Great Northern Insulation Services Ltd. v. King Road Paving and Landscaping Inc., 2019 ONSCDC 3671
DIVISIONAL COURT FILE NO.: DC 1072/18
DATE: 20190614
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
D.L. CORBETT, F.L. MYERS and SHEARD JJ.
B E T W E E N:
GREAT NORTHERN INSULATION SERVICES LTD.
Plaintiff/Appellant
- and -
KING ROAD PAVING AND LANDSCAPING INC., also known as KING ROAD PAVING & LANDSCAPING INC., LOUIS ALAIMO, AGOSTINO PLATI, GIUSEPPINA PLATI and SCOTIA MORTGAGE CORPORATION
Defendants/Respondents
Counsel:
Michael Odumodu, for the Appellant
Amanda Pilieci, for the solicitors Sutherland Law
No one else appearing
Heard at Oshawa: January 22, 2019[^1]
DECISION
D.L. Corbett J.
[1] This appeal concerns priority claims to money payable to a contractor by owners in an action under the Construction Lien Act[^2] (the “CLA”). One of the contractor’s subcontractors says that it is entitled to the money because it is a trust beneficiary under the CLA. The contractor’s law firm, Sutherland Law, says that it is entitled to a charging order and priority because it is through its efforts that the money was recovered by the contractor.
[2] The trial judge, Charney J., found for the law firm, issued a charging order in its favour, and ruled that the subcontractor does not have a CLA trust claim to the money and thus that the charging order has priority over the subcontractor’s claims. The appellant subcontractor appeals the trial judge’s decision on priorities but not the decision to grant a charging order.
[3] As I explain below, a portion of the money subject to the charging order is also subject to a CLA trust claim in favour of the appellant. This trust claim takes priority over the charging order. Thus, for the reasons that follow, I would allow the appeal and vary the order below.
Decisions Below
[4] The trial judge’s thorough trial reasons are reported at King Road Paving v. Plati, 2017 ONSC 557 (the “Reasons for Judgment”) and are reflected in a judgment issued and entered on April 18, 2017 (the “Judgment”). The trial judge issued a supplementary decision on October 23, 2017, reported at 2017 ONSC 6319, clarifying points in the Judgment at the request of the owners (the “Supplementary Decision”). Subsequently, the contractor’s lawyers, Sutherland Law, moved for the charging and priorities order, which was granted by the trial judge on December 21, 2017 for reasons reported at King Road Paving v. Plati, 2017 ONSC 7675 (the “Priorities Decision”). The Judgment and Supplementary Decision have not been appealed and finally dispose of most of the factual underpinnings for the Priorities Decision.
Jurisdiction
[5] Sutherland Law argues that the Priorities Decision is a final order made under the Solicitors Act[^3] for which appeal lies to the Court of Appeal.[^4] I do not accept that argument: this appeal does not concern the decision to grant the solicitors’ charging order, but rather the decision that the appellant’s claims do not have priority over the solicitors’ charging order.
[6] Appeals under the CLA go to the Divisional Court pursuant to CLA, s.71. As stated by the Court of Appeal, this applies to any judgment “by which the rights of a party to the… lien proceedings are finally disposed of…. [T]he substance of the disposition sought to be appealed is what governs.”[^5] “Judgment” has a wide and functional meaning in this context, and is not confined to a final order after a trial. These principles apply to CLA lien and trust claims.[^6]
[7] Sutherland Law argues that the Priorities Decision is not a “judgment” under the CLA because Sutherland Law was not a party to the lien proceedings. I do not accept this argument. Sutherland Law brought the motion within the CLA proceeding. The motion finally determined the CLA trust priority of the appellant in respect to the judgment rendered in the CLA proceeding. Since the only issue on appeal is this priority question, the “substance of the disposition… appealed” is the question of CLA trust priority over a solicitors’ charging order in a CLA proceeding: this is a final decision of the rights of a party to a CLA proceeding, and so appeal lies to this court pursuant to CLA, s.71.
Standard of Review and Applicable Law
[8] The decision below is reviewable on a “correctness” standard for questions of law and a “palpable and overriding error” standard for questions of fact.[^7]
[9] The CLA was substantially amended in 2017 by the Construction Lien Amendment Act, which changed the name of the CLA to the Construction Act.[^8] Material amendments came into force on July 1, 2018. Transitional provisions provide that the CLA continues to apply if “a contract for the improvement was entered into” before July 1, 2018.[^9] The contracts in this case were entered into around 2012 and all events in issue were completed long before July 1, 2018: the CLA governs as it existed before the Construction Lien Amending Act.
