Friday, 16 October 2015

Towards a More Relaxed Interpretation of the Builders' Lien Act

Author: Corbin Devlin

A few recent cases from Alberta Masters show a trend towards a less strict interpretation of lien deadlines and requirements. In particular, these cases suggest that equitable considerations may sometimes operate to avoid the strict interpretation of the statute.

Saving a Lien Through Estoppel
The most recent example is the decision of Master Prowse in Boulevard Real Estate Equities Ltd v 1851514 Alberta Ltd.

A lien claimant discharged its' lien when the owner promised payment. When the owner failed to come through with payment, the lien claimant re-registered a lien - even though it was out of time. The owner applied to court to ask for the lien to be discharged on the grounds that it was registered out-of-time. The Master held that the promise to pay, which the lien claimant relied on to miss the lien registration deadline, estopped the owner from obtaining a discharge of the lien. The owner's promise created a "promissory estoppel" that prevented the owner from relying on the strict operation of the legislation. In effect, equitable considerations overruled the strict interpretation of the legislation.

The Master made a point of observing that only the rights of the owner and the lien claimant were in issue. If a third party would be affected (prejudiced), then the Court would have to strictly follow the legislation.

Not a Unique Case
This case seems to indicate a trend, as a similar result was obtained in TRG Developments Corp. v. Kee Installations Ltd.

In that case, a lien was lost because the lien claimant did not register a lis pendens within 180 days of lien registration as required by the statute. But the court ordered the lien to be restored because, even though the requirements of the legislation were not strictly followed, the lien claimant had started a proceeding in which the validity and value of the liens could be determined, and nobody was prejudiced by the failure to register the lis pendens. This decision was upheld on appeal.

The Problem With The Trend
At first blush, it is hard to argue against introducing principles of equity and fairness into the interpretation of the Builders' Lien Act, particularly when all the affected parties are before the court. This trend certainly benefits the lien claimant. But there are competing considerations – such as protecting the rights of construction owners and lenders.

For one thing, a more relaxed interpretation of the legislation is less predictable, and so we might see a corresponding increase in lien litigation, at least until there are additional reported cases to clarify the issue. More significantly, this development may cause practical concerns for those who rely on the predictable operation of the lien legislation to make lending and payment decisions (owners, lenders and construction managers). There is some comfort in the Master's assurance that the doctrine of promissory estoppel will not operate if any third party would be prejudiced. On the other hand, liens affect contractual rights in addition to statutory rights. Lending and payment decisions are made every day based on lien deadlines elapsing, and based on the registration or non-registration of liens – in other words, based on an assumption that the lien legislation will be strictly enforced. The commercial consequences of allowing an expired lien to be restored may therefore extend beyond the obvious.