Jaspal Sangha

A surety (Westport) brought an interpleader motion seeking a declaration of priority over funds awarded to a subcontractor (High Tech) in an ODACC adjudication, or alternatively, for the funds to be paid into court.

The funds were held in trust by the general contractor's (BDA) counsel due to competing claims.

The court found that Westport, as surety, had a valid security interest and trust claim over the funds based on the indemnity agreement with High Tech.

The court rejected High Tech's argument that the Construction Act's prompt payment provisions gave it priority.

However, the court also found that there were triable issues regarding Westport's good faith in processing claims and making advances, which precluded a final order for immediate payment to Westport.

Therefore, the court ordered the disputed funds to be paid into court pending the outcome of ongoing litigation between the parties.

The defendant, BDA Inc., brought a motion to reduce the bond filed as security in a construction lien matter, arguing that funds paid to its lawyers in trust, pursuant to an ODACC adjudication determination, should be credited against the lien amount.

The plaintiff, High Tech Power Inc., opposed the full reduction, contending that funds held in trust by the defendant's counsel were not "paid" to the lien claimant and thus could not stand as security.

The court ruled that funds held in a lawyer's trust account on behalf of the client do not constitute payment to the lien claimant and cannot be considered security for the lien, as they do not ensure the flow of money as intended by the Construction Act.

The motion for a full reduction was dismissed, and the bond was reduced only by the amount High Tech Power Inc. had consented to.

The Court of Appeal for Ontario allowed an appeal concerning an award of punitive damages.

The motion judge had awarded $50,000 in punitive damages without providing any analysis or reasons for the award.

The appellate court found that this lack of analysis rendered the decision unreviewable, concluding that punitive damages are an exceptional remedy requiring proper justification.

Consequently, the appeal was allowed, and the punitive damages award was set aside.