The Parties and the Construction Project
[10] The defendants Agostino and Giuseppina Plati (“the Platis” or “owners”) own an old barn in Schomberg, Ontario. They hired the defendant King Road (“contractor”) to renovate the barn. Contractor did the work, and in so doing purchased supplies and/or services from subcontractors Great Northern and Webdensco.
[11] Thus in the lexicon of the CLA:
(a) The project to renovate the barn was an “improvement”.
(b) The Platis were “owners” of the premises being improved.
(c) Contractor was a “contractor” under a “contract” with owners to perform the improvement.
(d) Great Northern and Webdensco were “subcontractors” that “supplied services and/or materials to the improvement” under contracts with contractor.[^10]
(e)
[12] In terms of the “construction pyramid” the parties are in relation to each other as follows:
Owners
Contractor
Great Northern (subcontractor)
Webdensco (subcontractor)
Parties were in privity of contract with parties immediately above and/or below them (Great Northern and Webdensco severally with contractor) in this typical, simple construction project pyramid.
[13] The moving party on the motion for a charging order, Sutherland Law, represented contractor in the litigation. Sutherland Law also asserted the interests of Webdensco on behalf of contractor, which had obtained an assignment of Webdensco’s lien claim.
The Underlying Claims
[14] In the Reasons for Judgment the trial judge found that:
(a) The value of services and materials provided to the improvement by contractor was $184,624.[^11]
(b) The amount paid by owners to contractor was $105,800.[^12]
(c) The outstanding balance owed by owners to contractor was $78,824.[^13]
(d) The value of services and materials provided to the improvement by subcontractor Great Northern was $51,415.[^14]
(e) The value of services and materials provided to the improvement by subcontractor Webdensco was $54,387.99.[^15]
(f) The “basic holdback” obligation of owners was $18,624, being 10% of the contract price of $184,624.[^16]
(g) When owners first received notice of liens, they owed contractor $78,824. Pursuant to CLA, s.24, this amount was the “notice holdback” required to be retained by owners.[^17]
(h) Owners’ total holdback obligation was the sum of the “basic” holdback and the “notice” holdback, being $97,287 ($18,624 + $78,824).[^18]
(i) Subcontractors Webdensco and Great Northern registered timely claims for lien in respect to their claims.[^19] Contractor did not.[^20]
(j) Webdensco assigned its lien to contractor pursuant to CLA, s.73.[^21]
(k) Owners’ total holdback obligation ($97,287) was ordered shared pro rata between the two lien claimant subcontractors (Great Northern and Webdensco).[^22]
(l) As assignee of Webdensco’s lien rights, contractor stood in Webdensco’s shoes to receive Webdensco’s rateable share of owners’ holdback obligations.
These are all findings of fact or mixed findings of fact and law that are not challenged on this appeal. I proceed on the basis of these unchallenged findings.[^23]
[15] On the basis of these findings, the trial judge ordered (among other things):
(a) Judgment for contractor against owners for the unpaid balance of the contract price ($78,824).[^24]
(b) Judgment for subcontractor Great Northern against contractor for $105,803.[^25]
(c) Declaration that Great Northern is entitled to a lien against the interest of owners for $51,415.[^26]
(d) Declaration that Webdensco is entitled to a lien against the interest of owners for $54,387.99.[^27]
(e) Order that the “personal liability” of owners to the two subcontractor lien holders “in respect of the holdbacks” is $97,287.[^28]
[16] In Schedule “E” to the Judgment, the pro-rated shares of the two subcontractor lien claimants in owners’ holdback of $97,287 is found to be as follows:
i. Great Northern $47,670.63
ii. Webdensco $49,616.37
[17] Subsequently, in the Supplementary Decision, the trial judge confirmed that “[t]o the extent that [owners’ holdback obligation] is used to pay the subcontractor, it is deducted from the amount owing by the owner[s] to the contractor”.[^29] Therefore “if the [owners] pay the holdback to the subcontractors, the sum paid is credited to the amount owing in the [contractor’s] judgment.”[^30] The same principle applies to accounting between contractor and subcontractor: “[s]imilarly, the payment of $47,670.63 by the [owners] to Great Northern is set off against Great Northern’s judgment against [contractor]…. No one gets double recovery.”[^31] In other words, the trial judge found, correctly, that the amounts found owing to subcontractors in paras. 14(d) and (e), above, are subsumed in the amount found owing to contractor described in para. 14(a), above.
