



COURT OF APPEAL FOR ONTARIO

CITATION: Great Northern Insulation Services Ltd. v. King
    Road Paving and Landscaping Inc., 2021 ONCA 367

DATE: 20210601

DOCKET: C67541

Doherty, Nordheimer and Harvison Young JJ.A.

BETWEEN

Great Northern Insulation
    Services Ltd.

Plaintiff/Appellant

(Respondent)

and

King Road Paving and
    Landscaping Inc. also known as King Road Paving & Landscaping Inc., Louis
    Alaimo, Agostino Plati, Giuseppina Plati, and Scotia Mortgage Corporation

Defendants/Respondents

Jonathan Frustaglio, for the appellant Sutherland Law

Michael Odumodu, for the respondent Great
    Northern Insulation Services Ltd.

Heard: April 30, 2021 by video conference

On appeal from the order of the Divisional Court (Justices David
    L. Corbett, Frederick L. Myers and Elizabeth C. Sheard), dated June 14, 2019,
    with reasons reported at 2019 ONSC 3671, 71 C.B.R. (6th) 187, varying the judgment
    of Justice Robert Charney of the Superior Court of Justice, dated December 14,
    2017, with reasons reported at 2017 ONSC 7675, 86 C.L.R. (4th) 331.

Nordheimer
    J.A.:

[1]

Sutherland Law appeals, with leave, from the order of the Divisional
    Court that allowed the appeal of Great Northern Insulation Services Ltd. from
    the trial judges decision regarding its claim for priority arising out of a
    charging order that the appellant law firm had obtained in this construction
    lien proceeding. As I am in substantial agreement with the analysis undertaken
    by the Divisional Court, I would dismiss the appeal.

BACKGROUND

[2]

King Road Paving and Landscaping Inc. (King Road) was hired in June
    2012 by the defendant Agostino Plati and Giuseppe (Pino) Nesci, as a contractor
    to complete extensive work on the renovation of an old barn located in
    Schomberg, Ontario. A dispute arose over payment for the work.

[3]

The dispute captured two suppliers (subcontractors) that supplied goods
    and services to the project and remained unpaid. They registered construction
    liens against the property. These lien claims were tried together with King
    Roads claim against the owners. The first supplier is Great Northern
    Insulation Services Ltd. (Great Northern), which contracted with King Road to
    supply spray foam insulation to the barn for $51,415. The second supplier is
    Webdensco, a building supply centre. Subsequently, Webdensco assigned its
    interest in its lien to King Road, pursuant to s. 73 of the
Construction
    Lien Act
, R.S.O. 1990, c. C.30.
[1]
King Road then sought payment in the amount of $54,387.99 on behalf of
    Webdensco.

[4]

A trial of the issues was eventually heard and determined.
[2]
The trial judge granted judgment in favour of King Road against the owners. He
    also granted judgment in favour of Great Northern against King Road in the
    amount of $105,803. Further, the trial judge declared that both Great Northern and
    Webdensco were entitled to liens under the
Construction Lien Act
.

[5]

Some months after the trial decision was released, the appellant law
    firm, which had represented King Road in the proceedings, brought a motion on
    an urgent basis for a charging order under s. 34(1) of the
Solicitors Act
,
    R.S.O. 1990, c. S.15. The trial judge granted the charging order.
[3]
In doing so, the trial judge provided that the charging order would have
    priority over any amount owed to Great Northern by King Road pursuant to the
    trial judgment and costs order.

[6]

Great Northern did not appeal the granting of the charging order, but it
    did appeal the priority provided by the charging order over the amounts owed to
    it. By reasons dated June 14, 2019, the Divisional Court allowed the appeal and
    varied the charging order to provide that Great Northern had priority over the
    solicitors' charging order in the amount of $54,737.61, plus any interest that
    accrued on this amount to the time it is paid to Great Northern. That amount represents
    the funds that remained from what had been paid by the owners to King Road. As
    will be seen, those funds are trust funds under the
Construction Lien Act
.

THE DECISION BELOW

[7]

In making the order that it did, the Divisional Court found that
    interest owing to Great Northern was to be included in the amount that Great
    Northern could claim against the trust funds created by operation of the
Construction
    Lien Act
. In this case, interest amounted to $51,065.39 as found by the
    trial judge. The other amount of $3,744.37 was the amount that was left unpaid to
    Great Northern on the base contract price.

