Artis Builders v Kehoe, 2019 SKCA 14

Court of Appeal for Saskatchewan Docket: CACV3159 Citation: Artis Builders v Kehoe , 2019 SKCA 14 Date: 2019-01-30 Between: Artis Builders Appellant (Defendant) And Heather Kehoe Respondent (Plaintiff) Before: Richards C.J.S., Caldwell and Herauf JJ.A. Disposition: Appeal allowed Written reasons by: The Honourable Chief Justice Richards In concurrence: The Honourable Mr. Justice Caldwell The Honourable Mr. Justice Herauf On Appeal From: QBG 1404 of 2017, Saskatoon Appeal Heard: May 15, 2018 Counsel: John Benesh for the Appellant Bradley Jamieson for the Respondent Richards C.J.S. I.

Introduction [ 1 ] This appeal raises an issue about builders’ liens. More specifically, it requires the Court to determine when or if a builders’ lien can be vacated if the lien claimant fails to commence an action to enforce the lien. [ 2 ] The appellant, Artis Builders, registered a lien but did not commence an action to enforce it. The lien was ultimately declared void by a Queen’s Bench Chambers judge who, in reaching his decision, applied the standard two-year limitation period prescribed by The Limitations Act , SS 2004, c L-16.1 .

The Chambers judge held that the date on which the lien was registered was the latest date on which Artis Builders could have discovered its claim, and hence the latest date on which the limitation period for an action to enforce the lien could have begun to run. Given that more than two years had elapsed since the registration of the lien, the Chambers judge declared the lien to be void. Artis Builders appeals from that decision. [ 3 ] I conclude this appeal should be allowed. A lien may be vacated if no action to enforce it is commenced within two years of when the claim is discovered.

However, discoverability is a question of fact. As explained below, the latest date on which the limitation clock can begin to run with respect to matters of this kind is not necessarily the date on which the lien was filed. Given the conflicting affidavits that have been filed, this matter must be returned to the Court of Queen’s Bench so the factual questions relating to the limitation period can be sorted out. II. background [ 4 ] Artis Builders is a construction firm.

The respondent, Heather Kehoe, owns a house [Property] in Saskatoon. [ 5 ] Mark Nickolayou, one of the principals of Artis Builders, avers in his affidavit that Artis Builders provided construction materials and services to Ms. Kehoe in connection with renovations made to the Property. He says Artis Builders had provided similar construction services to Ms. Kehoe in the past when she had “flipped” other houses. Ms. Kehoe would make partial payment to Artis Builders, usually to pay for materials, and then cover the balance of her account when the house sold. [ 6 ] Mr. Nickolayou also avers that he understood Ms.

Kehoe would be delayed in selling the Property because of an issue she was facing in her personal life. He registered a builders’ lien on the title of the Property on August 19, 2015, “to give notice of our agreement and that I was not yet paid”. [ 7 ] In her affidavit, Ms. Kehoe denies any indebtedness to Artis Builders. [ 8 ] Artis Builders did not commence proceedings to enforce its lien claim. III. the Chambers decision [ 9 ] In September of 2017, Ms.

Kehoe filed a notice of application in the Court of Queen’s Bench seeking an order declaring Artis Builders’ lien to be void and directing Information Services Corporation to discharge it. Ms. Kehoe argued that, because Artis Builders had failed to commence proceedings to enforce its claim of lien within two years of registering the lien, the lien was void. [ 10 ] The Chambers judge referred briefly to various Queen’s Bench decisions including Syed v 612565 Saskatchewan Ltd. , 2009

SKQB 141 , [2009] 7 WWR 682 [ Syed ], where Dovell J. had concluded that, where no statement of claim is filed, a lien is subject to a two-year limitation period running from the date the claim was discovered. [ 11 ] The Chambers judge concluded the lien in issue here was void by writing as follows: [5] The issue in this case is whether or not the alleged agreement by the respondent that payment would be made when the property was sold saves the respondent from the operation of the limitation period. [ Caldwell v Rhode , 2016 SKQB 193 , 62 CLR (4th) 70] dealt with a similar issue, the issue of whether or not an understanding that a party would forbear from acting on its lien for a certain period of time would be sufficient to allow the court to extend the lien thereby preserving the right.

Danyliuk J. concluded that with no agreement to forbear there were not sufficient grounds for an extension. [6] In this case, we do not have an application for extension but simply the issue of whether or not the limitation period has run. [7] I find that following cases such as Syed that the limitation period in this case would commence to run no later than the date that the lien was registered on the title. There is no agreement put before the court that shows that the understanding the respondent has put forth was in fact an agreement between the parties. Therefore I conclude that there is no basis for an

interpretation other than the one that the limitation period commenced upon the registration of the lien. [8] As such, I must grant this application, find the lien to be void and grant the order directing Information Services to discharge that lien. IV. analysis [ 12 ] In order to work through this appeal, it is necessary to begin by situating the question it raises in the scheme of The Builders’ Lien Act , SS 1984-85-86, c B-7.1 [ Act ]. This done, I will turn more specifically to the approach applied by the Chambers judge. A.

