In the recent decision of A.W. Kennedy Construction Inc. v. Wan, 2021 BCCA 175, the BC Court of Appeal had an opportunity to consider whether a non-substantive error on a Claim of Lien form rendered the claim of lien invalid under sections 15 and 22 of the Builders Lien Act ("BLA").
Section 15 (1) of the BLA provides that "... a claim of lien is made by filing in the land title office a claim of lien in the prescribed form" [emphasis added] and section 22 states that "a lien in respect of which a claim of lien is not filed in the manner and within the time provided in this Act is extinguished."
The Claim of Lien in question deviated from the prescribed form in that the first paragraph of the Claim of Lien was left blank. This section of the form requires the lien claimant to set out its name and address. However, this information was not missing from the Claim of Lien, as the lien claimant had included the company name and address in the preamble of the form. Insofar as this was the case, the deviation could not have prejudiced anyone as all the necessary information was on the form.
Those unfamiliar with the case law concerning the validity of builder's liens would quite reasonably question how such an innocent harmless mistake could possibly invalidate a lien. However, for those more familiar with the relevant precedents, it may not be particularly surprising that it took BC's highest court and a 12-page decision to conclude that this intuitive response was entirely correct. In finding that the Claim of Lien was valid notwithstanding the omission, the BC Court of Appeal reviewed the history of the legislation and case law, which stands for the proposition that there must be "strict compliance" with the provisions of the BLA.
In 1997, the BLA was amended to remove a broad curative provision which stated that only substantial compliance was needed for a lien to be valid unless the affected party could establish that the defect caused prejudice. In the decision of Nita Lake Lodge Corp v. Conpact Systems (2004) Ltd., 2006 BCSC 885, the court interpreted the removal of this curative provision to signify the intention of the legislature to preclude courts from curing defective claims. The rationale for requiring "strict compliance" with all provisions in the BLA was that the Act created new propriety rights.
The BC Court of Appeal noted that the court in Nita Lake had not considered the general curative provision included in the Interpretation Act at section 28 which reads:
28 (1) If a form is prescribed under an enactment, deviations from it not affecting the substance or calculated to mislead, do not invalidate the form used.
The BC Court of Appeal found that although the curative provision of the old BLA had been removed, section 28(1) was still applicable and applied to the current BLA. Therefore, the court could rely on section 28(1) to validate a lien that deviated from the prescribed form. To the extent Nita Lake Lodge concluded otherwise, this was incorrect.
The BC Court of Appeal did point out that the powers of the court remained quite limited and would not apply to substantive deficiencies such as failing to identify the relevant parties by their correct legal names.
In the final analysis, the Court of Appeal struck the balance as follows:
The goal of certainty demands that Form 5 be completed accurately and does not permit the court to relieve against any substantive error or omission. However, it does not demand the invalidation of lien claims because of inconsequential defects in the completion of the prescribed forms not affecting their substance or calculated to mislead.
In this case, it was fairly obvious that the omission – which was not really an omission given the presence of the information elsewhere on the form – fell into the latter category, being only an inconsequential defect. There, will no doubt, be cases where the line between whether a defect is substantive or inconsequential is not so clear. Therefore, while the BC Court of Appeal's decision in Wan will provide considerable assistance to those considering the merits of challenging the validity of a Claim of Lien, it can be expected that this will remain a heavily litigated area in years to come.
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