Hastings Enterprises Ltd. v 7-Eleven Canada Inc., 2021 SKCA 70

Court of Appeal for Saskatchewan Docket: CACV3507 Citation: Hastings Enterprises Ltd. v 7-Eleven Canada Inc. , 2021 SKCA 70 Date: 2021-04-29 Between: Hastings Enterprises Ltd., NT Excavating Ltd., Turnbull Excavating Ltd. and DW Earnshaw Excavating Appellants (Respondents) And 7-Eleven Canada Inc. Respondent (Applicant) And BLS Asphalt Inc., Cormode & Dickson Construction (Okanagan) Ltd., Romana Express Inc., and Weyterra Development GP Inc. Non-Parties (Respondents) Before: Caldwell, Barrington-Foote, Tholl JJ.A. Disposition: Appeal dismissed Written reasons by: The Honourable Mr.

Justice Caldwell In concurrence: The Honourable Mr. Justice Barrington-Foote The Honourable Mr. Justice Tholl On appeal from: 2019 SKQB 246 , Estevan Appeal heard: February 3, 2021 Counsel: Scott R. Moffat for the Appellants Jason M. Clayards for the Respondents No one appearing for the Non-Parties Caldwell J.A. I.

INTRODUCTION [ 1 ] Hastings Enterprises Ltd., NT Excavating Ltd. and Turnbull Excavating Ltd. [Subcontractors] appeal against a Court of Queen’s Bench judge’s decision ( 7-Eleven Canada Inc. v BLS Asphalt Inc. , 2019 SKQB 246 [ Chambers Decision ]) made under an application by 7-Eleven Canada Inc. [Owner] pursuant to s. 56(2) of The Builders’ Lien Act , SS 1984-85-86, c B-7.1 . [ 2 ] In this matter, the Subcontractors’ liens expired because they had not registered them or given the Owner formal notice of their claims of lien.

The Owner later released the holdback to its contractor, Cormode & Dickson Construction Okanagan Ltd. [Contractor], but for an amount that remained owing to the Contractor under a change order. The Chambers judge concluded the Owner’s liability was limited by s. 49(5) of The Builders’ Lien Act to the amount of the change order, which had been paid into court. He therefore ordered the Subcontractors’ registered claims of lien vacated under s. 56(2).

In their appeal, the Subcontractors allege the Chambers judge erred when he found that the Owner had been entitled to release the holdback when a claim of lien was registered against the Owner’s land. [ 3 ] For the following reasons, I conclude the Owner was entitled, under s. 43(1) (

a) of The Builders’ Lien Act , to pay out the holdback when it did. The Chambers judge did not err when he found the Owner’s liability was limited to the amount of the change order. I would dismiss the appeal with costs to the Owner. II. BACKGROUND [ 4 ] The Owner owns real property in Weyburn, Saskatchewan [Land]. It hired the Contractor to build a convenience store [Improvement] for $1,657,499 [Contract]. The Contractor hired the Subcontractors to provide services and materials to the Improvement. The Owner paid $1,520,653 to the Contractor.

On November 29, 2016, the Contractor certified substantial performance. At that time, $136,846.45 remained outstanding under the Contract [Holdback]. [ 5 ] Between November 21, 2016, and February 16, 2017, six subcontractors registered claims of lien. By March 6, 2017, the Contractor had paid out these claims and the registrations had been discharged from the Owner’s title. The Owner’s title was clear of registered claims of lien at that point. [ 6 ] On March 9, 2017, the Owner approved Contract changes totalling $59,903. Also on that date, EFL Flooring Ltd. [EFL] registered a claim of lien.

On March 29, 2017, the Owner released the Holdback on the understanding that the Contractor would use it to discharge EFL’s registered claim of lien and to pay other claims of lien, if any. On April 6, 2017, A&B Concrete Ltd. [A&B] registered a

claim of lien. [7] The Contractor brought an application in the Court of Queen’s Bench under s. 56(1) of The Builders’ Lien Act to vacate theEFL and A&B registered claims of lien on payment into court of the full amount claimed plus 25% as security for costs. On April 21,2017, a judge vacated the two registered claims of lien [April 21 Fiat]. The formal order is dated April 21, 2017, but was issued on April25, 2017 [April 25 Order]. Then, on April 26, 2017, BLS Asphalt Inc. [BLS] registered a claim of lien.