The Priorities Decision
[18] In the Priorities Decision the trial judge granted a charging order in favour of Sutherland Law of up to $93,618.90 over amounts recoverable by contractor in the litigation.[^32] This aspect of the Priorities Decision is not appealed.[^33] The trial judge also found that the charging order in favour of Sutherland Law has priority over Great Northern’s claims.[^34] It is this aspect of the Priorities Decision that is appealed.
Analysis of the Priority Issue
[19] The trial judge correctly concluded that the solicitors’ charging order takes priority over unsecured claims.[^35] Except to the extent that Great Northern is a CLA trust beneficiary, this finding correctly disposes of the priority issue in favour of Sutherland Law.
Trust Funds Payable to Great Northern
[20] The trial judge correctly identified the applicable statutory provisions and jurisprudence respecting Great Northern’s argument that it should take priority as a CLA trust beneficiary. As noted by the trial judge, CLA s.8(1) provides that “[a]ll amounts, (a) owing to a contractor… or (b) received by a contractor… on account of the contract price… constitute a trust fund for the benefit of the subcontractors….”
[21] CLA s.8(2) states:
The contractor… is the trustee of the trust created by subsection (1) and the contractor… shall not appropriate or convert any part of the fund to the contractor’s… own use or to any use inconsistent with the trust until all subcontractors… are paid all amounts related to the improvement owed to them by the contractor….
[22] A charging order in favour of the contractor’s solicitors cannot take priority over CLA trust funds for the benefit of subcontractors. This is clear law, and was correctly stated by the trial judge.[^36]
[23] After a direct payment of holdback of $47,670.63 from owners to Great Northern (which reduced contractor’s obligations to Great Northern), the trial judge found that the balance owed by owners to contractor was $99,588.29, calculated as follows:
Webdensco’s assigned pro rata share of holdback
$49,616.37
Interest on holdback
5,121.24
Costs awarded to contractor
44,500.00
Interest on costs
350.68
Total
$99,588.29
[24] The trial judge found that the amount owed by owners on account of contractor’s costs is not subject to a CLA trust.[^37] As explained below, this finding is correct.
[25] Then the trial judge found that Webdensco’s pro rata share of owners’ holdback “cannot be deemed trust monies for the benefit of Great Northern” because “[t]hey are expressly trust funds for the benefit of Webdensco.”[^38] With respect, and as explained below, the trial judge erred in this conclusion. All monies paid to contractor by owner “on account of the contract price” are trust funds “for the benefit of the subcontractors”. The language of CLA, s.8(1) is clear: there is one “trust fund” arising from a contract between owner and contractor, and it is “for the benefit of the subcontractors”.[^39] This language is reinforced in s.8(2), which speaks of “the” trustee of “the” trust held for the benefit of “all subcontractors”.
[26] The trial judge did not undertake a separate analysis respecting whether interest payable by owners to Great Northern is subject to CLA trust claims. This is understandable given his conclusion that none of the funds payable to Great Northern were trust funds. As is explained below, the correct position is that the status of interest payments reflects the status of the principal sums on which interest accrued. That is, costs are not trust funds and so interest on those costs is not trust funds. The Webdensco share of owners’ holdback is trust funds, and so interest on it is trust funds.
A. Costs Awarded to Great Northern are not Trust Funds
[27] Costs are an indemnity for legal expenses incurred by a party in litigation. They are not “amounts received… on account of the contract price” of a construction contract. The plain language of the CLA makes this clear and I am aware of no jurisprudence to the contrary. The trial judge made no error in so finding.
B. Interest on Great Northern’s Costs are not Trust Funds
[28] If costs are not “amounts received… on account of the contract price” then interest on costs is likewise not “amounts received… on account of the contract price.” Again, this is clear on a plain reading of the CLA and I am aware of no jurisprudence to the contrary.
C. Payment on Account of Assigned Webdensco Lien is Trust Funds
[29] CLA s.8(2), quoted above, requires contractor to use funds it receives from owners on account of the contract price to pay all its subcontractors before using those funds for other purposes. All of this money is impressed with this trust, and all of this money must be used to pay trust beneficiaries until every trust beneficiary is paid in full or the trust funds are exhausted.
