Saskatchewan Court of King’s Bench affirms purpose of Lien Payout Provision in The Builders’ Lien Act

( Disponible en anglais seulement )

30 avril 2024 | Khurrum Awan, Titli Datta, Éric Bergeron

The Saskatchewan Court of King’s Bench recently released its decision for DW Earnshaw Excavating v 7-Eleven Canada Inc., 2023 SKKB 252.

The matter involved an application by DW Earnshaw Excavating (“DW Earnshaw”) to the Court under section 56(9) of The Builders’ Lien Act (the “BLA”). A lien claimant whose registered claim of lien or written notice of a lien has been vacated but who has not been able to prove his claim can apply to the Court under section 56(9) of the BLA [the “Lien Payout Provision”], after notifying any affected persons, for an order requiring the money paid into Court be paid out to the person(s) who are found entitled to receive the funds. DW Earnshaw relied on this section in its application.

The issues addressed by the Court included the following:

  1. Does the Lien Payout Provision of the BLA authorize the Court to determine the validity of liens and order payments to the entitled person(s)?
  2. Did the claim have to served on the contractor?

Factual background

7-Eleven Canada Inc. (“7-Eleven”) had hired the contractor BLS Asphalt Inc. (“BLS”) in 2016 to build a convenience store in Weyburn, Saskatchewan on a property owned by 7-Eleven (the “Project”). It was agreed between 7-Eleven and BLS that the Project would cost $1,657,499. BLS hired multiple sub-contractors to work on the Project. DW Earnshaw was one of them. 7-Eleven paid BLS the amount of $1,520,653, and BLS issued a Certificate of Substantial Performance on November 29, 2016, meaning that the contract between the owner and the contractor had been completed. An amount of $136,846.45 remained outstanding as part of a holdback agreed to as per the terms of the contract between 7-Eleven and BLS.

Between November 21, 2016 and February 16, 2017, six sub-contractors registered claims of lien which were all paid out by BLS by March 6, 2017. On March 9, 2017, after 7-Eleven approved contract changes totalling $59,903, two more sub-contractors registered their claims of lien on March 9, 2017 and April 6, 2017 respectively (the “last two liens”). On March 29, 2017, 7-Eleven released the holdback on the understanding that BLS would use it to discharge the first lien registration and to pay any other claims of lien.

7-Eleven then applied to the Court to vacate the last two liens on payment into Court of the full amount claimed plus security for costs. The amount of $59,903 plus GST was paid into Court by 7-Eleven in accordance with an order that was made pursuant to s. 56(2) of the BLA. By doing so, the liability of 7-Eleven became limited to the affected lien claimants, thus vacating all liens from 7-Eleven’s property, and leaving the lien claimants to apply to Court for money owed.

Application for payout of lien funds

DW Earnshaw, one of the lien claimants, applied for payment of the funds out of court relying on the Lien Payout Provision of the BLA, and asked that the funds be paid out on a pro-rata basis to all lien claimants with a valid claim. DW Earnshaw also asked for the Court’s directions about the process for lien claimants to prove their lien claims. All other lien claimants argued that no such instruction was necessary because they had already filed with the Court sufficient evidence showing the validity and amount of their lien claims.

Judgment from the Court of King’s Bench

The Court was unable to grant the order that DW Earnshaw was seeking and dismissed the application without limiting the ability of the remaining lien claimants to bring further applications that would be supported by evidence validating their lien claims – provided that advance notice was given to the affected parties.

The Court acknowledged that the amount of the funds in court was limited. However, while the BLA directs that the procedure is to be summary (or simplified) in nature in order to reduce expenses related to the enforcement of liens, the Lien Payout Provision of the BLA did not apply in the circumstances before that Court. The provision was intended for lien claimants who cannot prove their claim in situations where liens had been vacated. The provision did not provide a mechanism for the Court to determine the validity of lien claims.

The Court explained that the relief sought by DW Earnshaw could only be granted after the Court determined who was entitled to the funds and what the proportionate share was between the entitled persons. Further, DW Earnshaw could apply for a relatively quick determination of the matter by bringing a summary judgement application before the Court. None of the lien claimants had made such an application, and only DW Earnshaw had provided evidence of the amount it was owed by the contractor.

Further, the contractor had not been properly notified of the application. Therefore, even if the Lien Payout Provision of the BLA had applied in the circumstances, the Court would not have granted the remedy sought.

Key takeaways

The decision in DW Earnshaw Excavating v 7-Eleven Canada Inc affirms that the purpose of the Lien Payout Provision of the BLA is to provide a mechanism for the payout of funds paid into court in order vacate lien registrations, not to determine whether the liens were valid in the first place. Further, in situations where the provision applies, the decision underscores the necessity of ensuring that all procedural requirements for seeking a remedy have been met.

Please reach out to a member of Miller Thomson’s Construction and Infrastructure Group if you have any questions.

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