The Land Titles Registry, actingon the April 25 Order, discharged the registrations of the EFL and A&B claims of lien from title to the Land on April 27, 2017. The BLSclaim remained registered. [8] On May 3, 2017, Hastings Enterprises Ltd. registered its claim of lien; NT Excavating Ltd. registered its claim on July 12,2017; and Turnbull Excavating Ltd. registered its claim on July 28, 2017. On September 26, 2017, BLS filed a statement of claim namingthe Owner and the Contractor as defendants. The Subcontractors and others eventually joined in the action.

All told, claims of lientotalling $242,006 were registered against the Land after the Owner had released the Holdback. [9] On February 25, 2019, the Owner applied under s. 56(2) of The Builders’ Lien Act to have all registered claims of lien vacatedupon payment into court of the amount of the change order. In the Chambers Decision, the Chambers judge ruled that the Owner had beenentitled to release the Holdback to the Contractor when it did.

He found the Owner was only liable to subcontractors in the amount of thechange order, writing: [46] Having considered the arguments of counsel for the [Subcontractors] and counsel for [the Owner], I have come to the conclusionthat the [Subcontractors] are not entitled to an order requiring [the Owner] to pay into court an amount equal to the holdback on thecontract with [the Contractor].

I agree with counsel for [the Owner] that when McMurtry J. ordered that the liens of EFL Flooring and A& B Concrete be vacated and discharged on April 21, 2017, [the Owner] was immediately entitled to pay the balance of the monies owedto [the Contractor] without jeopardy as [the Owner] had not received notice of any claim of lien from any of the [Subcontractors]. [47] I am of the opinion that the fact that [the Owner] had paid the monies prior to the date that the title was cleared of all liens did notchange the fact that the right to pay out the remaining funds had accrued.

Again, repeating the “second principle” in Doig v Stehn, (SK CA), [1924] 1 WWR 1169 (Sask CA): “A premature payment of the holdback does not give a lienholder any greater rightthan he would have had the owner retained the money for the statutory period and then made the payment.” (Rasmussen at para 13) I findthis principle to be applicable to the fact situation in this case. [48] In addition, I agree with the argument of counsel for [the Owner] that the notice issue resulting from the liens of EFL Flooring andA & B Concrete not being discharged until April 27, 2017, does not resolve in favour of the [Subcontractors].

Those two liens ceased toattach to the lands of [the Owner] when the order of McMurtry J. was pronounced on April 21, 2017, and the funds were paid into court.When the claim of lien of BLS Asphalt was registered on April 26, 2017, the claims of lien of EFL Flooring and A & B Concrete werevacated and no longer attached to the land, even if the administrative act of removing them from the title had not yet occurred.

Theirpresence on the title was irrelevant to BLS Asphalt as BLS Asphalt would have proceeded to late file its claim of lien, as did all of theother respondents, whether the EFL Flooring lien or the A & B Concrete lien were registered on the title. [49] In the result, I find that the Grasswood case is not applicable to the present situation as there was no continuous registration ofclaims of lien from and after the date 40 days after substantial performance, being January 9, 2017. [The Owner] was entitled under theprovisions of the BLA to pay the balance of the monies owed to [the Contractor] on the main contract, including the holdback amount(incorrectly calculated or not).

The only amount that [the Owner] is required to pay into court is the amount it still owes to [theContractor] for the approved change orders, being $59,903.00. III. ANALYSIS [10] The Subcontractors appeal on three grounds but, at root, they say the judge erred when he determined that the Owner had beenentitled to release the Holdback when it did.

Included in that issue is a question as to the validity or effect of claims of lien that areregistered after the release of a holdback. [11] As is often the case in matters such as this, the timing of events affects the determination of the rights and obligations of theparties under The Builders’ Lien Act. It is important to understand that the Subcontractors’ liens arose when they first provided servicesand materials to the Improvement (s. 26), which occurred prior to substantial performance of the Contract on November 29, 2016. Thismeans s. 43 of The Builders’ Lien Act governed the release of the Holdback.

