The Construction Lien Act is a technical statute; it gives rights to persons who have provided goods or services to an improvement, rights that would not have existed without the Act. The Act sets out various rules and timelines; follow the rules and the timelines and you will be able to take advantage of the rights that the Act gives; fail to do so and your rights may evaporate. This proposition is demonstrated in Dolvin Mechanical Contractors Ltd. v. Trisura Guarantee Insurance Co. a 2014 decision of the Ontario Superior Court of Justice.
Section 39 of the Act gives every claimant a right to obtain information, up the construction ladder, regarding contracts that affect it. For example, a sub has a right to obtain from the owner the state of accounts between the owner and the general and copies of all labour and material payment bonds affecting the project. These are important rights. They alert the claimant to a possible breach of trust and add a deep pocket to pay money due to the claimant.
The general had not been paying the sub. The sub wrote to the owner, TTC, requesting that TTC pay the sub directly. The sub also had a brief conversation with TTC. Although there were some discrepancies regarding the information TTC gave in the conversation, both parties agreed that TTC always took the position that, because it did not have a contract with the sub, it would only deal with the general. All of this took place in the spring of 2010.
Realising that it would receive no help from TTC, the sub turned its attention to the general. The sub issued a section 39 demand for information from the general, but received no answer. The sub commenced an action against the general and its principal and, ultimately in 2012, the sub obtained a judgment against them for $122,000.
In July 2012, the sub garnished TTC. Not surprisingly, given that it was approximately two years after the contract had been completed, TTC indicated that it owed no money to the general and therefore would pay nothing to the sub. Finally, in October 2012, the sub’s lawyer asked TTC’s lawyer whether the general had posted a bond. TTC’s lawyer immediately acknowledged that there was a bond.
The sub then commenced an action against the bonding company for payment under the bond. Also not surprisingly, the bonding company defended the action. The bond, like all other such bonds, would have had a one-year limitation period for the claimant to commence an action; it also would have had an even shorter period to notify the bonding company of the sub’s claim. Presumably, a claim that was two years late, would have problems.
The sub also claimed against TTC for damages in case the bonding company was not liable to pay it under the bond. The sub alleged that TTC ought to have notified it of the bond’s existence.
Both TTC and the bonding company brought motions for summary judgment to dismiss the sub’s action against them. TTC’s motion was the first to be heard.
The sub claimed that TTC’s silence was not golden. The sub alleged that, because of its 2010 cry for help, TTC had a duty to inform it of the bond’s existence. However, the judge noted that previous cases had held that, outside of section 39, an owner has no duty, fiduciary or otherwise, to provide information of a labour and material payment bond to a sub. The judge commented that the sub knew of the existence of section 39 because it made a section 39 demand to the general. It ought to have made a section 39 demand to TTC.
There was simply no cause of actiona against TTC. It owed no duty of care to provide information to the sub, did not engage in any misrepresentation relating to the bond, and did not breach section 39 of the Act.
Unless there are some facts of which we are unaware, we assume that the sub will also be unsuccessful against the bonding company. Accordingly, the sub will have paid the costs of its own lawyers for two actions, been enmeshed for four years in its futile attempt to collect its debt, will probably be called upon to pay part of the legal costs of TTC and the bonding company, and will have collected nothing. Why? Because in the spring of 2010, no one thought to send to TTC a simple section 39 demand for information.