The scheme of the Act [ 13 ] The foundation of the lien regime established by the Act is found in s. 22(1) .

A person has a lien by virtue of the provision of services or materials and the lien is for the price of the services or materials that remains owing: 22(1) A person who provides services or materials on or in respect of an improvement for an owner, contractor or subcontractor, has , except as otherwise provided in this Act , a lien on the estate or interest of the owner in the land occupied by the improvement, or enjoyed therewith, and on the materials provided to the improvement for as much of the price of the services or materials as remains owing to him. (Emphasis added) [ 14 ] A lien arises at the point in time when services or materials are provided.

Section 27 says this: 27 A person’s lien arises and takes effect when he first provides his services or materials to the improvement. [ 15 ] A lien expires in various circumstances listed in s. 49, which I will not detail here, unless it is registered. [ 16 ] Section 50(1) of the Act deals with registration. It provides that an interest based on a claim of lien may be registered pursuant to The Land Titles Act, 2000 , SS 2000, c L-5.1 : 50(1) A lien claimant may apply to the registrar to register an interest based on a claim of lien.

(2) Every claim of lien shall set out: (

a) the name and address of: (

i) the person claiming the lien; (ii) the owner or the person who the claimant or the agent of the claimant believes to be the owner; and (iii) the person for whom the materials or services were provided; (

b) a short description of the services or materials that have been provided; (

c) the amount claimed in respect of services or materials that have been provided; (

d) a description, sufficient for registration, or, where the Crown is the owner, sufficient for identification, of the land or the estate or interest affected; and (

e) the lien claimant’s address for service. [ 17 ] Section 86(1) of the Act , in turn, indicates that an action to enforce a claim of lien must be undertaken by way of statement of claim. When such an action is commenced, the lien expires if the action has not been set down for trial within two years of the date when it was commenced, or such later date as the court may fix: 55(1) Subject to subsection (2), a lien, for which an action has been commenced, expires where an action in which that lien may be

realized is not set down for trial within two years of the day the action was commenced.

(2) The court may extend the time mentioned in subsection (1).

(2.1) An order pursuant to subsection (2) extending the time for commencing an action may be registered as an interest in the Land Titles Registry.

(3) Where a lien has expired under subsection (1), the court shall, on application, make an order dismissing the action if there is no other registered claim of lien at the time of the application, otherwise the court shall make whatever order it deems appropriate for continuation of the action. [ 18 ] All of this leads to the issue raised by this appeal. As noted, s. 55(1) speaks to the status of a lien when an action based on the lien claim has not been set down for trial within two years.

However, the Act says nothing about the status of a lien if the lien claimant does not, for whatever reason, commence an action. This is different from the approach taken in the builders’ lien legislation in other provinces. Those Acts provide that a lien for which a claim has been registered will cease to exist unless an action is launched to enforce the claim of lien within some specified period of time.

For example, s. 43 of the Alberta Builders’ Lien Act , RSA 2000, c B-7 , stipulates that a lien that has been registered ceases to exist unless, within 180 days from the date it is registered, an action is commenced to realize on the lien. [ 19 ] As a result, a Saskatchewan land owner faced with a registered lien, and troubled by a circumstance where no action has been commenced, would seem to have three options under the Act .

First, as contemplated by s. 56, the land owner could vacate the lien by paying into court the full amount claimed as owing in the claim of lien. [ 20 ] Second, and pursuant to s. 58 of the Act , the owner could apply to lapse the lien in accordance with The Land Titles Act, 2000 .

As per the combined effect of s. 58(2) of the Act and s. 46 of The Land Titles Regulations, 2001 , RRS c L-5.1 Reg 1 , the Registrar would be required to lapse if, within 30 days of notifying the lien claimant of the application, the claimant failed to register a “certificate of action” generated pursuant to s. 86(5) of the Act to establish that an action was proceeding. [ 21 ] As an aside, this second option engages two drafting errors, which have been described in the Court of Queen’s Bench as “completely unexplainable”. See: Syed at para 13 .

The first is found in s. 58(2)(b), which provides that a lien may not be lapsed on the application of a land owner if the lien claimant has registered an interest extending the time for commencing an action “mentioned in subsection 55(4)”.

Section 58 reads as follows: 58(1) Subject to subsection (2), a registered interest based on a claim of lien may be lapsed in accordance with The Land Titles Act, 2000 .

