Does Ontario’s Construction Act allow a trust claim to be joined with a lien claim? Until recently in Ontario the answer has not been clear. In recent years there have been a series of legislative changes to the laws that govern construction in Ontario. There has also been a series of cases that have come to different conclusions.
Legislative Changes
In December 2017, the Ontario legislature passed an Act changing the Construction Lien Act to the Construction Act. In addition to the name, one of the most significant changes to the Act was removing section 50 (2), which provided that a trust claim could not be joined with a lien claim. Generally, this change was well received. Ontario was the only common law province (and possibly still is – more on that in a moment) to prohibit joining construction and trust claims. Allowing the claims to be joined would remove duplicate proceedings, simplify the process, and help prevent court backlogs.
However, in May 2019, over a year and a half since the prohibition had been removed, the Ontario legislature introduced language via a regulation provision, which stated that “a plaintiff may, in action, join a lien claim and a claim for breach of a contract or subcontract.” This provision, which does not include trust claims in the list of claims that are allowed to be joined, essentially reintroduced the “old” section 55(1) of the Construction Lien Act.
Conflicting Case Law
The issue of whether this regulation re- instated the joinder prohibition was addressed in 2022 by Justice Wiebe in 6628842 Canada Inc. v. Topyurek, 2022 ONSC 253. Justice Wiebe found that, while the prohibition from the original Construction Lien Act was indeed removed, he argued that the introduction of the provision in the regulation was the legislature changing its mind and re-instating the prohibition. Thus, trust claims and lien claims could not be joined in law.
In January 2022, the plot thickened. The same issue was brought before Justice Harper in SRK Woodworking Inc. v. Devlan Construction Ltd. Et al., 2022 ONSC 1038. Justice Harper disagreed with Justice Wiebe’s approach and found upon review of the legislative intent and a survey of the principles of statutory interpretation that the regulation should not be interpreted to prevent prohibitions on joinder applications. He concluded, “I find that there is no reason why the trust and lien claims cannot be part of the same action in this case.”
Divisional Court Response
While it is not uncommon for Judges to come to different conclusions, the varying results are noteworthy. However, Justice Harper’s decision was appealed to the Divisional Court, which gave leave to the appeal on May 6, 2022.
In May, 2023 the Divisional Court released its decision, which allowed the appeal – overturning Justice Harper’s decision. Thus, despite the judicial back-and-forth on the issue, for the time being trust claims cannot be joined with lien claims under the Construction Act in Ontario.
This blog post was written by Brett Hodgins, a member of the Commercial Litigation team. He can be reached at 613-369-0379 or at brett.hodgins@mannlawyers.com.
