Olson (Stuart) Dominion Construction Ltd. v. Date:, 2014 MBCA 8

Citation: Olson (Stuart) Dominion Construction Ltd. v. Date: 20140122 Structal Heavy Steel, 2014 MBCA 8 Docket: AI 13-30-07942 IN THE COURT OF APPEAL OF MANITOBA Coram: Mr. Justice Alan D. MacInnes Madam Justice Holly C. Beard Mr. Justice Marc M. Monnin BETWEEN : ) STUART OLSON DOMINION ) K. T. Williams and CONSTRUCTION LTD. formerly known ) K. A. Pedersen as DOMINION CONSTRUCTION ) for the Appellant COMPANY INC. ) ) D. G. Hill and (Applicant) Respondent ) M. J.

Weinstein ) for the Respondent - and - ) ) Appeal heard: STRUCTAL HEAVY STEEL, A DIVISION ) September 4, 2013 OF CANAM GROUP INC. ) ) Judgment delivered: (Respondent) Appellant ) January 22, 2014 ) MacINNES J.A. [ 1 ] This appeal raises the questions whether, by filing a lien bond in court in the full amount of a subcontractor’s lien claim, a contractor has thereby extinguished its obligations to that subcontractor under the trust provisions of The Builders’ Liens Act , C.C.S.M., c.

B91 (the Act ), and whether, in the circumstances of this case, the contractor is entitled to claim a set-off against the subcontractor’s claim advanced under both the lien provisions and the trust provisions of the Act . The Facts [ 2 ] The respondent (Dominion) was the general contractor and the appellant (Structal) its subcontractor in respect of the structural steel work required for the construction of the new stadium at the University of Manitoba known as Investors Group Field (the Stadium). [ 3 ] In early 2011, Structal entered into its subcontract with Dominion.

The subcontract contained provisions that Dominion may withhold from Structal’s “progress claims any amounts (such amounts would have to be mutually agreed by contractor and subcontractor) deemed necessary to protect the Contractor/Client in respect of defective Work, non-payment of liens or other obligations for which the Subcontractor is liable, breaches of this Subcontract and the lien holdback.” As well, it contained a provision that, if Structal were delayed in the completion of its work by any of a number of expressed occurrences, then Structal “shall be reimbursed for reasonable costs incured [ sic ] by the subcontractor as a result of such delays.” [ 4 ] Structal asserted that it experienced delays throughout the performance of its work, and in August 2012, provided Dominion with a particularized claim for delay in the amount of $8,067,558.59. [ 5 ] On September 7, 2012, Structal filed a builder’s lien against the Stadium property in the amount of $15,570,974.53 made up as follows:

Past-due invoices $3,538,029.97 Invoices due October 1, 2012 $633,885.28 Statutory holdback $3,331,500.69 Delay claim $8,067,558.59 Total lien $15,570,974.53 The past-due invoices and the invoices due October 1, 2012, are hereinafter called the “progress payments.” [ 6 ] On October 22, 2012, Dominion deposited a lien bond (the lien bond) in the Court of Queen’s Bench for the full amount of Structal’s lien claim.

The lien bond provided that “IN THE EVENT that [Dominion] shall fail to satisfy any judgment for lien in favour of [Structal], the Surety [under the bond] shall forthwith pay … the amount of any such judgment not exceeding the amount of this bond.” [ 7 ] Structal then discharged its lien, but continued to seek payment from Dominion of the monies owing for its subcontract work.

Dominion refused payment. [ 8 ] Dominion asserted that the lien bond fully secured Structal’s claim and thus extinguished Dominion’s obligations under the trust provisions of the Act , such that it was entitled to use the contract monies otherwise payable to Structal, to pay other of Dominion’s creditors. As well, Dominion advanced a claim for damages by way of set-off against Structal’s claim.

It said that the damages which it claimed were suffered in the performance of its work as general contractor and were caused by acts or omissions of Structal. [ 9 ] The work under Structal’s subcontract has been completed and has been certified for payment by the appropriate certifying authorities under the contract.

The subcontractors of Structal have been paid in full for their work and there are no deficiencies or lien claims advanced by any of them in respect of the work required and performed under Structal’s subcontract. [ 10 ] Structal has not been paid the outstanding progress payments or the statutory holdback. Both continue to be held by the Stadium owner.

Structal seeks payment of such money. [ 11 ] Dominion applied to the court for an order declaring that the filing of the lien bond satisfied its trust obligations to Structal under the Act and that, upon receipt from the Stadium owner of the outstanding progress payments on account of Structal’s work, Dominion could pay such funds to others than Structal without being in breach of the trust provisions of the Act . [ 12 ] Structal opposed Dominion’s application and brought its own motion for an order requiring Dominion to pay Structal all of the monies Structal asserted were owing under its subcontract, including the statutory holdback, without deduction or set-off, immediately upon receipt of such monies from the Stadium owner. [ 13 ] The motion judge ordered that the filing of the lien bond by Dominion satisfied its trust obligations to Structal under the Act and that, upon receipt of the progress payments from the owner, Dominion may disperse them to others than Structal without being in breach of the trust provisions of the Act .