In relevant terms, it provides: Payment of holdback where certificate of substantial performance of contract 43(1) Subject to

section 38, and except where a claim of lien is registered, where a contract has been certified to be substantiallyperformed pursuant to

section 41, each payer on the contract and any subcontract shall, if the money is otherwise due and payable underthe contract or subcontract, without jeopardy, make payment: (

a) of the holdback, calculated as of the day of substantial performance of the contract, 40 clear days after the day a copy of thecertificate of substantial performance of the contract is given pursuant to

section 41; … [12] In functional terms, s. 43(1)(

a) establishes four preconditions that must be met before an owner becomes obliged to release theholdback (and before an owner may do so “without jeopardy”): (1) no claims of lien are registered; (2) the contract has been certified assubstantially performed; (3) the amount retained as the holdback is otherwise due and payable under the contract; and (4) 40 clear dayshave elapsed since the certification of substantial performance [Preconditions]. [13] If an owner releases a holdback in accordance with s. 43(1)(a), the payment “operate[s] as a discharge of the lien to the extentof the amount paid” (s. 48).

If an owner releases a holdback prior to the four Preconditions being met, it does not do so “without jeopardy”(s. 43(1)). If an owner fails to release a holdback once the Preconditions have been met, it exposes itself to liability for loss or damage

resulting from that failure: 36 Where a payer on a contract or subcontract is required by this Act to release the holdback and fails to do so within the time provided, he is liable to any lien claimant who suffers loss or damage as a result of the failure. [ 14 ] On the facts of this matter, all four of the Preconditions had been satisfied as of March 6, 2017. The certificate of substantial performance was issued on November 29, 2016 (Precondition 2). Although its terms are not in evidence, no one asserted that the Holdback was not “otherwise due and payable” under the Contract (Precondition 3).

The judge calculated that January 7, 2017, was the 40th clear day after substantial performance of the Contract (Precondition 4). Therefore, the Owner would have been statutorily obligated to pay out the Holdback on January 7, 2017, but for the fact that there were six claims of lien then registered against the Land. When the Contractor discharged those liens on March 6, 2017 (Precondition 1), the Owner became statutorily required to release the Holdback. [ 15 ] The registration of EFL’s lien on March 9, 2017, affected the Owner’s liability for the Holdback, but only in respect of that claim of lien.

As it was not registered and notice had not been given within 40 clear days after substantial completion, EFL’s claim of lien had expired on January 7, 2017 (s. 49(3)(b)(i)). Although expired, EFL’s claim of lien remained valid except as against the Owner, inter alia , in respect of payments made to the Contractor “after the expiration of the lien and before registration of the claim of lien” (s. 49(5) (b)).

Section 49(5) also states this in positive terms, by providing that an expired lien “so registered” is a charge “only against that portion of the contract price which has not yet been paid out and to which the lien claimant would have been entitled if the claim of lien had been registered before the expiry of the lien” (emphasis added). For these reasons, the Owner had to address EFL’s late-registered claim of lien. [ 16 ] Therefore, when the Owner released the Holdback on March 29, 2017, it did so on the condition that the Contractor discharge EFL’s registered lien and any other registered claims of lien.

Subsequently, A&B registered its claim of lien. Acting on the condition imposed by the Owner, the Contractor applied to court and obtained the A pril 21 Fiat , vacating these two registered claims of lien—which were the only ones registered at that time. [ 17 ] However, relying on the timing of the registration of BLS’s claim of lien on April 25, 2017—i.e., a day before the registered interests based on the EFL and A&B claims of lien were discharged from the Land Titles Registry—the Subcontractors argue that the Owner was not entitled to release the Holdback when it did.

They say there has been a continuous chain of overlapping registrations that prevented the release of the Holdback under s. 43(1) (a). That is, they assert that Precondition 1 has not been satisfied. [ 18 ] In support, the Subcontractors refer to Grasswood Mechanical Ltd. v P.R. Hotels Ltd. , 2001 SKQB 553 , [2002] 9 WWR 105 [ Grasswood ], where Gerein C.J.Q.B. concluded that, because “a claim of lien has been registered continuously throughout” (at para 13), “there was not compliance with s. 43 and there was no entitlement to pay out the statutory holdback” (at para 18).

To reach this conclusion, Gerein C.J.Q.B. observed that “[n]owhere is there legislation stating when the registration of a document comes to an end”. Relying on an objective of The Land Titles Act , RSS 1978, c L-5 (repealed), namely, the objective of giving notice about the state of a title, he concluded that the registration of a claim of lien under The Builders’ Lien Act “should cease only when the instrument has been removed from the title” (at para 17). [ 19 ] I find Grasswood does not assist the Subcontractors for two reasons. First, the facts of this matter are distinguishable from those of Grasswood .

