Most contractors and owners know that
once a lien is filed against title, the only way that it can be
removed from title (in the absence of an agreement between the
parties) is for the owner or general contractor to post a bond or
pay the full amount of the lien into Court or a solicitor's
trust account pending resolution of the dispute between the
parties. What often comes as a surprise, is that it has long been
the practice in British Columbia that to remove a lien from title,
the paying party will have to post an additional 10 to 15% of the
value of a lien as security for legal costs. This unanticipated
extra expense which requires a party to post "security for
costs" emerges from wording in the Builders Lien Act which,
upon distribution of holdback funds, gives priority to the recovery
of a party's legal costs ahead of the principal debt claim.
However, there is no wording in the Builders Lien Act which
expressly requires a party to pay "security for
In commercial and civil litigation, a
party in an action does not have the right to obtain an order for
"security for costs". Generally, it is it is difficult
and rare for the Court to make an order that one party must pay
security for costs. On a typical application for security for
costs, the party seeking security has to establish that the party
who ought to pay security would be unlikely to be able to pay the
successful party's costs at the end of the trial. Further, the
Court must conclude that the claim has a reasonable chance of
success. These stringent guidelines in the commercial and civil
litigation context makes the automatic allowance for "security
for costs" in the builders lien setting a somewhat remarkable
practice. In the builders lien context, the Courts tend to skip
over these factors and award security as a matter of course when a
party seeks to discharge a lien from title.
The recent decision of the British
Columbia Supreme Court in Tylon Steepe Homes Ltd. v. Pont,
considers the long standing practice of requiring a party to post
security for costs in additional to the amount of the lien in order
to remove the lien from title. The Court noted that while there are
many cases which order a party to pay security for costs, there
appeared to be little legal justification for the order. The Court
concluded that requiring a party to post security for costs created
additional substantive legal rights for the lien claimant; rights
which were not the intended purpose of the Builders Lien Act. The
Builders Lien Act permits a lien to be filed only in respect of
"the price of the work and material, to the extent that the
price remains unpaid". Posting security for a lien in order to
discharge it from title is meant to substitute the cash (or the
bond) for the charge on title. Therefore, to require a party to pay
an additional amount for "security for costs" arguably
enhances the limited nature of the lien right.
Because liens are such powerful tools
for lien claimants to invoke, the Courts must be cautious about
expanding a lien claimant's rights without express
language. Ontario, Saskatchewan, Manitoba and Alberta all
have builders lien legislation which contains language that
expressly permits the Court to add an amount for security for
costs. In the absence of that language in the British
Columbia Builders Lien Act, the Court concluded that it is
inappropriate to order a party to pay "security for
costs" in addition to the amount required to secure the
The contractor in Tylon Steepe
Homes Ltd. v. Pont sought permission to appeal the Supreme
Court's conclusion on security for costs, however, the Court of
Appeal concluded that it was not an appropriate case for an appeal.
Although the Court of Appeal did not consider the merits of the
lower Court's decision, it stated that the judge gave
"comprehensive reasons which security for costs should not be
included in the amount of security posted to discharge the
lien" and that it was unlikely that the Court of Appeal would
overturn the Court's decision in this matter.
The result is that for the time being
in British Columbia, and until the Court of Appeal addresses the
issue (or until the lien legislation is amended), the costs
associated with removing a lien from title have decreased in that a
party will no longer have to post security in addition to the
amount of the lien.
Originally published in Construction
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Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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