As well, he ordered dismissal of Structal’s motion for payment of the progress payments certified as owing to Structal on account of its work under the subcontract and, in addition, including the statutory holdback. It is from those orders that Structal appeals. Issues on Appeal [ 14 ] Structal raises three issues on appeal, namely: 1. Does the provision of security in the form of the lien bond for a builder’s lien diminish or extinguish a general contractor’s obligations to its subcontractor under the trust provisions of the Act ? 2.

Does Dominion have a right of set-off and, if so, can such an alleged set-off diminish or extinguish its obligations to Structal under the trust provisions of the Act ? 3. If the answers to issues one and two are negative, then should Structal be entitled to receive the outstanding progress payments on account of amounts certified and payable to it on account of its work? Standard of Review [ 15 ] Structal asserts that there are few, if any, contentious facts in respect of the issues on this appeal.

It says that the appeal relates to the legal consequences which flow from undisputed facts and whether the motion judge applied the wrong legal principles or tests to those facts. Accordingly, it says the appropriate standard of review on each issue is correctness. [ 16 ] Dominion agrees that all of the issues on this appeal raise questions of law and that the standard of review is that of correctness. [ 17 ] I agree with counsel in respect of issue one.

While the application of the law to the facts is generally a question of mixed fact and law where, as is the case with issue one, it is possible to extricate a discrete legal question from the facts, that discrete legal question will be reviewed on a standard of correctness. See Housen v. Nikolaisen , 2002 SCC 33 at para. 34 , [2002] 2 S.C.R. 235. [ 18 ] However, as will be seen from these reasons, it is my view that issues two and three (namely, those pertaining to set-off and payment of money to Structal), raise questions pertaining to the exercise of discretion by the motion judge, having regard to the

particular circumstances of this case. [ 19 ] Thus, the standard of review with respect to issues two and three is, in my view, one of considerable deference. [ 20 ] As Freedman J.A. wrote in Towers Ltd. v. Quinton’s Cleaners Ltd. et al. , 2009 MBCA 81 , 245 Man.R. (2d) 70 (at para. 28 ): The standard for intervention in a discretionary decision is very high. It is not enough that the appellate judges think the trial (or motions) judge simply reached a wrong result; there rarely is, in truly discretionary matters, a “right” or “wrong” result.

It is not enough that the appellate judges would have decided differently; they are to respect, and not replicate, the unique role of trial judges. Assuming there have been no reversible errors on fact or law, the appellate judges are not to usurp the trial judge’s role in discretionary matters, barring a decision so “clearly wrong” as to yield a truly unjust result. The Law [ 21 ] Determination of the issues on appeal requires a consideration and application of the Act as it relates to questions of liens, trust money and set-offs.

In my view, the provisions of the Act relevant to this appeal are: Receipts of contractor constitute trust fund 4(1) All sums … received by a contractor on account of a contract price constitute a trust fund for the benefit of (

a) sub-contractors who have sub-contracted with the contractor … …. (

d) the owner for any set-off or counterclaim relating to the performance of the contract. Receipts of sub-contractor constitute trust fund 4(2) All sums … received by a sub-contractor on account of a contract price in the sub-contract, constitute a trust fund for the benefit of (

a) sub-contractors who have sub-contract with the sub-contractor … …. (

d) the contractor or any sub-contractor for any set-off or counterclaim relating to the performance of the sub-contract. Duties of contractor respecting trust fund 4(3) A contractor receiving a sum mentioned in subsection (1) is the trustee of the trust fund and he shall not appropriate or convert any part of the trust fund to or for his own use or to or for any use not authorized by the trust until (

a) all sub-contractors who have entered into a sub-contract with him … have been paid all amounts then owing to them out of the sum received; ….

