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Survival

Section 178(1)(d) of the Bankruptcy and Insolvency Act provides that a discharge from bankruptcy does not release the bankrupt from any debt or liability arising out of fraud, embezzlement, misappropriation, or defalcation while acting in a fiduciary capacity. Assume that a subcontractor establishes a breach of a general contractor’s obligations under the trust provisions of the Construction Act and, perhaps, also establishes liability against one or more of its directors and officers under s. 13 of the Act. Can the sub properly claim that the breaches should result in a declaration that the judgment against the trustee contractor, and its directors and officers (if applicable), survives a subsequent bankruptcy? This question has been answered a number of times, most recently in Matthews Equipment Limited v. Yalda Contracting Inc., a 2021 decision of the Ontario Superior Court of Justice.

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An equipment rental supplier delivered equipment for the corporate contractor’s use on six construction projects. The contractor did not pay the aggregate amount of $72,000 for the rentals and the supplier commenced an action against the contractor and its two directors.

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