Legal Blog

Trust Fund

Bank of Montreal v. Kappeler 2017 Ont SCJ

A masonry contractor was put into receivership and ultimately into bankruptcy. The block and concrete subcontractor claimed a deemed trust under section 8 of the Construction Lien Act and therefore claimed priority over the secured creditor. The judge relied on RBC v. Atlas Block (2014 Ont SCJ). She noted that the Bankruptcy and Insolvency Act took precedence over the CLA such that a deemed trust under the CLA did not apply. Only a common law trust would allow the subsub to gain priority over the secured creditor. In this case, the judge held that there was no common law trust because there was no certainty of subject matter. The receivership order did not require any segregation of funds and all funds were put in the same receiver account. The judge held that the fact that funds were received from various projects and could be traced and identified was irrelevant because the trust had not arisen in the first place.

Written by Jonathan Speigel Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.