Court of Appeal Clarifies Test for Abandonment of Contract in Lien Registration Timelines

Authors: Dana Nowak, Eleanor Olszewski, Q.C.

This post was written prior to our January 2017 merger, under our previous firm name, MacPherson Leslie & Tyerman LLP.

Can a contractor file a second builders’ lien for the same work after the expiry of a first lien? If a contract is abandoned, when does the time period to file a lien start to run? These questions were recently answered by the Alberta Court of Appeal in Tervita Corporation v ConCreate USL (GP) Inc., 2015 ABCA 80.

The issue before the Court was whether Tervita had a valid builders’ lien for work that it had completed under contract with ConCreate. In April 2012, prior to Tervita finishing its work, ConCreate went into receivership. The Builders’ Lien Act provides that a lien claimant has 45 days to file a lien from either the completion or the abandonment of the contract. Tervita registered a lien on April 5, 2012, but then lost this lien as it failed to meet the requirement in section 43(1) of the Act to register a certificate of lis pendens within 180 days of registering the lien. On October 12 2012, on the basis that it still had outstanding work and that the contract had not yet been abandoned, Tervita registered a second identical lien.

Whether this second lien was valid was decided by a summary trial. The judge held that the second lien had been filed in time, as the contract had not been abandoned until October 23, 2012, the date on which the landowner told Tervita that they had decided not to hire Tervita directly to complete its work. However, the judge concluded that the lien was ultimately invalid because a contractor could not file a second lien for the same work after the first lien had expired.

Tervita appealed and the Court of Appeal concluded that the trial judge had erred in applying a subjective test for abandonment, in considering only when Tervita knew that it would not be asked to complete its work under the contract. Rather, a mixed subjective/objective test should be applied, meaning that a contract is abandoned when the lien claimant knew or ought to have known that the other party would not complete the contract. The Court noted that abandonment can occur without a formal communication from the other parties that the contract is terminated.

The Court also held that the Act does not preclude the filing of multiple liens and, consequently, the expiry of a first lien is not determinative of the validity of a second lien. However, in order for a second lien to be valid, it must be filed within the time requirements of the Act. Therefore, it is possible for a lien claimant to lose its lien through a failure to meet a required timeline and to register a second lien prior to the right to lien expiring.

In this case, Tervita’s July 23, 2012, acknowledgment of ConCreate’s receivership and the receiver’s actions to block the construction site demonstrated that Tervita had objective knowledge that the contract had been abandoned. While Tervita was not barred from registering a second lien, it had not been registered within 45 days of abandonment of the contract and was thus invalid.

The Court of Appeal’s decision emphasizes the importance of timing. Builders should be aware of their rights and the timelines under the Act, so that they can take appropriate steps as soon as an issue arises. In circumstances of contract abandonment, the period of time for filing a lien runs from the date the lien claimant knew or ought to have known that the other party would not complete the contract.