The regime for construction contracting is like a pyramid, with labour and materials ascending from workers and suppliers through subcontractors to the general contractor and ultimately the owner. Funds flow in the opposite direction, from the owner through the general contractor to the subcontractors and so forth. Unpaid parties can file liens, which can trigger funding delays. The construction industry relies on statutory declarations to help ensure that payments flow down to the base of the pyramid. How effective are they? The BC Supreme Court decision in Beatty Floors Ltd. v. KTM Development Corp. is a case in point. In Beatty Floors, the plaintiff was a supplier of floor coverings. It entered into a contract with the defendant contractor for the supply of materials to various construction projects. One of the defendant’s principals swore statutory declarations that all of its accounts for subcontractors, labour and materials had been paid. But the plaintiff had not in fact been paid. The statutory declarations were false. The defendant received payments from the owner that never reached the plaintiff. The Court found the defendant and its principals liable for breach of trust, in that the funds paid to the defendant by the owner had been impressed with a trust under the Builders Lien Act. In addition to general damages in the amount of $37,829.88, being the amount owed by the defendant to the plaintiff, the Court awarded the plaintiff punitive damages in the amount of $15,000 and “special costs” of the action.
So what good did the statutory declaration do? Observations:
- The award of punitive damages for $15,000 against the defendant contractor and its principals was influenced by the fact that the statutory declarations were falsely sworn. The same for the “special costs”.
- Obviously, but for the Court action, the statutory declarations were not of themselves effective to ensure that the money reached the people down the pyramid.
- You might like to think that a statutory declaration won’t be falsely sworn. It does provide some assurance. But you can’t count on it. A statutory declaration cannot guarantee compliance, and the remedies are limited. In this case punitive damages were awarded, but generally punitive damages are rare.
- No word yet on whether the “perjury” aspect of the statutory declarations was enforced. It’s doubtful. By virtue of the Canada Evidence Act, if a person swears a false declaration, then that is the same as if the person made a false statement in Court. That is the essence (i.e. the “statutory” aspect) of a statutory declaration. However the criminal sanction incorporated by the statute rarely comes into play.