(2) A registered interest based on a claim of lien may not be lapsed where any of the following interests have been registered: (

a) an interest based on a certificate of action issued pursuant to subsection 86(5); (

b) an interest based on a court order extending the time for commencing an action mentioned in subsection 55(4). (Emphasis added) The problem is that the Act has no s. 55(4) . [ 22 ] The second problem is in s. 55(2.1). This subsection provides that an order to extend the time for commencing an action may be registered as an interest. For ease of reference, the relevant parts of s. 55 are reproduced below: 55(1) Subject to subsection (2), a lien, for which an action has been commenced, expires where an action in which that lien may be realized is not set down for trial within two years of the day the action was commenced.

(2) The court may extend the time mentioned in subsection (1).

(2.1) An order pursuant to subsection (2) extending the time for commencing an action may be registered as an interest in the Land Titles Registry. (Emphasis added) The error here is that s. 55(2.1) refers to s. 55(2) as if s. 55(2) deals with extending the time for commencing an action.

However, s. 55(2) deals with something different – the time for setting an action down for trial. [ 23 ] In considering these errors, it is important to note that, prior to the amendments by which they were introduced into the Act , s. 58 of the Act did have a mechanism for addressing the situation where an application to lapse was made before an action to enforce the underlying claim of lien had been commenced.

More specifically, that version of the Act contemplated the prospect of a court order extending the time for commencing an action and provided that the registration of such an order operated to fend off an application to lapse. This allowed a lien holder who did not yet have a debt due and owing from the land owner, and hence no cause of action and no ability to commence proceedings and thereby obtain a certificate of action, to maintain its lien.

The provisions of the Act to which I refer read as follows: 58(1) At any time after registration of a claim of lien, and before a certificate of action issued under subsection 86(5) is registered, any person claiming a mortgage on, or claiming any estate or interest in the land in respect of which a claim of lien is registered, may by request, in the prescribed form, require the registrar to send a notice to the lien claimant pursuant to subsection (2).

(2) On receipt of a request mentioned in subsection (1), the registrar shall send to the lien claimant at his address for service, by

registered mail, notice in the prescribed form.

(3) Where no certificate of action or order extending the time for commencing an action is registered against the land in respect of whichthe claim of lien is registered within 30 days of the mailing of the notice pursuant to subsection (2), the lien ceases to exist and theregistrar shall vacate the registration of the claim of lien. (Emphasis added) [24] Courts have a very limited authority to correct drafting mistakes where it is clear that the statutory language does not reflectlegislative intention.

Justice Lamer (as he then was) put it this way in R v Paul, (SCC), [1982] 1 SCR 621 at 662: Courts have always been reluctant to giving statutes exceptional construction. This is well illustrated in the reported cases on the subject.But this reluctance did not stop courts from departing from the ordinary rules of construction if through their application the law were tobecome what Dickens’ Mr.

Bumble said it sometimes could be, “a ass, a idiot” (Dickens, Oliver Twist). [25] It is not strictly necessary to decide, in this case, whether ss. 55 and 58 of the Act should be interpreted in a remedial way toovercome their obvious problems. That can wait for another day when the Court has the benefit of the full submissions of counsel on thematter. For present purposes, I tentatively note only that there is some arguable attraction in the idea of reading those two provisions asmeaning that (

i) a court may make an order extending the time for commencing an action to enforce a claim of lien, (ii) such an ordermay be registered as an interest in the Land Titles Registry, and (iii) if so registered, the court order would mean a registered interestbased on the claim of lien in issue could not be lapsed. (See also: Axcess Capital Partners Inc. v Allsteel Builders

(2) Limited, 2015SKCA 33 at footnote 1, 383 DLR (4th) 334.) [26] These observations having been made, I return to the main track of my analysis to note that the third option for a land ownerfaced with a lien and a failure by the lien claimant to commence an action is the one pursued by Ms. Kehoe in this case. She brought anapplication in Chambers to have the lien declared void in apparent reliance on s. 60 of the Act. It sets out a general authority of the Courtof Queen’s Bench to vacate the registration of a claim of lien: 60 The court may, on application: (

a) order that the registration of: (

i) a claim of lien; or (ii) a certificate of action; or both, be vacated; (

b) declare that a written notice of a lien no longer binds the person to whom it was given; or (

c) dismiss an action; on any terms and conditions that the court may order. B. The situation in this case [27] The analysis of the issue in this case begins with the reality that, where no statement of claim is filed, a lien will terminate twoyears after the date when the cause of action in respect of an action to enforce the claim of lien was discovered. Significantly, this two-year limitation period can sometimes begin to run after the date a lien is registered. [28] Sections 3(1)(a), 5 and 6 of The Limitations Act provide as follows: 3(1) Subject to subsections (2) to (5), this Act applies to claims pursued in court proceedings that: (

a) are commenced by statement of claim; … 5 Unless otherwise provided in this Act, no proceedings shall be commenced with respect to a claim after two years from the day onwhich the claim is discovered. 6(1) Unless otherwise provided in this Act and subject to subsection (2), a claim is discovered on the day on which the claimant firstknew or in the circumstances ought to have known: (

a) that the injury, loss or damage had occurred; (

b) that the injury, loss or damage appeared to have been caused by or contributed to by

an act or omission that is the subject of theclaim; (

c) that the act or omission that is the subject of the claim appeared to be that of the person against whom the claim is made; and (

d) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it.

