The case relates to a dispute between the surety, The Guarantee
Company of North America ("The Guarantee"), subrogated to
the rights of Alberta Builders' Lien Act
("BLA") trust claimants, and the Trustee over entitlement
to unpaid contract funds. The issue before the Court was whether
the trust created by s. 22 of the Alberta BLA conflicted with the
priority regime of the federal Bankruptcy and Insolvency
Act ("BIA") and, if not, whether a proper common law
trust was created on the facts of the case.
The majority of the Alberta Court of Appeal found that the BIA
and BLA are not in operational conflict and that, based on the
facts of the Iona case, a valid common law trust was
created. As a result, the Court ordered that the Trust Funds be
paid to The Guarantee in its subrogated capacity to the position of
the trust claimants.
The Trustee sought leave to appeal the decision of the majority
of the Alberta Court of Appeal to the Supreme Court of Canada, on
the basis of alleged national importance and alleged conflicting
decisions on the interaction between the lien legislation trust
provisions and the BIA provisions in other provinces. The Supreme
Court of Canada denied the application for leave to appeal and, as
is customary, did not provide reasons for its decision. A
conditional cross appeal was also brought by The Guarantee with
respect to the issue of whether the unpaid contract funds were
payable to Iona. However, as the cross appeal was conditional on
the application for leave to appeal, which was not granted, the
conditional cross appeal was also dismissed.
The fact that the Supreme Court of Canada found that the
Iona decision did not warrant further consideration
provides a strong endorsement of the reasoning of the majority of
the Alberta Court of Appeal. The extensive (and often
contradictory) commentary on the lower Court decisions will now
have to be considered in the context of the guidance provided by
the Supreme Court of Canada. One likely implication is that the
reasoning of the Court of Appeal will be applied across Canada and
give direction on the operations of the statutory trust
The clarity provided by the majority of the Alberta Court of
Appeal and now, the Supreme Court of Canada, should provide comfort
to subcontractors and suppliers that the trust rights contained in
the provincial lien legislation provide an effective remedy to
protect contract funds and facilitate payment on a construction
project even in insolvency cases. Resort to the trust remedy should
be considered by subcontractors and suppliers across Canada at the
earliest possible time in the face of a contractor's
insolvency, as a potential means of recovery.
Title requisitions, and responses to title requisitions, are often evidenced by two simple letters back and forth between solicitors; and yet, in the content of those two letters is the meat of the real estate transaction.
Now that the turmoil attendant upon the transference of power from one great party in the State to another has subsided, people may be permitted to devote their minds to a consideration of those sectional questions which are not less important for the welfare of the persons concerned, than are the great national issues upon which they have just pronounced judgment.
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).