Filing of lien bond has no effect on existence and application of trust remedy

Supreme court | Building Liens


Filing of lien bond has no effect on existence and application of trust remedy

Dominion Construction was hired by BBB as general contractor to construct new football stadium. Dominion entered into subcontract with Structal Heavy Steel for supply and installation of steel for project. Dominion started withholding payment from Structal, advising it was using unpaid amounts for back charges it claimed resulted from delays attributable to Structal. Structal registered builders’ lien against property. Dominion filed lien bond for full amount of builder’s lien. Structal approved bond and vacated its lien. Dominion refused to make further payments, maintaining that it had set-off against monies claimed by Structal, that there was no breach of trust, and that Structal was fully secured by lien bond. At Structal’s request, BBB withheld $3.5 million payment from Dominion. Dominion applied for declaration that it satisfied its Builders’ Lien Act, trust obligations to Structal. Application judge ruled that lien bond secured Structal’s trust claim, which was based on Dominion using BBB’s payment of $4.1 million on account of Structal’s completed and certified work to pay other contractors and itself. Structal paid its subcontractors in full from its own resources and its subcontract was certified for payment. Judge maintained that lien bond stood in place of lien, securing sum of money claimed by Structal and allowing Dominion to disburse funds of progress payment without being in breach of lien act trust provisions. Manitoba Court of Appeal overturned application judge’s decision. Dominion’s appeal dismissed. Right of lien against interest of owner of land or structure is available to persons who do any work, provide any services or supply materials in performance of contract or subcontract. Lien creates charge against land in favour of contractors, suppliers and workers who can prove their claim. Lien act provides for vacating liens, pending resolution of validity of lien claims, if alternate security, typically lien bond, is posted. Money or security paid into court stands in place of land against which lien was registered. Trust provisions of lien act provide that subcontractors to be paid before owner or contractor can appropriate trust funds for own use. Trust and lien provisions of lien act are two separate remedies. Act does not expressly delineate how lien and trust provisions are to interact where both remedies pursued concurrently. Filing of lien bond has no effect on existence and application of trust remedy. Lien bond does not constitute security for trust claim and does not result in protection of actual trust monies.
Stuart Olson Dominion Construction Ltd. v. Structal Heavy Steel (Sep. 18, 2015, S.C.C., McLachlin C.J.C., Rothstein J., Cromwell J., Moldaver J., Wagner J., Gascon J., and Côté J., File No. 35777) Decision at 236 A.C.W.S. (3d) 823 was affirmed.  256 A.C.W.S. (3d) 776.

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