approach taken by the majority turned what was a ben-eficial
risk-management tool into a significant liability for
general contractors.
As a result of this decision, an obligee under a labour and
material payment bond should take all reasonable steps to
inform subcontractors and suppliers of the bond. There is
no hard and fast rule as to the form of notice, although it is
advisable that it be posted in a place where it can be seen by
all subcontractors. A court will consider whether the obligee
did what an honest, reasonably skilful and prudent obligee
would have done to inform any potential beneficiaries of
the bond of its existence. In this particular case, the court
approved the idea of the Bird posting a notice of the bond in
its site trailer.
A lingering question from the court’s ruling is what form
of notice is to be given to subcontractors that never attend
the construction site. In these circumstances, or in those
where labour and material bonds are uncommon, obligees
may need to do more to meet their duty to disclose. Further,
even if labour and material bonds are common in a partic-ular
industry, if an obligee does nothing to notify potential
beneficiaries of the bond, it risks being held liable for breach
of trust.
LEGAL
A lingering question from
the court’s ruling is what
form of notice is to be
given to subcontractors
that never attend the
construction site.
This case will also be of particular interest to sureties. Now
that an obligee is required to advertise a bond, sureties may
see more claims being made under the bonds. Time will tell
as to whether this indeed occurs.
Finally, despite the majority’s subcontractor-friendly
ruling, subcontractors should continue to be proactive in
making inquiries as to whether a labour and material bond
exists for a particular project. As stated previously, in some
cases, a trustee may be required to take little or no steps to
notify subcontractors of the bond. Should the time limit
for making a claim under the bond expire in those circum-stances,
the subcontractor may have no one to blame but
itself for missing that window of opportunity.
Anthony R. Foderaro is an associate of Fillmore Riley LLP who
practises primarily in the areas of civil litigation and business/
personal immigration law. He may be reached at 204-957-8390
or afoderaro@fillmoreriley.com.
66 Q3 2018 www.pilingcanada.ca
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