Shimco Metal Erectors Ltd. Respondent ( Plaintiff ) v. Corporation of the District of North Vancouver, 2003 BCCA 193

Court of Appeal for British Columbia Citation: Shimco Metal Erectors Ltd. v. North Vancouver (District), 2003 BCCA 193 Date: 20030326 Docket: CA029535 Between: Shimco Metal Erectors Ltd. Respondent ( Plaintiff ) And Corporation of the District of North Vancouver Appellant ( Defendant ) And Design Steel Constructors Ltd. Defendant Before: The Honourable Mr. Justice Esson The Honourable Mr. Justice Donald The Honourable Mr. Justice Hall R.W. Jenkins, Q.C. S. Manhas Counsel for the Appellant J.P.

Mancuso Counsel for the Respondent Place and Date of Hearing: Vancouver, British Columbia 18 February 2003 Place and Date of Judgment: Vancouver, British Columbia 26 March 2003 Written Reasons by: The Honourable Mr. Justice Esson Concurred in by: The Honourable Mr. Justice Donald The Honourable Mr. Justice Hall Reasons for Judgment of the Honourable Mr. Justice Esson: [ 1 ] This is an appeal from the dismissal by Mr.

Justice Tysoe of the defendant District’s application under Rule 18A for an order declaring that all of the plaintiff’s lien rights under the Builders Lien Act , S.B.C. 1997, c. 45 (the “ Act ”) had been extinguished. The decision, which is said to be one of some general importance to the construction industry and owners, is reported at (2002), 2002 BCSC 238 (CanLII) , 99 B.C.L.R. (3d) 59 (S.C.); 2002 BCSC 238.

[ 2 ] The plaintiff was a subcontractor hired by the contractor to provide labour and materials in respect of a tennis facility to be built on the District’s land. The contractor having run into difficulties, a number of sub-contractors were left with substantial claims. Seven of them, including the plaintiff, filed claims of lien against the land, but only three of them, not including the plaintiff, “perfected” their claims by commencing action and registering a certificate of pending litigation within the one-year period fixed by the Act .

The three “perfected” liens claimed amounts totalling about half of the holdback amount of some $64,000, but the amounts claimed by the other four brought the total claims well above that amount. [ 3 ] On the hearing of the application, the plaintiff conceded that it could not succeed in its claim to a lien on the land but argued that it was entitled to continue to pursue its claim of lien against the holdback moneys retained by the owner as required by s. 4 of the Act . [ 4 ] The essence of the plaintiff’s submission is that the Act provides for a lien against the holdback moneys which is independent of the lien created by s. 2 of the Act upon the land.

The relevant sections of the Act which, in its present form, came into effect in 1997, are these: 2(1) Subject to this Act , a contractor, subcontractor or worker who, in relation to an improvement, (

a) performs or provides work, (

b) supplies material, or (

c) does any combination of those things referred to in paragraphs (

a) and (

b) has a lien for the price of the work and material, to the extent that the price remains unpaid, on all of the following: (

d) the interest of the owner in the improvement; (

e) the improvement itself; (

f) the land in, on or under which the improvement is located; (

g) the material delivered to or placed on the land. . . . 4(1) The person primarily liable on each contract, and the person primarily liable on each subcontract, under which a lien may arise under this Act must retain a holdback equal to 10% of the greater of (

a) the value of the work or material as they are actually provided under the contract or subcontract, and (

b) the amount of any payment made on account of the contract or subcontract price. . . .

(9) Subject to

section 34, a holdback required to be retained under this

section is subject to a lien under this Act , and each holdback is charged with payment of all persons engaged, in connection with the improvement, by or under the person from whom the holdback is retained. . . . 8(4) Payment of a holdback required to be retained under

section 4 may be made after expiry of the holdback period, and all liens of the person to whom the holdback is paid, and of any person engaged by or under the person to whom the holdback is paid, are then discharged unless in the meantime a claim of lien is filed by one of those persons or proceedings are commenced to enforce a lien against the holdback. [ 5 ] Prior to the 1997 revision, s. 4 of the Builders Lien Act , R.S.B.C. 1979, c. 40, provided for a lien on the land, improvements and materials in substantially the same terms as the present s. 2(1). A lien on the holdback was provided for by s. 20(2): A lien is a charge on the amount directed to be retained by this

section in favour of claimants whose liens are derived under persons to

whom the money required to be retained is respectively payable, or whose liens are filed as provided in this Act . [ 6 ] In Metropolitan Trust Company v. Abacus Cities Ltd. et al. (1979), 1979 CanLII 592 (BC SC) , 18 B.C.L.R. 317 (S.C.), Wallace J., later J.A., in approving a sale of lands under a mortgage on terms which would have the effect of discharging the builders’ liens against the land, expressed the view that the discharge of those liens would not preclude the lien claimants from pursuing their claims against the holdback monies.

Wallace J. stated at p. 319: In other words, s. 21(2) creates a separate and distinct lien to that created by s. 5 [now s. 4 of the Builders Lien Act ] and extinguishment of the one does not affect the existence of the other. [ 7 ] What Wallace J. referred to as s. 21(2) was shortly to become s. 20(2). It appears that the view that there was a separate and distinct lien on the holdback monies was not generally accepted by practitioners in the field.

