Executive Summary: Key Legal and Evidentiary Issues

• Characterization of the Vector/CBCC mortgage as either a purchase-money mortgage under s. 78(3) or a “building mortgage” under s. 78(2) of the Construction Act, and the resulting priority over Terra Bona’s construction lien.
• Evidentiary sufficiency of contemporaneous loan documentation and affidavit evidence to prove the lender’s intention as to use of funds (land acquisition versus financing of an “improvement”).
• Timing and validity of Terra Bona’s lien, including whether lien rights arose before or after registration and advances under the first mortgage, and whether the lien was properly preserved and perfected.
• Legality of CBCC’s unilateral use of an Application (General) under s. 75 of the Land Titles Act to delete Terra Bona’s lien without notice, consent, or a prior court order.
• Interaction and conflict between the detailed lien discharge regime in Part VII of the Construction Act and the general title-amendment power of the land registrar under the Land Titles Act.
• Procedural and jurisdictional questions regarding which issues (validity of mortgage, lien timeliness, rectification of title, security for the lien) must instead be determined in the separate receivership proceedings.

Facts of the dispute
The dispute arises from a planned high-rise redevelopment project in Toronto in which the property owner, Cacoeli Kennedy Steeles LP (through its general partner 2778754 Ontario Ltd.), purchased a commercially tenanted property for $17 million with the intention of constructing a 30-storey, 315-unit residential tower with retail and office space. Terra Bona Developments Ltd. entered into a development management agreement with the general partner in December 2020, later amended in April 2022, to provide pre-construction development management and consulting services alleged to be “necessary and essential” to the planned improvement and to have increased the value of the land. Physical construction never actually commenced; the site remained occupied by pre-existing tenants and existing structures. Terra Bona later claimed that a large portion of its consulting fees remained unpaid and asserted a construction lien to secure its alleged entitlement.
Financing structure and mortgages
To complete the initial acquisition, Cacoeli arranged an $8.5 million first mortgage from Vector Financial Services Limited. Vector’s commitment letter stated that the purpose of the loan was to “finance the acquisition of the real property,” with detailed use-of-funds provisions covering the purchase price, land transfer tax, interest reserve, lender fees, legal costs, and related closing expenses. The commitment also contemplated, in a separate option that was never exercised, potential future construction financing for the project. The Vector loan was advanced in a single advance at closing and the funds, according to both documentary and affidavit evidence, went to the vendor and to acquisition-related items rather than to pay trades or finance any actual “improvement” work. In November 2022, Clifton Blake Capital Corp. (CBCC) entered into a refinancing transaction whereby it advanced $8.5 million and took an assignment of Vector’s first mortgage. The CBCC commitment letter described the purpose of its loan as assisting the owner to refinance existing debt and pay associated financing costs, and the advance was disbursed entirely to Vector in accordance with an assignment of security and a transfer of charge registered on title. CBCC thereby stepped into Vector’s position as first mortgagee, subject to any priorities arising under the Construction Act.
The construction lien and receivership context
In November 2023, Terra Bona preserved a construction lien in the amount of $3,434,438.77 (inclusive of HST) against the property for unpaid consulting fees. Terra Bona’s lien relied on the development management agreement and alleged ongoing pre-construction services which, it said, materially enhanced the property’s value. Terra Bona issued a statement of claim and certificate of action in December 2023, although the certificate of action was not immediately registered on title. Terra Bona maintains that it continued supplying services into early 2024 and challenges both whether it abandoned the project and whether any termination by Cacoeli was valid. While these issues bear on lien timeliness, they were not fully determined in this motion because of the procedural posture. In parallel, the Ontario Securities Commission brought proceedings resulting in the appointment of a receiver over Cacoeli and related entities under s. 129 of the Securities Act. The receivership court later permitted the discrete priority contest between CBCC and Terra Bona to proceed before Associate Justice Robinson, on the understanding that the validity and enforceability of CBCC’s mortgage itself, as well as the ultimate status of Terra Bona’s lien, would be dealt with in the receivership. The current decision is therefore premised on an assumption (for this motion only) that CBCC’s mortgage is valid, without finally deciding that issue or prejudging Terra Bona’s challenge to the mortgage.
Competing motions on priority and lien deletion
Two motions came before the court. Terra Bona, as plaintiff and lien claimant, sought declarations including that it was entitled to a lien under the Construction Act and related relief. CBCC, as assignee first mortgagee, sought a declaration that its mortgage had full priority over Terra Bona’s lien regardless of the lien’s ultimate validity, and it also defended the steps its prior counsel had taken to remove Terra Bona’s lien from title. The immediate spark for the priority dispute was CBCC’s unilateral registration of an Application (General) under s. 75 of the Land Titles Act, asking the land registrar to delete Terra Bona’s lien on the basis that the lien had expired under the Construction Act. CBCC’s then-lawyer included a law statement asserting that the lien had lapsed because no certificate of action had been registered within 90 days of Terra Bona’s stated last supply date in the lien claim. The land registrar accepted this application and certified it, causing Terra Bona’s lien to be removed from title without notice to Terra Bona and without any prior court order. Terra Bona later attempted to register its certificate of action, but the land registrar rejected it because the claim for lien had already been deleted. CBCC then brought an ex parte motion for a declaration that the lien had expired. When that motion first came before Associate Justice Robinson, he found that the materials did not justify a finding that the lien had clearly expired, especially given that Terra Bona’s lien as a “contractor” is tied by statute to completion, abandonment or termination of its contract, not simply to the lien’s “last supply” date. He declined to declare the lien expired on the record presented and in effect signaled that the issue should proceed, if at all, on notice.
