Bird Construction Group v Trotter and Morton Industrial Contracting Inc, 2023 MBCA 64

Citation: Bird Construction Group v Trotter and Morton Industrial Contracting Inc, 2023 MBCA 64 Date: 20230713 Docket: AI21-30-09712 IN THE COURT OF APPEAL OF MANITOBA Coram: Madam Justice Freda M. Steel Madam Justice Holly C. Beard Madam Justice Jennifer A. Pfuetzner BETWEEN : ) E. A. F. Grigg Bird construction group ) for the Appellant ) (Applicant) Appellant ) R. J. Handlon and ) J. M.

Hersey - and - ) for the Respondent ) trotter and morton industrial ) Appeal heard: contracting inc. ) January 20, 2023 ) (Respondent) Respondent ) Judgment delivered: ) July 13, 2023 On appeal from 2021 MBQB 233 pfuetzner JA [ 1 ] This appeal raises two novel issues regarding builders’ liens in construction projects on Crown or municipal land (Crown land) under

section 16 of The Builders’ Liens Act , CCSM c B91 (the Act ). [ 2 ] First, does the Court of King’s Bench have the jurisdiction to vacate a lien in respect of Crown land under section 55(2) of the Act ? If so, can a lien bond ever be adequate security for the vacation of a lien on Crown land? Background [ 3 ] The underlying facts are not in dispute. [ 4 ] The Manitoba Water Services Board (the Board) contracted with the applicant (Bird) to construct a wastewater treatment plant for the City of Selkirk (the project).

Bird in turn subcontracted aspects of the project to the respondent (TMIC). [ 5 ] Disputes arose between Bird and TMIC as a result of which TMIC delivered two notices of claim for liens. Just over a month later, Bird filed an application under sections 55(2) and 55(3) of the Act for an order vacating the liens upon the deposit with the court of lien bonds as security.

Bird arranged for lien bonds with face values equivalent to the two liens to be issued by the Travelers Insurance Company of Canada (Travelers). [ 6 ] Although TMIC was prepared to accept a lien bond as security for the second lien, it resisted Bird’s application with respect to the first lien, asserting that a lien bond was not appropriate security in that case. TMIC insisted that Bird pay cash into court in the amount of the first lien.

However, TMIC did not question the creditworthiness of Travelers or object to the wording of the lien bonds. [ 7 ] The Board has retained the full amount of the first lien from the payments otherwise owing to Bird.

Decision of the Application Judge [ 8 ] The application judge agreed with the view of both counsel “that a section 55(2) application may be made in a project that involves [Crown] land” (at para 6). [ 9 ] He noted that Crown land cannot be the subject of a lien, but that, in such a case,

section 16 of the Act “has replaced the normal lien registration process with a process that provides a lien claimant with a charge on the statutory holdback” ( ibid ). He described the nature of this lien as being “‘registered’ against the owner’s holdback account as distinct from the land itself” (at para 7).

Later, he states “Put another way, the security given to the lien claimant by the Legislature is a charge on cash” (at para 10). [ 10 ] The application judge found that “any security that is ordered under section 55(2) of the Act should be at least as good as, if not better than, the security provided to the lien claimant” under the Act (at para 15).

Having already found that a lien claimant in respect of Crown land is entitled to a lien on “cash”, he then turned to consider “whether a lien bond is as good as cash” (at para 16). [ 11 ] The application judge concluded that “a lien bond is not as good as cash” because with a lien bond, “there is always the risk that the credit worthiness of the surety will have diminished by the time of the judgment” and steps must also be taken to enforce the lien bond against the surety (at para 18). [ 12 ] In support of his conclusion, the application judge also relied on the trust provisions of the Act .

He found that, in the case of liens in respect of Crown land, “there is a tighter relationship between” the lien and trust remedies (at para 20). [ 13 ] The application judge concluded that “lien bonds are not an acceptable substitute for the cash that is charged by the liens on this Crown Land Project” (at para 22). He ordered that Bird would be required to deposit cash in the amount of the face value of the first lien with the court at which time the first lien would be vacated. Bird appeals.

