Labour and material payment bonds are meant to protect parties that contribute to a construction project as a subcontractor or supplier. To collect pursuant to a labour and material payment bond the subcontractor or supplier must meet the definition of “claimant” under the bond, typically, this will require that they have a direct contract with the bonded contractor. In the recent decision of Wolverine Construction Inc. v. Trisura, 2023 BCSC 405, the B.C. Supreme Court held that a trade contractor that provided work and services to a construction project was not properly a “claimant” within the meaning of the bond.
The plaintiff Wolverine Construction Inc. (“Wolverine”) became involved in a building project after the original contractor, Frontline Civil Holdings (“Frontline”), came into financial difficulty. The construction involved various waste management projects (the “Project”) on lands owned by the Peace River Regional District (“PRRD”). Trisura Guarantee Insurance Company (“Trisura”) issued a labour and material payment bond in relation to the Project with Frontline as the “principal” and PRRD as the “obligee” (the “L&M Bond”). The L&M Bond provided that Trisura and Frontline would be jointly and severally liable for payments to “claimants”.
Claimant was defined in the L&M Bond as follows:
A Claimant for the purpose of this Bond is defined as one having a direct contract with the Principal for labour, material or both, used or reasonably required for use in the performance of the Contract …
Frontline commenced work on the Project but soon ran into financial difficulties. Frontline entered into discussions with Wolverine for assistance and Wolverine became involved with the Project. Wolverine undertook certain work and paid various expenses associated with the Project. Frontline was assigned into bankruptcy. Wolverine gave written notice to Trisura and PRRD that Frontline had failed to pay it the amount of $476,048.14 in respect of labour and materials supplied to the Project and claimed this amount plus interest as against the L&M Bond.
Wolverine claimed that it had a direct contract with Frontline as a subcontractor on the Project and that it was a proper claimant under the L&M Bond for the sums that Frontline had failed to pay it. Trisura denied that Wolverine was a “claimant”, specifically denying that Wolverine had a contract with Frontline as a subcontractor on the Project.
The main issue before the court was whether Wolverine entered into a contract directly with Frontline. The court stated that the existence of a contract depends on the objective intentions of the parties, and is to be determined by looking at all of the material facts. Ultimately the question is whether an objective reasonable bystander would conclude the parties intended to contract. The court considered various factors to determine whether Wolverine contracted with Frontline. The following evidence worked against Wolverine:
- There was no signed, written contract between Frontline and Wolverine relied on an incomplete standard form of contract entitled “Subcontract Agreement”, where the document contained the names and addresses for Frontline and Wolverine but otherwise contained no particulars;
- Wolverine issued invoices directly to PRRD not to Frontline; and
- Wolverine was unclear as to whether the work on the Project was performed pursuant to an agreement with Frontline or not.
Specifically, the affidavit evidence relied on by Wolverine was fatally inconsistent with discovery evidence from the same deponent who said that he did not know if a subcontract agreement between Wolverine and Frontline was ever finalized.
On its assessment of this evidence, the court found that Wolverine had not discharged its onus of proving on a balance of probabilities that there was a direct contract with Frontline and that amounts were owing to Wolverine by Frontline. The court held that Wolverine was not a proper claimant within the meaning of the L&M Bond and the action as against Trisura was dismissed.
This case provides two important reminders: (1) parties always ensure that their contracts are documented, a failure to do so may preclude a party from recovering in the event of a default; and (2) parties seeking to rely on a labour and material payment bond should always read the terms of the bond very carefully to ensure that they are a “claimant”.