Court’s analysis on mortgage priority
The central legal issue was whether CBCC’s mortgage (standing in Vector’s shoes) was a prior, non-building mortgage with full priority under s. 78(3) of the Construction Act, or a “building mortgage” taken “with the intention to secure the financing of an improvement” under s. 78(2), in which case lien claimants may enjoy priority to the extent of any deficiency in the statutory holdbacks. The court applied the modern approach to statutory interpretation, examining the text, context, and purpose of s. 78 and the Construction Act’s overall design of protecting lien claimants but subject to explicit priority rules for mortgages. A key step in the analysis was distinguishing between funds advanced to acquire land and funds advanced to finance an “improvement,” which the Act defines as physical work on or to the land (alterations, construction, installation of essential equipment, demolition), not mere land acquisition. The judge reviewed case law recognizing that purchase-money financing generally enjoys priority over subsequent liens where the lender’s money is used to acquire the land, even if construction later commences, and that separate advances under a single mortgage can be treated differently for priority purposes depending on whether they fund land purchase or actual construction. On the evidence, the court accepted CBCC’s burden to show, on a balance of probabilities and using contemporaneous documentation, that neither Vector’s original mortgage nor CBCC’s refinancing advance was intended to finance the improvement. The commitment letters, statements of advance, and assignment documents showed that Vector’s funds went entirely to the vendor and acquisition-related costs, and CBCC’s funds went solely to pay out Vector. There was no evidence that either lender’s advances were used to pay trades, consultants, or contractors, or were tied to construction milestones or progress draws. Terra Bona argued that because the lenders knew about the planned redevelopment and required planning, zoning, design, and pro-forma materials as part of their due diligence and security package, they should be treated as having intended to finance the improvement. The court rejected this, holding that knowledge of a future development and reliance on project viability as part of underwriting do not equate to an intention to finance the improvement within the meaning of s. 78(2). Otherwise, almost any purchase mortgage for development land would be exposed to building-mortgage treatment simply because the lender knew the borrower’s plans. The court concluded that Vector’s mortgage was a purchase-money mortgage, not a building mortgage, and CBCC’s assigned mortgage and refinancing advance maintained the same character. Because the mortgage was registered at closing and no lienable services were shown to have been supplied before that date, the first lien under s. 15 arose only after the mortgage was already on title and fully advanced. Accordingly, CBCC’s mortgage fell within s. 78(3), giving it priority over Terra Bona’s asserted lien to the extent of the full amount advanced, subject to the ultimate determination in the receivership as to the mortgage’s validity and the lien’s own timeliness and validity.
Court’s findings on lien deletion and remedies
On the second major issue, the court examined CBCC’s use of s. 75 of the Land Titles Act to delete Terra Bona’s lien via a unilateral Application (General) based merely on a law statement asserting expiry under the Construction Act. The judge emphasized that lien rights are purely statutory and that the Construction Act is a “complete code” governing how liens arise, are preserved, perfected, expire, and are discharged. Part VII of the Act sets out specific procedures for the discharge, vacation, postponement, or declaration of expiry of liens, either by the lien claimant’s own act (e.g., discharge or withdrawal) or by court order on motion with an evidentiary foundation. Although s. 75 of the Land Titles Act allows the land registrar to amend the register to reflect other statutes or court orders, there is no provision in the Construction Act authorizing a mortgagee or other third party to cause a preserved or perfected lien to be removed from title unilaterally, without the lien claimant’s consent or a court order. Applying the principle that specific legislation prevails over more general legislation where they conflict, the court held that the detailed, specific lien-discharge framework in the Construction Act must govern over the general title-amendment discretion in the Land Titles Act when the subject is a construction lien. The stark contrast between the registrar’s acceptance of CBCC’s bare law statement and the court’s own earlier refusal to declare the lien expired on evidence illustrated that conflict. To harmonize the statutes, the court held that s. 75 cannot properly be used to delete a construction lien except to give effect to the mechanisms and orders contemplated by the Construction Act—such as a voluntary discharge signed by the lien claimant or a court order declaring the lien expired or vacated. On that basis, the court declared that CBCC’s application under s. 75, and the resulting deletion of Terra Bona’s lien from title, was improper and invalid and ought not to have been certified by the land registrar. However, the court declined to determine what remedial steps should follow (for example, rectifying title to reinstate the lien registration and certificate of action) or how that would interact with the receivership and any subsequent sale process. Those matters, including the lien’s ultimate validity and any relief to undo the improper deletion, were left for determination in the receivership proceedings, possibly with further directions from a Commercial List judge.
Outcome and implications
The court ultimately granted declaratory relief on the issues squarely within the narrow reference made out of the receivership. First, it declared that CBCC’s first mortgage has priority over Terra Bona’s asserted lien under s. 78(3) of the Construction Act, to the extent of all amounts advanced under the mortgage, subject to a later ruling in the receivership on the mortgage’s validity and enforceability and subject also to the lien later being proven valid and timely. Second, it declared that CBCC’s Application (General) to delete Terra Bona’s claim for lien, as registered in June 2024, was invalid. All remaining disputes—including the validity and enforceability of CBCC’s mortgage, the timeliness and validity of Terra Bona’s lien, whether and how title should be rectified to restore the lien instruments, and any security or monetary realization for Terra Bona—were expressly left to the receivership court or to be brought back before Associate Justice Robinson with appropriate consents or directions. No damages, costs, or other monetary relief were fixed or awarded in this decision, and costs were left for further submissions or agreement between the parties; accordingly, there is no determinable total monetary award, costs, or damages in favour of any party at this stage.