24 Cancellation Of Claim Of Lien By Giving Security

PRACTICE

Cancellation of Claim of Lien

Submissions

On the Form 17 Cancellation of Charge, Notation or Filing, select Nature of Interest, Claim of Builders Lien by Court Order, and Certificate of Pending Litigation Builders Lien Act, where applicable, and attach an image of the following supporting documents:

1. a court certified copy of the court order stating that the claim of builders lien is cancelled on the giving of certain security to the court, and stating the legal description of the property; and
2. a certificate of the registrar of the court certifying that the security shown in the order has been given to the court.

CASE LAW

For a discussion regarding the posting and amount of security, see the annotation for Henderson Land Holdings (Canada) Ltd. v. Micron Construction Ltd., 1999 CanLII 5251 (BC SC), under s. 25 of the Act.

Amount of Security

When a question arises at the time of posting security with respect to the amounts claimed under a builders lien, the onus shifts to those who want full security to provide at least the barest of details—something more than a bald statement that the monies are owing and something less than prima facie proof of the claim. In this case, claims were filed some time ago, no detailed information was given, and some claims had not even been invoiced. In these circumstances, the court reduced the amount of the security by deducting claims for work either not done or in progress and claims for which not the barest details were provided (Strata Plan LMS 2262 v. Belgrove Construction Ltd., 2003 BCSC 535 (Master)).

The plaintiff applied, on the posting of nominal security, to have the defendant’s two claims of lien cancelled. The defendant’s claims included the unpaid contract price, an amount for extra work, replacement costs for damaged materials, and overtime charges related to delay. The court found that damage claims do not, as a matter of law, properly form part of a claim of lien and that the defendants were responsible, in part, for at least some of the delays and extra costs. However, in ordering security in an amount less than the unpaid contract price, the court found that it should be cautious in reducing security on the basis of delay claims by owners and general contractors because, if delay claims are not ultimately proven, lien claimants may be left with an amount of security less than their proven claims, and owners and general contractors may not have sufficient assets to satisfy any shortfall by the time the lien is proven. In this case, the court ordered security close to the unpaid contract price with liberty to the plaintiff to apply for a further reduction in the amount of security as litigation between the parties progressed (Q West Van Homes Inc. v. Fran-Car Aluminum Inc., 2007 BCSC 823). The Court of Appeal affirmed the findings of the chambers judge except with respect to the amount of security. The Court of Appeal held that, on the question of the claim for overtime, its characterization as either part of the work or part of the overhead and financing charges was a matter that should have been left for the trial judge and that the chambers judge erred, at this stage of the proceedings, in deducting the overtime amount from the amount claimed. Accordingly, the Court of Appeal increased the amount of security to include an amount for the overtime claim (Q West Van Homes Inc. v. Fran-Car Aluminum Inc., 2008 BCCA 366).

The petitioner, an owner/developer, applied to cancel lien claims filed by the respondents for labour and materials supplied to the petitioner’s ongoing construction project. The supplementary conditions of the contract provided for a bonus payment on a sliding scale depending on the date of substantial completion. The full amount of the bonus was included in the lien claim. Following its decision in Q West Van Homes Inc. v. Fran-Car Aluminum Inc., 2007 BCSC 823, the court held the contract bonus was so closely connected to the claim for work performed and material supplied that it was reasonable and proper for the bonus to be included in the lien claim. In ordering cancellation of the lien, the court directed that the full amount of the bonus be included in the monies paid into court as security (Fairfield v. Pacific Western, 2008 BCSC 135).

The dispute in this case concerned the value of work done for a mixed-use residential tower. This was an appeal from an order of a chambers judge reducing the amount of security paid into court to secure a builders lien, pursuant to s. 24. The court allowed the appeal, concluding that the judge improperly engaged in an assessment of the merits of the appellant’s claim, rather than adopting the cautious approach mandated by the authorities. The security for the lien claim should not have been reduced. In addressing which of the lien claimant’s claims should be taken into account for the purposes of determining the appropriate amount of security, a judge must order security posted for a claim or component of a claim of lien unless the owner can demonstrate that it is plain and obvious that the claim is bound to fail (Centura Building Systems (2013) Ltd. v. 601 Main Partnership, 2018 BCCA 172).

Security for Costs

The court granted the defendant’s application to cancel a claim of lien on the posting of adequate security. However, the court declined to include either an amount or a percentage of the claim as security for costs. On a plain reading of the language in s. 24 of the Act, the court found express language limiting the amount of security to “sufficient security for the payment of the claim” and no reference to security for costs. Although earlier legislation in British Columbia and several statutes in other jurisdictions made provision for costs, the court held that, in the absence of an express provision in s. 24 of the present Act, the court had no jurisdiction to entertain such an inclusion (Tylon Steepe Homes Ltd. v. Pont, 2009 BCSC 253, leave to appeal refused 2009 BCCA 211 (Chambers)).

