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.