On September 18, 2015, the Supreme Court of Canada issued its
reasons in Stuart Olson Dominion Construction Ltd. v.
Structural Heavy Steel, 2015 SCC 43. Although the judgment
concerned the interpretation of the Manitoba Builders' Lien Act, it has
implications for owners, contractors and others in the construction
industry across Canada, including remedies available to industry
participants in British Columbia under the BC Builders Lien Act. The decision will no
doubt have an important procedural impact on how liens ought to be
discharged during the currency of a project where the claim is
The facts of the case were rather unremarkable. A dispute arose
between a contractor and subcontractor on the construction of a
stadium at the University of Manitoba. The dispute was not resolved
and the subcontractor filed a claim of builders' lien. In order
to ensure funds did not cease to flow on the project, the
contractor secured the discharge of the lien by posting a lien bond
in court for the full amount of the claim. As the claim was still
not resolved in a timely fashion, the contractor subsequently
sought a declaration that it was entitled to use further funds it
received from the owner disregarding any trust claim the
subcontractor may have, given that the lien bond had already been
posted in court securing the subcontractor claim. In other words,
the contractor took the position the lien bond was security for not
only the lien claim but also any trust claims that may arise. The
Manitoba Court of Queen's Bench initially sided with the
contractor but that decision was overturned at the Court of Appeal.
The Supreme Court of Canada dismissed the appeal, essentially
holding that the lien bond was not posted as security for both the
lien claim and any trust obligations. The remedies available to the
subcontractor – i.e., a lien claim and a trust
claim, could co-exist and the mere fact of securing of one did not
discharge the other.
The result serves to confirm that contractors and subcontractors
have a variety of remedies available to them to ensure payment on a
construction project – that proposition, in and of itself, is
not controversial. However, perhaps the most surprising aspect of
the decision was the court also confirmed that if trust money had
been posted into court as opposed to a lien bond, the result may
have been different. This is because the court expressly
acknowledged that payment of trust funds into court as security for
a claim will not result in a breach of trust and, therefore, such a
payment could secure not only a lien claim but also any trust
obligations. The court reasoned that the subcontractor would not
recover twice on a lien claim and on a trust claim and that if for
a variety of reasons the lien claim was not successful, the trust
claim would still be available.
As a result of this decision, the manner in which lien claims
are secured pending their determination by a court may result in a
change of practice. Previously, either lien bonds or letters of
credit have been posted as security to discharge liens during the
currency of a project. However, if actual funds are posted instead,
such funds may also stand in the place of trust rights or trust
obligations that a contractor may have. What remains to be seen is
whether other trust claimants may then complain that their trust
rights ought to be secured in the same fashion. Regardless, it is
clear that the protection afforded to contractors' and
subcontractors' in builders' lien legislation across Canada
have been fortified by this decision.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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