35777    Stuart Olson Dominion Construction Ltd. v. Structal Heavy Steel

Liens — Trusts — Relationship between lien and trust provisions in provincial legislation

On appeal from a judgment of the Manitoba Court of Appeal (2014 MBCA 8), setting aside in part a decision of Schulman J. (2013 MBQB 48)

D was the general contractor and S was its subcontractor in respect of structural steel work for a construction project. S filed a builder’s lien against the property upon which the construction work was being done. After filing a lien bond in the full amount of S’s lien claim, D brought an application in the Court of Queen’s Bench seeking a declaration that it had satisfied its trust obligations. S then filed its own motion requiring full payment of its past-due invoices, without deduction or set-off, upon D receiving the funds from the owner. The motion judge held that the security in the form of the lien bond extinguished the trust obligations of D pursuant to the Manitoba Builders’ Liens Act. The Court of Appeal overturned this holding and concluded that under the Act, subcontractors have two separate and distinct rights beyond the common law right to sue for breach of contract: the right to the statutory trust and the right to file a lien claim against the property.

Held (7:0): The appeal should be dismissed.

Ensuring payment of contractors and subcontractors and encouraging liquidity in the flow of funds to them are both significant preoccupations in the construction industry. Construction liens and statutory trusts are statutory remedies which are found in provincial legislation to protect those who provide services or materials to a construction project. The Manitoba Builders’ Liens Act is silent as to how these two statutory remedies interact. The text and context of the provisions, as well as the history of the Act, reveal that the trust and lien provisions are two separate remedies that exist independently and may be pursued concurrently under s. 66 of the Act.

The purpose of a lien is to create a charge against the land in favour of contractors, suppliers and workers who can prove their claims. The purpose of the statutory trust is to help assure that money payable by owners, contractors and subcontractors flows in a manner which is in accord with the contractual rights of those engaged in a building project and that it is not diverted out of the proper pipeline. Finding that a trust claim is extinguished by filing a lien bond would undermine this purpose. A lien bond merely secures a contractor’s or subcontractor’s lien claim rather than satisfying it through payment and it does not extinguish the owner’s or contractor’s obligations under the statutory trust. The filing of a lien bond has no effect on the existence and application of the trust remedy. This conclusion is consistent with s. 4(3) of the Act, which provides that the contractor is barred from diverting trust funds for its own use until all subcontractors “have been paid all amounts owing to them”.

There will never be a requirement for the owner, contractor, or subcontractor to pay the funds at issue to the claimant twice. To the extent that the lien and trust claims are for the same work, services, or materials, payment under the trust will eliminate the equivalent amount payable to satisfy the lien claim. In the present case, S acknowledges that, had D paid the trust monies into court, there could have been a reduction in the amount of the lien bond by an amount equivalent to the monies paid into court. D chose to provide security by way of a lien bond rather than payment of funds into court. It is true that it paid premiums for that bond which are not recoverable, but that is simply the cost of the security which it chose to provide. S will not receive double payment.

Reasons for decision by Rothstein J.

Neutral Citation: 2015 SCC 43. Docket No. 35777