[30] In this case, the trial judge found as a fact that owners had previously paid contractor $105,800 “on account of the contract price”. All of this money was CLA trust funds for the benefit of subcontractors.
[31] At some point contractor settled with Webdensco and took an assignment of its lien claim. Whether the settlement was for nominal or substantial consideration, if contractor used money it received from owners to pay the settlement (some portion of the $105,800 it was paid prior to trial), then Webdensco’s trust claim was extinguished by payment from trust funds.[^40] It would double-count contractor’s trust payments to exempt from CLA trust requirements the money it received from assignment of the Webdensco lien if it acquired that assignment with trust funds.
[32] The CLA contemplates this situation. It is possible, of course, that contractor could have settled with Webdensco with money that was not impressed with a CLA trust (ie if it showed that it used all of the $105,800 it received from owner to pay down trust claims). Section 11(1) of the CLA contemplates this situation and provides that:
… a trustee who pays in whole or in part for the supply of services or materials to an improvement out of money that is not subject to a trust under this Part may retain from trust funds an amount equal to that paid by the trustee without being in breach of trust.
If contractor used trust funds to settle with Webdensco, it would not be entitled to retain funds now paid to it by owners without first paying the trust entitlement of Great Northern. If contractor used non-trust funds to settle with Webdensco, then, to the extent of that payment of non-trust funds, it would be entitled to retain trust funds payable to it under the Judgment.[^41]
[33] There is no evidence that contractor used non-trust funds to pay Webdensco. The $49,616.37 payable to contractor on account of Webdensco’s assigned lien is money payable “on account of the contract price” between owners and contractor[^42] and thus it is trust money, to be applied to all trust claims, including the trust claim of Great Northern, until all trust claims have been paid in full.[^43]
[34] Sutherland Law argues that Great Northern’s position is inconsistent with the parity accorded lien claimants on the same tier of the construction pyramid, and the requirement of “privity of trust”.[^44] This is not so. Great Northern’s lien claim ranks in parity with the lien claim of Webdensco. If the Webdensco lien had not been assigned to contractor, then the money would have been paid to Webdensco, thereby discharging (to the extent of the payment) contractor’s trust obligation to Webdensco. In this event, Great Northern could not have claimed “laterally” against the funds payable to Webdensco.[^45] Great Northern has “privity of trust” with contractor, and thus can enforce its trust claim against proceeds paid to contractor.[^46] And this example makes the point about the distinction between the trust and lien regimes: if it were otherwise, a contractor could settle some subcontractor lien claims for less than 100%, and shield the discount from the trust obligations of the CLA. Subsection 11(1) of the CLA makes it clear that the contractor cannot do this: it may retain only amounts it has paid to settle liens to the extent that it proves that it did so with non-trust funds.
[35] Sutherland Law restates its argument as follows:
It is clear from the express wording of section 8 of the CLA that there are in fact separate trusts with separate and distinct beneficiaries. In order to make a claim against trust funds, one must demonstrate that they are in fact a beneficiary of a specific trust.
This argument is wrong. Section 8 creates one trust fund for a contractor under its contract with owner in respect to all of its subcontractors under that contract. There is one trust, and all of the unpaid subcontractors and suppliers in “privity of trust” with the contractor are beneficiaries of that trust. All are entitled to assert their trust claims against the entirety of trust proceeds until their trust claims have been paid in full or until trust funds are exhausted.[^47]
[36] In its supplementary argument, Sutherland Law argues:
[t]he effect of such a finding would be that a Contractor/Assignee of the lien would no longer be obtaining the rights of the lien claimant as conferred… by the express wording of section 73 of the CLA. Instead, the Contractor/Assignee would be conferred the rights of the lien claimant but subject to the Contractor’s trust obligations to other subcontractors who are owed money by the Contractor but not the subcontractor whose lien was assigned. If that were the case, it would no longer make sense for a Contractor to purchase a subcontractor’s lien rights as they would not reap the benefits of the lien and instead would be forced to pay any amount awarded to it in accordance with the assignment of lien to another subcontractor based on its obligations as Contractor.
This in terrorem argument is wrong. First, a contractor with the means to pay its debts would be unaffected by the application of trust principles to payments on account of assigned liens. Solvent contractors will settle with subcontractors and take lien assignments for the reasons any party might settle a claim. Second, contractors may settle claims for extra-litigation considerations. For example, if the contractor has an ongoing supply relationship with a subcontractor, it may resolve a claim to continue in that supply relationship. Third, the argument fails to address the salutary effect of s.11 of the CLA, under which a settling contractor is entitled to retain settlement funds paid with non-trust funds.
