Sunview Doors Limited v. Pappas

Sunview Doors Limited v. Pappas 2010 ONCA 198, Released 16 March 2010

Construction Law – Statutory Trust – Breach of Statutory Trust – No Specific Intent or Knowledge of Improvements Required

The Plaintiff, Sunview Doors Ltd. ("Sunview"), manufactures supplied custom-made patio doors for contractors. Between September 2005 and October 2006, Sunview supplied doors to a subcontractor, Academy Doors and Windows Ltd. ("Academy"), which had carried on business as a manufacturer, supplier and installer of windows, doors and curtain walls in renovated and retrofitted low and high-rise buildings. The doors were supplied by Sunview on $100,000 unsecured credit. Before Sunview received any payment, Academy went bankrupt. Sunview brought an action for breach of contract against Academy on the basis of the unpaid accounts. Additionally, Sunview sought a claim for breach of trust against two directors of Academy as well as Academy's office manager. This second claim was brought pursuant to the combined operation of s. 8, the statutory trust provision, and s. 13, the pierced corporate veil provision, of the Construction Lien Act ("Act").

The Superior Court had allowed the claim against Academy for breach of contract, but did not allow the claim for breach of trust to succeed. The trial judge held that Sunview was not entitled to benefit under a statutory trust. Turning on the prior decision of a panel of the Court of Appeal sitting as the Divisional Court in Central Supply Co. 1972 Ltd. v. Modern Tile Supply Co. (2001), 55 O.R. (3d) 782, the trial judge held that Sunview could not establish as a prerequisite that at the time it sold or supplied its doors to Academy, it had intended that they be used for known and identified improvements (emphasis added). In other words, Sunview was not able to identify the particular projects that the doors were used for, but that they had been requested by Academy for existing projects based on the specifications provided.

In this case, a unanimous five-member panel of the Court of Appeal upheld the Divisional Court's decision on the basis of distinguishing Central Supply. The decision effectively creates a lower threshold for a supplier in the construction industry to claim...