Lien rights can't be enforced through arbitration, but many
construction contracts provide for mandatory arbitration. In a
recent decision, West Coast Installations, Inc. v. Frazier
Industrial Co., the Alberta Court explained how
arbitration clauses and liens can co-exist. This is not new law,
but it is useful clarification of an issue that comes up time and
Many construction contracts provide that the parties choose to
resolve their disputes outside of court, usually by arbitration.
The courts will give effect to these agreements – that is, a
party who has agreed to resolve a dispute by arbitration may find
his case thrown out if he tries to proceed instead by way of a
Lien rights can only be enforced by the courts. Section 8 of the
Builders' Lien Act makes it clear that the parties
cannot contract out of the remedies provided by the Act.
As stated by the court, in the West Coast Intallations case:
"That does not mean that the parties to a contract cannot
agree to have the substance of any dispute referred to arbitration,
but it means that the party who has done the work cannot be
prevented from claiming a builder's lien and similarly the
landowner or the general contractor cannot be prevented from
providing security to stand in place of the lien under section 48
of the Builders' Lien Act. These are remedies
available under the legislation."
A Pause in the Legal Process
In the West Coast Installations case, the lien claimant sued
despite the existence of a mandatory arbitration clause. (In fact,
the lien claimant probably had no choice but to sue, to preserve
its' lien rights in accordance with the Builders' Lien
Act.) On a court application by the counterparty, the court
issued a stay of proceedings. That is, the court referred the
dispute to be resolved by arbitration, and directed that the
parties could return to court only after the arbitration concluded,
or upon settlement of the dispute, for the court to give directions
in respect of the claimant's lien rights. In this way, the
court process would be put on pause, the substantive dispute
between the parties would be resolved by an arbitrator, and then a
judge would (if necessary) give effect to the arbitrator's
decision by enforcing the claimant's lien rights.
Allowing for some minor variations in the process, there is no
doubt that lien rights and arbitration clauses can co-exist. In
many cases, co-existence would not be the subject of any real
dispute; the court process would be paused ("stayed") by
agreement while the arbitration proceeds.
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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Legal issues surrounding contaminated sites affects landowners, developers, realtors, as well as consultants and contractors working on the front lines. This webinar will provide a practical review of how the legislation is actually being used, recent court decisions, challenges with brownfield developments, and future changes.
Who Should Attend: This webinar will be of interest to developers, contractors, environmental and real estate consultants, realtors, owners or lessors of land which may be impacted, and municipalities.
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