Who Owns That School? The Crown And The Validity Of Lien Claims

Terra Services Inc. v. Her Majesty the Queen 2018 NLSC 221

As the Province of Newfoundland and Labrador remains a major driver of local construction and development the issue frequently arises as to whether the protections intended by the Mechanics' Lien Act ("MLA") can be extended to these provincial projects. As a general rule, the Crown is not subject to the MLA and there is no suggestion that the legislation will be changed anytime soon. Terra Services offers the most recent affirmation of Crown immunity in this area; Justice Frances Knickle extends a logical analysis of the MLA definition of 'Owner', the perfection of a lien claim, and the scope of the MLA's curative provisions in the context of the lien bond and Crown immunity, and appears to close the door on the suggestion that, absent express legislative authority, the Crown could voluntarily submit to the MLA.

In 2009, a contract to construct a new school in L'Anse Au Loup, Newfoundland and Labrador was entered directly between the provincial Department of Works, Services and Transportation and Pomerleau Inc. ("Pomerleau") as contractor. When dispute arose on Pomerleau's subcontract with Terra Services Inc. ("Terra"), Terra filed a claim for lien (the "Lien") against land "... owned by the Dept. of Education/Labrador School Board District." Terra's statement of claim and certificate of action perfecting the Lien named Her Majesty the Queen (the "Crown") as the First Defendant and Pomerleau as the Second Defendant. The School District was not named as a party. Upon application by Pomerleau to post security, a consent order was granted in February 2010 that on posting a lien bond (the "Lien Bond") the Lien would be vacated. In April, 2018, Pomerleau made application to be relieved of its obligation to maintain the Lien Bond on the basis that the Lien was invalid, either on the basis of Crown immunity or because it was never perfected. Justice Knickle granted the application on concluding that Crown immunity would not apply if the School District is the owner, but because the School District is not a party, the action is flawed and the Lien cannot be saved. While the Lien is invalid, the action continues as a civil proceeding against Pomerleau.

As Knickle, J. explains, even though a consent order operated to vacate the Lien when the Lien Bond was posted, there was no dispute that the validity of the Lien underpins the requirement for the Bond - if the Lien was invalid that would be...