T-4637-73
Black & McDonald Limited (Plaintiff)
v.
The Queen as represented by the Minister of
Public Works (Defendant)
Trial Division, Urie J.—Toronto, January 14,
1974.
Crown—Contract for work and materials—Payment
bond—Bankruptcy of contractor—Action by subcontractor
against Crown—Application to strike out statement of claim
on ground that Crown should not be party—Financial
Administration Act, R.S.C. 1970, c. F-10, s. 86(1X2).
An application to strike out the statement of claim was
allowed on the ground that it discloses no reasonable cause
of action. An action was instituted by a subcontractor
against the Queen for $49,375 by virtue of work done and
materials supplied on behalf of the Queen under a contract
with a general contractor who subsequently became bank
rupt. A labour and material payment bond had been issued
and the plaintiff based its action on the provisions of the
bond which referred to the defendant as obligee and claimed
the defendant is indebted to it as trustee for moneys paid or
payable under the bond.
Held, (1) the plaintiff must establish the claim against the
trustee in bankruptcy of the contractor; (2) under the bond
the plaintiff may sue the trustee in bankruptcy or the surety
but not by implication, the Queen; (3) this is not a defence
to be dealt with in the pleadings or after trial but goes to the
root of the action and may be dealt with under Rule
419(lxa) of the Federal Court Rules; (4) if the surety had
not paid moneys payable under the bond to the defendant,
section 86(1) and (2) of the Financial Administration Act,
R.S.C. 1970, c. F-10 clearly indicates that the Crown ought
not to be a party to an action on the bond.
McDougall General Contractors Ltd. v. The Foundation
Co. of Ontario Ltd. [1952] O.R. 822, agreed with.
APPLICATION to strike out statement of claim.
COUNSEL:
R. Hull for plaintiff.
E. A. Bowie for defendant.
SOLICITORS:
Woolley, Hames, Dale and Dingwall,
Toronto, for plaintiff.
Deputy Attorney General of Canada for
defendant.
URnE J.—The defendant seeks an order in this
application striking out the statement of claim
on the ground that it discloses no reasonable
cause of action. The motion is brought pursuant
to Rule 419(1)(a).
While I am reluctant to grant such an order, in
my view I must do so. The plaintiff takes the
position that it has alleged in its statement of
claim that the defendant is indebted to it in the
sum of $49,375.00 by virtue of work done and
materials supplied by it pursuant to a subcon
tract between the plaintiff and W. A. McDougall
Limited for the supply and installation of
mechanical work in the construction of
R.C.M.P. Headquarters in the City of Toronto.
W. A. McDougall Limited was the general con
tractor for the work under an agreement with
the defendant. A labour and material payment
bond issued through the Halifax Insurance
Company was furnished by the McDougall
Company which at some stage of the work
became bankrupt. The plaintiff bases its action
herein on the provisions of the bond, which
refers to the defendant as obligee thereunder, in
that it provides that the moneys payable there-
under are "for the use and benefit of claimants
as hereinbefore defined". It submits that it is a
claimant by definition and that the obligee
therefore is indebted to it as a trustee for the
moneys paid or payable pursuant to the terms of
the bond.
I cannot agree with the plaintiff's contention
for the following reasons:
1. The plaintiff has not established its claim
against the trustee in bankruptcy of W. A.
McDougall Limited. Until such liability is
established there is no triable issue between
the plaintiff and Her Majesty the Queen. See
McDougall General Contractors Limited v.
The Foundation Company of Ontario Ltd.
[1952] O.R. 822.
2. Paragraph numbered 2 in the bond clearly
spells out that subcontractors claiming against
the general contractor "may sue on this
bond" and in my view that suit refers to one
against the general contractor (or in this case
its trustee in bankruptcy) and/or the surety,
the Halifax Insurance Company, but not by
implication Her Majesty the Queen.
3. This is not a defence that must be dealt
with in the pleadings or after trial, but goes to
the root of the action and may be dealt with
under Rule 419(1Xa).
4. Moreover, if the surety has not paid
moneys payable under the bond to the
defendant, section 86(1) and (2) of the Finan
cial Administration Act, R.S.C. 1970, c. F-10
clearly indicates that the Crown ought not to
be a party to any action brought by virtue of
the bond.
In view of my proposed disposition of the
motion it is unnecessary for me to deal with
whether or not the plaintiff is entitled to the
declaration or order for mandamus claimed, in a
case of an action against Her Majesty the
Queen.
An order will go striking out the statement of
claim and dismissing the action with costs.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.