In the Star Wars movies, there are points where the Jedi seem to have wiped out the Sith (or vice versa) only to find out that the other has come back to life. Stakeholders, lawyers and insolvency professionals who had seen, or hoped for, the end of the statutory construction lien trust after bankruptcy might be forgiven for feeling like that right now after the January 14, 2019 decision of the Court of Appeal for Ontario in The Guarantee Company of North America v. Royal Bank of Canada, which arose out of the receivership and bankruptcy of A-1 Asphalt Maintenance Ltd.
This decision, by a unanimous five-judge panel, has upended what had been a line of three trial level cases over 4+ years in Ontario (Atlas Block, Kappeler Masonry and A-1 Asphalt at the trial level) holding that this statutory trust in what is (now renamed) the Ontario Construction Act was not effective after a bankruptcy. Notably, the reasoning in those three cases, while not uniform, clashed with other trial level decisions from BC. Nova Scotia, and with the Alberta Court of Appeal decision in Iona Contractors.
The Court of Appeal’s decision firmly establishes that these trusts can be effective after bankruptcy. Irrespective of whether one regards that as good or bad, a positive takeaway is that this brings Ontario into line with the other common law jurisdictions in Canada on this point, including the other appellate level decision in Iona Contractors. Stakeholders and practitioners will therefore be able to address this issue somewhat more uniformly.
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