Sloppy Accounting Costs Developer - Construction Lien Act Protects Parties Down The Chain

Article by Jason J. Annibale and Allison Worone (summer student)

Developers and others with payment obligations in the construction pyramid (payors) can better manage their risk and exposure by ensuring that their payment and accounting practices are well managed and clear – particularly given the Ontario Court of Appeal 's recent decision in Colautti Construction Ltd v Ashcroft Development Inc. As the case confirms, payors must clearly allocate their payments to particular invoices or debts.

Failing to do so may in certain circumstances allow those entitled to payment (payees) to apply received payments to other outstanding accounts, even where such accounts are due on other contracts or where the accounts have been outstanding past the two-year limitation period in which a claim for payment could be made. Colautti also cautions that payors who comingle project monies received with other funds, may be found to have breached their trust obligations owed to their