Owner Continues as Party after Security Posted in Court

The defendant property owners sought to substitute their contractor as a defendant in a claim of builders lien. The contractor posted security for the lien under s. 24 of the Act and the lien was cancelled against the defendants’ property. As owners, the defendants claimed they had no further interest in the litigation and were no longer necessary parties to the action. The court found that, in contrast to s. 23(2) of the Act, s. 24 does not discharge owners from liability once a lien against their property is cancelled. After depositing sufficient security for the payment of the claim under s. 24, the lien remains an action in rem against the property. All that has occurred is that the registered claim has been cancelled and the land as security for the claim has been replaced with the security posted in court. The owners of the property remain necessary parties to any action to enforce the lien. Even though their participation in the litigation may be “nominal or notional” where security is posted by another party, they may be liable for amounts not covered by the security. In declining to remove the owners as defendants in the action, the court also ordered that the contractor be added as a defendant (Paramount Drilling and Blasting Ltd. v. North Pacific Roadbuilders Ltd., 2004 BCSC 622, affirmed 2005 BCCA 378).

Tactical Advantage for Lien Claimant Not the Purpose of Section 24

In 2011, the petitioner general contractor applied under the Builders Lien Act, s. 24, for cancellation of lien filed by the respondent subcontractor upon its depositing alternate security in form of a bond for the full amount of the lien. The respondent said security should be in cash deposited with the court. The court found the deposit of a bond issued by an authorized surety in full amount of the lien claim amounted to satisfactory security for cancellation of the lien under s. 24(2). The Legislature’s purpose in enacting s. 24 was to permit the court to cancel a lien if other security could be provided to secure the claim, not to give a lien claimant a tactical advantage (IDL Projects Inc. v. M3 Steel (Kamloops) Ltd., 2011 BCSC 1600).

Section 24 Authorizes Court to Cancel CPL and Lien on Lien Bond Payment

The plaintiff subcontractor filed a claim of lien against the property in the amount of $115,234, commenced an action claiming a builders lien and a constructive trust based on unjust enrichment, and registered a CPL against the property. The defendant DWC applied under s. 24 of the Builders Lien Act for cancellation of the lien on payment of a lien bond; there was some urgency, as the property owner/developer had advised DWC it would not make the next progress payment until the lien was removed from title. A master (now “associate judge”) allowed DWC’s application, finding that the proposed lien bond would be sufficient to fully compensate 4HD for its claim of lien. The master also directed cancellation of the CPL, finding the claim for unjust enrichment to be “essentially duplicative” of the lien claim. The plaintiff appealed the master’s order. The court, dismissing the appeal, said s. 24 implicitly authorizes the court to order cancellation of a CPL as consequential relief to cancellation of a lien (4HD Construction Ltd. v. Dawson Wallace Construction Ltd., 2020 BCSC 1224).

Application to Cancel CPL Filed in Support of Builders Lien Should Be Remedied by Builders Lien Act, Not Land Title Act

Where it is not obvious that the claims by the plaintiff will fail, an application under s. 24 is not an appropriate procedure for the court to effectively dismiss the claims, on the authority of West Fraser Mills Ltd. v. BKB Construction Inc., 2012 BCCA 89. It is within the court’s discretion to consider the strength of the plaintiff’s claim to the full amount of the liens in setting an appropriate amount of security. Following Tylon Steepe Homes Ltd. v. Pont, 2009 BCSC 253, the court reduced the security below the quantum of the liens due to the weakness of the claim, the dearth of evidence, potential prejudice to the defendants seeking to market the properties, and the requirement to balance the need to protect the plaintiff with the interests of the defendant.

Following 4HD Construction Ltd. v. Dawson Wallace Construction Ltd., 2020 BCSC 1224, s. 24 implicitly authorizes the court to cancel a CPL as consequential relief to the cancellation of a claim of lien, so the court ordered that the CPLs be removed from title upon the posting of security as ordered.

An owner experiencing hardship or inconvenience from a builders lien and associated CPL should find their remedy in the Builders Lien Act, not the Land Title Act. Further, it would be inappropriate for a court to reach a different conclusion under ss. 256 and 257 of the Land Title Act than it would under ss. 24 and 25 of the Builders Lien Act (BSSD Excavating & Landscaping Ltd. v. Green Blvd. Construction Ltd., 2023 BCSC 1685).