In a recent Alberta Court of Appeal decision, the court had to determine the different consequences that may arise from the Builders’ Lien Act’s Certificate of Substantial Performance issuance and posting requirements.

What Happened?

In July 2014, a tank truck services company (“truck company”) entered into a contract with a construction company to erect a building, under which the construction company was to be paid approximately $5.1 million. In March 2015, the construction company sub-contracted with a plumbing and heating company (“plumbing company”) to perform some of the work.

On January 25, 2016, the construction company issued a Certificate of Substantial Performance (CSP) for the work in question. However, there was conflicting evidence as to whether and when the CSP was posted at this worksite.

The plumbing company registered a lien against the title of the land in the amount of $111,146 on March 11, 2016, which was 46 days after the CSP was issued.

The truck company alleged that the lien was filed one day after the expiry of the time period during which it was obliged to retain a major lien fund on the project and that the major lien fund was paid out by the time the lien was filed so that there was nothing against which it could attach. The truck company declined to pay any of the money the construction company owed to the plumbing company, arguing that its lien was ineffective because it was out of time.

On August 10, 2016, the plumbing company filed a Statement of Claim in which it alleged outstanding invoices to the construction company for work done that had not been paid.

Lower Court Decision

On December 15, 2016 a chambers judge granted a without prejudice consent order directing that upon security in the amount of $122,260 (being the amount of the plumbing company’s lien of $111,146.03, plus 10% for costs) being paid into court, the lien would be removed, with the right to bring a further application to determine the proper value of the lien.

In November 2017, the truck company unsuccessfully applied to the same chambers judge to have the security reduced to $8,100.

The chambers judge concluded that he did not have sufficient evidence before him to resolve the entire dispute. He agreed that if the lien period started to run from the date the CSP was issued rather than the date it was posted, then the date of posting was irrelevant. He nonetheless declined to decide the issue on a summary basis because if he determined that the 45 day time limit ran only from the date of posting, there remained a factual issue of whether the posting actually occurred and there was no evidence before him to allow him to determine whether and when the CSP was posted.

The truck company appealed.

The Law

The court explained that  s. 20(1) of the Builders’ Lien Act (the “BLA”) requires a CSP to be posted on a worksite within three days after it has been issued.

Additionally, s. 18(1) of the BLA obliges an owner to create and retain a “major” lien fund for a minimum period of 45 days from the date of the issuance of a CSP, after which it may pay the monies in that fund to the contractor if no lien has been filed. A major lien fund is to contain a minimum of 10% of the value of the work actually done and materials actually supplied prior to the issuance of the CSP. Section 18(2) provides that the fund also contain any additional monies the owner owed the contractor, but had not yet paid to it as of the date of the filing of a lien.

Finally, s. 23 of the BLA provides for the creation of a minor lien fund which consists of a minimum of 10% of the value of the work actually done or materials supplied after the CSP was issued.

Court of Appeal Decision

The court identified one of the main issues as whether the 45 day period within which a party must register a lien starts to run on the date of issuance of the CSP or the date of posting of the CSP.

The plumbing company argued that the 45 day lien period ran from the date of the posting of the CSP. It submitted that the obligation to post an issued CSP created by s. 20(1) of the BLA should be interpreted in this fashion because such an interpretation is required to allow suppliers and tradespersons to know that the 45 day period has started to run. Otherwise, their right to file liens and obtain security for indebtedness cannot effectively operate.

However, after reviewing the numerous relevant provisions in the BLA, the court concluded:

“The [provisions] from the BLA together expressly provide that the 45 day lien period runs from the date of the issuance of the CSP, not the date of its posting on the jobsite.”

The court found that s. 20(2) creates a separate remedy from a claim against the major lien fund as a result of a failure to post, but does not also create, after the fact, a right to payment of its debt by the owner as a result of its release of the lien fund where no lien has been filed. Instead, where a failure to ever post the certificate of substantial performance on the jobsite deprived sub-contractors of knowing when and if the 45 day period had begun to run, the remedy of those subcontractors lay only in seeking damages in a civil lawsuit from the party who issued that certificate.

The court concluded that, while the evidence before the chambers judge was that the certificate of substantial performance was issued January 25, 2016, the date of posting was disputed.

As a result of the fact that the chambers judge lacked evidence to make these necessary findings of fact, the court found that he was acting well within his area of discretion in concluding that he could not resolve this matter summarily. The appeal was therefore dismissed.

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The knowledgeable Calgary construction lawyers and staff at DBH Law understand the complex risks of both multimillion-dollar and smaller construction projects and the expensive disputes that can arise when something goes wrong in all cases. We handle all elements of a construction relationship, including builders’ liens. We can proactively advise and help draft important documents such as contractor and subcontractor agreements and similar, to make expectations clear and eliminate as much risk as possible. We can also represent you in any litigation or other dispute resolution that may be needed if a dispute arises.

The team of professional and experienced construction lawyers at DBH Law have the experience and technical knowledge to provide you with the legal advice needed in the modern construction industry. We understand the number of moving pieces involved in construction projects and work tirelessly to resolve issues quickly. Contact us online or by phone at 403.252.9937 to discover how we can help you today.