Receipts and moneys of owner constitute trust fund 5(1) Where, under a contract, sums become payable to the contractor by the owner on the basis of a certificate of a payment certifier, any amount, up to the aggregate of the sums so certified, that is in the hands of the owner or received by him at any time thereafter for payment under the contract constitutes, until paid to the contractor, a trust fund for the benefit of (

a) the contractor and all sub-contractors … under the contract; …. Duties of owner as to trust fund 5(3) The owner is the trustee of the trust funds created under [subsection] (1) … and he shall not appropriate or convert any part of the trust fund to or for his own use or to or for any use not authorized by the trust until (

a) the contractor has been paid all sums justly owed to him in respect of the performance of the contract; and (

b) provision for the payment of other affected beneficiaries of the trust has been made. Waivers, etc., against public policy 11 Every agreement, oral or written, express or implied, on the part of any person …. (

b) that provides or purports to provide that remedies available under this Act are not to be available for his benefit; … …. is against public policy and void. Creation of lien 13 Any person who (

a) does any work; or (

b) provides any services; or (

c) supplies any materials to be used; in performance of a contract or sub-contract for any owner, contractor or sub-contractor has, by virtue thereof, a lien for the value of the work, services or materials which … attaches upon the estate or interest of the owner in the land or structure upon or in respect of which the work was done or the services were provided or the materials were supplied, and the land occupied thereby or enjoyed therewith.

Vacating lien on payment into court, etc. 55(2) Upon application, a judge may order security or payment into court in an amount equal to the holdback required under this Act as it applies to a particular contract and any additional money payable with respect to that contract but not yet paid but not exceeding the total amount of the claims for liens then registered against a parcel of land and may then order that the registration of those liens be vacated. Money paid into court, etc., in place of land 56(1) Any money paid into court or any security given under subsection 55(2) stands in place of the land against which the lien was registered and is subject to the claims of (

a) the persons whose liens have been vacated; … …. No reduction of holdback 56(2) Money paid into court or security given under subsection 55(2) does not reduce the amount required to be retained by the owner under

section 24. The foregoing provisions are set out in full in

Schedule A to these reasons. [ 22 ] I turn then to the issues. Issue number one: Does the provision of security in the form of a lien bond for a builder’s lien diminish or extinguish a general contractor’s obligations to its subcontractor under the trust provisions of the Act ? Argument [ 23 ] Structal argues that the Act provides for two separate and distinct remedies; namely, the statutory trust remedy and the lien remedy.

As well, it argues that each of these remedies compliments, rather than usurps, the remedies available under the common law. [ 24 ] Structal says that, not having been paid for construction work performed under its subcontract, it has the common law right to sue Dominion for breach of contract. In addition, however, it asserts that the lien provisions of the Act entitle it to file a lien against the property upon which the work was performed.

Further, it argues that its filing of the lien does not extinguish, but may be done concurrent with, the exercising of its right to sue for breach of contract. [ 25 ] Similarly, it argues that it has the right to advance a claim under the trust provisions of the Act , and that that right is not extinguished by reason of its filing a lien under the Act or suing for breach of contract. [ 26 ] In short, it submits that the Act is not intended as a comprehensive code, but that the provisions of the Act which create the right to lien, and the statutory trust, provide for remedies which are in addition to and not in lieu of each other or the remedies available at common law and may be advanced concurrently to each other. [ 27 ] Thus, it argues that provision of security in the form of a lien bond in respect of its builder’s lien claim does not impact or affect its rights as a subcontractor under the trust provisions of the Act such as to diminish or extinguish the obligations of a general contractor in respect of those trust provisions. [ 28 ] Structal therefore asserts that, in finding that the filing of the lien bond satisfied Dominion’s obligations to Structal under the trust provisions of the Act , and in permitting Dominion, upon receipt of the progress payments, to disburse them to others than Structal notwithstanding the trust provisions of the Act , the motion judge erred.

It argues that he either incorrectly interpreted or failed to consider or appreciate the distinction between the lien provisions and the plain meaning of the statutory trust provisions contained in ss. 4(1) and 4(3)(

a) of the Act and thus, erred in law. [ 29 ] Dominion argues that the various provisions of the Act cannot be interpreted in isolation. It says that the purpose of a lien is to provide security for a debt not otherwise protected under the common law.

It asserts that the lien bond, being in the full amount of Structal’s lien claim, stands as full security for the debt. [ 30 ] Dominion states that it has not challenged, and will not challenge, the validity of the lien from a technical perspective, such as, for example, that it is in some way defective by reason of late or improper registration, or the like. [ 31 ] Thus, Dominion argues that the obtaining and filing of the lien bond has satisfied its trust obligations to Structal and that the motion judge was correct in so concluding and in holding that Dominion was entitled, upon receipt of the progress payments, to

disperse them to others without being in breach of the trust provisions of the Act as regards Structal. Analysis [32] There is no dispute that Structal’s lien claim was for the full amount of the progress payments then due or to become dueto it, the full amount of the statutory holdback under its subcontract and the full amount of the delay claim which it advanced againstDominion, all totalling $15,570,974.53.