Analysis – Jurisdiction of the Court to Vacate a Lien [ 14 ] The first issue on this appeal was not argued at first instance and concerns the statutory jurisdiction of the Court of King’s Bench to vacate a lien in respect of Crown land pursuant to section 55(2) of the Act , which states: 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. [emphasis added] [ 15 ] This Court invited submissions from the parties on this issue, and, in particular whether the application judge’s order to vacate the liens was inconsistent with the findings of the Manitoba Law Reform Commission (the Commission) as set out in its final Report of November 2018 (Manitoba Law Reform Commission, The Builders’ Liens Act of Manitoba: A Modernized Approach , Final Report #136 (Winnipeg: MLRC, 2018) (the Report). [ 16 ] In the Report, the Commission wrote (at p 98): . . . . . .

Section 55(2) of the Act establishes the process for vacation of liens upon the posting of security but this provision only applies to liens registered against land. The Legislature’s reasons for excluding

section 16 owners from section 55(2) relief is unknown. In fact, the Commission heard from one Crown agency owner that has, nevertheless, been making use of the section 55(2) vacation procedure in the absence of any express alternative in the Act . . . . [ 17 ] The concern articulated by the Commission arises from the interaction between section 55(2) and

section 16 of the Act , which states: Liens against Crown, etc. 16 Where the owner of the land or structure upon or in respect of which any work is done, or services are provided, or materials are supplied, is the Crown, a Crown agency, or a municipality, the lien created by

section 13 does not attach to the interest of the Crown, the Crown agency or the municipality, in the land or structure but constitutes a charge on amounts required to be retained under

section 24 and, subject to

section 45 , this Act applies, with such modifications as the circumstances require, and shall be construed to have effect in the enforcement of the charge on the amounts retained without the requirement of registration of the lien or a claim for lien against the land or structure. [emphasis added] [ 18 ] The proper

interpretation of section 55(2) of the Act is a question of law. Modern principles of statutory

interpretation require that the text of provisions be read harmoniously and as a whole as it is presumed that provisions are intended to work together as

parts of a functioning whole to form a rational, internally consistent framework. See R v Kirkpatrick, 2022 SCC 33 at para 46. [19] The primary purpose of the Act has been described as ensuring “that a person contributing to the improvement of suchland is paid for that contribution in accordance with his contractual entitlement” (Canotech Consultants Ltd v 5994731 Manitoba Ltd,2017 MBCA 48 at para 21). Like all legislation, the Act is deemed to be remedial in nature. As noted by the Commission in the Report(at p 1): . . . . . .

Most construction projects give rise to a complex construction contract pyramid composed of many two-party contracts connected toform a series of payment chains that require payment for completed work to flow from owner to contractor to sub-contractor/supplier,and so on. There is considerable risk in this model for an innocent party whose contract may be remote from the owner or the contractorin possession of the project funds. . . . [20] The structure of the Act allows an unpaid party anywhere in the payment chain to file a lien on the owner’s interest inthe land to secure the value of their work (see

section 13 of the Act). The practical result of the filing of a lien is described in StuartOlson Dominion Construction Ltd v Structal Heavy Steel, 2015 SCC 43 (at para 20): Because a lien creates an encumbrance on the land, mortgage advances subsequent to registration of a lien are typically stalled whenliens are filed.

Recognizing this impediment to liquidity, the Act provides for vacating the liens, pending resolution of the validity of thelien claims, if alternative security is posted. . . . [21] The provisions of the Act that allow for the filing of liens by claimants and the vacation by the court of those liens uponposting of security aim to strike a balance between protecting the financial interests of contributors to a construction project and the needfor owners to continue to access, and disburse, sources of funding for the project.

Position of the Appellant [22] Bird argues that section 55(2) of the Act must be read together with the other provisions of the Act, in particular section45(2), which indicates that the Act applies to a lien under

section 16 “with such modifications as the circumstances require as though thegiving of the notice were registration of the lien under this Act.” As a result, Bird submits that the Court of King’s Bench hasjurisdiction to vacate liens under section 55(2) in respect of Crown land despite them not being “registered against a parcel of land”. Position of the Respondent [23] TMIC advocates for a narrower

interpretation of section 55(2) of the Act based on the plain meaning of that

section andthe Act’s scheme and objectives. It agrees with the Commission’s view that there is no authority under section 55(2) of the Act to vacateliens that are not registered against an interest in land. [24] TMIC relies on an earlier decision of this Court, Provincial Drywall Supply Ltd v Gateway Construction Co (1993), (MB CA), 101 DLR (4th) 111, in which Kroft JA stated that “sections 55(2) and 56(1) of the Act are written in clearand understandable language.