[37] In respect to s.11(1) of the CLA, Sutherland Law argues that the section has no application unless it is first pleaded and then shown that the contractor acquired the assignment of the Webdensco lien in breach of trust. This argument does not make sense and it is wrong. It does not make sense because a payment by the contractor to Webdensco is payment to a trust beneficiary by the trustee – i.e., performance of the trust. It is hard to see how such a payment could be a breach of trust.[^48] It is wrong because there is nothing in the text of the CLA to support it, it is inconsistent with the basic scheme of the CLA trust provisions, and there is no jurisprudence to support it.
[38] Sutherland Law argued that it should have priority because it was only through its efforts that funds were available for distribution to anyone. This cannot avail the solicitors in respect to monies impressed with a CLA trust.[^49] It is often the case that the first portion of a contractor’s claim is owed to its subcontractors, and the contractor’s solicitors do not have a “cushion” for their fees that includes money belonging to subcontractors. This is rather trite in lien proceedings: where it is possible that there will be little or nothing left after subcontractors are paid, contractors’ solicitors need to make appropriate arrangements for payment with their clients.
[39] Funds payable to contractor by owners on account of the assignment of the Webdensco lien are CLA trust funds. Great Northern is a trust beneficiary entitled to payment from those funds. The trial judge’s conclusion to the contrary was in error.
D. Interest on Trust Funds are Trust Funds
[40] Interest on trust funds is impressed with the same trust as the trust funds themselves. This would be a rather obvious point but for the confusion that arises when lien rights and trust rights are conflated.
[41] In Ontario there is no lien for interest on a lien claim.[^50] But that does not mean that there is no interest on lien claims. Interest on lien claims is awarded routinely as contractual and statutory claims for prejudgment and post-judgment interest, but without lien security.[^51]
[42] The CLA does not say that there is no interest on trust claims. Nor does it say that interest on trust claims is not impressed with the CLA trust. Basic and ancient principles of trust law are clear on this point: earnings on trust property are trust property, payable in accordance with the terms of the trust.[^52] Duncan W. Glaholt reviews the limited jurisprudence on this point under the CLA and concludes as follows in his text Construction Trusts: Law and Practice:
Having found the principal sum to be a trust fund, it would appear anomalous to the general law of trusts to find that earnings on that fund, whether by interest or otherwise, were anything but trust funds.[^53]
I agree. There is no reason to exclude interest paid to the trustee on trust funds from the trust fund, and decisions to the contrary in the jurisprudence seem to conflate the lien with the trust and fail to analyse the issue through basic principles of trust law.[^54]
[43] The trust provisions of the CLA are premised on the principle that everything received by contractor on account of its contract with owner must be used first to pay its subcontractors in full. Only after everything owed to subcontractors has been paid can the contractor use surplus funds for its own purposes. This includes interest accruing on trust funds.[^55]
Summary: Trust Funds Available for Distribution to Great Northern
[44] The funds payable to contractor as a result of the assignment to it of Webdensco’s lien rights ($49,616.37), plus interest payable to contractor on this amount ($5,121.24), total $54,737.61, and constitute trust funds pursuant to s.8(1) of the CLA. These funds are payable to Great Northern to the extent of its trust entitlement pursuant to s.8(2) of the CLA. Great Northern is entitled to payment in full of its trust claim to a maximum of $54,737.61 from the funds payable to contractor by owners, in priority to the charging order in favour of Sutherland Law.
Quantum of Great Northern’s Trust Claim
[45] Great Northern was owed $51,415 for services and materials provided to the improvement under its subcontract. It has been paid $47,670.63 by owners on account of this claim. This payment reduces contractor’s obligations to Great Northern, but leaves a balance of $3,744.37 owing on the subcontract price. This is an “amount related to the improvement owed to [Great Northern] by the contractor” and thus must be paid from available trust funds: CLA, s.8(2).
[46] What of interest owed to Great Northern by contractor? Contractual interest owed under the subcontract is high in this case ($51,065.39) because that is what the parties agreed and the trial judge found.[^56]
[47] As stated above, the amount subcontractor is entitled to be paid from trust funds is “all amounts related to the improvement owed to them by the contractor….” Is interest “amounts related to the improvement owed to [the subcontractor] by the contractor” within the meaning of CLA, s.8? The answer to this question mirrors the analysis set out above to find that interest that accrues on trust property is, itself, trust property. Again, this is a trite principle of trust law, and is not displaced because there is no lien for interest.
