Legal Blog

Trust Funds & Lien Assignment

Great Northern Installation Services Ltd v. King Road Paving and Landscaping Inc. 2019 Ont SCJ (Div Ct)

Players: an owner, a general, 2 subs, and the lawyers for the general. General, through the services of the lawyers, obtained judgment against the owner. Similarly, the 2 subs, pursuant to their claims for liens, obtained judgment against the general and, on account of holdback, against the owner. The money actually available from the owner was insufficient to pay the subs and that money was allocated between them on a pro rata basis. One of the subs had assigned its claim to the general. The general therefore claimed the money to be paid to that sub. Realising that the general otherwise had no money to pay them, the general’s lawyers obtained a charging order against any money to be paid to the general. That charging order would have allowed the lawyers to scoop the funds payable to the sub who had assigned its claim, but only if those funds were not to be held in trust for the other sub. The court held that, since the general had not proven that the money it paid to obtain an assignment from the sub came from non-trust funds, the sub who had not assigned its claim was to be paid first. This money exhausted the money that was available, the general was therefore to receive nothing, and the lawyers who had a charging order of what was ultimately nothing, received nothing. Query: would the result have changed had the general used a 3^rd party to take an assignment of the claim for lien?

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