Standing alone they admit to little ambiguity” (at p 116) and that “the statutory provisions under reviewwere intended to provide a ‘freestanding’ procedure” (at pp 117-18). Based on this, TMIC argues that it is inappropriate to assign ameaning to section 55(2) that is contrary to its plain meaning based only on the general language of section 45(2) when section 55(2) hasbeen recognized as freestanding and unambiguous. [25] TMIC asserts that the question of whether section 55(2) can be used to vacate a lien in respect of Crown land must beconsidered in light of the legal effect of section 55(2).

The Commission has stated that subsection 55(2) “essentially provides a safetyvalve for diffusing the ‘stay the hand of the paymaster’ effect of a registered lien” (the Report at p 110). TMIC maintains that a “safetyvalve” is not needed in the context of a lien under

section 16 that is not registered against land as such a lien “has far less impact” than alien on a “typical construction project that requires financing with necessary security registrations against title.” It contends that liensunder

section 16 “only have a discrete and limited impact on the flow of construction funds as only the amounts owing to the contractoror sub-contractor, up to the value of the lien, are to be retained by ss. 27(7).” [26] Finally, TMIC argues that there is no basis to extend section 55(2) beyond its plain meaning and purpose of removingregistered liens from titles to land. It asserts that section 45(2) of the Act should not be applied in a way so as to effectively redraftsection 55(2) by removing words and extending its application beyond its clear limits.

Decision [27] As I will explain, in my view, section 55(2) must be read in light of the rest of the Act—primarily section 45(2). Doingso leads to the

interpretation argued by Bird—that the Court of King’s Bench has jurisdiction to vacate liens in respect of Crown land. [28] First,

section 16 of the Act provides that liens in respect of Crown land do not attach to the land and that, subject tosection 45, the Act applies, “with such modifications as the circumstances require” to such liens. Next, section 45(1) of the Act must beconsidered, which provides that where a lien “does not attach to land by reason of

section 16”; then sections 37 (in respect of registrationof a claim for lien); 38 (in respect of the contents and form of a claim for lien); and 39 (in respect of what may be included in a singleclaim for lien) do not apply. [29] Section 45(2) of the Act indicates how the remaining provisions of the Act are to apply to a lien in respect of Crownland. That

section states:

Notice of claim to holdback 45(2) Where a lien does not attach to land by reason of

section 16, a person who is claiming the lien shall give notice thereof in writingto the owner in the manner provided by this Act and, subject to subsection (1), the notice shall, for the purposes of this Act be theequivalent of registration of a lien under this Act and this Act applies to the lien, the lienholder and the owner, with such modifications asthe circumstances require as though the giving of the notice were registration of the lien under this Act. [emphasis added] [30] In R v Penunsi, 2019 SCC 39, Rowe J wrote that the phrase “with such modifications as the circumstances require”means “(w)ith the necessary changes in points of detail, meaning that matters or things are generally the same, but to be altered whennecessary, as to names, offices and the like” (at paras 49-50).

I agree with Bird’s assertion that this allows sections 45(2) and 55(2) to beread together. [31] Thus, the giving of a notice of a lien in respect of Crown land is the “equivalent of registration of a lien” so that section55(2) of the Act—together with all sections of the Act other than 37, 38 and 39—apply to such a lien “with such modifications as thecircumstances require” (section 45(2) of the Act). [32] To adopt the construction suggested by the Commission and by TMIC would effectively give no meaning to section45(2) of the Act. The Legislature is presumed not to enact useless or meaningless provisions.