As well, there is no dispute that the lien bond obtained by Dominion and filed in court was forthe full amount of Structal’s lien claim and that the lien bond stipulated that, if Dominion should fail to satisfy any judgment in favour ofStructal under its lien claim, the surety would pay the amount of such judgment not exceeding the sum of $15,570,974.53, being theamount of the lien bond. [33] In addition, it is agreed that the work under Structal’s subcontract has been completed and certified for payment, thatStructal’s subcontractors have been paid in full for their work under the subcontract and that there are no deficiencies or any lien claimsby any of Structal’s subcontractors in respect of that work.

The effect of this is that Structal is the only beneficiary of the statutoryholdback in the sum of $3,331,500.69. [34] It is clear from the language of the lien bond that payment under it would only be made to satisfy a judgment for lien. Having said that, Dominion has stated that it has not challenged and will not challenge the validity of the lien from a technicalperspective or otherwise. [35] The motion judge acknowledged in his judgment that the Act afforded Structal various means of asserting a claim wherethere was money owing to it under its subcontract.

He stated that, while Structal was entitled to file a lien claim against the Stadiumproperty, Dominion had the right to apply to have the lien vacated upon payment into court of a sum of money equal to the amountclaimed in the lien or on filing a letter of credit or a lien bond. He concluded that, had Dominion paid into court the full amount ofStructal’s lien claim, such funds would stand in place of the lien as security for the full amount claimed by Structal. He found that, inthis instance, the lien bond stood in the place of the lien securing the sum of money claimed by Structal.

Finally, he concluded that, as aresult, the filing of the lien bond exhausted Dominion’s trust obligations in the circumstances of this case. [36] In my view, the motion judge erred in his conclusion that the lien bond stood in the place of the lien. Moreover, he alsoerred in his conclusion that the filing of the lien bond exhausted Dominion’s obligations under the trust provisions of the Act. [37] As to the former conclusion, I can deal with it succinctly.

Section 56(1) of the Act provides: Money paid into court, etc., in place of land 56(1) Any money paid into court or any security given under subsection 55(2) stands in place of the land against which the lien wasregistered … ….

Thus, the lien bond stands in the place of the land, not in place of the lien. [38] As to the latter, it is my view that the Act and the jurisprudence interpreting it make clear that rights given to asubcontractor, pursuant to the trust provisions found in ss. 4-9, and the right to claim a lien upon the property in respect of which thecontract work was done, provide two potential remedies separate and distinct from one another and beyond the mere common law rightto sue for breach of contract. [39] In Provincial Drywall Supply Ltd. v.

Gateway Construction Co. et al. (1993), (MB CA), 85 Man.R.(2d) 116 (C.A.), Kroft J.A. wrote of the history of the Act. The first mechanics’ lien legislation in Manitoba was enacted in 1873. Intime, that act became known as The Mechanics’ Liens Act. In 1883, another act was passed which in time became known as TheBuilders and Workers Act. Following a review by the Manitoba Law Reform Commission and its Report on Mechanics’ LiensLegislation in Manitoba, (Winnipeg: 1979), the separate acts were repealed and essentially incorporated into a comprehensive builders’liens act, now the Act.

Kroft J.A. wrote (at para. 47): The trust provisions which appear in ss. 4 to 9 of the Builders’ Liens Act [C.C.S.M., c. B91] were, until 1981, found in the Buildersand Workers Act [C.C.S.M., c. B90]. The provisions relating to liens and the vacation of liens were in the Mechanics’ Liens Act. Thelegislation which followed the Manitoba Law Reform Commission’s Report combined these two pieces of legislation into one Act. Nonetheless, the trust provisions and the lien provisions still address different problems and for the most part stand separately.

The trustprovisions are designed to help assure that money payable by owners, contractors and subcontractors flows in a manner which is inaccord with the contractual rights of those engaged in a building project and it is not diverted out of the proper pipeline. Theseprovisions have nothing to do with the separate matter of creating charges against the land in favour of those contractors, suppliers andworkers who can prove their claims. [40] And in Glenko Enterprises Ltd. v.

Keller, 2000 MBCA 7, 150 Man.R. (2d) 1, Huband J.A. wrote (at paras. 31-32): The Builders’ Liens Act contains provisions which provide contractors and sub-contractors with greater protection than the normal

rights and remedies under construction contracts. There is a set of provisions which enables contractors or sub-contractors to file a lienagainst the property on which the goods or services were applied, providing the lien, in a prescribed form, is filed within a certain timeperiod and is followed by the commencement of a court action, also within a statutory time frame. It must be evident, however, that theright to file and claim a lien on the owner’s property is additional to existing common law remedies; specifically, the right to sue forbreach of contract.

Simply put, a sub-contractor who has performed work on the owner’s property, and who fails to file a lien within thestatutory time limit, is still entitled to sue the contractor for failing to pay the contract price. The extraordinary statutory remedy of a lienon the owner’s property is forfeited, but the sub-contractor still has his common law remedy. It becomes clear that the Act, at least inthis area, was not intended as a comprehensive code displacing other common law remedies.