As to that, I will say only that the language of the 1979 Act is not clearly inconsistent with the view that the lien referred to in s. 21(2) is the lien created under s. 4 . [ 8 ] Sections 4(9) and 8(4) were new provisions in the 1997 Act .

Those sections, the chambers judge held, are clearly inconsistent with the view that the lien on the holdback is the lien created by s. 2(1). [ 9 ] The essence of the reasoning of the chambers judge is set out in this passage: . . . it is my opinion that the wording of [the] Act demonstrates the intention of the Legislature to create a lien against the holdback in addition to the lien against the land. [18] On a plain and literal reading of s. 4(9), the holdback is made subject to a lien which is independent of the lien created by s. 2 .

The language refers to "a lien under this Act " (not "the lien under this Act "), which suggests that it is a different lien than the one created by s. 2 . In addition, the second phrase of s. 4(9) describes the benefactors of the lien. The lien does not benefit the persons who have a subsisting lien under s. 2 . It benefits the persons for whose benefit the holdback is retained. As Lowry J. commented in Myers [ Enterprises v.

Atlas Painting & Decorating Ltd. (1997), 29 B.C.L.R. (3d) 174 (S.C.) ] with respect to the second clause of s. 75(3) of the Condominium Act [R.S.B.C. 1979, c. 61], there would be no need for the second clause in s. 4(9) if the lien referred to in the first clause was the same lien as the one created by s. 2 . [19] It is also to be noted that the second phrase of s. 4(9) creates the lien against the holdback in favour of a potentially different group of persons than those benefiting from the s. 2 lien.

When the owner hires a head contractor, the two groups will be the same in relation to the lien against the land and the lien against the holdback retained by the owner from the head contractor. However, when the owner acts as its own head contractor (as I understand to be the case in the present situation), there will be as many holdbacks as there are contractors because there will be a separate holdback under each contract. All of the subcontractors will have a lien against the land irrespective of which contractor engaged them.

On the other hand, only the subcontractors engaged by a particular contractor will have a lien against the holdback retained from that contractor and subcontractors engaged by other contractors will not have a lien against that holdback (although they will have a lien against the amount held back from the contractor which engaged them).

In most cases, it will make no difference but it could become significant if the amount owed to one group of subcontractors exceeded the holdback for their benefit and the amount owed to another group of subcontractors was less than their holdback. [20] In my opinion, the wording of s. 8(4) reinforces the existence of a separate lien. It provides that a holdback may be released upon expiry of the holdback period unless (

i) a claim of lien is filed or (ii) proceedings are commenced to enforce a lien against the holdback. The first of these events corresponds to the s. 2 lien and the second corresponds to the s. 4(9) lien. Even if a claimant has not filed a lien in the land title office by the time of the expiry of the holdback period, the holdback may not be released if proceedings have been commenced to enforce a lien against the holdback.

The lien against the land will have been extinguished by operation of s. 22 but the holdback may not be released and there may be continuing proceedings to enforce the lien against the holdback. This acknowledges that there is a separate lien against the holdback which has not been affected by the extinguishment of the lien against the land. [ 10 ] The appellant’s submissions are based largely on what are asserted to be the awkward and impractical consequences which flow from having two types of liens on separate assets with different methods of enforcement and different classes of beneficiaries.

The chambers judge considered those matters at some length in his reasons and acknowledged that there appear to be “imperfections” in the Act , including an element of unfairness to those lien claimants who, having perfected their liens against the land, must share the holdback pro rata with those who did not perfect their s. 2(1) liens. Mr.

Jenkins, on behalf of the appellant, emphasizes what it as owner sees as the unfairness in preventing it, upon the expiration of the one-year period, paying out the holdback to the three subcontractors who began their actions in time and using the balance of the holdback to protect itself against the damages caused by the contractor’s failure.

It is, of course, possible that one of the objects of the amendments was to prevent the owner from using the holdback in that way, while subcontractors and others claiming under the contractor remain unpaid. [ 11 ] All of those matters were considered by the chambers judge in some detail as discussed in paragraphs 21 and 22 of his reasons. In the end, he concluded that those matters do not overcome the clear and unambiguous wording of s. 4(9) and s. 8(4). I agree with his conclusion and with his reasons.

[ 12 ] The final point raised by the appellant in its factum is that ss. 22 and 33(5) of the Act have the effect of extinguishing both the lien against the land and that against the holdback if the requirements of s. 33(5) are not met.

Section 22 and the relevant part of s. 33(5) read as follows: 22 A lien in respect of which a claim of lien is not filed in the manner and within the time provided in this Act is extinguished . . . 33(5) Unless an action to enforce a claim of lien is commenced and a certificate of pending litigation is registered within the time provided in this section, the lien is extinguished.

I agree with the conclusion of the chambers judge who disposed of that submission as follows: . . . it is true that s. 22 and s.33(5) do not specify which lien is being extinguished but, as they mention a “claim of lien” and filings or registrations in the land title office, it is reasonable to infer that they are referring to the lien against land; Not only is it reasonable to infer that the sections refer only to the lien against land but, in my view, no other meaning can reasonably be taken from the language of the Act when read as a whole. [ 13 ] I would dismiss the appeal. _________________________________ The Honourable Mr.

Justice Esson I AGREE: ___________________________________ The Honourable Mr. Justice Donald I AGREE: ___________________________________ The Honourable Mr. Justice Hall