The British Columbia Court of Appeal recently delivered a significant decision in Kingdom Langley Project Limited Partnership v. WQC Mechanical Ltd., 2025 BCCA 169 ("Kingdom Langley"), which has important implications for how builders liens are managed in the province. This ruling reaffirms the long-standing "dual lien" theory under British Columbia's Builders Lien Act ("BLA"), particularly regarding the interplay between liens against land and liens against holdback funds.
The case: A dispute over holdback release
The appeal in Kingdom Langley arose from a dispute between Kingdom Langley Project Limited Partnership ("Kingdom"), the project owner, and WQC Mechanical Ltd. ("WQC"), a subcontractor. WQC had a proven claim for a builders lien and sought the release of its proportionate share of the holdback retained by Kingdom under section 4 of the BLA.
The general contractor, Metro-Can Construction (TC) Ltd. ("Metro-Can"), had previously obtained a consent order under section 24 of the BLA to cancel WQC's lien against the land by posting a lien bond. This bond was intended to serve as security for both the land lien and any claim by WQC for a lien against any holdback claims. Kingdom argued that the posting of this security cancelled WQC's right to claim against the holdback, asserting that payment should instead be made from the lien bond. The chambers judge, however, granted WQC's application, finding that WQC had a right to payment from the holdback funds, notwithstanding the consent order providing for alternate security. Kingdom appealed this decision.
Key findings and reaffirmation of the Shimco lien
The Court of Appeal dismissed Kingdom's appeal, upholding the chambers judge's decision. The core of the Court's reasoning centered on reaffirming the "dual lien" theory, as established in Shimco Metal Erectors Ltd. v. North Vancouver (District), 2003 BCCA 193 ("Shimco"). The Court specifically addressed and rejected Kingdom's argument that Shimco was wrongly decided and should be overruled.
The key findings from the decision include:
- Separate Lien Against Holdback: The Court confirmed that there is a distinct and separate lien against the holdback under sections 4(9) and 8(4) of the BLA. This holdback lien is not subject to the time limits found in sections 20 and 33 of the BLA.
- Holdback Lien Not Extinguished by Section 24 Security: Crucially, the Court held that a holdback lien cannot be extinguished under sections 22 and 33(5) of the BLA, nor is it cancelled by the posting of security under section 24. Security posted to cancel a land lien under section 24 has no effect on a claimant's holdback lien or their right to a pro rata share of the holdback. Even where a lien bond posted under section 24 also provides security for a holdback lien, that security does not, in itself, cancel the holdback lien.
- Judicial Restraint: The Court emphasized that it is the Legislature's role – not the Court's – to amend the BLA if deficiencies exist, thereby exercising judicial restraint in making changes not expressly provided for in the legislation.
Implications for the construction industry
This decision reinforces the existing legal framework and has several important implications for owners, contractors, and subcontractors in the British Columbia construction industry:
- Continued Complexity in Lien Management: Parties involved in construction projects must continue to account for two distinct types of liens: the traditional lien against the land and the separate lien against the holdback. This dual structure adds a layer of complexity to lien management and resolution.
- Holdback Remains a Primary Source of Recovery: For contractors and subcontractors, the holdback remains a critical and accessible source of recovery for proven claims, even if a lien against the land has been cancelled by the posting of security.
- Strategic Considerations for Security: Owners and general contractors who post security under section 24 to remove a lien from title must understand that this action does not automatically extinguish a claimant's right to the holdback. Careful administration of holdbacks is required, and separate strategies may be necessary to address holdback liens.
- Call for Legislative Review: The decision acknowledges ongoing criticism of the dual lien system, particularly the uncertainty it may introduce to lien enforcement. While the Court upheld the current interpretation, it implicitly highlights the ongoing debate and the need for potential legislative reform to clarify or streamline the lien process.
In summary, Kingdom Langley solidifies the "dual lien" framework in British Columbia. It serves as a crucial reminder for all participants in the construction industry to carefully navigate the distinct nature of land liens and holdback liens, and to consider the implications for their contracts and lien management strategies.
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.
