Forgetful would-be lien claimants who miss the 45 day window to register a construction lien will appreciate this April 2016 decision of the Ontario Superior Court of Justice. In NKP Painting Inc., Justice Douglas allowed a subcontractor to recover holdback from the owner under the common law of unjust enrichment, despite the fact that the subcontractor did not have a registered lien or a contract with the owner.

The Facts

York Condominium Corporation, the owner, contracted with RBG, the general contractor, for the refurbishment of a common area and building corridors at a cost of approximately $285,000. The general contractor retained NKP Painting, the subcontractor, to supply painting and wallpapering materials. The owner paid 90% of the contractor’s invoices, retaining the requisite 10% holdback under the Construction Lien Act (“CLA”). The contractor went bankrupt and the subcontractor was not paid.

Neither the contractor nor subcontractor registered liens under the CLA, but the subcontractor brought a claim for unjust enrichment against the owner. In the lower court (Small Claims Court), the Deputy Judge found that there was no contract between the subcontractor and the owner, and dismissed the subcontractor’s claim for unjust enrichment. The subcontractor appealed to the Superior Court.

The Law

Remedies under the CLA do not exist to the exclusion of common law remedies such as unjust enrichment.

The common law remedy of unjust enrichment involves the enrichment of one party, the corresponding deprivation of a second party, and no juristic reason for the enrichment of the first party (such as a gift or a contract). The courts will also consider the reasonable expectations of the parties in deciding whether a party has been unjustly enriched.

In NKP Painting Inc, the owner was enriched because it received 100% of the benefit of the invoiced renovation work, but paid only 90% of the invoiced amounts. The owner’s enrichment corresponded to the efforts of the subcontractor, for which it received no compensation, and therefore suffered a detriment. There was no contract between the owner and the subcontractor or other juristic reason for the owner’s benefit and the subcontractor’s corresponding deprivation. Furthermore, the owner could not reasonably have expected to retain the holdback funds, which represent a windfall to the owner.

The Decision

On appeal, Justice Douglas of the Superior Court held that the owner was unjustly enriched in a sum equal to the amount of the holdback and ordered that the subcontractor receive judgment in the amount of the holdback.