Timing Is Everything: Claims Of Lien And Releasing Holdbacks

• Published date: 26 July 2021
• Subject Matter: Litigation, Mediation & Arbitration, Real Estate and Construction, Trials & Appeals & Compensation, Construction & Planning
• Law Firm: MLT Aikins LLP
• Author: Mr Andrew Konopelny and Josh Morrison

A recent Saskatchewan Court of Appeal judgment significantly clarifies owner liability for claims of lien registered after the time for release of the holdback. The Court of Appeal's decision also clarifies the effect of an order discharging a lien versus registration of the order.

In Hastings Enterprises Ltd. v 7-Eleven Canada Inc., 2021 SKCA 70 (Hastings Enterprises), the Saskatchewan Court of Appeal affirmed a Chambers decision on the validity of claims of lien that subcontractors had registered after the release of holdback.

Background on Claims of Lien after Holdback Release

The case concerned the construction of a convenience store. Near the end of the project, several subcontractors filed builders' liens:

• Six subcontractors filed liens between November 21, 2016, and February 16, 2017. The owner paid out and discharged the liens by March 6, 2017.
• On March 9 and April 6, 2017, subcontractors registered two other claims of lien. These liens were discharged by an order granted on April 21 and formally issued on April 25, 2017, but not registered with ISC until April 27, 2017.
• Beginning on April 26, 2017, subcontractors registered four additional claims of lien after the April 25, 2017 order.

Altogether, the subcontractors registered $242,006 in claims of lien against the property after the owner released the holdback of $136,846.45.

The subcontractors who filed liens after April 25, 2017, brought an action against the owner and the contractor for the amount of the registered liens.

In a Chambers decision, the judge ruled that the owner was entitled to release the holdback to the contractor when it did, and it was only liable to subcontractors for the amount still owed to the contractor (a change order for $59,903).

The Court of Appeal's Decision

The subcontractors appealed on grounds that the Chambers judge erred in his decision on the validity of the claims of lien that had been registered after the owner released the holdback.

In dismissing the appeal, the Court of Appeal addressed the importance of timing the events that determine the rights and obligations of parties under The Builders' Lien Act (the BLA).

The Court explained that, according to section 43(1)(a) of the BLA, an owner may release the builders' lien holdback when the following preconditions are met:

1. No claims of lien have been registered;
2. The contract has been substantially performed;
3. The amount retained as the holdback is otherwise due or payable under the contract; and
4. Forty clear...