Moreover, when section 55(2) is construedto allow the court to vacate liens filed in respect of Crown land, one of the important remedial purposes of the Act—to balance thecompeting interests of participants in the construction pyramid—is respected. While I accept TMIC’s submission that liens under section16 would not normally affect an owner’s access to third-party financing, it is apparent, even from the facts of the present case, that liensunder

section 16 nonetheless have the effect of interrupting the flow of funds from the owner down the remainder of the payment chain. [33] For these reasons, I am of the view that section 55(2) of the Act applies to liens under

section 16 of the Act. Analysis – Requiring Cash to Vacate a

Section 16 Lien [34] The application judge’s decision under section 55(2) of the Act dismissing Bird’s application, but ordering that the liencould be vacated upon posting cash, is discretionary. As such, deference is owed to the application judge’s decision unless he hasmisdirected himself, or his decision is so clearly wrong as to amount to an injustice. A misdirection can include a reversible error of factor law.

See Perth Services Ltd v Quinton et al, 2009 MBCA 81 at paras 25, 28. [35] A judge “may order security or payment into court” and may then order that the registration of the relevant liens bevacated (see section 55(2) of the Act). In practice, “security” typically takes the form of a lien bond or letter of credit. [36] There is little jurisprudence regarding a judge’s discretion to “order security or payment into court” (ibid).

However, areview of the cases that have considered similar provisions in other provinces reveals certain common factors that are often consideredby courts in the exercise of discretion to vacate liens. I bear in mind that the legislative provisions differ and, in some of these cases, thecourts were determining the amount of security to be posted as opposed to its form. Nonetheless, the factors include: • Whether the proposed security would leave the lien claimant in a less secure position than they would be prior to replacing theland with substituted security.

See ADI v WCI & WCI v ADI & IWMC, 2002 PESCTD 89 at paras 15, 25. • Whether the creditworthiness of the surety is in question or is uncertain. See Grand Pacific Holdings Ltd v Progressive SheetMetals Ltd, 1993 CarswellBC 648 (BC SC) at para 5; 360090 BC Ltd v Tham Demolition Ltd, 1994 CarswellBC 1136 (BC SC) at para 5;ADI at para 26; and IDL Projects Inc v M3 Steel (Kamloops) Ltd, 2011 BCSC 1600 at para 16. • The particular conditions attached to, or the wording of, the proposed lien bond or letter of credit.

See Tham Demolition at para 6;ADI at para 26; and Sundance Development Corporation v Islington Chauncey Residence Corp, 2021 ONSC 241 at para 3. • Whether the security aligns with the purpose of the relevant statutory provisions and the overall purpose of the statute—forexample, to balance the interests of owners and lien holders or to protect those who supply work and materials for a construction projectso long as the owner is not prejudiced.

See Q West Van Homes Inc v Fran-Car Aluminum Inc, 2008 BCCA 366 at para 56; and ZahmolProperties Ltd v Richardson Bros (Olds) Ltd, 2011 ABQB 136 at para 15. • Whether the proposed security is a practical solution that promotes business efficacy. See Town-N-Country Plumbing & Heating(1985) Ltd v Schmidt (1991), (SK CA), 86 DLR (4th) 716 (SK CA) at p 725; and Tempo Alberta ElectricalContractors Co Ltd v Man-Shield (Alta) Construction Inc, 2022 ABCA 409 at para 10. • Whether the lien claimant is opposing the security to gain a tactical advantage.

See IDL Projects at para 14. • The apparent merit of the owner or contractor’s claim of deficiencies in the lien claimant’s work and whether the owner orcontractor has provided any evidence as to why it cannot pay cash into court. See Vector Projects Group Ltd v Decor 8 Painting (1990)Ltd and another, 2008 BCSC 1919 at paras 8-10. [37] The jurisprudence also indicates that decisions as to the type of security that should be posted to vacate a lien are madeon a case-by-case basis and are highly fact-driven.

However, where the type of security was successfully opposed by the lien claimant,it was generally because of concerns for the creditworthiness of the surety or the terms of the lien bond or letter of credit. [38] Bird submits that the application judge made several errors in denying its request to file a lien bond to vacate the firstlien and ordering instead that it be required to deposit cash security in the face amount of the first lien with the court.