[48] I note that interest owed to a contractor may be greater than interest that accrues on trust funds found owing to contractor. This does not create an anomaly. It is inherent in the structure of CLA trust provisions that trust claims may exceed trust funds: in cases where contractors have entered into losing contracts, where contractors incur costs for subcontractors and suppliers that exceed the contract price with owners, this will inevitably happen. Contractor’s trust liability is limited to the aggregate amounts “owing to” and “received by” contractor, and the inclusion of interest in the calculation of trust funds and trust claims does not change this principle.
[49] Great Northern has a trust claim for the unpaid balance of the contract price ($3,744.37) plus contractual interest ($51,065.39).
Conclusion
[50] Great Northern’s trust claim is $54,809.76. The trust funds available to meet this claim are $54,737.61. The claim exceeds the trust funds available, and is therefore limited to the total trust funds available. On this basis I would vary the Priorities Decision to find that Great Northern’s trust claim has priority over the charging order in the amount of $54,737.61.
Additional Issues: Great Northern’s Costs and Procedural Fairness
(a) Great Northern’s Costs
[51] Great Northern’s trust claim for the balance owed on the contract price and interest exhaust the available trust funds payable to contractor. Therefore it is not necessary to decide whether Great Northern’s costs payable by contractor are also part of its trust claim.
(b) Procedural Issues
[52] Great Northern took issue with the process followed by the trial judge to address the “urgent” request by the solicitors for a charging order. It is not necessary to address this issue in view of my conclusions on the substantive merits of the appeal.
Conclusion
[53] The appeal is allowed. The trial judge’s Priorities Decision is varied to provide that Great Northern has priority over the solicitors’ charging order in the amount of $54,737.61, plus any interest that has accrued on this amount to the time it is paid to Great Northern.
Costs
[54] Great Northern should have its partial indemnity costs from Sutherland Law subject only to any applicable offers to settle. If the parties are unable to resolve costs in light of this observation, then Great Northern shall deliver its bill of costs, any pertinent offers to settle, and its costs argument (not to exceed five pages), by June 28, 2019. Sutherland Law shall provide its responding materials (including argument not to exceed five pages) by July 12, 2019. There shall be no reply or oral costs submissions unless the court subsequently directs otherwise.
D.L. Corbett J.
I agree
F.L. Myers J.
I agree
Sheard J.
Released: June 14, 2019
Landscaping Inc., 2019 ONSC 3671
DIVISIONAL COURT FILE NO.: DC 1072/18
DATE: 20190614
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
GREAT NORTHERN INSULATION SERVICES LTD.
Appellant
- and -
KING ROAD PAVING AND LANDSCAPING INC. et al.
Respondents
DECISION
D.L. Corbett J.
Released: June 14, 2019
[^1]: At the conclusion of oral argument the court permitted the parties to deliver further written argument, which was completed by February 8, 2019.
[^2]: Construction Lien Act, RSO 1990, c. C.30.
[^3]: Solicitors Act, RSO 1990, c. S.15.
[^4]: Courts of Justice Act, RSO 1990, c. C.43, s.6(1)(b).
[^5]: Villa Verde Masonry Ltd. v. Pier One Masonry (2001) 2001 7060 (ON CA), 54 OR (3d) 76, para. 8, quoting with approval Durall Construction Ltd. v. W.A. MacDougall Ltd. (1979), 1979 1700 (ON CA), 25 OR (2d) 371 at 373-374 (CA).
[^6]: Villa Verde Masonry Ltd. v. Pier One Masonry (2001), 2001 7060 (ON CA), 54 OR (3d) 76, para. 9 (CA).
[^7]: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 SCR 235.
[^8]: Construction Lien Amendment Act, 2017, SO 2017, c.24.
[^9]: Construction Lien Amendment Act, 2017, SO 2017, c.24, s.87.3(1)(a).
[^10]: CLA, s.1(1).
[^11]: This total included the original contract price and five “extras”, with no deduction for alleged deficiencies: Reasons for Judgment, paras. 167, 168 and 172-177.
[^12]: Reasons for Judgment, para. 169.
[^13]: Reasons for Judgment, para. 170. This total does not include interest or costs.
