Parties facing grossly exaggerated lien claims now have some additional arsenal to defeat the liens before trial. In Darwin Construction (BC) Ltd. v PC Urban Glenaire Holdings Ltd., the British Columbia Court of Appeal (“BCCA”) clarified the circumstances under which a builder’s lien can be cancelled where the lien claim is both exaggerated and unsubstantiated.[1] While courts have previously reduced exaggerated lien amounts, this ruling represents the first instance where a court has canceled a lien without conditions due to an excessive and evidentiary unsupported lien amount.[2]
Judicial history
The lien claimant in Darwin claimed a lien in the amount of $3 million, which was later found to be over double the maximum lienable amount. The developer applied to have the lien cancelled in its entirety, or to have the amount of the security for the lien reduced to a nominal amount of $1.[3] Due to a number of unsuccessful demands for the lien claimant to produce documents, the developer set down its application for hearing and provided the lien claimant with notice of the foregoing.
A few days before the application hearing, the lien claimant requested an adjournment. The parties agreed to an adjournment by way of a consent order, which required the lien claimant to deliver a response to the application. The lien claimant failed to produce a response and on the hearing of the developer’s application, counsel for the lien claimant sought an adjournment. The Chambers Judge refused the adjournment application and reduced the amount of the lien bond security to $500,000.[4]
Appeal proceedings
The lien claimant appealed to the BCCA, arguing that the Chambers Judge erred in reducing the lien security amount. The developer cross-appealed, advancing the position that the Chambers Judge erred in failing to cancel the lien or to reduce the security to $1. The BCCA found that in the present case, the lien claim constituted an abuse of process under s. 25(2)(b) of the Builders Lien Act, which allows courts to cancel a lien if it is vexatious, frivolous, or an abuse of process. In a first decision of its kind, the BCCA cancelled the lien, citing the gross inflation of the claimed amount, repeated adjournments, and non-compliance with the consent order as clear abuses of process under s. 25(2)(b) of the Builders Lien Act.
Takeaways and application across jurisdictions
Each province and territory has its own lien act, most of which include a provision empowering the court to remove or cancel improper liens. While the applicable provision in Darwin specifically addresses lien claims that are deemed vexatious, frivolous, or an abuse of process, other statutes afford courts a broader scope of power to cancel liens, or to award costs and damages due to the exaggerated or false for a lien. For instance:
- British Columbia’s Builders’ Lien Act, SBC 1997, C 45:
- 19: a person who wrongfully files a claim of lien is liable for costs and damages as a result of its wrongful filing
- 25(2)(b): the court, upon application, may cancel a lien if it is vexatious, frivolous, or an abuse of process
- Alberta’s Prompt Payment and Construction Lien Act, RSA 2000, c P-26.4,(the “PPCLA”):
- 40: a person is liable where they claim for a lien in an amount that grossly exceeds the amount due or where they know or ought to know that they do not have a lien
- 48(1): the court, upon application, may order the removal of a lien registration on any grounds it deems appropriate
- Saskatchewan’s Builders’ Lien Act, Chapter B-7.1 S.S.:
- 53: a person is liable where they claim for a lien in an amount that grossly exceeds the amount due or where they know or ought to know that they do not have a lien
- 60(a): the court, upon application, may vacate a claim of lien with the discretion to impose terms and conditions as deemed necessary
- Manitoba’s Builders’ Liens Act, CCSM c B91:
- 40: a person is liable where they claim for a lien in an amount that grossly exceeds the amount due or where they know or ought to know that they do not have a lien, unless they can satisfy the court that the lien was made and claimed in good faith and without negligence
- s 55(3): a judge holds the authority to order the vacation of a lien registration based on any grounds except those outlined in s 55(2), such as payment into court
- Ontario’s Construction Act, RSO 1990, c C.30:
- 35(1): a person is liable where they know or ought to know that the amount was wilfully exaggerated, and per s 35(2), a court may order that the lien amount be reduced if it finds that the person acted in good faith
- 47(1): the court may discharge a lien if it determines that the claim for the lien is frivolous, vexatious, or an abuse of process, or for any other valid reason
While the statutory provisions granting courts the authority to remove or cancel improper liens vary across provinces, the BCCA’s decision in Darwin highlights an important aspect regarding lien claimants’ responsibilities. Lien claimants must not only demonstrate their entitlement to the lien, they must also justify the amount claimed or risk losing their lien rights entirely.[5]
As the BCCA explained in Darwin, lien claims serve as a safeguard against contractor exploitation, but they also carry considerable implications for individuals whose property or finances are affected by the lien.[6] Just as withholding payment from a contractor can unfairly result in underpayment, an exaggerated lien claim can similarly be misused to extract unwarranted payments from an owner or contractor.
In cases where an owner, or contractor, is confronted with an excessively inflated lien, the BCCA’s decision suggests that failure by the claimant to adequately justify such a grossly exaggerated amount may lead to the court canceling the lien in its entirety. This represents a departure from previous rulings, where exaggerated lien claims typically resulted in the court adjusting the lien amount rather than outright cancellation.
Lien claimants should also be rightfully cautious of failing to provide information substantiating their claims in a timely and responsive manner or risk significant consequences. These comments are particularly interesting in jurisdictions where the applicable statute includes a process requiring the lien claimant to prove its lien. For example, in Alberta, the PPCLA requires a lien claimant to provide detailed particulars of its lien in the form of an affidavit upon receiving notice from an interested party. The decision in Darwin is likely to be raised in situations where claimants take a lax approach to these responses, which is a reminder that lien claimants are well advised to obtain counsel to provide advice on what should and should not be claimed for, and to ensure their claims are sufficiently documented.
Should you have any questions, please feel free to reach out to a member of Miller Thomson’s Construction Litigation group.
[1] Darwin Construction (BC) Ltd. v PC Urban Glenaire Holdings Ltd., 2023 BCCA 436 [Darwin].
[2] For example, in GTA Restoration Group Inc v Baille, 2020 ONSC 5190, the Court reduced the value of the lien due to the lien claimant’s willful exaggeration of lien value.
[3] Darwin, supra note 1 at para 3.
[4] Ibid at para 2.
[5] Ibid.
[6] Darwin, at para 109.
