Duty of trustee to collect in trust funds

The trustee may not be required to collect in trust funds that would otherwise be due to the bankrupt contractor, particularly if the value of the trust claims exceeds the amount of the trust funds. However, if the trust funds are more than required to satisfy the trust claims then the excess would be due to the contractor and the trustee in bankruptcy should collect in such funds.
In Wakeman & Trimble Contr. Ltd., 1984 CanLII 432 (BCSC) the contractor (Farmer) had received payment from the owner (Western) and put a stop payment on a cheque issued to the subcontractor (Wakeman) when it was learned that the subcontractor had made an assignment into bankruptcy. The court held that the monies should not be paid to the trustee in bankruptcy of the subcontractor, but should be dealt with by the contractor under the Builders Lien Act:
The circumstances of this case are the following:
1. The moneys had never reached the trustee in bankruptcy.
2. The contract is not completed.
3. Liens under the Builders Lien Act have been filed.
4. The funds are trust funds under s. 2 of the Builders Lien Act.
Because of these conditions, the appropriate party to handle the distribution of these Funds is the general contractor, Farmer. Further, there is no responsibility on the part of the trustee, Henfrey Samson Belair Ltd., in relation to the subcontractors to obtain the payment of these funds and to ultimately disburse them: see Re Groves-Raffin Const. Ltd., 28 C.B.R. (N.S.) 104, [1978] 4 W.W.R. 451 (B.C.S.C). These funds, being trust funds within s. 2 of the Builders Lien Act, will be dealt with by Farmer within that legislation.
(Wakeman & Trimble Contr. Ltd., 1984 CanLII 432 (BCSC) at para. 6).




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