Summary: Court of Appeal confirms payments made to contractors after receiving notice of subcontractor lien claims will increase the amount an Owner must pay to remove liens from title under s.23 of the BLA. 

Recent Appeal Decision

This week, the Court of Appeal released a decision in favor of our client, J.A.W. Fabricators Co. Ltd. (“J.A.W.”).  J.A.W. was a material fabrication subcontractor to a general contractor, which had become insolvent during the project.  The Appeal looked, for the first time, at the relationship between s.23 and 34 of the Builders Lien Act (“BLA”).   Specifically, here, the Court of Appeal addressed the issue of how much the Appellant, Lonsdale Quay Market Corporation (the property “Owner”), was required to pay into Court to clear its property of subcontractor builders’ lien claims.

The amount that an Owner must pay into Court to remove lien claims from title to its property is set out in the BLA.  Sometimes, this is a straightforward calculation.  Here, however, since the Owner continued to pay the defaulting general contractor after receiving notice of J.A.W’s claim of lien, the parties disputed the proper amount to be paid into Court,. J.A.W. argued that due to this payment made after knowledge of the lien claim, the Owner was required (by s.34) to pay in the amount of the holdback, plus the amount of its lien claim in order remove the liens.

Lonsdale had argued, among other things, that because it had to pay money to remedy the general contractor’s defaults, any amount it was required to pay into Court to remove the lien claims was limited to the minimum statutory holdback amount (and not the lien claims of which it had knowledge).

The chambers judge resolved the dispute, for the most part, in favour of J.A.W, when it found that the total amount to be paid into Court was the amount of the actual holdback, plus the full amount of J.A.W.’s lien claim.

This decision was upheld by the Court of Appeal.

At the Appeal, Lonsdale sought to make new arguments about the distinction between “lien claimants” and “lien holders”, which had not been raised or considered by the judge at the original hearing. Lonsdale argued that s. 34 did not apply to J.A.W. as it was only a “lien claimant” and not a “lien holder”. The Court of Appeal denied leave to Lonsdale to make these new arguments.  It looked at the other grounds of Appeal raised by Lonsdale and reviewed the lower court’s decision, and found that the chambers judge made no appealable error.

This decision reiterates that the BLA provides certain protections to industry participants and promotes a balancing of interests.  At para. 55 of the judgment, the Court of Appeal stated the following:

Lonsdale’s proposed interpretation would tip the balance to favour the owner much more than the subcontractor. It would leave subcontractors with incomplete recourse even if they take the necessary steps to provide notice to the owner of their claim of lien. On this point, I agree with J.A.W.’s submission that it is unjust to allow Lonsdale to benefit from its own intentional actions in making further payments to the defaulting contractor, despite having notice of J.A.W.’s lien. Such an interpretation does not strike the balance that animates the purpose of the BLA.

This Appeal decision gives clarity to the interpretation of s.23 and 34 of the BLA, and has a few practical implications for owners, contractors, and subcontractors.

For Owners:

  • When an Owner receives notice of a lien claim registered against its property, it should be cautious about continuing to pay the general contractor, to the extent of the lien claim. It will likely be prudent for the Owner to retain the amount of the lien claim, as it may be required to pay this amount into Court to remove the subcontractor liens and clear its title.
  • By not granting leave to Lonsdale to argue whether there is a material difference between “lien claimants” and “lien holders”, the Court of Appeal may have left this open to be argued at a future time. This means that in a similar scenario as the one in this case, if the Owner seeks to make this argument, a s.23 Application will not likely be able to proceed until the lien claims have been adjudicated. The fastest route to clearing title then, will be through s.24, and an Owner should expect that it may need to pay into Court the full value of the lien claims to get clear title.

For Contractors:

  • If Contractors don’t pay their subtrades, prudent Owners will deduct the lien claim amounts from progress draws, and may end up paying this amount into Court to clear the property title, which will tie up those funds for a period of time while the dispute is resolved.
  • Contractors should seek to resolve subcontractor claims quickly to ensure payment continues to flow to it from the Owner.
    • We note that the future Prompt Payment legislation is also expected to support speedy resolution of claims.

For Subcontractors:

  • Always provide notice to the Owner of a project that you have filed a lien claim. Consider delivering a copy of the lien claim to parties that could be affected by the lien claim, including the general contractor,  the project owner, the property owner, mortgage holder, and/or construction manager, if any.
  • Ideally, this notice ought to be delivered in a manner that may be accepted as evidence of delivery by a Court (eg. registered mail, email). The contract itself may suggest an effective means of delivery (likely in the Prime Contract), or the subcontractor may need to run searches to determine where delivery to the Owner may be made.
  • Ensure lien claims are legitimate and well supported. Owners or general contractors may be more motivated to challenge dubious lien claims, if they risk tying up project funding. Keep a good documentary record ready (Note: you will need to do this under Prompt Payment legislation, so if your record keeping leaves something to be desired, address this now).

Read full decision here:  2025 BCCA 461 Lonsdale Quay Market Corporation v. Klondike Contracting Corporation

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Stay tuned for our upcoming article on Bill 20, the Construction Prompt Payment Act.

*None of this is legal advice, but rather general information. You should always seek specific legal advice from an experienced construction lawyer who is familiar with the situation you are facing.