[^14]: Reasons for Judgment, para. 179. This total does not include interest or costs.
[^15]: Reasons for Judgment, para. 201. This total does not include interest or costs.
[^16]: Reasons for Judgment, para. 194. This total does not include interest or costs.
[^17]: Reasons for Judgment, paras. 197 and 204.
[^18]: Reasons for Judgment, para. 198. This total does not include interest or costs.
[^19]: Reasons for Judgment, paras. 9, 188 and 203.
[^20]: Reasons for Judgment, para. 6.
[^21]: Reasons for Judgment, para. 10. This assignment was presumably pursuant to a settlement between King Road and Webdensco, terms of which are not set out in the Judgment and appear not to have been before the trial judge.
[^22]: Reasons for Judgment, para. 217.
[^23]: On its face, finding h. appears to be an error: unless the owners advanced funds after receiving notice of liens (which they did not), they were liable for holdback obligations equal to the greater of (a) the basic holdback and (b) the balance owing of the contract price. Only if the owners made payments after receiving notice of a lien would they be liable for more, potentially up to the sum of the liens of which they had been given notice plus the basic holdback. It is not clear how this issue was approached by the parties at trial, this finding was not appealed by owners, and this issue was not raised on this appeal. I proceed on the basis of the trial judge’s unchallenged findings on this point, but should not be taken to endorse what seems to be a miscalculation of the owners’ total holdback obligation.
[^24]: Reasons for Judgment, para. 219. This total does not include interest or costs.
[^25]: This total includes the principal claim of $51,415 plus contractual interest.
[^26]: Reasons for Judgment, para. 221. This is the entire principal amount of Great Northern’s claim, without interest, and not its rateable share of the owners’ holdback obligations.
[^27]: Reasons for Judgment, para. 222. This is the entire principal amount of Webdensco’s claim, without interest, and not its rateable share of the owners’ holdback obligation.
[^28]: Reasons for Judgment, para. 223.
[^29]: Supplementary Decision, para. 31.
[^30]: Supplementary Decision, as summarized in the Priorities Decision, para. 8.
[^31]: Supplementary Decision, para. 34.
[^32]: Priorities Decision, paras. 29-42, 65.
[^33]: The trial judge also found (a) that it is not necessary to obtain leave to bring a motion under s.67(2) of the CLA to move for a charging order for legal fees, or to contest relative priorities arising in the context of a garnishment; and (b) in the alternative, the trial judge would have granted leave to bring the motion under CLA, s.67(2): Priorities Decision, paras. 21-28.
[^34]: Priorities Decision, para. 64.
[^35]: Budinsky v. The Breakers East Inc. (1993), 1993 5442 (ON SC), 15 OR (3d) 198, 106 DLR (4th) 370 (Ont. SCJ), per Ground J.; Guergis v. Hamilton, 2016 ONSC 4428, per Hackland J.
[^36]: Priorities Decision, paras. 52-53. See Budinsky v. The Breakers East Inc., (1993), 1993 5442 (ON SC), 15 OR (3d) 198, 106 DLR (4th) 370 (Ont. SCJ), per Ground J.; 561861 Ontario Ltd. v. 1085043 Ontario Inc. (1999) 1999 14845 (ON SC), 15 CBR (4th) 146 (Ont. SCJ), per Chadwick J.; George & Asmussen Ltd. v. MCM Projects Inc. (1992), 1992 7619 (ON SC), 9 OR (3d) 382 (Ont. SCJ), per Salhany J.
[^37]: Priorities Decision, para. 61.
[^38]: Priorities Decision, para. 60.
[^39]: In some cases there may be more than one “contract” between owner and contractor. Separate trusts can arise under separate contracts between owner and contractor, for the benefit of all of the subcontractors under each contract respectively. That situation does not arise in this case.
[^40]: Ross Gibson Industries Ltd. v. Greater Vancouver Housing Corp., 1985 230 (BC CA), [1986] 1 WWR 441 (BC CA).
[^41]: Here the distinction between lien rights and trust rights is crucial. If Sutherland Law’s argument on this point was correct, then contractors could settle lien claims for less than 100%, shield the discount on the settlement from trust claims, and thereby retain trust funds without paying outstanding trust claims. CLA, s.11(1) exists in part to make it clear that this is not permitted. See, for example, Minneapolis-Honeywell v. Empire Brass, 1955 40 (SCC), [1955] SCR 694, per Rand J.
