The statute doesn't forbid it. It also doesn't make it consequence-free.
Short answer
Usually yes, as a matter of contract law — there's nothing that automatically stops an owner from paying a subcontractor directly. But doing so doesn't discharge the owner's own statutory holdback obligation, doesn't change the trust status of the money once it lands, and can put the owner offside the general contractor's own contract if the GC never agreed to it.
Absent a specific agreement otherwise, a subcontractor's contract is with the general contractor, not the owner — ordinary privity of contract. That means the owner has no contractual duty to pay the sub directly. But it also doesn't mean the owner is barred from doing it.
BC's Builders Lien Act, s.10 shows why a direct payment isn't unusual on its own: “money received by a contractor or subcontractor on account of the price of the contract or subcontract constitutes a trust fund for the benefit of persons engaged in connection with the improvement.” And s.12: “if a person makes a payment from money in a trust fund constituted in respect of a particular improvement, a person who receives the money must credit it against the debt in respect of the improvement.” Wherever the money for that job originates, once it reaches a sub it credits against what's owed for that job — the statute doesn't require it to pass through the GC's hands first.
It doesn't touch the owner's own holdback obligation on the head contract. Section 4(2) is explicit that the 10% retention applies “whether or not the contract or subcontract provides for periodic payments or payment on completion” — and under s.5, that holdback still has to sit in a jointly administered account, with no payout “without the agreement of all the persons who administer the account.” Paying a sub directly is a separate act from meeting that retention requirement, and doesn't reduce it.
It also doesn't erase the GC's own position under its contract with the owner. If the GC never consented, a direct payment that bypasses agreed contract-administration and markup on that portion of work is exactly the kind of dispute in this case where an owner paid subs direct and the GC objected.
Assuming a direct payment is automatically improper — by itself, it isn't. The bigger mistake is assuming it fixes everything: it doesn't touch the owner's own holdback duty, and it doesn't retroactively rewrite the GC's contract terms. See also why a contract can’t simply write away the protections underneath this, and how trust status attaches to project money generally.
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