It is commonly understood that the British Columbia (BC) Builders Lien Act (the Act)1 provides for a lien claim against land and improvements. Almost 20 years ago, the BC Court of Appeal recognized that the Act provides a second and distinct lien claim: a lien against the 10% holdback that must be retained by owners, contractors and subcontractors. This second type of lien claim is commonly referred to as the "Shimco" lien claim, named after the court case that first recognized its existence.2
Unlike the lien against the land, the Shimco lien is claimed by commencing a lawsuit in court. The Act states that once a lawsuit is commenced, the holdback cannot be paid out.3
In January 2025, the BC Court of Appeal confirmed the existence of the Shimco lien claim and held that while the Act permits the posting of security to discharge a lien claim against title to land, the Act does not provide mechanism to discharge Shimco lien claims by posting security.
The case
The Kingdom Langley Project Limited Partnership v. WQC Mechanical Ltd. (Kingdom)4 dispute arose from the construction of a mixed-use development project in Langley, BC. A subcontractor filed a lien claim on title. The general contractor discharged the subcontractor's lien claim from title by posting a lien bond into court as security, as permitted under Section 24 of the Act:
24 (1) A person against whose land a claim of lien has been filed, and a contractor, subcontractor or any other person liable on a contract or subcontract in connection with an improvement on the land, may apply to the court to have the claim of lien cancelled on giving sufficient security for the payment of the claim.
Twelve years prior, the BC Supreme Court concluded in the Preview Builders International Inc. v. Forge Industries Ltd. (Preview), case that despite Section 24 of the Act not making reference to a claim of lien against the holdback, it was possible to make the security stand as security for both the lien claim against the land and the Shimco lien claim.5 By doing so, owners could release the holdback. As a result of this decision, for over a decade, lawyers drafting security orders have included terms indicating that the security stands for both lien claims.
In Kingdom, the court order which allowed the lien bond to be posted as security stated that the lien bond "shall also stand as security for any claim by [the subcontractor] for a lien against any holdback retained."6 This language has been commonly used since the Preview decision.
Court's decision
The subcontractor applied for its proportionate share of the owner's holdback funds, pursuant to Section 4 of the Act. In response, the owner argued that instead of releasing any holdback funds, the subcontractor's share should be paid out of the lien bond as the lien bond stood as security for the both the lien claim against land and the Shimco lien claim. The owner argued that when the lien bond was posted as security, it cancelled both the lien claim against land and the Shimco lien claim.
The Court of Appeal rejected the owner's position, underscoring the purpose of the Section 24 security application in relation to the commercial realities of construction projects:
- Cancellation of lien claims against land is necessary in order to ensure that the project lenders will continue to fund the project; and
- Cancellation of a Shimco lien claim against the holdback is not necessary to move the project ahead.7
The Court confirmed that the security posted under Section 24 of the Act only cancels a claim of lien against land – security posted under Section 24 has no effect on a lien claim against the holdback or the claimant's right to share pro rata in the holdback funds. The Court held that even where a lien bond posted under Section 24 states that it stands as security for a Shimco lien claim against the holdback, that security does not in and of itself cancel the Shimco lien claim against the holdback.8 The Court also confirmed that posting security to discharge a claim of lien against land does not relieve an owner or contractor of the obligation to maintain the statutory holdback.9
Takeaways
This case provides an important distinction between a lien claim against land and a Shimco lien claim, which is a lien against the holdback. The important results for the industry are: first, a lien claim against the holdback is a right that can be enforced separately from a lien claim against land. Second, security posted under Section 24 of the Act does not cancel a Shimco lien claim against the holdback or eliminate the lien claimant's right to share pro rata in the holdback funds.
This decision provides some reassurance to subcontractors that their statutory rights to access the holdback funds remain available even when security orders may cancel a claim of lien against the project land at issue. For owners, this case provides a helpful reminder to continue to manage and retain holdback funds even when posting security to discharge lien claims against title. For construction lawyers, it's time to revisit and clarify the terms in the security order.
Footnotes
1. Builders Lien Act, SBC 1997, c 45.
2. Shimco Metal Erecters Ltd. v Design Steel Constructors Ltd., 2002 BCSC 238, Shimco Metal Erectors Ltd. v. North Vancouver (District), 2003 BCCA 193 [Shimco].
3. Act, S 8(4).
4. Kingdom Langley Project Limited Partnership v. WQC Mechanical Ltd., 2025 BCCA 169 [Kingdom].
5. Preview Builders International Inc. v Forge Industries Ltd., 2013 BCSC 1532.
6. Kingdom at para 84.
7. Kingdom at para 96.
8. Kingdom at para 103.
9. Kingdom at para 108.
About Dentons
Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com
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. Specific Questions relating to this article should be addressed directly to the author.