[^42]: This is evident on first principles, and moreover was expressly confirmed in the Supplementary Decision.
[^43]: See Minneapolis-Honeywell v. Empire Brass, 1955 40 (SCC), [1955] SCR 694, per Rand J.
[^44]: Edward Stephens Associates Ltd. v. G.L. Trenching Ltd. et al. (1989), 1989 4217 (ON SC), 73 OR (2d) 112, per O’Brien J.
[^45]: Edward Stephens Associates Ltd. v. G.L. Trenching Ltd. et al. (1989), 1989 4217 (ON SC), 73 OR (2d) 112, per O’Brien J.
[^46]: Maintemp Heating and Air Conditioning Inc. v. Momat Developments Inc. (2002), 2002 49469 (ON SC), 59 OR (3d) 270, para. 61, per Langdon J.; Graham Construction & Engineering (1985) Ltd. v. Weyburn (City)(1989) (1989), 1989 5081 (SK QB), 33 CLR 207 (Sask. QB), per MacLeod J.; Edward Stephens Associates Ltd. v. G.L. Trenching Ltd. et al. (1989), 1989 4217 (ON SC), 73 OR (2d) 112, per O’Brien J.
[^47]: Questions relating to prorating or priorities among trust claims do not arise and are not addressed in this appeal. Also, complications can arise if there are multiple “contracts” between contractor and owner, with separate trust beneficiaries under separate “contracts” between contractor and owner. Separate trusts can arise in these circumstances, but need not be addressed here because they do not arise in this case.
[^48]: Assuming, of course, that the funds used to pay Webdensco were not impressed with a trust arising under an entirely different “contract” within the meaning of the CLA – a situation that can arise if, for example, contractor wrongly applies proceeds received from an owner in respect to Project A to pay its subcontractors on a different project, Project B, without first paying its subcontractors on Project A. Again, this situation does not arise in this case.
[^49]: Sutherland Law cited Dalcor Inc. v. Unimac Group Ltd., 2016 ONSC 299, as authority to the contrary. Dalcor did not concern priority over trust funds, but rather over the holder of security under the Personal Property Security Act. The positions of secured creditors and trust beneficiaries are distinct; Dalcor does not assist Sutherland Law.
[^50]: CLA, s.14(2).
[^51]: D'Urzo Demolition Inc. v. Damaris Developments Inc., 2012 ONSC 3938; Roboak Developments Ltd. v. Lehndorff Corp., 1987 CarswellOnt 695, 47 RPR 275, para. 8 (Div. Ct.); P & D Holdings Ltd. v. Alta Surety Co. (1996), 1996 780 (ON CA), 30 OR (3d) 97 (CA). See also the discussion in Golden Hill Ventures Ltd. v. Kemess Mines Inc. (2002), 2002 BCSC 1460, 7 BCLR (4th) 1, paras. 1158-1167, per Burnyeat J.; Fast Trac Bobcat & Excavating Service v. Riverfront Corporate Centre Ltd. (2009), 2009 BCSC 840, 95 BCLR (4th) 323, paras. 31-39, per Martinson J.
[^52]: Gibson v. Bott (1802), 32 ER 37 (Chanc.); Keech v. Sandford (1726), 25 ER 223 (Chanc.).
[^53]: Duncan W. Glaholt, Construction Trusts: Law and Practice (1999), p. 96. See also Fundy Ventilation Ltd. v. Ferrigan Mechanical Contractors (N.B.) Ltd., (1982), 1982 3081 (NB CA), 40 NBR (2D) 484 (CA).
[^54]: 1463150 Ontario Limited (Edgecon) v. 11 Christie Street Inc., 2007 44943, para. 23 (Ont. Master).
[^55]: Deep Foundations Contractors Inc. v Gottardo, 2016 ONSC 6245; Forest City Fire Protection v. General Refrigeration Canada, 2015 ONSC 2346.
[^56]: As stated above, this is an unappealed finding of the trial judge. I note, so that the context is fully appreciated, that onerous interest terms (2% per month; 26.8% annually) were agreed after there was default in payment, as a condition upon which Great Northern agreed to continue to provide services and materials after payment default. There is nothing untoward in the high interest debt in the context of this case. I infer the interest total from the trial judge’s finding that the unpaid contract balance is $54,737.61, and the total of the unpaid balance, plus interest, is $105,803.00 ($105,803.00 - $54,737.61 = $51,065.39.