Can A Lien Bond Satisfy A General Contractor's Trust Obligations? An Analysis Of The Recent Stuart Olson Dominion Construction Ltd v Structal Heavy Steel Decision

Introduction

The Supreme Court of Canada's ("SCC") recent decision in Stuart Olson Dominion Construction Ltd v Structal Heavy Steel1 ("Stuart Olson") has important implications for the construction industry. In Stuart Olson, the SCC considered whether an unpaid subcontractor had valid and distinct claims against a general contractor under both the statutory trust and construction lien of Manitoba's Builders' Liens Act ("Manitoba BLA")2.

Facts

Stuart Olsen Dominion Construction Ltd. ("Dominion") was the general contractor for the construction of a stadium at the University of Manitoba. Dominion entered into a subcontract with Structal Heavy Steel ("Structal") for the supply and installation of steel for the stadium.

In April 2012, Dominion began withholding Structal's payments, originally stating it was because the owner was late in paying but later saying that it was due to delays attributable to Structal. As a result, Structal registered a builder's lien against the property for over $15 million. In response, Dominion filed a lien bond for the full amount in the Manitoba Court.

Structal accepted the bond and vacated its lien on the property. However, Structal claimed that any further payments made to Dominion by the owner were still subject to the statutory trust provisions under the Manitoba BLA and Dominion could not use the money until it paid Structal. In the Manitoba BLA, the trust provisions require a general contractor to hold any money it receives from the owner in trust for unpaid sub-contractors until all sub-contractors are paid.3

Dominion submitted that because the lien bond fully secured any amount unpaid to Structal, Dominion did not have to hold the money in trust and make payments to Structal. They also submitted that Structal's approach would require them to pay twice. The owner of the property, at Structal's request, withheld over $3 million because of Dominion's alleged violation of the trust provisions of the Manitoba BLA. Dominion applied to the court for a declaration that the lien bond satisfied the Manitoba BLA's trust conditions. Structal sought its own declaration requiring full-payment, without deduction or set-off, once the owner paid Dominion.

The issue was whether the lien bond satisfied Dominion's requirements under the trust provisions of the Manitoba BLA.

Do Lien Bonds Satisfy a General Contractor's Trust Obligations?

The SCC noted that the trust and lien provisions of the Manitoba BLA are separate...