In High Tech Power Inc. v. BDA Inc., 2024 ONSC 4327, Justice Janet Mills of the Ontario Superior Court of Justice clarified that payment into a lawyer's trust account does not constitute "payment" under Section 13.19(2) of the Construction Act. This decision underscores the court's commitment to enforcing prompt payment and preventing practices that undermine the prompt payment and adjudication framework.
Background of the Dispute
High Tech Power Inc. successfully secured an adjudication award of $316,960.26. Instead of transferring this amount directly to High Tech, BDA Inc. deposited the funds into its lawyer’s trust account. While some of the funds were eventually released to High Tech, the balance was not paid.
BDA sought a motion to reduce its lien bond. While High Tech was not opposed to a portion of the relief sought on the motion, it was opposed to BDA’s position that the lien bond be reduced by the full adjudicated award, rather than just the amount which had been released to High Tech.
Payment and Trust Issues
Under Section 13.19(2) of the Construction Act, a party required to pay an adjudicated amount must do so within 10 days of the adjudication determination. Upon agreement, BDA’s lawyer released $161,037.68 to High Tech to cover a debt owed to its unionized workers, leaving $155,922.58 in trust. High Tech’s surety demanded the funds remain in trust pending a preservation order.
The central issue was by how much the lien bond should be reduced. BDA argued that the lien bond should be reduced by $316,960.26, being the entire adjudicated amount, whereas High Tech argued that the lien bond should only be reduced by the amount it received, being $161,037.68.
Legal Precedents and Tests
The decision draws on the legal test established in Pentad Construction Inc. v. 2022988 Ontario Inc., 2021 ONSC 824, and reaffirmed in Demikon Construction Ltd. v. Oakleigh Holdings Inc. et al., 2024 ONSC 2151. These cases outline that the court's authority to adjust the amount paid into court as lien security depends on whether the evidence provided substantiates a reasonable basis for the claim.
Since a motion under s. 44(5) is akin to a summary judgment motion, both parties had to put their best foot forward: BDA had to show that there was no reasonable basis for the amounts claimed by High Tech in its lien, and High Tech was required to provide evidence to demonstrate that there was a reasonable basis for the amount it claimed.
Court’s Finding
Justice Mills concluded that the funds held in BDA’s lawyer's trust account could not substitute for payment to High Tech. The funds remained under BDA's control and could potentially be managed in a manner contrary to High Tech’s interests.
As a result, Justice Mills reduced the lien bond by $161,037.68, reflecting the actual amount released to High Tech, and awarded reasonable and proportionate costs to High Tech.