The Supreme Court of Canada has recently held that an obligee under a la-bour
and material payment bond has a duty to inform potential claimants
of the existence of that bond. This decision will undoubtedly have wide-reaching
effects on the construction industry.
In Valard Construction Ltd. v. Bird Construction Co., Suncor Energy Inc. (Suncor)
hired Bird Construction Company (Bird) as a general contractor for an oil sand
construction project on one of Suncor’s worksites near Fort McMurray, Alta. Bird
subcontracted with Langford Electric Ltd. (Langford) for certain electrical work.
As was required under the subcontract, Langford obtained a labour and material
payment bond, issued by the Guarantee Company of North America for $659,671,
naming Bird as obligee, Langford as principal and the Guarantee Company
as surety.
The terms of the bond allowed for a “beneficiary,” – being a provider of labour or
materials who has not received payment from Langford within 90 days of the last
day upon which it provided labour or materials – to sue the Guarantee Company
on the bond for that unpaid amount. The bond designated Bird as a trustee, hold-ing
in trust for the beneficiaries their right to claim against and recover from the
Guarantee Company. The beneficiary’s right, however, was subject to a condition
that it give notice of its claim to Langford, the Guarantee Company and Bird within
Supreme Court of
Canada rules in
favour of proactive
reporting
Is an obligee bound
to advertise a bond?
LEGAL
By Anthony R. Foderaro
ICEDMOCHA / 123RF STOCK PHOTO
PILING CANADA 63
/profile_icedmocha
/profile_icedmocha
