Trust Provisions in The Builders’ Liens Act

Under The Builders’ Liens Act of Manitoba there are certain provisions buried in the legislation that touch upon issues not directly tied-in with the other sections concerning your ability to file a lien on a property. These provisions are known as the “Trust Provisions” and concern the money received by either the general contractor at a job, the subcontractors at a job, or the owner of the property where the job is being completed.

The gist of these provisions is that all sums of money received by a contractor, subcontractor or monies payable to contractors by property owners constitute a trust fund for the benefit of contractors, subcontractors and other persons or businesses who have supplied materials or provided services for the purposes of completing the main contract at the property. Further, these monies are also considered as a trust fund for the benefit of the Workers’ Compensation Board in the event any contractor fails to remit payments to the W.C.B. as required.

Whether you’re a contractor, subcontractor, or the property owner, so long as you are keeping money in your possession that ultimately is to be paid out to another person or company, your primary duty with that money is to not appropriate or convert any of those monies making-up the trust fund, for your own use or towards any use that the money is not in reality intended to be used for. Basically, don’t be funny with the money, and make sure it goes into the pockets of whom is rightfully owed that money.

As private business goes, there are many ups and downs, and one project may not flow as well as the other one you’re managing. However, your legal duty, if you’re managing the trust for the benefit of anybody else, is to ensure that you do not take money owing on one project and apply it to another in order to keep that second project going. That very action is in direct violation of the Act’s trust provisions and what could result in you finding yourself or your business on the receiving end of what could end-up being lengthy, stressful, and costly legal proceedings. That one bad decision can not only mess-up your pocket-book in the present and down the line, but if you’re in business for yourself or are managing a project for yourself, you need to also be concerned with your reputation.

Those are the risks you are voluntarily taking when making a go of things for yourself. Yet, you might be thinking: “So what if I breach the trust? I need to keep all of these projects going.” Well, aside from the potential civil lawsuits you could face for not abiding by your legal duty of properly managing that money, the Act also provides for fairly serious penalties resulting from a breach of the trust provisions.

The potential penalties you could face if found guilty on summary conviction of breaching the trust range from being fined up to an amount of $50,000.00, imprisonment for a term of up to two years, or possibly, if the facts are especially egregious, both a fine and imprisonment.

If you’re thinking: “I’m incorporated, so personally, I’m protected. Go after my company, we’ll fold, and I’ll just reincorporate a new company and carry-on.” In fact, even if incorporated, you can still be personally subject to the penalty provisions of the Act. If you’re a director or officer of the company, and you have a part in the breach of the trust, then not only will the corporation be subject to the noted potential penalties, but you may be as well in your capacity as a director or officer of the concerned company.

The risks you decide to take and then the risks you face from those decisions will vary with every specific situation, so if you have questions about a course of action you’re thinking of taking or only realize after the fact that you’re not sure if what you’ve done is on the up and up, then be sure to contact your lawyer to discuss those issues.

Even if you’re just starting-up a new business and want to have a better understanding of the law you may be subject to, it’s probably a good decision to have a meeting with your lawyer to talk about your plans and develop a plan of action while you’re still in shallow waters and can see the bottom; a pro-active position will always generate better results than simply reacting to a situation after it’s already happened.

If you have any further questions or need advice about your particular situation, please feel free to contact our office to schedule a consultation to further discuss your concerns.