Canada: The Builders' Lien Trust – A Separate Statutory Right

On September 18, 2015, in Stuart Olson Construction Ltd. v Structal Heavy Steel, the Supreme Court of Canada held that builders liens and statutory trusts are separate remedies that exist independently of one another and may be pursued concurrently by a subcontractor pursuant to the terms of the Manitoba Builders Lien Act.1 One effect of this decision is that a lien bond posted to discharge a lien will not discharge a contractor's trust obligations. Structal has application to all other jurisdictions that employ the concept of a builders' lien trust, including Alberta, Ontario and British Columbia.

Structal, involved a lien dispute between a general contractor and a subcontractor (as opposed to, for example, a lien dispute between an owner and contractor). Stuart Olson was the general contractor for the construction of the Winnipeg Blue Bombers' new football stadium on the University of Manitoba campus. In Decembe 2010, Stuart Olson entered into a subcontract with Structal Heavy Steel for the supply and installation of structural steel, a roof with a (bow) truss scheme, precast bleachers and a vomitory wall at a price of $44,435,383.

Under the Manitoba Builders Lien Act (as in Alberta, Ontario and British Columbia) a subcontractor enjoys a statutory right to register a lien against property to which it has made an improvement or contributed materials. In addition to its lien provisions, the Act contains various trust provisions of use to a subcontractor. These trust provisions provide, in part, that all sums received by a contractor on account of a contract price constitute a trust fund for the benefit of subcontractors and, furthermore, that the contractor is the trustee of the trust fund and is prohibited from appropriating or converting any part of the trust fund for any use (not authorized by the trust) until all of its subcontractors have been paid in full.

The legal action between Stuart Olson and Structal arose after Structal filed a builder's lien against the Stadium property. In response, Stuart Olson sought to discharge the lien by filing a lien bond for the full amount of Structal's lien. Structal discharged its lien, but continued to seek payment from Stuart Olson of the monies owing for its subcontract work. Stuart Olson refused payment and applied to the court for an order declaring that the filing of the lien bond satisfied its trust obligations to Structal under the Act. Stuart Olson further argued that, upon receipt from the Stadium owner of the outstanding progress payments on account of Structal's work, Stuart Olson could pay such funds to entities other than Structal (e.g. other subcontractors and material suppliers) without being in breach of the trust provisions of the Act.

In reply, Structal argued that the provision of security in the form of a lien bond for a builder's lien did not diminish or extinguish a general contractor's obligations to its subcontractor under the trust provisions of the Act.

Writing for a unanimous Supreme Court of Canada, Justice Rothstein held for Structal, stating that the trust provisions of the Act guard a distinct set of interests from those protected by the lien provisions of the Act.2 Specifically, the "purpose of a lien is to create charges against the land in favour of those contractors, suppliers and workers who can prove their claims."3 By contrast, the purpose of the trust provisions of the Act is to ensure that subcontractors, suppliers and workers who can prove their claims are paid before an owner or general contractor can appropriate trust funds for his or her own use.4 In essence, all funds received by a general contractor are trust funds for not only subcontractors, "but also the Workers Compensation Board, any workers employed by the subcontractor, and the owner for any set-off or counterclaim relating to the performance of the contract."5

During the Supreme Court of Canada hearing, Stuart Olson argued that treating the lien provisions and trust provisions of the Act as separate remedies could force a general contractor to pay twice for the same work. In response, Justice Rothstein held that there was a difference between double payment and double security, explaining:

...a lien bond involves only an assurance that the surety will pay the amount of any lien judgment should the lien defendant fail to do so. The bond does not constitute security for the trust claim and does not result in the protection of the actual trust monies at issue. An owner, contractor or subcontractor who chooses to file a lien bond with the court instead of depositing the funds at issue must maintain the trust fund in addition to the bond.6

In short, Justice Rothstein concluded that regardless of a lien claim, a contractor or subcontractor may still have an independent trust claim, which cannot be secured by a lien bond. Accordingly, when a general contractor seeks to discharge a lien by posting funds with the court, it can do so either by posting the trust funds or by using a lien bond while still holding the trust funds (i.e, by maintaining double security).7 The payment of trust funds into court reduces the need for (or the amount of) the lien bond by an amount equivalent to the trust monies paid into court. Because Stuart Olson chose to provide full security by way of a lien bond, it was required to maintain the trust funds as well.8

The Structal decision clarifies that the two statutory rights provided by Canadian builders lien legislation are separate remedies and may be concurrently invoked by a subcontractor. Because the legislation differs from province to province, the precise impact of Structal in Alberta remains somewhat uncertain. In Alberta, funds received by a general contractor are not subject to a statutory trust until after a certificate of substantial performance has been issued.9 Accordingly, following the logic of Structal, once a certificate of substantial performance is issued, a general contractor in Alberta must decide whether to:

  • file a lien bond and hold any funds then received in trust; or
  • submit any funds received to the court in cash in order to discharge the lien.

On its face, the Structal decision represents a significant victory for subcontractors who now may concurrently avail themselves of the lien and trust remedies found in builder's lien legislation. However, it remains to be seen whether, as a practical matter, Structal will provide sub-contractors with meaningful added protection.

Footnotes

1 Stuart Olson Construction Ltd. v Structal Heavy Steel, 2015 SCC 43.

2 Ibid at para 18-32.

3 Ibid at para 20.

4 Ibid at para 26.

5 Ibid at para 32.

6 Ibid at para 47.

7 Ibid at para 46.

8 Ibid at paras 48 and 49.

9 Builders Lien Act (Alberta), R.S.A 2000, c B-7 s.22(1)(b).

To view original article, please click here.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
McLennan Ross LLP
McLennan Ross LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
McLennan Ross LLP
McLennan Ross LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions