Recent Judgment – Managing Construction Contract Holdbacks: Knowing How Long To Hold Them And When Not To Release Them

A decision rendered by the Quebec Court of Appeal this past June 10 should serve as a caveat for construction project owners and contract managers regarding the management of contract holdbacks: Compagnie d'assurances Jevco v. Québec (Procureure générale), 2015 QCCA 1034. 

Not so long ago, the Court of Appeal upheld a trial judgment that sanctioned a project owner for having retained "abusive holdbacks" from a general contractor (Développement Tanaka inc. v. Commission scolaire de Montréal, 2007 QCCA 1122)). In this latest decision however, the project owner was sanctioned for having released the holdbacks too early, to the detriment of subcontractors and the surety for wages and materials. The situations covered by this recent decision are markedly different and the major takeaway is that contract holdbacks must be carefully and thoughtfully managed. They must neither be held overly long nor released too soon.