[ 39 ] Bird says that the errors arise in three areas: (1) the adequacy of a lien bond as substitute security for the first lien; (2) the relationship between the holdback on a Crown land construction project and the trust provisions of the Act ; and (3) granting an order, to preserve a specific fund, that was not sought by any party. Adequacy of Lien Bond [ 40 ] I now turn to Bird’s first argument. It asserts that the application judge misdirected himself in finding that a lien claimant in respect of Crown land has a charge on “cash”.

It submits that this error came from the application judge’s finding that “[f]or Crown Land projects, a lien is ‘registered’ against the owner’s holdback account as distinct from the land itself” (at para 7). Bird points out that there is no holdback account for projects on Crown land due to the effect of section 24(6) of the Act and that a lienholder’s charge is not “over a specified, existing fund.” Rather, it is a charge against the debt owed or that might yet be owed, if any, by the Crown to the contractor.

As a result, Bird submits that the application judge’s holding that the proposed lien bond was inadequate was based on a misdirection. [ 41 ] TMIC argues that the application judge’s exercise of discretion is owed deference as there was no misdirection, nor was his decision clearly wrong. It submits that the application judge was entitled to conclude that any security ordered under section 55(2) of the Act should be at least as good as, if not better than, the security otherwise provided under the Act . TMIC maintains that the application judge did not err in finding that

section 16 gives a lien claimant a charge on amounts required to be retained under

section 24 of the Act (namely, holdback monies) and that this is effectively cash, as the Crown can be deemed to be solvent. It asserts that Bird did not discharge its onus to satisfy the application judge that the lien bond did not diminish the security TMIC received under the Act . [ 42 ] As I have already indicated, lien bonds or letters of credit have generally been rejected only when there are concerns with the creditworthiness of the surety or the wording of, or conditions attached to, the security.

In contrast, here, the application judge noted that TMIC “did not raise any lack of credit worthiness on the part of the proposed surety, nor did it raise any difficulties in the wording of the proposed lien bonds” (at para 2). [ 43 ] Instead, the application judge based his decision on two primary factors. The first was his finding that the security given to a

section 16 lien claimant under the Act is a “charge on cash” (at para 10).

Second was his determination that “any security that is ordered under section 55(2) of the Act should be at least as good as, if not better than, the security provided to the lien claimant under” the Act . [ 44 ] As I will explain, in my respectful view, the first finding conflates two related, but distinct, concepts in the Act— the holdback required to be deducted and retained by all owners and other payors in the construction pyramid and the holdback account required to be set aside by owners in certain circumstances. [ 45 ] The general holdback provision is in section 24(1) of the Act which requires all owners (including the Crown) and other payors to deduct and retain 7.5% from each payment made to a contractor or sub-contractor.

A further obligation to withhold funds in Crown land projects arises under section 27(7) of the Act . Upon receiving written notice of a

section 16 lien claim in respect of Crown land, an owner, contractor or sub-contractor is to “retain out of amounts payable to the contractor or sub-contractor under whom the lien is derived, an amount equal to the amount claimed in the notice” ( section 27(7) of the Act ). [ 46 ] It is these holdbacks against which lien claimants in respect of Crown land are given a “charge” rather than the usual “lien” that attaches on the interest of the owner in the land under

section 13 of the Act . [ 47 ] The duty of an owner to go beyond mere withholding, but to segregate and deposit holdback amounts into a separate holdback account arises under section 24(3) of the Act . This obligation applies if the value of the holdback exceeds a prescribed amount, in which case “the owner shall … pay the holdback into a holdback account.” The term “holdback account” is defined in

section 1 of the Act as “an interest bearing account in a bank, trust company or credit union in the joint names of the owner and the contractor”. [ 48 ] Importantly, when the owner of the land is the Crown or a municipality, section 24(3) does not apply by virtue of section 24(6) of the Act . As a result, there is no holdback account in respect of Crown land projects. [ 49 ] The application judge made a palpable error in finding that “for Crown land projects, a lien is ‘registered’ against the owner’s holdback account as distinct from the land itself” (at para 7).

