An often overlooked remedy under the Construction Lien
Act is a claim for a breach of trust. This is a very
powerful remedy because it can permit trades and suppliers in the
construction industry to pursue personal liability for non-payment
against officers, directors and anyone else who have effective
control of a contractor, subcontractor or owner's activities.
If the company has no funds, a trade may still be able to
obtain some payment (so long as the individuals behind the company
are not similarly insolvent).
The remedy may seem odd as although it is found within the
Construction Lien Act, there is no requirement that a lien
be registered in order to pursue it. The breach of trust
provisions apply to a construction lien project as long as the work
or material supplied was originally something in respect of which a
lien could have been filed.
However, the remedy does fit within the scheme of the
Construction Lien Act which tries to promote fair, honest
dealings and protect those who contribute to a project from being
left unpaid for work performed. The Construction Lien
Act sets up a requirement that owners, contractors, and
subcontractors who receive money on a project use those funds first
to pay for services and materials supplied to that project.
The failure to use these funds for this purpose can amount to
a breach of trust. This breach of trust can attract personal
liability for those with effective control of the company.
Whenever there has been non-payment for services or materials
on a construction project, whether or not a lien has been
registered, trades and suppliers should consider pursuing an action
for breach of trust as a means of securing payment.
Conversely, contractors and subcontractors need to be aware
of these possible claims to protect themselves against them.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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