[8]

In reaching this conclusion, the Divisional Court held that the proper
    interpretation of s. 8 of the
Construction Lien Act
, included interest
    due on the contract price. At the core of this appeal is the appellants
    contention that the Divisional Courts interpretation is in error.

ANALYSIS

[9]

In my view, the issues raised by the appellant boil down to the
    following:

1.

The Divisional Court erred in finding that it had jurisdiction to hear
    an appeal from the charging order.

2.

The Divisional Court erred in finding that interest payable on the
    contract price was to be included within the trust funds.

3.

The Divisional Court erred in finding that Great Northerns priority
    over the trust funds was not affected by the assignment of Webdenscos lien to
    King Road.

I will deal with each of the issues in turn.

(1)

Jurisdiction

[10]

I
    do not agree with the appellant that any appeal from the charging order lay
    directly to this court, and that the Divisional Court erred in concluding that
    it had jurisdiction to hear the appeal. The charging order was obtained
    pursuant to s. 34(1) of the
Solicitors Act
, which reads:

Where a solicitor has been employed to prosecute or
    defend a proceeding in the Superior Court of Justice, the court may, on motion,
    declare the solicitor to be entitled to a charge on the property recovered or
    preserved through the instrumentality of the solicitor for the solicitors
    fees, costs, charges and disbursements in the proceeding.

[11]

It
    is implicit in the wording of s. 34(1) that a lawyer who wishes to obtain a
    charging order must do so by bringing a motion in the proceeding where the property
    recovered or preserved through the instrumentality of the solicitor
    originated. In this case, that proceeding was the construction lien proceeding.
    The necessary appeal route from any order obtained in a proceeding is dictated
    by the statute that governs the proceeding, in this case, the
Construction
    Lien Act
.
The
Construction Lien Act
provides, in s. 71,
    that an appeal from a judgment lies to the Divisional Court. This court does
    not have original appellate jurisdiction when a statute provides a right of
    first appeal to the Divisional Court:
Courts of Justice Act
, R.S.O.
    1990, c. C.43, s. 6(1)(b).

[12]

The
    Divisional Court was correct in concluding that it had jurisdiction to hear the
    appeal from the charging order.

(2)

Trust funds and Interest

[13]

This
    is the issue that lies at the heart of this appeal. Indeed, the appellant
    essentially conceded, during the hearing, that if it did not prevail on this
    issue, the appeal would likely fail. This issue turns on the proper
    interpretation of s. 8 and, in particular, s. 8(2) of the
Construction Lien
    Act
, which reads:

The contractor or subcontractor is the trustee of the
    trust fund created by subsection (1) and the contractor or subcontractor shall
    not appropriate or convert any part of the fund to the contractors or
    subcontractors own use or to any use inconsistent with the trust until all
    subcontractors and other persons who supply services or materials to the
    improvement are paid all amounts related to the improvement owed to them by the
    contractor or subcontractor.

[14]

The
Construction Lien Act
is remedial legislation. Consequently, it should
    be given a fair, large and liberal interpretation in order to achieve its
    objectives:
Legislation Act, 2006
, S.O. 2006, c. 21, Sched. F, s.
    64(1). Principal among those objectives is the protection of those lower down
    on the pyramid of claimants. As Weiler J.A. said in
Sunview Doors Ltd. v.
    Academy Doors & Windows Ltd.
,
2010 ONCA 198, 101 O.R. (3d) 285,
    at para. 99:

The object of the Act is to prevent unjust enrichment of those
    higher up in the construction pyramid by ensuring that money paid for an
    improvement flows down to those at the bottom. In seeking to protect persons on
    the lower rungs from financial hardship and unfair treatment by those above,
    the Act is clearly remedial in nature. The remedial nature of the Act also
    supports a liberal construction so as to enable it to serve its purpose.

[15]

In
    my view, the words all amounts related to the improvement owed to them by the
    contractor found in s. 8(2) ought to be given that large and liberal interpretation.
    The words all amounts related to are, themselves, broad, much like the words
    in respect of have been found to be. In that regard, I refer to the language
    of Major J. in
Markevich v. Canada
, 2003 SCC 9, [2003] 1 S.C.R. 94, at
    para. 26, where he said: The words in respect of have been held by this
    Court to be words of the broadest scope that convey some link between two
    subject matters.