If the Builders’ Liens Act was not intended as a comprehensive code in this area, it would seem illogical that it should be so regarded inthe other area where the statute has provided a unique remedy; namely, the statutory trust. [41] As well, he wrote (at paras. 34-35): Section 4(1) establishes the statutory trust of all moneys “received by a contractor on account of a contract price.” The statutory trust isfor the benefit of sub-contractors. Section 4(3)(

a) obliges the contractor not to “appropriate or convert any part of the trust fund to or for his own use” until such time as allsub-contractors have been paid the amount then owing to them out of the trust fund. [42] Further, in GRH Ventures Ltd. v. De Neve (1987), (MB CA), 46 Man.R. (2d) 100 (C.A.), Huband J.A.wrote (at para. 9): The defendant’s second contention was that prejudgment attachment should not be allowed where the claim is under the Builders’ LiensAct, and where the plaintiff has already obtained the security of a lien against the defendant’s land.

Counsel for the defendant couldsubmit no authority for the proposition that prejudgment attachment is improper in the context of a builders’ lien claim. In the absenceof authority, I would not be prepared to accept the defendant’s argument. Who knows, at this date and time, whether the security of thelien claim will be of any value to the plaintiff.

I would make the observation that, if the garnishing order were maintained, it would beopen to the defendant to move to have the builder’s lien withdrawn from the defendant’s title, in the same way that the defendant wouldbe entitled to have the lien removed upon making a voluntary payment into court of the amount claimed by the contractor. [43] I refer to GRH Ventures Ltd. only to note the comments of Huband J.A. as to the uncertainty of knowing whether thesecurity of the lien claim will ultimately be of any value to the claimant. In my view, that is so until the validity of the lien claim isdetermined.

While, in this case, the assurance has been given by Dominion that it has not and will not challenge the technical validity ofthe lien, the fact remains that the ultimate security provided by the lien bond is provided by the surety under it, not by Dominion, and isultimately payable only in respect of a judgment for lien. From the perspective of Structal, therefore, the party ultimately responsible forpaying under the lien bond will not be obligated to pay unless a judgment is obtained on the lien which, at this point in time, is an issueyet to be resolved. [44] I note as well that, in Minneapolis-Honeywell v.

Empire Brass, (SCC), [1955] S.C.R. 694, Locke J., inconcurring reasons, wrote (at pp. 703-4): The Mechanics’ Lien Act of British Columbia [R.S.B.C. 1948, c. 205] has since 1879 afforded to labourers, material men, contractors andothers a means of enforcing their claims against the work produced as a result of their efforts, or with the materials they have supplied,by filing claims of lien within a defined period and, if default were made, instituting proceedings to realize the amounts payable.

S. 19was apparently designed to provide further security for such persons by providing that moneys received as payments on account of theprincipal contract or of any sub-contract should, in the hands of the recipients, constitute a trust fund for their benefit. [45] Thus, it is clear to me that Structal, in addition to its common law remedy, is afforded two separate and additionalremedies under the Act; namely, the remedy provided under the trust provisions of the Act and, as well, the remedy afforded under thelien provisions of the Act. [46] Further, as I previously stated, it is not correct that funds paid into court to vacate a lien, or a lien bond filed for thatpurpose, stands in the place of the lien, as stated by the motion judge.

Rather, such security stands in place of the land against which thelien was registered. [47] It is important to remember that it is the owner or contractor, not the party claiming the lien, who chooses to act in such a

way as to vacate a lien. It need not do so. It is true that the vacating of a lien will permit the continuation of the flow of money and is thus in the interests of those doing work on the project whereas the non-vacating of the lien will stop the flow of such money. Nevertheless, it is the decision of the party responsible for payment under a contract, whether owner, contractor or subcontractor, who determines what, if anything, to do in respect of a lien filed against the property upon which the contract work is being performed.

However, the security provided, in this case, the lien bond, does not secure the claim any more than did the land. The claim must still be proved before steps may be taken by the claimant to realize upon the underlying asset. [ 48 ] In my view, it would be unheard of for a contractor to say to a subcontractor that, because he had filed a lien claim, the contractor was no longer obligated to comply with the trust obligations under the Act . Indeed, it is almost inevitably the case that lien claims are advanced because of late payment and a concern as to the possibility of non-payment.

It is difficult to understand how, in such a circumstance, a subcontractor, by reason of filing a lien claim, should then be deprived of the benefits of the trust provisions of the Act .

