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Trust Fund

SGJ Northland Steel Manufacturing Inc. v. Local Decor Designs Inc. 2017 Ont SCJ

Owner sued the general and its sole officer and director because the general took deposit monies, completed only part of the project, and then abandoned the project. The judge held that the final cost to the owner of completing the project was $105,000 more than what the owner had contracted to pay the general, of which $44,000 was used to pay unpaid lien claimant subcontractors. The judge held that there was a breach of trust for which the sole officer and director would be liable under section 13 of the Construction Lien Act. The judge therefore held that the individual was liable for the full $105,000. We note that no one represented the individual or the general at the hearing. We have a problem with this decision. There was no analysis to determine why a third party would have a complaint against a trustee for breach of that trust to a beneficiary. The owner was not a beneficiary to that trust. If the owner had taken an assignment of the funds paid to the lien claimants, it may have been able to claim for the $44,000 paid to them, but there is no evidence that this took place and there is no reason, regardless, why the individual should be liable for the additional $61,000.

Written by Jonathan Speigel Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.