[16]

In
    the normal commercial context, interest that accrues on payments due under a
    contract would be considered amounts owing on the contract. Interest on overdue
    amounts may be expressly included in the terms of the contract or it may be
    implied such as, for example, where the interest provision is included in the
    invoices that are rendered under the contract. This interpretation is
    consistent with the definition of price contained in s. 1(1) of the
Construction
    Lien Act
which reads, in part:

price means the contract or subcontract price,

(a) agreed upon between the parties

[17]

The
    actual contractual agreements between the parties are not in the record before
    us. However, the trial judge referred in his reasons, at para. 183, to the fact
    that Great Northern and King Road had entered into a credit agreement that provided
    credit terms of 30 days for payment, with interest on outstanding amounts at
    the rate of 2% per month. Therefore, the interest amount in this case was
    expressly provided for by the contractual arrangements between the parties.

[18]

Thus,
    interest reasonably falls within the scope of s. 8(2) as an amount owing to a
    subcontractor relating to the improvement. Interest owing is therefore part of
    the trust fund created by s. 8(1) and falls directly within the restrictions on
    the permissible use of those trust funds stipulated by s. 8(2).

[19]

Given
    the priority established by s. 8(2) that subcontractors enjoy over the trust funds,
    there was no basis for the trial judge to give the charging order a greater priority
    over the trust funds. Such a conclusion would be fundamentally inconsistent
    with the purpose behind the creation of the trust and would violate the above
    restriction on the use of the trust funds.

[20]

I
    would add, on this point, that we are not speaking here about lien rights. We
    are speaking about trust funds. The two are separate concepts under the
Construction
    Lien Act
. Liens give subcontractors and suppliers the right to assert a
    claim directly against the property, whereas trusts serve to protect the
    interests of subcontractors and suppliers by protecting funds that are owed to,
    or have been received by, the contractor. Actually, the
Construction Lien
    Act
provides expressly that interest is not part of the lien claim in s. 14(2),
    which reads:

No person is entitled to a lien for any interest on
    the amount owed to the person in respect of the services or materials that have
    been supplied by the person,
but nothing in this subsection affects any
    right that the person may otherwise have to recover that interest
.
    [Emphasis added.]

[21]

No
    such exclusion is contained in s. 8. While Great Northern would not have been
    entitled to include the interest amount within its lien claim, there is no
    principled reason to exclude interest from the trust fund provisions, absent
    the legislation so providing. Excluding interest would also be inconsistent
    with the object of the legislation as expressed in
Sunview Doors Ltd.
above.

[22]

This
    conclusion is also consistent with the purpose of the trust provisions as
    enunciated by Sharpe J.A. in
The Guarantee Company of North America v. Royal
    Bank of Canada
, 2019 ONCA 9, 144 O.R. (3d) 225, where he said, at para. 31:

[T]he legislature enacted the trust provisions because it
    recognized that the lien provisions only provided a partial form of security to
    suppliers. The lien provisions failed to protect suppliers at the bottom of the
    pyramid in situations where the owner of the land had already paid the
    contractor. The trust provisions complement the lien provisions by providing
    security to suppliers at the bottom of the pyramid in these situations.

[23]

I
    would also note that this conclusion mirrors the conclusion reached by the New
    Brunswick Court of Appeal in
Fundy Ventilation Limited v. Brunswick
    Construction Ltd., Fraser Companies Limited and Minister of National Revenue
(1982), 40 N.B.R. (2d) 484 (C.A.), 136 D.L.R. (3d) 455, leave to appeal
    refused, 45 N.R. 528, where, in considering a similar issue, La Forest J.A.
    said, succinctly, at p. 502: Interest would equally attach to Fundy's claim
    under the trust.

[24]

Finally,
    on this point, I agree with the Divisional Court that there is only one trust
    fund for the subcontractors. This is clear from the wording of s. 8(1)  constitute
a
trust fund (emphasis added). It is also clear from the observations
    made by Sharpe J.A. in
Royal Bank of Canada
, at paras. 27-32, as to
    the purpose of the trust fund provisions.

(3)

The Webdensco assignment

[25]

A
    final issue must be addressed. There is an issue raised as to whether the above
    analysis is altered by the fact that the other subcontractor, Webdensco,
    assigned its lien to King Road during the course of the proceeding. The
    Divisional Court held that if King Road used monies that it had received from
    the owners to pay Webdensco, which would be trust funds, then Webdenscos trust
    claim was extinguished, leaving only Great Northern with rights to the trust
    funds. Put another way, if King Road used monies impressed with a trust in
    favour of the subcontractors, then Webdenscos claim to the trust funds was
    gone, leaving only Great Northern with the right to claim against the trust
    funds. King Road did not acquire any right to claim against those trust funds.

