
completed, TTC indicated that it owed no money to the general and
therefore would pay nothing to the sub. Finally, in October 2012,
the sub's lawyer asked TTC's lawyer whether the general had
posted a bond. TTC's lawyer immediately acknowledged that there
was a bond.
The sub then commenced an action against the bonding company for
payment under the bond. Also not surprisingly, the bonding company
defended the action. The bond, like all other such bonds, would
have had a one-year limitation period for the claimant to commence
an action; it also would have had an even shorter period to notify
the bonding company of the sub's claim. Presumably, a claim
that was two years late, would have problems.
The sub also claimed against TTC for damages in case the bonding
company was not liable to pay it under the bond. The sub alleged
that TTC ought to have notified it of the bond's existence.
Both TTC and the bonding company brought motions for summary
judgment to dismiss the sub's action against them. TTC's
motion was the first to be heard.
The sub claimed that TTC's silence was not golden. The sub
alleged that, because of its 2010 cry for help, TTC had a duty to
inform it of the bond's existence. However, the judge noted
that previous cases had held that, outside of section 39, an owner
has no duty, fiduciary or otherwise, to provide information of a
labour and material payment bond to a sub. The judge commented that
the sub knew of the existence of section 39 because it made a
section 39 demand to the general. It ought to have made a section
39 demand to TTC.
There was simply no cause of action against TTC. It owed no duty
of care to provide information to the sub, did not engage in any
misrepresentation relating to the bond, and did not breach section
39 of the Act.
Unless there are some facts of which we are unaware, we assume
that the sub will also be unsuccessful against the bonding company.
Accordingly, the sub will have paid the costs of its own lawyers
for two actions, been enmeshed for four years in its futile attempt
to collect its debt, will probably be called upon to pay part of
the legal costs of TTC and the bonding company, and will have
collected nothing. Why? Because in the spring of 2010, no one
thought to send to TTC a simple section 39 demand for
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Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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