Monday, 26 May 2014

Can a Lien Include Damages Due to Delay?

Author: Corbin Devlin

In Krupp Canada Inc v. JV Driver Projects Inc, 2014 ABQB 259, Master Robertson addressed the question whether damage claims – in particular delay claims - can be included in builders’ liens.  The issue has been considered by the Alberta courts before, but Master Robertson contributed to the jurisprudence with a thorough review of the authorities and a considered discussion. 
Krupp was applying to court to reduce the amount of a claim of lien by JV Driver – specifically, disputing that damages for delay were properly included in the lien.  Krupp thereby sought to reduce the security that Krupp had previously paid into court to have the lien discharged. After extensively reviewing the case law on the issues, the Master summarized the law as follows:
  1. Where the lienholder has done work on or in respect of an improvement, or furnished material to be used in or in respect of an improvement, then that person has a lien for so much as ”remains due to him”, either pursuant to an agreed price or on a quantum meruit basis;
  2. If the amount the lienholder claims remains due is for damages in tort, or for breach of contract but not relating to work actually done on or in respect of the improvement (or, in the case of materials, materials that were used in or in respect of the improvement), then there may be a damages claim, but it is not properly part of a lien; and
  3. If it is not clear whether the claim is properly the subject of a lien, then on the standard used for summary judgment applications the amount to be posted as security should be the higher amount and the issue left to the trial court or, perhaps, to a later application before trial once further facts have been learned in the questioning process.
The Master declined to reduce the lien amount as it related to damages for delay. In essence, paraphrasing point 2 above, the Master concluded that a damage claim (including a delay claim) can legitimately form part of a claim of lien, provided the claim is “relating to work actually done on or in respect of the improvement (or, in the case of materials, materials that were used in or in respect of the improvement).” The question is whether the damages claimed relate directly to the work that is the subject of the lien. The Master gives an example; a claim for lost productivity or delay is a legitimate lien claim if the lost productivity or delay occurred on the project that is liened; on the other hand, a claim for damages for a contractor’s inability to do work elsewhere, or for inability to do the work for which it was contracted, would not support a claim of lien.  
As JV Driver was claiming various damages (not just damages due to delay), the court also considered the burden of proof on such an application. Master Robertson concluded (as indicated in point 3 above) that the party seeking to discharge or reduce a lien claim has to satisfy the court “that there is no genuine issue of material fact requiring a trial.” If there is any doubt on the issue, the court will decline to reduce the lien claim (and the security paid into court) until the question can be resolved at trial – whether the lien claim is disputed on the basis that the damages are not properly the subject of a claim of lien, or on any other basis. To the extent that the Master was unsure whether all of the damages claimed by JV Driver did or did not relate directly to the work, the doubt was resolved in favour of the lien claimant, JV Driver.
This is a favourable decision for lien claimants; in simple terms, the court confirmed that delay claims (and other damage claims) can be included in builders’ liens, and the court resolved that a lien claimants’ security will not be reduced before trial unless there is “no genuine issue” to be tried.

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