Unlike in that case, here, there was a period of time (i.e., between March 6 and 9, 2017) when the Owner was entitled to pay out the Holdback because all four of the Preconditions under s. 43(1) (

a) of The Builders’ Lien Act had been met. Thus, a claim of lien has not been registered continuously throughout. Second, as is apparent from his reasons, Gerein C.J.Q.B. was not asked to consider the effect of a court order made under s. 56(2) of The Builders’ Lien Act [vacating order], which is what is at issue in this case. Section 56(2) provides: Vacating lien by payment into court … 56

(2) Any person may apply to the court, on notice to such persons as the court may direct, for an order vacating a registered claim of lien or written notice of a lien, and where an application is made, the court may order that the registration of the claim of lien or written notice of a lien be vacated, on payment into court or posting of security in an amount that the court considers reasonable in the circumstances . (Emphasis added) [ 20 ] Some assistance in interpreting the effect of a vacating order may be found in Therrien (Re) , 2001 SCC 35 , [2001] 2 SCR 3.

In that case, when determining the effect of a pardon that “vacates the conviction” under the Criminal Records Act , RSC 1985, c C-47 , Gonthier J. relied upon the definition of vacate in the Oxford English Dictionary , 2d ed., noting: [117] …the expression “vacate” means “to make void in law, to deprive of legal authority, validity, force, efficacy or value, to render inoperative or to annul or cancel”, which does not necessarily involve retroactive effects.

Thus, it is possible to make something void, deprive it of any effect or authority or annul it for the future only. … [ 21 ] When the Oxford English Dictionary definition is substituted for vacated in s. 56(2) , it explains that a court may order that the registration of a claim of lien or written notice of a lien be made void in law, be deprived of legal authority, validity, force, efficacy or value, or be annulled or cancelled, on payment into court or posting of security in an amount that the court considers reasonable in the circumstances.

This meaning of vacated in s. 56(2) is fully supported by ss. 56(6) and (7) of The Builders’ Lien Act , which state: 56

(6) Where an order is made under subsection (1) or (2): (

a) the lien: (

i) ceases to attach to the holdback and to the other amounts subject to a charge under

section 33;

(ii) in the case of a claim of lien registered pursuant to

section 50, ceases to attach to the land; and (iii) becomes instead a charge on the amount paid into court or security posted; and (

b) the owner or payer shall be, in respect of the operation of sections 34, 37 and 40, in the same position as if the claim of lien hadnot been registered or written notice of a lien had not been given.

(7) Where an order is made under subsection (1) or (2), the lien claimant whose registered claim of lien or written notice of a lien has beenvacated may proceed with an action to enforce his claim against the amount paid into court or security posted in accordance with theprocedures set out in

Part VIII, but no certificate of action with respect to that action shall be registered against the land. [22] In addition, ss. 62 to 64 of The Builders’ Lien Act provide for the discharge of a claim of lien registration from the land titlesregime in various circumstances.

Section 62, in particular, addresses the discharge of “the registration of an interest based on a claim oflien” in terms that recognise that it is the court’s order under s. 56 that vacates, or renders void in law, a registered claim of lien for thepurposes of The Builders’ Lien Act: 62 The registration of an interest based on a claim of lien or an interest based on a certificate of action may be discharged on application tothe registrar accompanied by an order or certificate vacating or discharging the interest. [23] To be clear, it is the registration of a claim of lien that is vacated upon the making of a vacating order, not the claim of lien orthe lien itself.

Although not directly on point, this conclusion is supported by D & K Horizontal Drilling

(1998) Ltd. (Trustee of) vAlliance Pipeline Ltd., 2002 SKQB 86, 216 Sask R 199 [D&K QB], aff’d 2002 SKCA 145, 227 Sask R 250 [D&K CA]. In D&K QB,Barclay J. addressed the effect of a vacating order in the context of competing claims in bankruptcy to monies that had been paid intocourt under The Builders’ Lien Act, writing: [24] Where an application has been made to vacate the lien, under s. 56(6) of the BLA, the effect of the order is that the lien is notdischarged, it merely causes it to cease to attach to the land, holdback and contract amount and attaches instead to the money paid intoCourt.