(2) A claimant is presumed to have known of the matters mentioned in clauses (1)(

a) to (

d) on the day on which the act or omission onwhich the claim is based took place, unless the contrary is proved.

[ 29 ] There is nothing in the Act speaking to when an action to enforce a claim of lien must be commenced. As a result, a two-year limitation period set out in The Limitations Act applies to actions aimed at enforcing a lien. In other words, such actions must be commenced within two years from the day on which the claim is discovered. It also follows that, if an action to enforce a claim of lien is statute-barred, the lien itself, or more accurately the interest represented by the claim of lien, should be removed from the title. I understand all of this to be common ground between Artis Builders and Ms.

Kehoe. [ 30 ] The question of when a claim is discovered is one of fact. This is significant because a cause of action does not arise automatically when a lien comes into existence by virtue of the provision of services or materials or later by virtue of a lien being filed with the Registrar of Titles. As noted above, liens themselves arise immediately on the provision of services or materials. But, depending on the applicable contractual arrangements, the obligation of the person receiving those services or materials to pay for them might not be coincident with their supply.

There can sometimes be a lag time between the provision of materials or services and the right to demand payment for them.

This means, simply put, that a lien can be filed before the price of the relevant services or materials becomes due and payable and hence before the provider of the services or materials has a basis for commencing an action to enforce its claim of lien. [ 31 ] In this regard, I agree with Justice Barrington-Foote when, as a Queen’s Bench judge, he wrote as follows in West Dee Construction Ltd. v T & B Electric Ltd. , 2013 SKQB 260 , 425 Sask R 87: [13] … The Builders’ Lien Act provides for a lien in favour of a person who provides services or materials “for as much of the price of the services or materials as remains owing to him”.

That lien exists regardless of whether any amount is then due and payable. Indeed, a claim of lien may be registered before an account has been issued at all. While registration of the claim of lien may be relevant evidence as in determining whether a claim has been “discovered”, registration does not necessarily mean that the limitation clock has begun to tick. [ 32 ] That takes the analysis to the particulars of the situation at hand. The Chambers judge was of the view that the basic facts of the matter before him were not in dispute. This might be so, depending on what the judge meant by “basic”.

However, there was definitely a conflict in the affidavits of Mr. Nickolayou and Ms. Kehoe on the critical question of whether there was a debt due and owing by Ms. Kehoe to Artis Builders. [ 33 ] In his affidavit, Mr. Nickolayou recounted an established practice in relation to Ms. Kehoe’s renovation projects whereby Ms. Kehoe would make partial payment for materials and services to Artis Builders when the work was undertaken and would then pay the balance when the house was sold. Mr.

Nickolayou explained in his affidavit that “I filed a lien on the [Property] to give notice of our agreement and that I was not yet paid. I did not commence an action as the property had not been sold”. But, in her affidavit, Ms. Kehoe stated, “I deny any indebtedness to Artis Builders”. In other words, Mr. Nickolayou explained that Ms. Kehoe was indebted to Artis Builders but that the debt was not yet due and payable. For her part, Ms.

Kehoe denied there was any debt at all. [ 34 ] Given all of this, I am respectfully at a loss to understand how the Chambers judge was able to conclude, in paragraph 7 of his fiat, that “[t]here is no agreement put before the court that shows that the understanding [Artis Builders] has put forth was in fact an agreement between the parties”. I say this because, to repeat, Mr. Nickolayou had expressly referred to an “agreement”. At worst, from the perspective of Artis Builders, there was a conflict in the affidavit evidence.

That said, it might also be that the Chambers judge’s decision somehow reflects a failure to fully appreciate that, if Ms. Kehoe did not yet have a debt due and payable to Artis Builders because of the alleged agreement, then the limitation period would not yet have begun to run. [ 35 ] In any event, I conclude that the decision of the Chambers judge cannot stand. The contradiction in the affidavit evidence must be resolved. That done, the legal framework outlined above must be applied to the facts as found.

V. conclusion [ 36 ] I would allow Artis Builders’ appeal, set aside the decision of the Chambers judge and remit this matter to the Court of Queen’s Bench so that the factual issues flagged above can be resolved by way of the trial of an issue or otherwise. Artis Builders is entitled to costs in respect of this appeal in the usual way. “Richards C.J.S.” Richards C.J.S. I concur. “Caldwell J.A.” Caldwell J.A. I concur. “Herauf J.A.” Herauf J.A.