New Trust Obligations Where the July 1, 2018 Changes Apply:

 

  • our Courts have previously held that it is a technical breach of trust for a contractor or subcontractor who receives monies intended to pay those beneath them in the construction ladder for their supply of services or materials to "co-mingle" those construction trust funds in a single bank account, with proceeds from other improvements or sources. 

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  • While the Construction Act has not gone so far as to require a separate account for each improvement, contractors and subcontractors may now deposit trust funds together in one account so long as they maintain separate written records detailing the amounts received into and paid out of the funds;

  • in addition, the Act now deems the trust funds held in the single account to be traceable, so long as the written accounts have been kept as required. 

 

  • it is anticipated that the new trust provisions will help unpaid contractors and subcontractors to get paid, particularly in the event of an insolvency above them in the construction ladder;

  • anyone who receives trust funds, however, will have to take care to keep the accounts as required as a failure to do so will in and of itself be a breach of the trust provisions of the Act.

 

As always, determining one's rights and obligations under construction legislation can be very complicated.  The above is intended for general information and not for use in any particular circumstance.  It is recommended that experienced construction law counsel be consulted in this regard. 

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