Roni Excavating v. Sedona Development, et al., 2015 ONSC 389 (Ont. S.C.J)
RE: the definition of "Owner" for the purposes of the Construction Lien Act, R.S.O. 1990, c.C30
RE: whether privity of contract has to exist for a construction trust to arise under the Act
RE: summary judgment processes in a lien action
In this case we successfully acted as carriage counsel for 32 lien claimants on a two-day summary judgment motion to establish that their liens attached to the interest of the owner of the land to which they had provided their services and materials in the construction of a low-rise townhome project. The lien claimants were also successful in arguing that the proceeds of the sale of those townhomes constituted trust funds for their benefit pursuant to the Construction Lien Act, R.S.O 1990 c. C30, even if their liens were invalid or out of time. The facts were complicated in that the registered owner of the lands had entered into an agreement to sell the land to a builder who would first retain the trades and build, market and sell the townhomes on the understanding that its purchase of the lands would only close and be funded out of the builder’s sale to third party purchasers, upon completion of the project. The builder went insolvent after the townhomes were complete, but when the pending sales would not be sufficient to pay out the lien claims and the purchase price, combined. Because the builder could not pay for the land, it couldn't close its sales to the third party purchasers.
The registered owner of the lands took the position that it was entitled to the equity in the lands, ahead of the lien claims, as it had not requested the improvement in question, was not an ‘owner’ under the Act, and accordingly had no relationship with or obligations to the trades. The decision is important is it addresses the meaning and scope of a number of defined terms under the Construction Lien Act, in that it addresses a land owner’s ability to avoid liability to trades through such creative arrangements and because the proceeds of sale to the third parties were held to be trust funds for the benefit of the trades as contractors for the purposes of the Act. We were also successful in an Appeal of the decision to the Ontario Divisional Court.