If a person wrongfully registers a lien, the property owner is entitled to costs and damages incurred resulting from the wrongfully registered lien. The specific award will depend on the circumstances of the case, but may include reasonable legal fees and party-and-party of costs for lien litigation.
Each province has legislation that lays out the pre-conditions and process that parties supplying services and materials to construction projects must follow to lien against owners' property rights.
Can damages and costs be awarded against the lien claimant if a lien is wrongfully registered or a person maintains a wrongful lien when shown it is wrongfully registered? The Supreme Court of British Columbia faced this scenario in Century Group GP Co. Ltd. v. KRS Excavating Ltd.
In this matter, KRS Excavating Ltd. ("KRS") filed a builders' lien in the amount of $2,085,088.02 against the lands owned by Century Group GP Co. Ltd. and Century Group Lands Corporation (collectively, "Century Group"). The lien was subsequently discharged from title as Century Group and KRS entered into a security letter agreement, and later cancelled entirely by the Court because the lien was filed out of time.
Century Group then brought an application seeking recovery for costs and damages they alleged were incurred due to KRS's wrongfully filed lien, specifically costs and damages in the amount of $124,860.52, plus full indemnity costs of the application itself. The claimed amount included premiums and fees associated with a line of credit (LOC) in excess of $28,000 and legal expenses to the date of the application in excess of $96,000. The crux of the dispute between the parties was meaning of "costs and damages," under s. 19 of the of the British Columbia Builders Lien Act S.B.C. 1997, c. 45 ("British Columbia BLA")
Costs + Damages Consequences for the Wrongfully Registered Lien
Section 19 of the British Columbia BLA provides as follows:
- Liability for wrongful filing
19 A person who files a claim of lien against an estate or interest in land to which the lien claimed does not attach is liable for costs and damages incurred by an owner of any estate or interest in the land as a result of the wrongful filing of the claim of lien.
As the Court previously cancelled the lien and the replacement security, sole issue at this hearing was whether the "costs and damages incurred" should include all resulting damages and all costs for investigating and removing the lien and lien litigation.
When discussing how s. 19 was to be interpreted, the Court stated that the provisions of the BLA are to be read in their grammatical and ordinary sense harmoniously with:
- the scheme of the British Columbia BLA;
- the object of the British Columbia BLA; and
- the intention of the Legislature.
Further, the court referred to s. 8 of the Interpretation Act, RSBC 1996, c. 238, which provides that "every enactment must be construed as being remedial, and must be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects." Justice Fitzpatrick held that the plain reading of s. 19 is that, if a lien claimant does not satisfy the strict pre-conditions to file a lien, consequences follow to compensate a landowner for any "costs and damages" that the landowner incurred as a result of the wrongful filing. Put simply, if the filing harms the owner, the lien claimant who wrongfully filed will pay for the full consequences that follow.
No dispute arose regarding the over $28,000 associated with the LOC being within the meaning of "damages" under s. 19. However, what "costs" under s. 19 intended to cover was disputed by the parties. The Court held that an owner may seek two types of costs under s. 19:
- Lien investigation/removal costs: the reasonable legal costs incurred to address the filed lien directly; and
- Lien litigation costs: party-and-party costs incurred to challenge the validity of a lien.
The Court held that pursuant s. 19 the owner of land to which a wrongfully filed lien does not attach, but has been registered, is to be compensated for its out-of-pocket expenses in addressing the lien, including, but not limited to, the expense of legal advice contemplating the discharge of the lien or by having counsel negotiate replacement security (see paragraph 58 and 63 of the decision).
Ultimately, in addition to the LOC-related damages, the Court ordered that Century Group was entitled to an amount for "reasonable legal fees" associated with the lien investigation/removal as described above, and to to party-and-party costs for the application. Litigation over the unpaid invoices for contractor services provided by KRS was ongoing, and any further dispute about cost entitlement was to be assessed by the trial judge following the trial.
Applicability in Alberta
Like the BLA in British Columbia, in Alberta the Builders' Lien Act, RSA 2000, c. B-7 ("Alberta BLA") and the Prompt Payment and Construction Lien Act, RSA 2000, c P-26.4 ("PPCLA") (for construction contracts entered after August 29, 2022) contain identical provisions at s. 40 addressing wrongful registration of liens.
Section 40 of the PPCLA provides that:
40 In addition to any other grounds on which the person may be liable, a person who registers a lien against a particular estate or interest in land or a particular parcel of land
(a) For an amount grossly in excess of the amount due to the person or that the person expects to become due to the person; or
(b) When the person knows or ought reasonably know that the person does not have a lien
is liable for legal and other costs and damages incurred as a result of it unless that person satisfies the court that the registration of the lien was made or the amount of the lien was calculated in good faith and without negligence.
Alberta Courts have considered costs and damages awards against a person on the basis of section 40(a) for registering a lien in an amount grossly in excess of the amount due. In the case of Graham Construction and Engineering (1985) Ltd. v. LaCaille Developments Inc., 2006 ABQB 898 ("Graham"). In the Graham case, Justice Hughes concluded that while the lien was for an excessive amount, there was an entitlement to lien (i.e. there was no wrongful filing) and it was the registration of the lien (not the excessive amount) which led to the alleged damages. Therefore, the damages were not related to the excessive amount and were not awarded.
The Alberta Court of Appeal also considered section 40(a) in the decision of Impact Painting Ltd v Man-Shield (Alta) Construction Inc, 2019 ABCA 57 ("Impact Painting"). Impact Painting included an appeal of the trial judge's decision to award 76% of the cost it paid for bond premiums related to the excessive amount of the lien. Citing the Graham decision, the Court of Appeal held that Section 40 requires that the costs and damages be incurred as a result of the excessive amount of the builders' lien registered, not as a result of the lien's registration. Therefore, they held that there was no palpable and overriding error in the trial judge's determination that the respondent should recover 76% of the bond premiums it paid, given that due to the excessive lien, the bond was larger by factor than it was required to be.
However, there are not yet reported decisions in Alberta where the Court has awarded damages pursuant to section 40(b) for wrongful lien registration in circumstances where the person knows or ought reasonably to know that the person does not have a lien. The wrongful registration provisions in the Alberta PPCLA are similar to the provision in the British Columbia BLA. As such, the British Columbia Supreme Court decision in the Century Group case would likely be persuasive in Alberta. Thus, a lien claimant who wrongfully registers a lien and who cannot satisfy the court that the lien was made in good faith and without negligence, will be likely face liability for legal costs and other damages incurred by an owner resulting from the wrongfully registered lien.
These cases serve as a reminder to lien claimants to abide by the strict pre-conditions and limitations under the applicable construction legislation when registering liens.
Link to decision: Century Group GP Co. Ltd. v. KRS Excavating Ltd., 2022 BCSC 357
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.