The Builders’ Lien Trust – A Separate Statutory Right
On September 18, 2015, in Stuart Olson Construction Ltd. v Structal Heavy Steel, the Supreme Court of Canada held that builders liens and statutory trusts are separate remedies that exist independently of one another and may be pursued concurrently by a subcontractor pursuant to the terms of the Manitoba Builders Lien Act.1 One effect of this decision is that a lien bond posted to discharge a lien will not discharge a contractor’s trust obligations. Structal has application to all other jurisdictions that employ the concept of a builders’ lien trust, including Alberta, Ontario and British Columbia.
Structal, involved a lien dispute between a general contractor and a subcontractor (as opposed to, for example, a lien dispute between an owner and contractor). Stuart Olson was the general contractor for the construction of the Winnipeg Blue Bombers’ new football stadium on the University of Manitoba campus. In Decembe 2010, Stuart Olson entered into a subcontract with Structal Heavy Steel for the supply and installation of structural steel, a roof with a (bow) truss scheme, precast bleachers and a vomitory wall at a price of $44,435,383.
Under the Manitoba Builders Lien Act (as in Alberta, Ontario and British Columbia) a subcontractor enjoys a statutory right to register a lien against property to which it has made an improvement or contributed materials. In addition to its lien provisions, the Act contains various trust provisions of use to a subcontractor. These trust provisions provide, in part, that all sums received by a contractor on account of a contract price constitute a trust fund for the benefit of subcontractors and, furthermore, that the contractor is the trustee of the trust fund and is prohibited from appropriating or converting any part of the trust fund for any use (not authorized by the trust) until all of its subcontractors have been paid in full.
The legal action between Stuart Olson and Structal arose after Structal filed a builder’s lien against the Stadium property. In response, Stuart Olson sought to discharge the lien by filing a lien bond for the full amount of Structal’s lien. Structal discharged its lien, but continued to seek payment from Stuart Olson of the monies owing for its subcontract work. Stuart Olson refused payment and applied to the court for an order declaring that the filing of the lien bond satisfied its trust obligations to Structal under the Act. Stuart Olson further argued that, upon receipt from the Stadium owner of the outstanding progress payments on account of Structal’s work, Stuart Olson could pay such funds to entities other than Structal (e.g. other subcontractors and material suppliers) without being in breach of the trust provisions of the Act.
In reply, Structal argued that the provision of security in the form of a lien bond for a builder’s lien did not diminish or extinguish a general contractor’s obligations to its subcontractor under the trust provisions of the Act.
Writing for a unanimous Supreme Court of Canada, Justice Rothstein held for Structal, stating that the trust provisions of the Act guard a distinct set of interests from those protected by the lien provisions of the Act.2 Specifically, the “purpose of a lien is to create charges against the land in favour of those contractors, suppliers and workers who can prove their claims.”3 By contrast, the purpose of the trust provisions of the Act is to ensure that subcontractors, suppliers and workers who can prove their claims are paid before an owner or general contractor can appropriate trust funds for his or her own use.4 In essence, all funds received by a general contractor are trust funds for not only subcontractors, “but also the Workers Compensation Board, any workers employed by the subcontractor, and the owner for any set-off or counterclaim relating to the performance of the contract.”5
During the Supreme Court of Canada hearing, Stuart Olson argued that treating the lien provisions and trust provisions of the Act as separate remedies could force a general contractor to pay twice for the same work. In response, Justice Rothstein held that there was a difference between double payment and double security, explaining:
…a lien bond involves only an assurance that the surety will pay the amount of any lien judgment should the lien defendant fail to do so. The bond does not constitute security for the trust claim and does not result in the protection of the actual trust monies at issue. An owner, contractor or subcontractor who chooses to file a lien bond with the court instead of depositing the funds at issue must maintain the trust fund in addition to the bond.6
In short, Justice Rothstein concluded that regardless of a lien claim, a contractor or subcontractor may still have an independent trust claim, which cannot be secured by a lien bond. Accordingly, when a general contractor seeks to discharge a lien by posting funds with the court, it can do so either by posting the trust funds or by using a lien bond while still holding the trust funds (i.e, by maintaining double security).7 The payment of trust funds into court reduces the need for (or the amount of) the lien bond by an amount equivalent to the trust monies paid into court. Because Stuart Olson chose to provide full security by way of a lien bond, it was required to maintain the trust funds as well.8
The Structal decision clarifies that the two statutory rights provided by Canadian builders lien legislation are separate remedies and may be concurrently invoked by a subcontractor. Because the legislation differs from province to province, the precise impact of Structal in Alberta remains somewhat uncertain. In Alberta, funds received by a general contractor are not subject to a statutory trust until after a certificate of substantial performance has been issued.9 Accordingly, following the logic of Structal, once a certificate of substantial performance is issued, a general contractor in Alberta must decide whether to:
- file a lien bond and hold any funds then received in trust; or
- submit any funds received to the court in cash in order to discharge the lien.
On its face, the Structal decision represents a significant victory for subcontractors who now may concurrently avail themselves of the lien and trust remedies found in builder’s lien legislation. However, it remains to be seen whether, as a practical matter, Structal will provide sub-contractors with meaningful added protection.
1 Stuart Olson Construction Ltd. v Structal Heavy Steel, 2015 SCC 43.
2 Ibid at para 18-32.
3 Ibid at para 20.
4 Ibid at para 26.
5 Ibid at para 32.
6 Ibid at para 47.
7 Ibid at para 46.
8 Ibid at paras 48 and 49.
9 Builders Lien Act (Alberta), R.S.A 2000, c B-7 s.22(1)(b).
builders lien Builders Lien Act contractor contractor's obligations statutory trust subcontractor