Canada: The Guarantee Company Of North America v. Royal Bank Of Canada (Aka A-1 Asphalt) – Return (Or Revenge?) Of The Statutory Lien Trust

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.

The Court of Appeal's decision comprehensively addressed many of the arguments made why such trusts should not survive bankruptcy. For example:

  1. the statutory trust is invalid because it was intended to apply to bankruptcy, which is in federal jurisdiction – the fact that this was one of its objectives does not mean that the province is legislating in bankruptcy;
  2. the statutory trust is invalid because it conflicts with the Bankruptcy and Insolvency Act – no conflict arises because the Supreme Court held in Henfrey that the provinces could deem a statutory trust to arise (for the Crown or for third parties, like lien claimants here) and there is no conflict with the policy of the BIA. Further, deeming a particular class of funds to be a trust is different than other after-the-fact deeming provisions (such as in employment or pension benefits areas upon a deficit arising);
  3. as noted at the trial level, there was no trust on the payor of the funds – the fact that the municipalities that had paid the trustee of A-1 Asphalt were not treating those funds as under a trust is not relevant to whether the province can deem those funds to a trust in the hands of A-1 Asphalt (or its trustee) as the recipient; and
  4. the funds in question were not kept strictly apart from any other funds – ordinary rules of treating other types of trust funds still apply, so if the funds are identifiable, as they were in this case, then they are traceable.

The commentary about identifying and tracing lien trust funds will be particularly important for Ontario practitioners to pay attention to in the future. The Court of Appeal in GCNA/A-1 Asphalt held that simply receiving funds and putting them together with other funds did not deprive them of their trust quality (or at least not right away). While in that case the receiver/trustee was under a court ordered obligation to keep one account for all the funds said to be trust funds, the important issue for practitioners going forward is what happens if a receiver or trustee does not treat such fund separately in the future? It does not take much of a stretch to foresee arguments of personal liability for court officers if they do not do so.

A corollary to that identification and tracing of funds point is worth mentioning. This decision (and for that matter those in other provinces) only stands for the proposition that a lien trust can be valid after bankruptcy. A critical part of that is being able to identify which funds are deemed to be trust funds. When dealing with funds on hand at a bankruptcy, that is not always possible (and if so, is certainly not easy). All that this decision means is that the lien trust needs to be taken into account again, not that it will prevail in all cases.

Is this really the last word on this, though? Just like how the Star Wars saga seems to depend on finding new Sith and Jedi conflicts, the answer is likely no, for at least two reasons:

  1. the bank in GCNA/A-1 Asphalt can attempt seek leave to the Supreme Court of Canada, and while the fact that this case brings Ontario into line with the sole other recent appellate authority in Iona Contractors as well as the other trial decisions won't help that attempt, others have made the mistake of treating a decision as the last word while appeal rights remain; and
  2. the bank was not permitted to make one argument by the Court of Appeal in GCNA/A-1 Asphalt, which would have questioned whether the bank's security nonetheless applied over a statutory deemed trust (as in Sparrow Electric). The Court of Appeal refused to consider that argument, because (among other things) it had not been made at the trial level. What happens if that sort of argument is properly made is, therefore, for another day.

Subject to those open issues, the statutory construction lien trust is now applicable again in Ontario after bankruptcy when funds can be identified and traced (while it never seems to have been inapplicable in BC, Nova Scotia and Alberta).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions