Amendments to the Construction Lien Act in 2017, now called the Construction Act (the "Act"), have left construction litigators confused as to whether they could combine breach of trust claims with construction lien actions.
Recently, the appeal case of Devlan Construction Ltd. v. SRK Woodworking Inc. ("SRK Woodworking") at the Ontario Superior Court of Justice clarified that breach of trust claims cannot be joined with construction lien actions.1
Section 50(2) of the previous Construction Lien Act expressly provided that "[a] trust claim shall not be joined with a lien claim but may be brought in any court of competent jurisdiction."2 In the new Act, however, that section was removed altogether.
The exclusion of the express provision in the new Act made it unclear whether it became acceptable to join breach of trust claims together with construction lien actions.
"The issue on appeal, however, is not a question of the wisest policy choice to be made,"3 said Justice Corbett. "The question is: what do the Act and the Regulations provide?"4
While it may seem convenient and more cost-efficient to combine breach of trust and construction lien claims to be tried in court at the same time, there are long-standing reasons as to why those two claims were traditionally separated and continue to be separated.
Lien proceedings are meant to be fast; there are consequences to stalling the construction process for a long period of time. Trust proceedings, on the other hand, are longer and more complex by nature and therefore present a problem when combined with construction lien actions.
In Damasio Drywall v. 2444825 Ontario Limited, Associate Justice Wiebe found that "[i]f the Legislature intended to allow trust claims to be joined with lien claims, it should have stated so explicitly, given this mandate and the nature and complexity of a trust claim. It did not."5The Associate Justice subsequently upheld his finding in the case of 6628842 Canada Inc. v. Topyurek.6 Before the recent SRK Woodworking appeal, however, Justice Harper disagreed and overruled those two prior decisions altogether.
Justice Corbett considered a couple of factors to support his decision in SRK Woodworking. One factor is that the Act "neither permits nor prohibits joinder of claims in a construction lien proceeding."7 Furthermore, the Act allows a litigant to rely on the Rules of Civil Procedure where it does not address procedural matters.8
Importantly, however, the Rules of Civil Procedure do not apply when deciding which types of claims can be brought together under the Act. Justice Corbett found that when "reading the Act as a whole, one can infer an intention on the part of the legislature to leave the issue of joinder to be addressed in the Regulations."9
Justice Corbett considered the effect of a new Regulation which became effective under the Act in 2019 which provides that "[a] plaintiff may, in an action, join a lien claim and a claim for breach of a contract or subcontract."10 Considering the Regulation specifically provides for the type of joinder that is permitted under the Act, it is implied that other joinder of claims, such as joining a breach of trust claim with a construction lien action, are not permitted.
Footnotes
1. Devlan Construction Ltd. v SRK Woodworking Inc., 2023 ONSC 3035 (CanLII).
2. Ibid at para 7.
3. Ibid at para 15.
4. Ibid.
5. Damasio Drywall Inc. v. 2444825 Ontario Limited, 2021 ONSC 8398 (CanLII) at para 8.
6. 6628842 Canada Inc. v. Topyurek, 2022 ONSC 253 (CanLII).
7. Supra note 1 at para 16.
8. R.R.O. 1990, Reg. 194.
9. Supra note 1 at para 23.
10. O. Reg. 302/18, s. 3(2).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
