Clarkson Co. Ltd. v. Canadian Bank of Commerce et al.

Clarkson Co. Ltd. v. Canadian Bank of Commerce et al.

The sums received by the contractor were impressed with the statutory trust under s.3(1); the bank, which had knowledge of the trust and unpaid subcontractors, failed to discharge the onus of proving the s.3(3) exception; alternatively the contractor had a discretionary power as trustee and the evidence showed it chose to apply the funds for beneficiaries, so the bank could not properly appropriate them; appeal allowed and trial judgment restoring the declaration of trust and reference was reinstated.

Citation
[1966] SCR 513
Parties
Plaintiff Appellant: The Clarkson Company Limited, Trustee in Bankruptcy of the Estate of John Ritchie Limited; Defendant Respondent: Canadian Bank of Commerce; Defendant Respondent: Gels General Contractors Limited
Court
Supreme Court of Canada
Jurisdiction
Canada
Judgment Date
26 April 1966
Procedural Posture
Appeal: Mechanics' Lien / Statutory Trust Action / Supreme Court of Canada Judgment on Appeal From Court of Appeal for Ontario
Outcome
Appeal allowed; judgment of Court of Appeal set aside and trial judgment restored
Legal Topics
Statutory Trust, Breach of Trust, Priority of Creditors, Appropriation of Funds, Onus of Proof, Trustee Discretion
Source Language
English
Mechanics' Liens Trusts Banking Construction Contracts Property Law Statutory Trust Breach of Trust Priority of Creditors +3 more

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Parties

The Clarkson Company Limited, Trustee in Bankruptcy of the Estate of John Ritchie Limited

Plaintiff Appellant

Canadian Bank of Commerce

Defendant Respondent

Gels General Contractors Limited

Defendant Respondent

Procedural Posture

Appeal: Mechanics' Lien / Statutory Trust Action / Supreme Court of Canada Judgment on Appeal From Court of Appeal for Ontario

Legal Issues

  1. 1 Whether sums received by contractor under s.3(1) of The Mechanics' Lien Act constituted a trust fund
  2. 2 Whether the bank, with knowledge of the trust, could apply the trust funds in reduction of the contractor's overdraft
  3. 3 Interpretation of s.3(3): whether it permits contractor to retain/use funds to recoup payments made from own funds

Ratio Decidendi

The sums received by the contractor were impressed with the statutory trust under s.3(1); the bank, which had knowledge of the trust and unpaid subcontractors, failed to discharge the onus of proving the s.3(3) exception; alternatively the contractor had a discretionary power as trustee and the evidence showed it chose to apply the funds for beneficiaries, so the bank could not properly appropriate them; appeal allowed and trial judgment restoring the declaration of trust and reference was reinstated.

Court Disposition

Appeal allowed; judgment of Court of Appeal set aside and trial judgment restored

Orders

  • Trial judgment restored declaring $31,999.01 (or so much as found due) constituted a trust fund under s.3 of The Mechanics' Lien Act
  • Reference to Master to ascertain which of the plaintiff and others on whose behalf it sues are to participate in the fund and their respective degrees of participation and amounts discharged from the trust