And, if that is so with respect to the lien claim filed against the land, it must be so with respect to a lien bond which, as the Act clearly provides, stands in the place of the land. [ 49 ] For these reasons, it is my opinion that the provision of the lien bond by Dominion does not exhaust its trust obligations to Structal under the provisions of the Act . [ 50 ] In the result, I would set aside the motion judge’s declaration that the filing of the lien bond by Dominion satisfied its trust obligations relating to Structal and that, upon receipt of the progress payments in question, it may disburse the funds without being in breach of the trust provisions of the Act . [ 51 ] I will deal with issues two and three together.

Issue number two: Does Dominion have a right of set-off and, if so, can such an alleged set-off diminish or extinguish its obligations to Structal under the trust provisions of the Act ? Issue number three: If the answers to issues one and two are negative, then should Structal be entitled to receive the outstanding progress payments on account of amounts certified and payable to it on account of its work? Issue Two: Argument [ 52 ] Structal argues that Dominion does not have a right of set-off in this case.

As well, it says that, even if it did, such an alleged set-off cannot diminish or extinguish its obligations to Structal under the trust provisions of the Act . [ 53 ] Structal asserts that there was clear and uncontradicted evidence by way of affidavit and exhibits before the motion judge which established that Dominion had given up any right of set-off under the terms of the contract between the parties, and that the motion judge ought to have made a determination to that effect under Queen’s Bench Rule 14.05(2)(c)(iv). [ 54 ] Structal says that Dominion’s claim for set-off relates to alleged damages suffered by Dominion on account of delay caused by Structal.

Structal argues that, as regards Dominion’s claim for set-off, the motion judge erred in his

interpretation of the legal test to be applied and in his application of the applicable authorities to the facts of this case. It argues that his reasons are not supported by the wording of the trust provisions of the Act or the purpose and intent of the Act , nor are they consistent with the principles enunciated in the applicable case law. [ 55 ] Moreover, Structal argues that s. 4(1) (

a) of the Act expressly provides that amounts paid to a contractor on account of a contract price are impressed with a trust for the benefit of its subcontractors and that s. 4(3) (

a) of the Act clearly provides that a contractor in receipt of such monies shall not convert or appropriate them to its own use until all of its subcontractors have been paid all amounts owing to them out of the funds received. [ 56 ] Accordingly, Structal submits that the motion judge’s order permitting Dominion to use monies (the progress payments) received from the owner on account of Structal’s work for the purpose of paying other subcontractors is in error and in contravention of the trust provisions of the Act . [ 57 ] As well, Structal argues that the Act speaks to the owner’s obligations in respect of these progress payments.

It says that under s. 5(3), the owner is not entitled to appropriate or convert any part of the trust fund to or for any use not authorized by the trust until “provision for the payment of other affected beneficiaries of the trust has been made.” Structal says that “other beneficiaries” is a reference to those entitled to a share of the trust fund, such as subcontractors. [ 58 ] Therefore, Structal submits that the owner must be satisfied that provision has been made for payment of subcontractors, including Structal, before it can advance the progress payments to Dominion, or the owner risks exposing itself to a breach of trust claim. [ 59 ] It argues that the s. 5(3) requirement for “provision for the payment” of Structal is not satisfied by the lien bond, as the lien bond will only respond to a judgment on the lien claim. [ 60 ] In the circumstances here, says Structal, Dominion has indicated that it intends to use the monies which it will receive from the owner to pay subcontractors other than Structal, notwithstanding that the monies in question are the progress payments certified as payable to Structal for its subcontract work.

It says that to do so will breach the trust provisions of the Act and, as the owner is aware of Dominion’s intention respecting the use of the monies, payment by the owner to Dominion will amount to a breach of trust by the owner. [ 61 ] It asserts that the progress payments that the owner is currently retaining on account of Structal’s unpaid invoices are impressed with a trust under the Act , and that the motion judge erred in granting an order which permitted Dominion to take such funds

to pay others than Structal, thereby diminishing or extinguishing Dominion’s trust obligations to Structal under the provisions of the Act. [62] Dominion submits that it is entitled to advance a set-off, including as against the statutory holdback where, in thecircumstances as exist in this case, Structal is the sole beneficiary of the trust monies. It argues that the lien bond has fully securedStructal’s entire claim, including that portion of Structal’s claim under the statutory trust and holdback provisions of the Act.

It arguesthat, having so secured Structal’s claim, Dominion’s claim for set-off does not diminish or extinguish its obligations to Structal under thetrust provisions of the Act. Issue Three: [63] Structal asserts that the answers to issues one and two are negative. Thus, it argues that, in dismissing Structal’s motionfor payment of the progress payments, the motion judge effectively declined jurisdiction, finding that it would be inappropriate todetermine the issue of set-off at this stage of the proceedings and leaving determination of both parties’ delay claims for a later date.

