From time-to-time we see lien legislation abused or distorted
for mischievous purposes. Anyone who deals with liens on a regular
basis has witnessed such abuse. Anyone involved in the lien process
– owners, contractors, subcontractors, suppliers, and yes
even lawyers – can be guilty of such abuse.
One of the more common abuses is the mischievous lien registered
by a subcontractor. The registration of a lien can have fairly
significant consequences. It will often disrupt project financing
and suspend further payments by the construction owner. It can also
be costly to get resolved. All experienced subcontractors know
this, and use it to their protection or advantage when appropriate.
Unscrupulous subcontractors will register liens even when they know
they do not have the right to do so.
Cancelling the Lien
Last week I was pleased when a Master of the Court of
Queen's Bench, in an unreported decision, cancelled a
subcontractor's builders' lien and ordered the lien
claimant to pay legal costs to the contractor. Not only was the
subcontractor's lien registered out of time (the subcontractor
had falsely claimed that work was ongoing, in an attempt to extend
the lien period), the lien was also registered for an improper
amount (there was strong evidence that the subcontractor had
inflated the lien amount).
It is not an easy thing to get a lien removed on the grounds
that it is improper or mischievous. The lien legislation is
considered "remedial" in nature (which is often used to
justify a broad interpretation in favour of the lien claimant). A
court application to remove a lien is usually done based on
affidavit evidence (i.e. without a full trial) such that the courts
are reluctant to make decisions when there is any controversy on
the facts. Also, the courts are sympathetic to smaller lien
claimants – even though it is often a false assumption that
smaller lien claimants are unsophisticated; many of them know their
lien rights very well.
Lack of Merit
In this particular case, the contractor's attempt to cancel
the mischievous lien was not guaranteed to be successful as there
was disputed evidence. The Master relied on
a new line of authority, including a recent Supreme Court of
Canada case, to order the cancellation of the lien. Based on this
new line of cases, the Court should consider if there is any claim
"of merit" and if there isn't, the matter should be
dismissed summarily and without the time and expense associated
with bringing the case to trial. Although the Supreme Court of
Canada was not dealing with a lien case, this reasoning is
applicable to the lien context, considering that the
Builders' Lien Act expressly provides "The
procedure in adjudicating on the claims shall be of a summary
character, so far as is possible, having regard to the amount and
nature of the liens in question and the enforcement of them at the
least expense" (s. 49(6)). So, the Master did not actually
have to go so far as to conclude that the lien was mischievous or
improper; he cancelled the lien upon determining that the lien did
not have sufficient merit to justify further legal process.
Lien rights are an important protective mechanism for
contractors, subcontractors, service providers and material
suppliers. But the lien process is complex, and unfortunately this
complexity means there are ways to manipulate the process. This
case was a gratifying reminder that the Court can sometimes
identify such mischief on a summary application, and deal with it
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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