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Construction Liens

. Tremblar Building Supplies Ltd. v. 1839563 Ontario Limited

In Tremblar Building Supplies Ltd. v. 1839563 Ontario Limited (Div Ct, 2020) the Divisional Court reviewed some basics of the Construction Lien Act (now the Construction Act):
[11] The Construction Lien Act creates two distinct sets of obligations and remedies relevant to this appeal: the construction lien and the construction trust. These obligations and remedies are in addition to and overlie the contractual rights and obligations between the parties.

[12] This creates three potentially intersecting sets of rights and obligations arising from the same facts. The Construction Lien Act is remedial legislation and provides additional obligations and rights to those provided by the common law. Those additional rights and obligations do not imply the existence of further rights and obligations that do not arise under contract law or the Construction Lien Act.

[13] This case illustrates this point. But for the Construction Lien Act, Tremblar would be restricted to its rights in contract law. It would have no direct recourse against Owner, with which it had no contractual relationship. If it obtained judgment against Contractor and remained unpaid, then it might have recourse against Owner under either the law of debtor/creditor (if Contractor was not bankrupt), or under the Bankruptcy and Insolvency Act (if Contractor was bankrupt). There would be no Construction Lien Act trust remedies. There would be no remedies for unjust enrichment.

[14] The Construction Lien Act creates additional rights and obligations, two of which relate to this appeal. The first is the construction lien. Appellant was entitled to assert this right by registering a construction lien. It would have been entitled to a rateable share of the statutory “holdbacks” Owner was obliged to retain from what it paid to Contractor. This creates security and a direct right of action between Tremblar and Owner, a person with which it has no privity of contract – something created by the Act. The appellant chose not to avail itself of this claim and lost it as a result.

[15] The second relevant regime created by the Act is the construction trust. This is a statutory trust, and it is created by, and limited by, the terms of the Construction Lien Act. The trust runs with contractual obligations, but only in respect to money received or receivable by the trustee in respect to the improvement. Owners do not hold funds in trust for subcontractors. Otherwise, owners would have a positive obligation to ensure that contractors apply their funds properly. Owners do not have that trust obligation under the Act and it would undermine the structure of relations under the Act to find otherwise.
. R&V Construction Management Inc. v. Baradaran

In R&V Construction Management Inc. v. Baradaran (Ont CA, 2020) the Divisional Court engaged in a prolonged consideration of the role of Masters in construction lien litigation [formerly under the Construction Lien Act, now under the Construction Act] [paras 14-42].

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