This directly led him to the conclusion that TMIC has “a charge on cash” (at para 10). In reality, TMIC only had a charge on the amount withheld by the Board on its payments to Bird under their contract. There is no segregated fund of cash representing this amount. As between the Board and Bird, the holdback is in the nature of a debt owing or account receivable. If TMIC were to prove its lien claim and Bird failed to pay the judgment, TMIC would be able to demand payment from the Board from any amounts that might be payable by the Board to Bird that had been withheld either as a holdback or under section 27(7) .

There is no separate holdback account at a bank against which TMIC could enforce its judgment. The application judge misdirected himself by grounding his exercise of discretion in an incorrect finding—that TMIC has a lien on cash. [ 50 ] I also have reservations about the application judge’s finding that the posting of a lien bond “is not as good as cash” (at para 18) in the circumstances of the present case—where there are no creditworthiness issues regarding Travelers.

The application judge based his finding, in part, on his concern that TMIC, as a judgment creditor, would be required to “take steps to enforce the lien bond against the surety” as opposed to merely applying “to the court for payment out once it has obtained its judgment” if cash were deposited ( ibid ). This reflects a misapprehension of the terms of the proposed lien bond. [ 51 ] The terms of the bond include that Bird and Travelers would be “jointly and severally bound unto” the Court of King’s Bench in the face amount of the first lien.

If TMIC obtained a judgment in the Court of King’s Bench against Bird and it failed to satisfy that judgment, Travelers “shall forthwith pay unto the Court of [King’s] Bench” the amount of the judgment, not exceeding the bond. In other words, if TMIC obtained a judgment against Bird and Bird failed to satisfy it, Travelers would be bound to the Court of King’s Bench to immediately pay cash into court up to the face value of the lien bond. [ 52 ] There are no additional enforcement steps that TMIC would be put to in respect of the lien bond, subject to the remote

chance that Travelers would attempt to resist payment on some basis. In either case—cash paid into court or a lien bond—all TMIC would need to do in the normal course is apply to the Court of King’s Bench for payment of its judgment in the event Bird fails to do so. In the absence of solvency concerns with respect to a proposed surety, in my view, a lien bond such as the one presented in the present case is effectively equivalent to cash.

In any event, it is as good as TMIC’s original security which is not cash but is a charge over Bird’s account receivable from the Board and which also carries the remote chance that the Board or Bird would resist payment. [ 53 ] Finally, the application judge’s decision loses sight of one of the important purposes of the Act —to allow funds to continue to flow down the payment chain while preserving the rights of lien claimants. The only effect of the judgment is to allow the lien to be vacated and for the Board to disburse payments to Bird—where the flow of funds stops again.

This is because, in order to vacate the lien, Bird is required to pay the equivalent amount of cash into court—an exercise that strikes me as pointless. If the application judge’s reasoning is accepted, a lien in respect of Crown land would never, in practice, be vacated without the lien claimant’s consent. The application judge misdirected himself by failing to consider the aim and purposes of the Act in exercising his discretion.

Relationship Between Lien and Trust Remedies [ 54 ] I will now address Bird’s second argument, that the application judge erred by attempting “to read the trust and the lien provision[s] of the Act together”, leading to the “erroneous conclusion that

section 16 of the Act requires cash security to be posted to vacate” the first lien. [ 55 ] Bird submits that the lien and trust remedies in the Act are separate and that there is nothing in

section 16 of the Act that suggests otherwise.

It asserts that the application judge attempted to interpret the trust and lien provisions of the Act in a cohesive manner when they are not and that additionally, no purpose was served by him engaging in this exercise. [ 56 ] TMIC argues that the application judge recognized that the trust and lien remedies are independent but that he made no error in considering them and how they may overlap in determining the appropriate security to order in this case. [ 57 ] In Stuart Olson , Rothstein J found that the lien and trust “remedies exist independently” (at para 35) and noted that “[t]his Court has recognized the distinct operation of lien and trust provisions” (at para 36).

