In our November, 1996 newsletter, we noted that the weight of authority supported the view that there was a breach of trust if overhead costs were paid before payments were made to unpaid suppliers and subcontractors. This is no longer a question of weight; it is now a fact. In Heritage Masonry Ltd. v. De Bartolo, a 1996 decision, the Ontario Divisional Court upheld the trial judge’s decision that payment of overhead costs before payment of suppliers was a breach of trust.
In our November, 1996 newsletter, we also discussed whether payment of direct overhead costs could be classified as a breach of trust. We argued that if an overhead cost could be directly allocated to a particular project, it would not be a breach of trust to pay that cost. In Shield Sprinkler & Fire System Ltd. v. Vahuki Construction Inc., a 1996 Ontario Court (General Division) case, the judge disallowed all overhead costs, direct or indirect.