In a September 19, 2017 decision from the bench in the matter of
Bank of Montreal v. Kappeler Masonry Corporation, et.
al.1 ("Kappeler
Masonry"), Madam Justice Conway of the Ontario
Superior Court of Justice (Commercial List) (the
"Court") confirmed that commingling of
construction project receipts in a receiver's estate account is
fatal to a Construction Lien Act (Ontario) (the
"CLA") trust claim in the face of a
debtor's bankruptcy.
Conway J. followed the Court's earlier decision in Royal
Bank of Canada v. Atlas Block Co. Limited2
("Atlas Block") and, in
particular, Atlas Block's application of the general
principles regarding provincial deemed trusts set out by the
Ontario Court of Appeal (the "OCA") in
GMAC Commercial Credit Corp. Canada v. TCT Logistics
Inc.3
("TCT"). TCT held that
provincial deemed trusts that do not bear all characteristics of a
common law trust cannot be effective in bankruptcy to alter the
priority scheme set out in the Bankruptcy and