Hedid this, it says, on the basis that a determination of the issues relating to the respective delay claims would involve a consideration of acomplex agreement containing conflicting provisions, pre-contract negotiations and the receipt and consideration of evidence touchingon the issue of fault for delay, whether as advanced by Structal against Dominion, or by Dominion against Structal. [64] Structal argues that there was clear and uncontradicted evidence furnished by way of affidavit and attached exhibitswhich clearly established that Dominion had given up any right of set-off under the terms of the contract between the parties, and that themotion judge ought to have made a determination to that effect under Queen’s Bench Rule 14.05(2)(c)(iv).

It says that in failing to do soand in dismissing Structal’s motion for payment out of the progress payments and the statutory holdback component of its claim, all ofwhich constituted trust funds under the Act, the motion judge committed error. [65] Structal argues that this error was compounded by the motion judge who, while deferring his decision of the set-off issue,made an order that effectively granted Dominion at least part of its alleged set-off, in that the order permits Dominion the right to use thetrust funds for its own purposes; that is, to pay others, before the validity of the set-off has been determined. [66] Dominion argues that, having provided security by way of the lien bond in the full amount claimed by Structal, themotion judge was correct in concluding that it was premature and inappropriate at this stage in the proceedings to attempt to determinethe question of set-off.

Analysis [67] The essence of the motion judge’s decision in dismissing Structal’s motion was that the dispute pertaining to the delayclaim of Structal and the claim for set-off of Dominion was a dispute that could not be decided at this stage of the proceedings and onthe materials before him. [68] The motion judge acknowledged that it was appropriate under Queen’s Bench Rule 14.05(2)(

d) to obtain an

interpretationof a statute where there are no facts in issue. He wrote, however, that it was inappropriate, given the stage of the proceedings beforehim, to determine whether or not there was a right of set-off, as that issue would involve a consideration of a complex agreementcontaining conflicting provisions and pre-contract negotiations.

He concluded that it would require a trial of the issue or evidencetouching on fault for delay in completion, asserted by each party against the other, and that no case had been made out for an order forpayment of funds to Structal. [69] Structal refers to the record and asserts that the position which it advances on the facts before the motion judge was notcontested and thus, there was a sufficient fact base upon which to permit the motion judge to make a decision. [70] Alternatively, Structal argues that, under Queen’s Bench Rule 14.05(2)(c)(iv), the motion judge was entitled to decide itsapplication, even if there were material facts in dispute. [71] When I consider the entire contract between the parties, including the addenda, I am not satisfied that the facts are as clearas Structal asserts. [72] Furthermore, there are two issues which were not argued before us on appeal, either in the written or oral submissions,and from what I can determine, were not argued before the motion judge, but which could have a material effect on the decision whetherDominion has a right of set-off and whether Structal should be entitled, at this time, for an order for payment out of the progresspayments and statutory holdback. [73] First, Structal argues that Dominion gave up its right to set-off under the provisions of the contract.

But for that, it wouldbe my view that Dominion was entitled to advance an equitable set-off against Structal’s claim. See Holt v. Telford, (SCC), [1987] 2 S.C.R. 193. [74] Assuming, without deciding, that the language of the contract excludes Dominion’s entitlement to a set-off againstStructal’s claim, the question then arises whether such provision is against public policy and void pursuant to s. 11(

b) of the Act. [75] Second, a further possible impediment, not necessarily to the payment to Structal of the progress payments and statutoryholdback, but, to the use of such funds by Structal in light of the set-off advanced by Dominion, would be s. 4(2)(

d) of the Act, whichprovides that all sums received by a subcontractor on account of a contract price in the subcontract constitute a trust fund for the benefitof the contractor for any set-off or counterclaim relating to the performance of the subcontract. [76] In my view, the motion judge’s decision to dismiss Structal’s motion for an order for payment of the progress paymentsand statutory holdback, being a discretionary decision, is not a decision with which I would interfere, both for the reasons which heexpressed and, in addition, in light of ss. 4(2)(

d) and 11 of the Act, neither of which have been argued before the motion judge or thiscourt.

Conclusion [ 77 ] In the result, I would allow Structal’s appeal from, and set aside, the motion judge’s order declaring that the provision of the Lien Bond extinguishes the trust obligations of Dominion under the Act and that, upon receipt of the progress payments in question, Dominion might disperse the funds without being in breach of such trust provisions. [ 78 ] As well, I would dismiss Structal’s appeal from the motion judge’s order dismissing Structal’s motion for payment. [ 79 ] As there is mixed success on the appeal, I would order that the parties bear their own costs. J.A. I agree: J.A. I agree: J.A.

