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Court Forces Contractor to Pay Over $100K for Failure to Account for Distribution of Trust Money

Zeilikman Law

Zeilikman Law

Case Summary

In a recent decision, the Ontario Superior Court of Justice ruled in favour of the plaintiff for materials and money supplied for a variety of construction projects. The facts of this case are pretty straightforward. The plaintiff brought an action for money and materials supplied to the defendants, the defendants filed a statement of defence, which was struck, and the plaintiff brought a motion for judgement. The central issues in this motion were two part: 1) whether the defendant was in violation of section 8 of the Construction Lies Act (“CLA)”); and 2) whether any such liability should survive a discharge order under the Bankruptcy and Insolvency Act (“BIA”).

Paragraph 7 of the decision provides a succinct summary of the law surrounding section 8 of the CLA. First, the plaintiff must establish that they gave the defendant money to be put towards construction. This requires establishing: 1) that the plaintiff supplied materials to the projects on which the defendant is the contractor or subcontractor; and 2) that the defendant has received or is owed monies on account of the contract price for the project and that the defendant owes the plaintiff money for the materials supplied. The Ontario Court of Appeal has further clarified that the plaintiff is not required to point to a specific and known project at the time of the investment, so long as they can establish a link between the money and an improvement. If the plaintiff succeeds in establishing that they gave money to the defendant to be used for a construction project, they will gain the protection of the trust imposed by section 8 of the CLA and the court’s focus shifts to the defendants who must then prove that all payments of trust funds were made to the proper beneficiaries of the trust. If successfully established, proving payment to proper beneficiaries will avoid liability under section 8 of the CLA.  

In this case the plaintiff’s job was made easier by the fact that the statement of defence was struck. The defendants were not able to account for the distribution of monies held in trust and were thereby found liable to the plaintiffs. Liability was extended to the directors and officers of the corporate defendant for their failure to properly account for the funds they controlled on behalf of the plaintiffs. Under section 13 of the CLA, individual defendants can be held jointly and severally liable for breach of trust where they acted as ‘controlling minds’ of a corporate defendant, and their acquiescence or assent amounted to a breach of trust. Further, the court highlighted that misappropriation of trust funds and liability under sections 8 and 13 of the CLA constitute sufficient wrongdoing to warrant survival of a discharge under the BIA.

OUR THOUGHTS

This case highlights the importance of maintaining a detailed and up-to-date accounting of all incoming and outgoing payments in respect of trust funds. Doing so protects against the eventuality where the project becomes insolvent and suppliers seek to have their investment(s) repaid in full. Failing to account for disbursements made out of the trust fund opens up contractors to the unfavourable position of potentially having to pay out-of-pocket for investments.

Another interesting aspect of this case is the court’s decision in respect of the BIA. The court’s decision to have the liability withstand a discharge order under the BIA is significant for the defendants because it essentially ensures repayment. Bankruptcy and insolvency should always be an underlying concern for creditors and judgement creditors because it has the potential to thwart repayment and leave creditors with nothing despite their legal entitlements.

The above article is for general information purposes only, does not constitute legal advice or create a solicitor-client relationship. Because each case is unique and factually driven, if you have concerns with regard to the foregoing issues, please make an appointment with one of our lawyers or a qualified legal practitioner elsewhere. We represent clients in the Greater Toronto Area including Toronto, North York, Markham, Vaughan, Thornhill, Newmarket, Aurora, Brampton, Mississauga, Barrie, Ajax, Whitby, Pickering and Oshawa.

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Legal Receptionist

Zeilikman Law is an employment law firm located in Vaughan, Ontario. We are looking to hire a legal receptionist to join our firm. Preference will be given to candidates who have experience working as a receptionist at another law firm.

Location: Vaughan, Ontario.

Start Date: Immediately.

Hours: Monday to Friday, 9 am to 5 pm. Full time. In-person only. This is not a remote work position.

Wages: 35,000 to 40,000 per year.

Duties and Responsibilities:

  • Manage our firm’s multi-line telephone system to receive incoming calls.  Screen incoming telephone call inquiries to determine the nature of the telephone call and provide standard information related to our legal services.  Take and deliver messages and route incoming telephone calls to the appropriate staff person.
  • Answer general inquiries coming from the firm’s social media and website email.
  • Welcome in-person visitors upon arrival.  Direct visitors to the appropriate staff person and / or office or boardroom.
  • Organize in-person visitor schedule to prevent overlap and multiple bookings.
  • Receive, sort, and distribute daily mail and deliveries.
  • Arrange for couriers.
  • Keep front reception, kitchenette area and boardroom tidy.
  • Perform various clerical duties such as filing, photocopying, and faxing on an as-needed basis.
  • Process client or other payments.
  • May be asked to run minor errands outside of office such as attending post office to arrange a courier or pick up mail.
  • May be asked to assist other law clerks or lawyers of the firm as required and as appropriate.
  • Any other basic administrative duties or tasks as deemed appropriate.

Required Skills:

  • Basic knowledge of general office procedures including filing, faxing, and printing and copying.
  • Basic word processing computer skills.
  • Proficient in receptionist and telephone practices, etiquette, and decorum.
  • Professional attitude and appearance.
  • Excellent organizational skills.
  • Positive customer service attitude is a must.
  • Must be able to maintain confidential and sensitive information.

Education and Experience:

  • Highschool diploma or equivalent.
  • 1 – 2 years’ experience in an office setting with an emphasis in accounting, reception or clerical work is required.   We would prefer experience in a law firm environment.

Applications for this position should be sent via email to jennifer@zeilikmanlaw.com. All applications should include a cover letter, resume and at least two references. Only successful candidates will be contacted.