Whether Crown lands in Canada can be liened varies by province, but invariably, work done on some lands is not lienable.
In JVD Installations Inc. v. Skookum Creek Power Partnership, the British Columbia Court of Appeal faced the following questions:
- If work is done on a power plant located on Crown lands that cannot be liened, can a lien claimant register a lien against lands on which the connected transmission lines are located, even if the lien claimant didn't work on the transmission lines?
- If a contractor subcontracts its entire scope of work to a subcontractor, does the contractor still have a valid lien despite not doing any work to support the lien?
Background
JVD Installations Inc. ("JVD") entered into a subcontract to complete concrete and mechanical work as part of the construction of the Skookum Creek power plant near Squamish. The power plant was built on unregistered Crown land, meaning no liens could be registered against the lands. Similarly, most of the connected transmission lines were constructed on unregistered Crown land, except for a small section of the transmission line located on private property. There is no indication that a labour and material payment bond was in place for the project.
JVD itself did not perform any of the construction work under the subcontract. Instead, JVD's wholly owned subsidiary, IDL Projects Inc. ("IDL") completed JVD's entire scope of work under the subcontract. Neither JVD nor IDL did any work related to the transmission lines – their work was limited to the power plant.
Upon completion of their work and subsequent non-payment, JVD and ILD registered several liens against both the fee simple title of the privately owned section of the transmission line land and against the related statutory right of way.
Issues
Was JVD prevented from claiming a lien because IDL performed the work?
The trial judge pointed out that the Builders' Lien Act (the "BLA") does not require that a lien claimant personally perform work relating to an improvement. A lien can arise if the claimant "provides" work to other parties that ultimately perform the work. JVD fulfilled its contractual obligations by subcontracting out its entire scope of work to IDL.
This finding was upheld on appeal. Specific reference was made to the definition of "subcontractor" under the BLA, defined as "a person engaged by a contractor or another subcontractor to perform or provide work." Similar definitions exist in the other common law provinces' and territories' lien legislation.
Is a lien against the privately owned transmission line valid where the actual work done was in relation to a power plant situated on lands that could not be liened?
Neither JVD nor IDL performed any work on the privately owned portion of the transmission lines against which they registered their liens. JVD and ILD argued that their work on the power plant site improved the transmission line and the whole project because both the power plant and the transmission line constituted a "single integrated improvement." This argument was accepted at the trial level. The trial judge determined that the project's various components were mutually interdependent and necessary to each other.
On appeal, this argument was rejected. The Court noted that the phrase "single integrated improvement" is not present in the BLA and there is no express "mutual interdependence" test for determining if work performed at two or more construction sites could constitute a single improvement for the purposes of the BLA.
The Court stated the following regarding the application of a "single integrated improvement" test:
While the powerplant and transmission lines in this case are connected and there is a high degree of interdependence between them, they cannot reasonably be classed as a "single improvement". They are functionally distinct, physically remote from one another, and were constructed by different subcontractors at different times.
Ultimately, because neither JVD nor IDL worked on the parcel of land on which the transmission lines were located, they had no right to a lien against those lands.
Applicability Elsewhere in Canada
Although this is a British Columbia Court of Appeal decision, some of the same principles would likely apply in the other common law provinces and territories.
With respect to whether a lien claimant can subcontract its entire scope of work and still maintain its own lien claim, as noted above, all of the other common law provinces' and territories' lien legislation contains a separate definition of "subcontractor" or "sub-contractor" which defines subcontractors as entities not directly retained by the owner, but retained by the contractor or another subcontractor to provide work at a project. As a result, the BC Court of Appeal's reasoning would be persuasive to other Canadian courts, given the similarity of the relevant definitions.
The result is less certain when looking at whether a lien against transmission lines for work done solely on a connected power plant gives rise to a valid lien. The trial judge cited an earlier Alberta decision, Prairie Roadbuilders Ltd. v. Stettler 23, for the principle that work done on a single improvement (in that case, a sewage collection system and sewage lagoon) gives rise to a valid lien, even if the work done was on lands which could not be liened. The Alberta Court reached its conclusion despite the Alberta BLA not having any language regarding "single integrated improvement" or "mutual interdependence." However, the sewage collection system and sewage lagoon were part of the same project, being undertaken by the same general contractor, at the same time, despite the collection system and lagoon being located on separately owned and separately titled lands.
The most likely conclusion to draw is that how the "improvement" at issue is characterized will determine whether work not performed on the liened lands can still give rise to a valid lien claim. The following factors would all determine whether particular work could be considered a single improvement or separate improvements:
- the geographic proximity of the different lands;
- whether the construction was subject to one or several prime contracts;
- whether the projects were undertaken by the same general contractor; and
- the timing of the work being performed.
Takeaways
This decision is significant for all industry owners, contractors, and subcontractors, specifically for projects spanning multiple parcels of land and containing separate interconnected components. It illustrates that situations may arise where an unpaid party has no recourse to register a lien simply because of the underlying land ownership on which work is performed. A prudent contractor should determine the legal ownership of lands prior to commencing work, to assess the potential risks of non-payment, and what options may be available to it under lien legislation, surety bonds, or otherwise.
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.
