Canada: Alberta Court Of Appeal Finds That Certificate Of Lis Pendens To Perfect Builders' Lien May Not Be Required

In a recent decision, TRG Developments Corp. v. Kee Installations Ltd. (TRG Developments), the Alberta Court of Appeal (Court) was required to determine whether the failure to register a certificate of lis pendens (CLP) within 180 days after registering a builders' lien means, in all circumstances, that the lien ceases to exist.

The Court ruled that if an owner files an originating application in respect of a lien, the contractor may not be required to register a CLP, depending on the circumstances.

CLP REGISTRATION REQUIREMENT

Section 43 of the Builders' Lien Act (Act) provides that a lien ceases to exist unless, within 180 days from registering the lien, the lien claimant commences an action to realize on the lien and registers a CLP. The CLP is intended to give the landowner notice of pending litigation in respect of the lien. The requirement to register a CLP in order to perfect a lien is mandatory under the Act.

BACKGROUND

Kee Installations Ltd. (Kee) and Universal Properties Inc. (Universal) worked on land owned by TRG Developments Corp. (TRG) in the summer of 2013. Kee and Universal claimed that they were not paid for their work and registered builders' liens against TRG's land in August, 2013. In October, 2013, TRG filed an originating application to discharge the liens on the basis that under the Act, it was not a landowner, that it did not request work to be done, and that Kee and Universal were not entitled to liens. Kee and Universal responded with affidavits, and questioning on the affidavits occurred shortly thereafter. Neither Kee nor Universal registered a CLP as required under the Act. The Registrar of Land Titles therefore removed the liens upon TRG's request after the 180-day period expired. Kee and Universal applied to reinstate the liens on the basis that CLPs were not necessary in the circumstances.

COURT DECISIONS

Master W. S. Schlosser reinstated both liens on the basis that TRG was aware of the liens, as evidenced by its application to set them aside, and therefore the notification requirements underlying the need to register a CLP were fulfilled. This in turn made a CLP unnecessary.

Master Schlosser also considered the fact that TRG adjourned the application multiple times, which eventually brought the matter beyond the 180-day period to register a CLP. He held that TRG could not use the adjournments as a mechanism to defeat the liens.

On appeal, Justice J.B. Veit upheld Master Schlosser's decision. She held that since the only parties involved in the litigation were the landowner and the lienholders and since it was clear that TRG was aware of the lien claims, TRG had effectively waived the obligation to register a CLP.

Justice Veit held that TRG's active engagement in the litigation could have misled the lien claimants about the landlord's intention regarding the liens and the necessity to register a CLP.

The Court of Appeal upheld the decision to reinstate the liens. The Court noted that when an owner brings an application before the court to have a lien removed — as TRG did in this case — the validity of the lien and any issue with respect to non-compliance with the Act are squarely before the Court. There is no need in such circumstances to file a CLP.

In making its decision, the Court also considered the fact that no third parties were adversely affected by the lien and that all parties were aware of the proceedings, since it was TRG that had contracted with Kee and Universal and TRG that was responsible for responding to their claims. Further, TRG spent a significant amount of time exploring the underlying facts, questioning on the affidavits, seeking undertakings and adjourning the proceedings to better prepare its case.

NOT ALL APPLICATIONS WAIVE REQUIREMENT TO FILE A CLP

Given that the Court's decision in TRG Developments was heavily dependent on the facts, it is useful to consider a case involving the same issue in which the court decided not to reinstate the liens in question.

In Nexen Energy ULC v. Pricewaterhousecoopers Inc. (Nexen), as in TRG Developments, the owners filed an originating application. However, in Nexen, this was an application to set and pay the lien fund into court. Master J.L. Mason distinguished the facts of Nexen from the facts of TRG Developments on two main grounds. First, the level of activity prior to the expiry of the 180-day period was significantly different. In Nexen, the parties had not participated in the litigation in a comparable manner; they did not file affidavits or perform any questionings. Second, Nexen's actions did not mislead the defendants into thinking that a CLP would not be necessary. Nexen requested one three-month adjournment. Master Mason held that, given this lengthy adjournment, the defendants should have recognized the need to register a CLP.

CONCLUSION

The key point to take from this decision is that if an owner files an originating application in respect of a lien, the contractor may not be required to register a CLP. Specifically, owners should be aware that applications that bring all issues regarding the lien squarely before the court, such as applications regarding the validity of the lien, may dispense with the need for a CLP. However, it is important to recognize that the facts of the TRG Developments case were unique and played a significant role in the decision. Therefore, contractors should be cautioned that registering a CLP within 180 days from the date that the builders' lien was registered will likely still be required in the majority of situations in order to maintain the lien.

In TRG Developments, the lienholder and the land owner also contracted directly with one another; there were no subcontractors or third parties. All parties knew about the claim and the claim's effects on the property. Further, there were significant steps taken in the litigation prior to the expiry of the 180-day period, such as questionings and undertaking responses. Also significant was the fact that the owner adjourned its application multiple times, which brought the parties beyond the 180-day period to register a CLP, before it applied to remove the lien. As the Court explained, these factors weighed in the decision to reinstate the liens and in finding that the CLP was unnecessary.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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