2025 Q1 Legal Update for the Surety Association of Canada, BC Chapter

In a Q1 2025 Update to The Surety Association, BC Chapter, Chris Schuld outlined two court decisions from the opposite ends of the spectrum.  One is a Supreme Court of Canada decision addressing $33 million dollars worth of misappropriated funds, and the other was an Ontario Small Claims Court decision for a claim of just over $5000.

Both of these cases have to do with the finances of construction companies. Read the full version of Schuld’s 2025 Q1 Update to The Surety Association.

Case 1: Aquino v. Bondfield Construction Co., 2024 SCC 31 (CanLII)

In this case, the principal of a large construction operation was found transferred over $33 million to privately held companies on the auspices of “services” that in fact were not performed, by creating fake invoices. The principal had the authority within his construction company to authorize the payments, and he did so.

When the construction company, Bondfield, faced financial trouble, a monitor and trustee took over the company's affairs.  The principal, Mr. Aquino, argued that these payments were normal business activities made when the company was still doing well. However, the trustee believed that the companies, not just Mr. Aquino was responsible for the fraud. This distinction was important because of Bankruptcy and Insolvency Act provisions that would entitle the trustee recover funds upon a finding that the companies (and not just the personal principals) were at fault.

The Supreme Court of Canada agreed with the trustee and upheld the lower court decisions. They decided that Mr. Aquino's fraudulent intentions could be attributed to the companies because he acted as their leader when he made the payments.

Case 2: Staraza v. Colliopoulos, 2024 CanLII 124082 (ON SCSM)

This decision appears to be the first determination around prompt payment adjudication that is available under Ontario’s Construction Act, and particularly the authority of adjudicators to bind parties to adjudicated results. The dispute arose from two adjudications under the Act, a process designed to keep project payments flowing. In the first adjudication, the contractor’s claim was dismissed due to improper invoicing. After correcting this, the contractor achieved success at a second adjudication, and was paid.

However, the contractor then commenced a small claims action, seeking additional compensation for (a) legal costs from both adjudications and (b) the contract balance. The property owner sought to set the small claims action aside on the basis that this contractor was abusing the process through multiple proceedings on the same subject matter.

The judge hearing the matter quickly identified the novel subject matter, and unique and specific legislation in the Construction Act that contemplated an interim characterization of adjudicator’s decisions, the legislative intent of adjudication to be a fluid process during a construction project, and the right of parties to address matters more comprehensively after completion of the work.