Construction disputes in Alberta frequently involve builders’ liens, certificates of lis pendens (“CLPs”), and the strategic use of lien security. While these tools are intended to balance the rights of unpaid contractors and property owners, disputes often arise over whether such security should remain in place as litigation progresses.

The recent decision in 1951789 Alberta Ltd. v. Britannia Block General Partnership Inc. provides important guidance on when lien security can be vacated or reduced under Alberta’s Prompt Payment and Construction Lien Act (the PPCLA).

In this case, the Court of King’s Bench of Alberta clarified the limits of judicial discretion, reinforced the statutory framework governing lien security, and emphasized the importance of procedural fairness in lien-related applications. The decision offers practical lessons for contractors, developers, and construction professionals navigating complex lien disputes in Calgary and across Alberta.

A Complex Construction Dispute

The dispute arose from a residential construction project in Calgary. The plaintiff, Urban Interiors Group (UIG), provided labour and materials but alleged it had not been fully paid.

To protect its interests, UIG registered a builders’ lien in February 2020 for approximately $1.47 million. Shortly thereafter, a CLP was registered against the property title.

These registrations had a significant commercial impact. The property owner, Britannia Block General Partnership Inc., intended to sell the land, but the lien and CLP impeded the transaction. To facilitate the sale, the parties agreed to discharge the lien and CLP and replace them with lien security posted with the Court.

The security (approximately $1.59 million) stood in place of the land, allowing the sale to proceed while preserving UIG’s claim. What followed was a lengthy and procedurally complex litigation involving multiple actions, applications, adjournments, and settlement attempts over several years.

The Application to Vacate or Reduce Security

Years into the litigation, Britannia applied to vacate or reduce the lien security. At first instance, the applications judge vacated the security entirely. This decision was notable because:

  • The judge found that UIG’s claim was arguable and supported by expert evidence;
  • There was no clear basis to reduce the amount of security on the merits;
  • Despite this, the judge relied (on his own initiative) on section 46(2) of the PPCLA to justify vacating the security due to delay.

This set the stage for the appeal.

Court of Appeal Considered Security Issues

On appeal, the Court addressed three central questions:

  1. Did the applications judge err in vacating the security?
  2. Should the security be reinstated?
  3. If reinstated, should it be reduced?

The Court ultimately allowed the appeal and reinstated the security (with a modest reduction), providing important clarification on each of these issues.

Builders’ Lien Security Under the PPCLA

The PPCLA establishes a statutory regime that allows contractors and suppliers to register liens against property, even if they do not have a direct contractual relationship with the owner.

When security is posted under section 48 of the PPCLA:

  • The lien is removed from title;
  • The security stands in place of the land;
  • The claimant’s rights attach to the security instead of the property.

This mechanism is designed to balance competing interests:

  • Owners can deal with their property (e.g., sell or refinance);
  • Claimants retain meaningful security for their unpaid claims.

Error #1: Granting Relief That Was Not Requested

A central issue on appeal was that Britannia had not requested relief under section 46(2) of the PPCLA. Section 46(2) allows a party to apply to vacate a CLP and discharge a lien if no trial has occurred within two years of registration.

However, the Court found:

  • Britannia’s application did not rely on section 46(2);
  • The applications judge introduced this provision on his own initiative;
  • This deprived UIG of the opportunity to respond with evidence and legal argument.

The Court emphasized a fundamental procedural principle: courts should not grant relief that was neither pleaded nor argued unless the parties have had an opportunity to address it. This alone was sufficient to find an error.

Error #2: Misapplying Section 46(2)

Even if section 46(2) had been properly raised, the Court held that it did not apply in this case. The reasoning was straightforward but significant:

  • Section 46(2) applies to liens and CLPs registered against land;
  • In this case, both the lien and CLP had already been discharged;
  • They had been replaced by security under section 48.

Once security is posted:

  • The statutory focus shifts from the land to the security;
  • Section 46(2) no longer governs the situation.

The Court concluded that section 46(2) does not authorize vacating security that has replaced a lien and CLP.

Error #3: Lack of Procedural Fairness on Delay

The applications judge also relied on delay as a basis to vacate the security.

However, the Court found that UIG was not given a fair opportunity to explain the delay. Further, the evidentiary record was insufficient to support a delay-based determination. Finally, the procedural history suggested ongoing litigation activity, not abandonment.

Importantly, the Court noted that even under section 46(2), the provision is discretionary (not mandatory) and requires consideration of the circumstances, including explanations for delay.

Should the Security Be Vacated?

After identifying the errors, the Court conducted its own analysis. Despite the lengthy timeline (over five years since the lien was filed), the Court declined to vacate the security.

Key factors included:

  • The litigation was active and ongoing;
  • There were multiple related proceedings;
  • The parties had engaged in procedural steps, examinations, and settlement efforts;
  • The delays were shared between both parties.

The Court emphasized that this was not a case of inactivity or abandonment. Rather, it was a complex dispute with a “convoluted procedural history.” In such cases, the default approach is to allow the matter to proceed rather than extinguish the claimant’s security.

Should the Security Be Reduced?

The Court also considered whether the amount of security should be reduced. Britannia argued that portions of the claim—particularly those relating to subcontractors whose claims had been assigned—should be removed.

The Court rejected this argument, finding that the issues were tied to separate legal actions. It held that determining their impact would require substantive findings on the merits, which was inappropriate in the context of a security application.

However, the Court did reduce the security slightly, reinstating it at approximately $1.41 million. 

Practical Implications for Calgary Construction Disputes

This decision has several important implications for parties involved in construction litigation in Calgary and throughout Alberta.

1. Lien Security Is Not Easily Displaced

Once security is posted in place of a lien, it will not be vacated lightly. Courts will require a clear legal basis grounded in the PPCLA or the Rules of Court.

2. Section 46(2) Has Limited Application

Section 46(2) applies to liens and CLPs on title, not to security posted in their place. Attempting to use it as a shortcut to vacate security is unlikely to succeed.

3. Procedural Fairness Matters

Courts must give parties an opportunity to address all legal grounds relied upon. Unexpected reliance on unpleaded provisions can result in reversible error.

4. Delay Alone Is Not Enough

Even a significant delay will not automatically justify vacating lien security. Courts will examine:

  • The reasons for delay;
  • Whether litigation has been actively pursued;
  • Whether both parties contributed to the delay.

5. Courts Will Avoid Deciding Merits Prematurely

Applications to vacate or reduce security are not substitutes for summary judgment. Courts will avoid making findings that effectively determine the dispute.

Moving the Litigation Forward

While reinstating the security, the Court also took steps to move the litigation toward resolution. It directed the parties to schedule a case conference, consider consolidating multiple related actions, and develop a litigation plan to bring the matter to trial efficiently.

This reflects the broader purpose of the PPCLA: to ensure timely and practical resolution of construction disputes.

DBH Law: Calgary Construction Lawyers Providing Trusted Advice in Builders’ Lien Disputes

If you are dealing with a builders’ lien, lien security, or construction dispute in Calgary or anywhere in Alberta, experienced legal guidance is essential. The construction lawyers at DBH Law advise clients on builders’ liens and lien enforcement, including comprehensive guidance on Prompt Payment and Construction Lien Act compliance.

Our firm understands the commercial realities of Alberta construction projects and provides practical, results-driven advice tailored to your situation. Contact us online or call 403-252-9937 to protect your interests and move your dispute toward resolution.