LEGAL
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The takeaway for contractors
is that there are three options
when a subcontractor places a
lien on property.
of Winnipeg’s new football stadium. The general contractor
deposited a lien bond into court for the full amount of
the lien claim to discharge the lien. The subcontractor then
demanded payment under the trust provisions of the statute.
The contractor sought a declaration from the court that the
lien bond satisfied its trust obligations under the builders’
lien legislation.
Like the Manitoba Court of Appeal, the Supreme Court of
Canada made it clear that liens and statutory trusts are separate
and distinct remedies. If a contractor files a lien bond
to vacate a sub-contractor’s lien, that will discharge the lien,
but not satisfy the contractor’s trust obligations under the
legislation. The contractor will still need to hold funds they
receive from the owner under the contract in trust for the
sub-contractor. The implication here is that the contractor
will need to provide double security; both the lien bond and
monies received from the owner held in trust.
After the Court of Appeal’s decision, many were left thinking
that the contractor had two options: either provide double
security or choose not to vacate the lien. The Supreme Court
explained that contractors have another option: if a contractor
wants to avoid posting double security but still wants to
vacate the lien, he or she can pay money into court to vacate
the lien rather than posting a lien bond.
46. There may be circumstances where a contractor
will choose to maintain double security where
there are lien and trust claims for the same work,
services, or materials, by acquiring a lien bond while
still holding trust funds. However, a contractor can
avoid double security by paying cash into court pursuant
to s. 55(2) instead of depositing a lien bond.
Money paid into court will remove the lien and still be considered
to be held in trust for the subcontractor. Therefore,
paying money into court rather than a lien bond satisfies
both the lien and trust obligations.
Payment of the trust funds into court to vacate a lien,
for the amount of the lien claim implicated by the
trust claim, does not constitute an appropriation or
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