Schedule A The Builders’ Liens Act , C.C.S.M., c. B91 ( ss. 4(1) - 4(3) , 5(1) , 5(3) , 11 , 13 , 55(2) , 56(1) - 56(2) ): Receipts of contractor constitute trust fund 4(1) All sums, including any interest on the holdback, received by a contractor on account of a contract price constitute a trust fund for the benefit of (

a) sub-contractors who have sub-contracted with the contractor and other persons who have supplied materials or provided services to the contractor for the purpose of performing the contract; (

b) the Workers’ Compensation Board; (

c) workers who have been employed by the contractor for the purpose of performing the contract; and (

d) the owner for any set-off or counterclaim relating to the performance of the contract. Receipts of sub-contractor constitute trust fund 4(2) All sums, including any interest on the holdback, received by a sub-contractor on account of a contract price in the sub-contract, constitute a trust fund for the benefit of (

a) sub-contractors who have sub-contract with the sub-contractor and other persons who have supplied materials or provided services to the sub-contractor for the purpose of performing the sub-contract; (

b) the Workers’ Compensation Board; (

c) workers who have been employed by the sub-contractor for the purpose of performing the sub-contract; and

(

d) the contractor or any sub-contractor for any set-off or counterclaim relating to the performance of the sub-contract. Duties of contractor respecting trust fund 4(3) A contractor receiving a sum mentioned in subsection (1) is the trustee of the trust fund and he shall not appropriate or convert any part of the trust fund to or for his own use or to or for any use not authorized by the trust until (

a) all sub-contractors who have entered into a sub-contract with him and all persons who have supplied materials or provided services to him for the purpose of performing the contract have been paid all amounts then owing to them out of the sum received; (

b) the Workers’ Compensation Board has been paid all assessments which the contractor could reasonably anticipate as arising out of work done by workers employed by him in performing the contract to the extent for which the sum was received; (

c) all workers who have been employed by him for the purpose of performing the contract have been paid all amounts then owing to them out of the sum received for work done in performing the contract; and (

d) provision has been made for the payment of other affected beneficiaries of the trust to whom amounts are then owing out of the sum received. Receipts and moneys of owner constitute trust fund 5(1) Where, under a contract, sums become payable to the contractor by the owner on the basis of a certificate of a payment certifier, any amount, up to the aggregate of the sums so certified, that is in the hands of the owner or received by him at any time thereafter for payment under the contract constitutes, until paid to the contractor, a trust fund for the benefit of (

a) the contractor and all sub-contractors and other persons who have supplied materials or provided services for the purposes of performing the contract or any sub-contract under the contract; (

b) The Workers Compensation Board; and (

c) workers who have been employed for the purpose of performing the contract or any sub-contract under the contract. Duties of owner as to trust fund 5(3) The owner is the trustee of the trust funds created under subsections (1) and (2) and he shall not appropriate or convert any part of the trust fund to or for his own use or to or for any use not authorized by the trust until (

a) the contractor has been paid all sums justly owed to him in respect of the performance of the contract; and (

b) provision for the payment of other affected beneficiaries of the trust has been made. Waivers, etc., against public policy 11 Every agreement, oral or written, express or implied, on the part of any person (

a) that provides or purports to provide that this Act does not apply to him; or

(

b) that provides or purports to provide that remedies available under this Act are not to be available for his benefit; or (

c) that waives or purports to waive any lien or right of lien under this Act ; is against public policy and void. Creation of lien 13 Any person who (

a) does any work; or (

b) provides any services; or (

c) supplies any materials to be used; in performance of a contract or sub-contract for any owner, contractor or sub-contractor has, by virtue thereof, a lien for the value of the work, services or materials which, subject to

section 16, attaches upon the estate or interest of the owner in the land or structure upon or in respect of which the work was done or the services were provided or the materials were supplied, and the land occupied thereby or enjoyed therewith.

Vacating lien on payment into court, etc. 55(2) Upon application, a judge may order security or payment into court in an amount equal to the holdback required under this Act as it applies to a particular contract and any additional money payable with respect to that contract but not yet paid but not exceeding the total amount of the claims for liens then registered against a parcel of land and may then order that the registration of those liens be vacated.

Money paid into court, etc., in place of land 56(1) Any money paid into court or any security given under subsection 55(2) stands in place of the land against which the lien was registered and is subject to the claims of (

a) the persons whose liens have been vacated; and (

b) every person who (

i) both at the time of filing the application under subsection 55(2) and at the time of filing application for payment out under subsection (3), has a subsisting claim for lien, and (ii) has registered a claim for lien prior to the time of filing the application for payment out under subsection (3); but the persons whose liens have been ordered vacated have a first charge on the money or security to the extent of any amount, including costs, found by the judge to be owing to them.

No reduction of holdback 56(2) Money paid into court or security given under subsection 55(2) does not reduce the amount required to be retained by the owner under

section 24.