[26]

On
    this point, at the hearing before the Divisional Court, the panel raised with
    counsel whether s. 11 of the
Construction Lien Act
played a role in
    the proper analysis of the issues raised. Given that the question was raised by
    the panel, the parties were given leave to file written submissions on the
    point.

[27]

As
    I have already said, the contractor had, at some point, settled the claim of
    Webdensco and taken an assignment of its lien. This then raised the issue
    whether that arrangement permitted the contractor to stand in the shoes of
    Webdensco when it came to the distribution of the trust funds. The appellants
    position was that the contractor was afforded all of its rights as a lien
    claimant  including the right to receive payment of Webdensco's pro-rata share
    from the trust funds. The appellant coupled this submission with its contention
    that there are separate trust funds  one for each subcontractor. Like the Divisional
    Court, I have rejected that latter argument above.

[28]

The
    Divisional Court disagreed with the appellant. It found that the result
    submitted by the appellant would only be the case if the contractor had used
    non-trust funds to pay Webdensco and receive an assignment of its lien. That
    conclusion follows from the express language of s. 11(1), which reads:

Subject to Part IV, a trustee who pays in whole or in part for
    the supply of services or materials to an improvement out of money that is not
    subject to a trust under this Part may retain from trust funds an amount equal
    to that paid by the trustee without being in breach of the trust.

[29]

In
    this court, the appellant changes tack. It now argues that the application of
    s. 11 was a new issue that ought not to have been permitted on appeal, citing
Kaiman
    v. Graham
, 2009 ONCA 77, 245 O.A.C. 130, at para. 18. The appellant also
    complains that it was not permitted to file evidence about the source of the
    funds used by King Road to pay Webdensco.

[30]

I
    do not accept either of the challenges raised by the appellant. While the
    application of s. 11 may have arisen first on the appeal, that does not make it
    a new [issue] as contemplated by the decision in
Kaiman
.
[4]
The Divisional Court was being asked to answer a specific question that
    involved the interpretation of the
Construction Lien Act
. Any section
    of the statute that might be relevant to the question to be answered had to be
    considered. If the Divisional Court thought that s. 11 might play some role in
    their analysis of the question that was before them, then the Divisional Court
    was obliged to raise the issue with the parties and permit them to make
    submissions. That is what happened.

[31]

In
    terms of the evidentiary issue, the appellant did not, at any point, ask for
    leave to file evidence as to the source of the funds. It did not do so at the
    time that the issue was raised by the panel at the hearing in the Divisional
    Court; and it did not do so in its written submissions responding to the s. 11 issue.
    Similarly, the appellant did not make any such request in this court, nor did it
    bring a motion to adduce fresh evidence. The appellant cannot complain about a
    denial of the right to file evidence that it never made any request for.
    Further, given that it was the appellant that was suggesting that the
    contractor might fall within the exception provided for in s. 11, it was the
    appellant who bore the evidentiary burden. Given that it did not seek to place
    evidence before the court on the issue, the Divisional Court was entitled to
    assume that King Road had used trust funds, i.e. funds received from the
    owners, to pay Webdensco.

CONCLUSION

[32]

The
    appeal is dismissed. The respondent is entitled to its costs of the appeal in
    the amount of $14,000 inclusive of disbursements and HST.

Released: June 1, 2021 D.D.

I.V.B. Nordheimer
    J.A.

I agree. Doherty J.A.
I agree. Harvison Young J.A.





[1]

The contracts in this case were entered into around 2012 and
    all events in issue were completed prior to July 1, 2018, the date on which numerous
    provisions of the
Construction Lien
    Amendment Act, 2017
, S.O. 2017, c. 24 came into effect.
    That Act made a number of changes to the
Construction Lien Act
,
    including changing the name of the statute to the
Construction Act
.



[2]

King Road Paving and Landscaping Inc. v.
    Plati
, 2017 ONSC 557, 64 C.L.R. (4th) 102;
King Road Paving and Landscaping Inc. v. Plati
,
    2017 ONSC 6319, 77 C.L.R. (4th) 165.



[3]

King Road Paving and Landscaping Inc. v.
    Plati
, 2017 ONSC 7675, 86 C.L.R. (4th) 331.



[4]

See the recent discussion of this distinction in
R. v. G.F.
,
2021 SCC 20, at para. 93.


