Legal

 

Legal

  • Restructuring Companies or Restructuring Contracts

    Lessons from Chandos Construction Ltd. v Deloitte Restructuring Inc.

    By David A. de Groot, Partner, and Yang Guo, Associate, Durnet, Duckworth & Palmer LLP

     

    In an October 2020 decision, the Supreme Court of Canada affirmed the common law anti-deprivation rule. This rule prevents parties from agreeing to contractual provisions that, upon insolvency, remove property that would otherwise vest in the trustee of a bankrupt’s estate.

  • Supreme Court of Canada Clarifies Builders’ Lien Legislation

    A third option exists

    By Kirk A. Vilks, Fillmore Riley

    In the Q3 2014 edition of Piling Canada, Sven Hombach wrote an article titled, “Paying Once, Paying Twice.” The article discussed a decision by the Manitoba Court of Appeal in Olson (Stuart) Dominion Construction Ltd. v. Structal Heavy Steel. That decision has now been reviewed and upheld by the Supreme Court of Canada in Stuart Olson Dominion Construction Ltd. v. Structal Heavy Steel. While the Supreme Court upheld the Manitoba Court of Appeal’s decision, they also provided some additional comments that will help guide contractors who wish to avoid providing double security for a subcontractor’s lien.

    The decision deals with the remedies in builders’ lien legislation. Each province has their own such legislation, but the effect of the various statutes is similar. Builders’ lien legislation provides two remedies to trades to ensure they are paid for their services: statutory liens and statutory trusts. A lien creates an encumbrance on the land. To remove the lien, money can be paid or security can be provided by the owner or general contractor. The security provided is usually in the form of a lien bond. The payment or security stands in place of the land, so that the land itself is no longer encumbered while the merits of the lien claim are decided. Under either scenario, the purpose is to ensure the subcontractor gets paid, either from the value in the land or from the value of the security posted to discharge the lien.

    In addition to the lien remedy, builders’ lien legislation provides for a statutory trust. The legislation provides that subcontractors, workers employed by the contractor, and other beneficiaries are to be paid before an owner or general contractor can use trust funds for their own use. All funds received by the general contractor for the general contract are trust funds held for subcontractors, the Workers Compensation Board, employees of the contractor and the owner for any counterclaim related to the performance of the contract. If a general contractor uses funds that are held in trust for a subtrade for his or her own purposes, the result can be stiff fines or jail time for breaching the trust.

    Olson (Stuart) Dominion Construction Ltd. v. Structal Heavy Steel involved a lien claim by a steel subcontractor totalling approximately $15.5 million to construct the roof of Winnipeg’s new football stadium. The general contractor deposited a lien bond into court for the full amount of the lien claim to discharge the lien. The subcontractor then demanded payment under the trust provisions of the statute. The contractor sought a declaration from the court that the lien bond satisfied its trust obligations under the builders’ lien legislation.

    Like the Manitoba Court of Appeal, the Supreme Court of Canada made it clear that liens and statutory trusts are separate and distinct remedies. If a contractor files a lien bond to vacate a sub-contractor’s lien, that will discharge the lien, but not satisfy the contractor’s trust obligations under the legislation. The contractor will still need to hold funds they receive from the owner under the contract in trust for the sub-contractor. The implication here is that the contractor will need to provide double security; both the lien bond and monies received from the owner held in trust.

    After the Court of Appeal’s decision, many were left thinking that the contractor had two options: either provide double security or choose not to vacate the lien. The Supreme Court explained that contractors have another option: if a contractor wants to avoid posting double security but still wants to vacate the lien, he or she can pay money into court to vacate the lien rather than posting a lien bond.

    46. There may be circumstances where a contractor will choose to maintain double security where there are lien and trust claims for the same work, services, or materials, by acquiring a lien bond while still holding trust funds. However, a contractor can avoid double security by paying cash into court pursuant to s. 55(2) instead of depositing a lien bond.

    Money paid into court will remove the lien and still be considered to be held in trust for the subcontractor. Therefore, paying money into court rather than a lien bond satisfies both the lien and trust obligations.

    Payment of the trust funds into court to vacate a lien, for the amount of the lien claim implicated by the trust claim, does not constitute an appropriation or conversion of the trust funds. The contractor is doing exactly what the Act requires – ensuring the monies are held in trust for the beneficiary.

    If the contractor pays funds into court and the lien claim later fails, the monies paid into court will be returned to the contractor, but will still be held in trust for the subcontractor.

    These funds remain impressed with the trust; should the lien claim fail while the trust claim is outstanding, the cash would continue to be trust funds when returned to the owner, contractor, or subcontractor. So long as the trust funds themselves are deposited with the court, the funds are secure and the trust has not been breached.

    The takeaway for contractors is that there are three options when a subcontractor places a lien on property. First, they could allow the lien to remain on the property, second, remove the lien with a lien bond while simultaneously holding funds paid for the contract in trust, or third, pay money into court to remove the lien. The circumstances will dictate which option the contractor selects, and unfortunately, there may be times when none of the options appear to be a desirable option for the contractor. Subcontractors will know this and use it to leverage a more favourable settlement in litigation with the contractor. Even with the additional option given to contractors by the Supreme Court of Canada, the remedies offered by builders’ lien legislation remain powerful tools that, in the hands of savvy subcontractors, can be used to apply tremendous pressure on general contractors. 

     Kirk A. Vilks is an associate with Fillmore Riley LLP who practises primarily in the area of civil litigation, with a focus on construction and insurance litigation. You may reach him at 204-957-8358 or This email address is being protected from spambots. You need JavaScript enabled to view it..

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  • The Ins and Outs of Hiring Foreign Workers in a New Era of Immigration Law and Policy

    Avoiding Pitfalls and new challenges of overcoming labour shortages

    By Sofia Mirza, Fillmore Riley LLP

     

    As an immigration laywer. I can't tell you how many times I've heard new clients say. "I wish I had known that before." Or, "If I had just consulted you before I files the application. this mess could have been avoided.

    Some examples of complications that may occur when a step is missed in the work authorization process include lengthy delays in the hiring process, officers rejecting appli-cations and interruptions in the work term of a valuable foreign national employee.

  • The Perils of Social Media

    When private becomes public

    By Keith A. Senden, Fillmore Riley LLP

    As social media becomes increasingly present in the workplace, employees and employers alike must educate themselves on the implications of social media use both in the workplace and outside of the workplace.

    The line that divides an individual’s private life is blurred by society’s overwhelming use of social media. Platforms such as Instagram, Facebook, Snapchat and Twitter serve as revolutionary ways to communicate ideas, thoughts and files; however, users should remain conscious of the implications of posting certain content on their own time and during work hours.

  • Weed in the Workplace

    What employers need to know to prevent their workplaces from going to pot

    By Jenna R. Seavers, Fillmore Riley LLP

    With the imminent legalization of marijuana, some employers in the construction industry worry their workplace cultures – and safety in particular – will go to pot, so to speak. Before the legalization takes effect, it is important employers get all the facts about the law and learn how they can create policies that will help maintain a safe workplace.

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About Us

Piling Canada is the premier national voice for the Canadian deep foundation construction industry. Each issue is dedicated to providing readers with current and informative editorial, including project updates, company profiles, technological advancements, safety news, environmental information, HR advice, pertinent legal issues and more.