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Construction - Trusts. B.L.T. Construction Services Inc. v. Una Pizza Napoletana Inc.
In B.L.T. Construction Services Inc. v. Una Pizza Napoletana Inc. (Ont CA, 2025) the Ontario Court of Appeal dismissed an appeal, here where the "motion judge refused to set aside the order striking the appellant’s defence, and concluded that the appellant was jointly and severally liable, along with his co-defendants".
Here the court considered a Construction Act s.7 ['Owner’s trust - Amounts received for financing a trust'] issue:[2] The respondent launched a claim that included allegations that the Corporations received leasehold improvement advances from the third-party landlords to fund the construction projects, yet failed to advance the funds to the respondent. The respondent’s claim asserted that this constituted a breach of the trust imposed by s. 7 of the Construction Act, R.S.O. 1990, c. C.30, as well as an unjust enrichment of the Corporations. It alleged that the individual defendants, including the appellant, were liable because they were each a person with effective control of” the Corporations and had assented to or acquiesced in the misuse of trust funds.
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[21] It is important to situate the claim within the legislative framework. The respondent alleged a breach of trust under s.7 of the Construction Act, R.S.O. 1990, c. C.30. That section provides as follows:(1) All amounts received by an owner, other than the Crown or a municipality, that are to be used in the financing of the improvement, including any amount that is to be used in the payment of the purchase price of the land and the payment of prior encumbrances, constitute, subject to the payment of the purchase price of the land and prior encumbrances, a trust fund for the benefit of the contractor. R.S.O. 1990, c. C.30, s. 7 (1).
(2) Where amounts become payable under a contract to a contractor by the owner on a certificate of a payment certifier, an amount that is equal to an amount so certified that is in the owner’s hands or received by the owner at any time thereafter constitutes a trust fund for the benefit of the contractor. R.S.O. 1990, c. C.30, s. 7 (2).
(3) Where the substantial performance of a contract has been certified, or has been declared by the court, an amount that is equal to the unpaid price of the substantially performed portion of the contract that is in the owner’s hands or is received by the owner at any time thereafter constitutes a trust fund for the benefit of the contractor. R.S.O. 1990, c. C.30, s. 7 (3).
(4) The owner is the trustee of the trust fund created by subsection (1), (2) or (3), and the owner shall not appropriate or convert any part of a fund to the owner’s own use or to any use inconsistent with the trust until the contractor is paid all amounts related to the improvement owed to the contractor by the owner. R.S.O. 1990, c. C.30, s. 7 (4). [22] The facts alleged establish liability for breach of trust. Money is alleged to have been paid to the Corporations to be used to finance, that is, to pay for, the improvements undertaken by the respondent, and that money, which the Act required be used to pay the respondent, is alleged to have been used for a purpose inconsistent with the trust, because it was not used to pay the respondent. As noted the appellant was deemed to admit all of those allegations, as well as his effective control over the Corporations that breached the trust.
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