The Supreme Court of Canada released its decision in Stuart
Olson Dominion Construction Ltd. v. Structal Heavy Steel, 2015
SCC 43, on September 18, 2015 and clarified the interaction between
lien claims and statutory trusts upon the filing of a lien bond.
The Court found that filing a lien bond to remove a lien from
property does not satisfy a contractor's trust obligations.
Although double recovery is not permitted, a subcontractor has two
separate remedies that can be pursued contemporaneously: (1) lien
claims; and (2) claims against statutory trust funds.
Structal was the subcontractor for Dominion, the general
contractor. Dominion withheld payment from
Structal, and Structal registered a builder's lien. Dominion
filed a lien bond in the full amount of the lien in order to vacate
the lien against the property and allow funds to flow on the
project. Dominion continued to receive progress
payments from the owner, and Structal argued that notwithstanding
the lien bond in place, Dominion was still required to comply with
the trust provisions of the Manitoba Builder's Lien
Act. Dominion disagreed arguing that it had
set-off against monies claimed by Structal, there was no breach of
trust, and Structal was fully secured by the lien
bond. The owner withheld funds from Dominion at
Structal's request, at which point Dominion applied to the
Court for a declaration that the lien bond satisfied its trust
obligations to Structal.
The Supreme Court of Canada held that there are two independent
remedies available to subcontractors that can be pursued at the
same time: liens and trusts. Filing a lien bond
with the court does not extinguish statutory trust
obligations. A lien bond only takes the place of
the property that was encumbered by the lien so funds are able to
flow on the project. However, the lien bond is
only available in the event of a lien judgment.
The purpose of the statutory trust, as previously articulated by
the Manitoba Court of Appeal, is to help ensure that money payable
by owners, contractors and subcontractors flows in a manner which
is in accord with the contracted rights of those engaged in a
building project and not diverted out of the proper
pipeline. A finding that a trust claim is
extinguished by filing a lien bond would undermine this
As a result, even where a lien bond is filed, the contractor or
trustee must also maintain amounts received as trust funds thereby
resulting in double security for a
subcontractor. However, any payment under the
trust does serve to reduce the amount of the lien claim to the
extent it is for the same obligation. In other
words, double recovery is prohibited.
The Court did offer a solution – a contractor is able to
pay trust funds into court rather than depositing a lien bond to
vacate the lien, which would not breach trust obligations.
Lessons for the Atlantic Canadian Construction Industry
The impact of Stuart Olsen varies depending on the
legislation in each province. In Atlantic
Canada, currently neither Prince Edward Island nor Newfoundland and
Labrador have trust provisions, so there is no impact on current
practice. In New Brunswick and Nova Scotia the
legislation does contain trust provisions and the wording of the
legislation in each Province makes it likely that a Court would
reach the same conclusion as in Stuart
Olsen. As a result, contractors need to be
aware of their continuing trust obligations, which are not
extinguished by filing a lien bond.
Subcontractors and suppliers should also recognize that there are
two distinct remedies available to them to ensure payment
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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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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