The trust provisions under the Construction Act (the “Act”) provide for obligations and rights for contractors/subcontractors additional to those established by common law. In the past few years, the law surrounding trusts under the Act has evolved to expand said obligations onto owners, financers, and even assignees of monies that were properly for the benefit of contractor/subcontractor beneficiaries.
Recently, the Court in the case of Electro-Works Ltd. v. Fogler, Rubinoff LLP (“Electro-Works”) further expanded this scope to include monies received through settlement funds and applied as payment for lawyers’ fees. In many ways, the Electro-Works case serves as a cautionary tale to all lawyers in the construction bar.
There were five main actors in the Electro-Works case:
- R & B Properties (Queen Street) Inc. (“R&B”), who was the owner of the subject property/project;
- Glenn Steven Abugov (“Abugov”), who was the director and officer of R&B;
- I.C.I. Construction Corporation (“I.C.I”) who was the general contractor for the subject project;
- Electro-Works Ltd. (“EWL”) who was a subcontractor of I.C.I. for the subject project; and
- Fogler, Rubinoff LLP (“Fogler, Rubinoff”), who acted as counsel for I.C.I. in a lien claim against R&B as well as in a breach of trust claim commenced by EWL against I.C.I., the quantum of which was disputed by I.C.I.