Lien Me Alone: Joinder of Trust and Lien Claims Remains Prohibited Under Ontario’s Construction Act
In Devlan Construction Ltd. v SRK Woodworking Inc., 2023 ONSC 3035, the Divisional Court of Ontario (the “Court”) resolved two conflicting lines of authority by confirming that the Ontario Construction Act does not permit breach of trust claims to be joined with lien claims.
In 2017, significant amendments were made to Ontario’s Construction Act (the “Act”). Among other changes, the Act removed sections 50(2), and 55(1), which together permitted the joining of lien claims and those in breach of contract or subcontract, but prohibited the joinder of lien and trust claims. Subsequently, section 55(1) was re-enacted in section 3(2) of O. Reg. 302/18 (the “Regulation”), permitting a lien claim to be joined with a breach of contract or subcontract. There was, however, no re-enactment of section 50(2), which explicitly stated that “a trust claim shall not be joined with a lien claim but may be brought in any court of competent jurisdiction.”
In the absence of this explicit provision, different courts considered whether the Act did in fact permit the joinder of breach of trust claims and lien claims.
In both Damasio Drywall v. 2444825 Ontario Limited, 2021 ONSC 8398 and 6628842 Canada Inc. v. Topyurek, 2022 ONSC 253, Associate Justice Wiebe of the Toronto Construction Lien Office determined it did not, reasoning that if the legislature had intended to permit trust and lien claims, it would have done so explicitly.
The Ontario Superior Court declined to follow this reasoning in SRK Woodworking Inc. v. Delvan Construction Ltd., 2022 ONSC 1038.
In this lien action, the plaintiff lien claimant brought a motion to amend its pleadings to include a claim for breach of trust against the defendant’s officers and directors. The court considered the principles of statutory interpretation and engaged in a review of documents and reports related to the amendments made to the Act. The decision included consideration of the recommendations made in a report commissioned by the Ministry of Attorney General entitled Striking the Balance, wherein various stakeholders had argued in favour of the joinder of lien and trust claims. Ultimately, the court determined that a claim for breach of trust could be joined with a lien claim in a proceeding under the Act to avoid a multiplicity of proceedings. The defendant appealed to the Divisional Court.
Divisional Court Decision
On appeal, the Court held that a trust claim cannot be joined with a lien claim under the Act.
Writing for the three-panel member Court, Justice Corbett noted an appreciation for the policy arguments on both sides and the fact that the express prohibition on joinder of trust claims was repealed and not re-enacted. However, after reading the Act and Regulation as a whole, the Court found that legislature intended to leave the issue of joinder to be addressed in the Regulations. The Court’s reasoning was that when one looks to the Regulation, the Regulation only permits joinder of contract and subcontract claims, so it must be interpreted to have precluded joinder of other claims in a construction lien proceeding. The Regulation’s express language on joinder implies that there was no intention to default to permissive joinder of claims under the Ontario Rules of Civil Procedure. Additionally, the Act is intended to enhance judicial efficacy and provide “as far as possible a summary procedure”.
Justice Corbett found that trust claims significantly complicate what would otherwise be narrow issues of breach of contract in most lien claims. Joining breach of trust claims with lien claims risks multiplying the parties involved, expanding documentary production, and lengthening examinations for discovery, all at increased cost and greater length of trial.
Justice Corbett concluded his reasons by noting that, if the Court was wrong, the Regulation could be easily amended to expressly address joinder of trust claims.
- Joinder of trust claims in a construction lien action is not permitted. Although it may be more costly, claimants must initiate a separate legal action for breach of trust claims pursued under the Act.
- The Regulation and Act allow for contract and subcontract claims to be joined with construction lien proceedings.
While a separate claim for breach of trust and construction liens may result in parties spending more time and money, the prohibition on joinder may promote more streamlined resolution for lien claims. Whether the Regulation will be amended to permit the joinder of trust and lien claims, and in what circumstances, remains to be seen.