In my view, it is important to respect the distinction between the two remedies, including the procedures to enforce them. [ 58 ] The application judge stated that the holdback in a Crown land project is “the same monies designated as trust monies under

section 4 of the Act ” and that “if the holdback monies are retained or paid into court, there is no risk that a contractor would improperly use the trust funds, because the contractor never receives them” (at para 20). Moreover, he reasoned that ( ibid ): . . . If a lien bond is permitted, a contractor could then requisition the holdback and additional funds, and although the funds as a matter of law could only be used in accordance with the trust provisions of the Act , the sub-contractor has no practical ability to ensure compliance with those trust provisions.

Although the same might be said if cash is ordered to be paid in, there is a practical advantage to the sub-contractor in that the cash is held up in court and available to the successful judgment creditor sub-contractor. [ 59 ] There are several difficulties with this chain of reasoning. First, funds retained by an owner do not become trust monies in the hands of the contractor under

section 4 of the Act until actually received by the contractor. In the present case, the withheld funds remain retained by the Board as a result of TMIC’s lien, have not been paid to Bird and are not yet trust funds under

section 4 of the Act . [ 60 ] Second, the application judge was concerned about the possibility that a contractor could breach its trust obligations unless “the cash is held up in court” (at para 20). This is undoubtedly a risk in respect of any trust claim and is merely a function of how the trust provisions of the Act operate. This is simply not relevant to the question that was before the application judge—whether Bird should be able to post a lien bond as security to vacate TMIC’s lien claim.

In addition, as pointed out by Bird, TMIC had not proved a breach of trust in any event. [ 61 ] The application judge’s focus on the apparent benefits to a sub-contractor’s trust claim of ordering the payment of funds into court affected his decision to reject the proposed lien bond as security for the first lien. Effectively he sought to give TMIC a better remedy in respect of a potential trust claim than what the trust provisions in the Act otherwise provide. As I have indicated, this is an extraneous consideration to the issue before him.

Moreover, it is not clear that the application judge even succeeded in his endeavour. [ 62 ] The application judge assumed that, if cash were paid into court under the lien provisions of the Act , “even if the liens were declared invalid, the cash would still be available against which [TMIC] could execute a personal judgment against Bird” (at para 22). [ 63 ] However, because lien and trust claims are separate, money paid into court to secure a lien claim is security only for that claim; it is not security for any trust claim.

As was made clear by Rothstein J in Stuart Olson , if a lien claim is found to be invalid, any money paid into court as security pursuant to the lien provisions of the Act would not be retained in court, it would be returned to the payor. This is because the authority to retain it in court would have disappeared. See para 46. [ 64 ] As a result, it was an irrelevant consideration to tie the security for discharging a lien claim to security for a trust claim.

In addition, it was an error to find that, even if the liens were declared invalid, the cash would still be available against which TMIC could execute a personal judgment against Bird. Decision [ 65 ] To conclude, while he had jurisdiction to make an order under section 55(2) of the Act , the application judge erred in exercising his discretion to order payment into court as a requirement for vacating the first lien.

He misdirected himself in several ways —by finding that TMIC had a charge on cash in the form of a holdback account; by focussing on whether the lien bond in the present case was as good as cash; in failing to consider the aims and purpose of the Act ; and in considering that payment into court would secure any trust claim that TMIC may have.

[ 66 ] In light of my conclusions regarding the first two errors alleged by Bird, there is no need to address whether the application judge erred in granting an order to preserve a specific fund that was not sought by any party. [ 67 ] In my view, returning the application back to the Court of King’s Bench for reconsideration would be disproportionate.

This is an appropriate case for this Court to give the judgment that ought to have been pronounced (see The Court of Appeal Act , CCSM c C240 section 26(1) ). [ 68 ] The fact that no issue has been raised by TMIC regarding the creditworthiness of Travelers or the wording or conditions attached to the proposed lien bond weighs heavily in favour of it being an appropriate substitute security.

In my view, the proposed lien bond is both an adequate substitute security and a practical solution to allow for vacation of the lien in a manner that promotes business efficacy and accords with the aims and purposes of the Act . Conclusion [ 69 ] I would order that the first lien be vacated upon Bird posting a lien bond in the same form and on the same terms and conditions as presented in its application under section 55(2) of the Act . [ 70 ] In the result, I would allow the appeal with costs. JA I agree: JA I agree: JA