Breach of Trust in Ontario Construction Projects and the Timeline to Pay

  • October 28, 2021
  • Ivan Merrow

The trust provisions in the Ontario Construction Act (the “Act”) impose serious obligations to retain and account for funds at every level of the supply chain. The consequences for failing to do so are serious. The trust provisions provide a direct personal cause of action against officers and directors who assent to or acquiesce in conduct they reasonably ought to know amounts to a breach of trust.

In the recent case Clearwater Structures v. 614128 Ontario Ltd. o/a Trisan Construction, 2021 ONSC 5601 (CanLII) (“Clearwater”), the court suggests that in addition to obligations to segregate and hold funds for trust beneficiaries in the Act, there may also be circumstances where there is an implied obligation to pay those trust funds in a timely fashion.

Reviewing Breach of Trust

Funds received by an owner or contractor for a construction improvement in Ontario are generally impressed with a deemed trust. The trust is for the benefit of the contractor(s) owed amounts for services or materials supplied to the project. This is intended to keep funds in the construction supply chain. Personal liability can be imposed on those who knowingly take funds out of the project and leave contractors unpaid.