In other words, the effect of the order is that once the liens are vacated a charge is created by virtue of s. 56(6) of the BLA andtherefore the money is subject to a security interest in favour of the lien claimants. By virtue of s. 136 of the BIA once a lien has beenestablished the property is not subject to distribution. … [24] As s. 56(6) makes plain, where a court has made a vacating order, the order simultaneously (

i) vacates (or voids) theregistration of the claim of lien, (ii) severs the lien’s in rem attachment to the land, (iii) severs its in personam attachment to the holdback,and (iv) attaches the lien to the amount the applicant has paid into court or posted as security in accordance with the court’s vacating order(see Town-N-Country Plumbing & Heating

(1985) Ltd. v Schmidt (1991), (SK CA), 93 Sask R 278 at paras 68–70[Town-N-Country]; and D&K CA at para 22). Although effective upon pronouncement, vacating orders do not vacate the registration ofclaims of lien until the conditions imposed by the court have been met—so as to permit the lien to attach to the moneys paid into court. [25] In this matter, the Contractor had paid the amount of the EFL and A&B claims of lien into court plus an additional 25% assecurity for costs when it applied under s. 56(1) of The Builders’ Lien Act.

These amounts satisfied the terms of the vacating order madeunder the April 21 Fiat, meaning the EFL and A&B claims of lien immediately attached to the monies so paid into court and immediatelyceased to attach to the Land, effective April 21, 2017.

As the registrations of the EFL and A&B claims of lien were vacated on April 21,2017, and no other liens had been registered and the Owner had no formal notice of any claims of lien, the Owner was thereafter entitledto release the Holdback without jeopardy. [26] At this point, it is useful to circle back to reiterate that, like EFL’s expired lien, the Subcontractors’ claims of lien had expired(s. 49(3)(b)(i)) and were, at best, a charge only on the Holdback and the amount owing under the change order (s. 33).

Notwithstandingexpiry, the Subcontractors were still entitled to register their claims of lien (s. 49(5)). However, having done so, each of theSubcontractors’ expired liens was valid except as against those listed in s. 49(5), which includes the Owner in respect of payments it hadmade to the Contractor “after the expiration of the lien and before registration of the claim of lien” (s. 49(5)(b)). The Owner paid out theHoldback on March 29, 2017. The April 21 Fiat satisfied the conditions the Owner had placed on the Contractor in respect of theHoldback.

At that point, the Subcontractors’ expired liens were a charge only against the amount of the change order because it was thatportion of the Contract price that had not yet been paid out and to which they would have been entitled if their claims of lien had beenregistered before the expiry of their liens (s. 49(5)).

Hastings Enterprises Ltd., the first of the Subcontractors to register, did not register itsexpired lien until May 3, 2017. [27] All of this means that the Subcontractors’ failure to crystalize their claims of lien before the Owner released the Holdback,whether through registration or formal notice, severed the liens’ attachment to the Holdback the moment the Owner released it.

In fact, thejurisprudence indicates this would have been the case even if the Owner had prematurely released the Holdback, as has been suggestedwas done in this matter (see Doig v Stehn (1924), (SK CA), 2 DLR 627 (Sask CA); Rasmussens’ Ltd. v Melville CountryClub (1977), (SK KB), 86 DLR (3d) 509 (Sask QB); and Town-N-Country). [28] Regardless of how this appeal is approached, s. 49(5) of The Builders’ Lien Act and the timing of events limited theSubcontractors’ claims of lien to a charge against the amount that was owing by the Owner to the Contractor on the date of registration—i.e., the amount of the change order, as the Chambers judge found. [29] Although the Subcontractors’ raised it as a separate ground of appeal, like the Chambers judge, I find it is not necessary todetermine whether the Owner had correctly calculated the Holdback because, whatever its amount, it was releasable under s. 43(1)(

a) andit had been paid out before registration of the Subcontractors’ expired liens (s. 49(5)(b)). IV. CONCLUSION [30] As I find no error in the Chambers Decision, I would dismiss the appeal and award the Owner one set of costs as against the

Subcontractors. “Caldwell J.A.” Caldwell J.A. I concur. “Barrington-Foote J.A.” Barrington-Foote J.A. I concur. “Tholl J.A.” Tholl J.A.