When Does The Saskatchewan Builders’ Lien Act Apply in the Context of a Government Street or Highway Construction Project?

September 13, 2018 | Jonathan Martin, Julian Nahachewsky

In PCL Construction Management Inc. v. Saskatoon, 2018 SKQB 119, Justice Currie confirmed that liens can be registered on government highway construction projects that (1) are not governed by The Highways and Transportation Act (the “HTA”) and (2) include a bridge. The court also declined to separate a highway construction contract into bridge and non-bridge work for the purposes of the Builders’ Lien Act (the “Act”). Rather, for the sake of workability and predictability, the Court found that unless the HTA applies, the Act would apply to the entirety of the contract if it includes the construction or improvement of a bridge.

Factual Background

This case arises out of the construction of two major interchanges in Saskatoon, Saskatchewan. The first interchange is located at the intersection of McOrmond Drive and Highway 5. The second interchange is located at the intersection of Boychuk Drive and Highway 16.

The prime contract for the interchanges was between the City of Saskatoon (“Saskatoon”) as the owner and PCL Construction Management Inc. (“PCL”) as the contractor. When disagreements arose between the parties, a number of sub-contractors served written notices of liens. In response to the notices of lien, PCL sought a declaration from the court that the Act did not apply to the constructions projects; or, at least, the subcontracts, which did not directly contribute labour or materials to the building of the bridges.

Section 5 of The Builder Lien Act

For context, it is important to remember that the Act as a whole applies differently to the government than it does to anyone else. It does not permit the registration of liens on crown land. It only provides for serving the government with a Written Notice of Lien, which essentially forces the government to set aside a fund for the entire satisfaction of the lien until the underlying dispute is settled or decided by the courts. The idea is that by tying up some of its funds, a Written Notice of Lien will put some pressure on the government to resolve its disputes with subcontractors.

Section 5 of the Act can appear confusing at first glance, and most will have to read it a few times to understand what it says. It carves out the principle that the Act will usually not apply to the construction of public streets or highways. However, it does apply to the construction or repair of bridges. It is not clear exactly why the Legislature saw fit to give special protections to bridge builders that are not available to road builders in general. However, there is an exception to the exception: the Act will once again not apply if the construction or improvement of the bridge is done pursuant to HTA.

Subsection 5(3) reads as follows:

5(1) Except as otherwise provided, the Crown is bound by this Act.

(2) This Act does not apply where services or materials are provided:

(a) in connection with a contract entered into under or pursuant to The Highways and Transportation Act; or

(b) in connection with the construction or improvement of a street or highway owned by the Crown.

(3) Notwithstanding subsection (2), this Act applies where services or materials are provided in connection with the construction or improvement of a bridge owned by the Crown other than a bridge constructed or improved under or pursuant to The Highways and Transportation Act.

The court in PCL Construction was tasked with determining whether the Written Notices of Lien filed for this construction project were valid. All parties agreed that paragraph 5(2)(a) did not apply. The contract was between PCL and Saskatoon, not the Ministry of Highways. It was, therefore, not a contract entered into under or pursuant to the HTA. However, paragraph 5(2)(b) did apply. By operation of subparagraph 2(1)(d)(i) of the Act, the “Crown” includes municipalities. The Act would, therefore, not apply unless subsection 5(3) provided otherwise.

The court broke down subsection 5(3) into two sub-questions. The first and critical question the court asked was: Are services or materials being provided in connection with the construction or improvement of a bridge owned by the Crown? The interchanges contained bridges that allowed traffic to pass through and overtop. PCL argued that these bridges were, in fact, a very small part of what was generally a much broader highway construction project. It argued that it could not have been the intention of the Legislature that the entire project would become subject to the Act just because it included a bridge as a small part of it. Rather, the bridge must be the dominant part of the contract for the Act to apply.

The court rejected this argument concluding that a bridge remained a bridge regardless of the amount of other non-bridge work that was being done around it. The proportionality argument was disregarded as the court concluded that a bridge did not become a road just because it was part of a “road system”. In addition, the court found that the wording was extremely broad and that any connection to a bridge was sufficient to trigger application of the Act. The presumption was, therefore, that the Act would apply.

But was there an exception to the exception? Were services or materials being provided in connection with a bridge constructed or improved under or pursuant to the HTA? PCL argued that since subsection 5(3) of the Act does not include the word “contract” (as found in paragraph 5(2)(a)), it is not necessary that the Department of Highways be a party to the contract. So long as the Department of Highways is providing funding toward the construction of the bridges, the Act would not apply. The court, however, concluded that subsection 5(3) means the same thing as paragraph 5(2)(a) – the Department of Highways has to be a party to the contract for the Act not to apply.

Finally, PCL argued that if the Act applied, it should only apply to the specific bridge-building parts of the contract, not the entire project. The court did not agree. The Ccourt found that if the Act applied, it would apply to the project as a whole. The court’s reasoning was that having to track various elements of services and materials to separate “bridge” work from “non-bridge” work would only cause confusion for all the contractors in the future, which could not have been what the Legislature intended.

Key Takeaways

In determining whether the Builders’ Lien Act applies to a government street or highway construction project, the first question to ask is whether the contract has been entered into pursuant to The Highways and Transportation Act. If construction is taking place on a public street, highway or bridge directly for the Ministry of Highways, the Builders’ Lien Act will never apply. If the street or highway construction is being done for some other entity, the Builders’ Lien Act will not apply unless the project includes the construction of a bridge, in which case it will apply to the entire project.

It remains to be seen how players in the road construction industry will respond to this decision. Government entities will have a modest incentive to separate bridge-building contracts from larger road-construction projects. They will, however, have to weigh the advantages of proceeding this way against the added cost and inconvenience of designing, procuring and administering separate contracts when they would otherwise be planned and executed as one.

Disclaimer

This publication is provided as an information service and may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice.

Miller Thomson LLP uses your contact information to send you information electronically on legal topics, seminars, and firm events that may be of interest to you. If you have any questions about our information practices or obligations under Canada's anti-spam laws, please contact us at privacy@millerthomson.com.

© 2020 Miller Thomson LLP. This publication may be reproduced and distributed in its entirety provided no alterations are made to the form or content. Any other form of reproduction or distribution requires the prior written consent of Miller Thomson LLP which may be requested by contacting newsletters@millerthomson.com.