The construction and builder’s line statutes in Canada generally provide that a lien may be lost if an action is not commenced or a lien registered within a certain period of time within the “completion or abandonment” of the work. Usually, the word “abandonment” is applied to the party claiming the lien. But in Tervita Corp. v. ConCreate USL (GP) Inc., the Alberta Court of Appeal has held that the conduct of the other party to the construction contract may result in the contract being “abandoned”. In addition, the Alberta Court of Appeal held that more than one lien claim may be filed or registered for one lien. Both of these findings are significant for those engaged in construction disputes.

Background

Tervita was a subcontractor to ConCreate which had contracted with the owner. Tervita performed its last work in February 2012. In March and April 2012 a receiver was appointed for ConCreate and the receiver barred access to the site. In April 2012 Tervita filed its first lien. In July 2012, Tervita emailed the City’s consultant to say that its “contract was terminated with ConCreate prior to us being able to complete the work.” In July 2012, Tervita issued a Statement of Claim but it did not register a lis pendens against the land.

On October 2, 20121, the 180 day period for Tervita to register a lis pendens expired. On October 12, 2012, Tervita registered a second, identical lien. In November 1, 2012, a lis pendens was registered with respect to the second lien and the original Statement of Claim was amended to now refer to the second lien.

Decision of the Alberta Court of Appeal

The Alberta Court of Appeal held that the subcontract between Tervita and ConCreate was abandoned due to the conduct of ConCreate and its receiver, and that this fact was recognized by Tervita in its email of July 23, 2012 to the City’s consultant. The Court of Appeal held that the word “abandonment” includes abandonment by the party claiming the lien -in this case, Tervita – or by the general circumstances relating to the subcontract.

The Court of Appeal described the issues of subjective and objective abandonment as follows:

“In some cases a contract may be “abandoned” on an objective basis. The statute just requires abandonment, not necessarily abandonment by the lien claimant. Certainly a subjective abandonment by the lien claimant will be sufficient. However, when it becomes clear that the contract has been rendered un-performable by the conduct of either or both parties, by the actions of third parties, or as a result of external factors, the contract is essentially “abandoned”. Once it becomes impractical or impossible to perform the contract, no reasonable party would persist in saying they are “ready, willing and able” to continue performing……There comes a point in time when it is clear that the contract is at an end. That will also start the 45 days running. At some time between the date when ConCreate’s receiver posted guards and blocked access to the site, and the email of July 23, this contract was essentially abandoned.” (underlining added)

The trial judge had held that the subcontract had never been completed, that Tervita was always ready, willing and able to complete the work and that only in October 2012 did the City conclusively tell Tervita that it would not be allowed to complete the subcontract. Accordingly the trial judge held that the time to register the second lis pendens had not expired.

The Court of Appeal disagreed, finding that, by its email of July 232, 2012 Tervita had effectively admitted that the subcontract had come to an end and therefor the work was “abandoned”. It said:

“The test is when the lien claimant knew or should have known that the other party would not complete the contract. Once it would have been obvious to a reasonable contractor that the cessation of work caused by the receivership was not merely temporary, but represented a termination of the contract, the contract was effectively “abandoned”. An abandonment can occur without a formal communication from the other parties that the contract is terminated. Here the insolvency of ConCreate, the actions of its receiver in blocking access to the site, the discussion with the City about the possibility of doing the remaining work directly for the City, combined with the other surrounding factors, would cause a reasonable person to conclude that the contract was terminated. Tervita acknowledged that in its email of July 23. The fact that the City of Calgary might enter into a new contract for the same work was irrelevant to the ability to file a lien for the work done under the first contract.

….. To resolve this appeal, it is not necessary to determine exactly when the 45 days started to run. The contract had been abandoned, at the very latest, by the time of Tervita’s acknowledgment on July 23 that its contract had been terminated. In an objective sense, Tervita realized by that day that the cessation of work was not just temporary. The last day on which a lien could have been filed was approximately September 6, 2012, making the second lien ineffective.”

Notwithstanding tis finding that the time to file the second lien had expired, the Court of Appeal went on to find that the filing of a second lien is permissible. It said:

“Thus, the Act does not appear to preclude the filing of multiple liens. Since the lien right arises when the work commences, a subcontractor might theoretically file a separate lien at the end of each month, for all the work done that month and in all the previous months. If a statement of claim was subsequently issued later than 180 days after some of the early liens were filed, those liens would undoubtedly “cease to exist”. But it does not necessarily follow that all of the lien rights for early work that are also captured by later liens, or at the least those for work that is done later, would also “cease to exist”.

As noted, a liberal approach is to be taken in determining whether the claimant has lien rights. After that threshold is reached, a strict interpretation is required of the registration requirements. If it were not for the fact the second lien was filed after the passage of 45 days from the abandonment of the contract, that second lien would have been valid. The first “registered lien” had ceased to exist, but on a proper interpretation of the statute the underlying lien rights should not be taken to have been extinguished as well. If the lien claimant meets all of those requirements, a second lien that overlaps with the claims in a first lien is not per se invalid. On a proper interpretation, the expiry of the first lien does not undermine the fundamental validity of the second one.” (underlining added)

Discussion

The email from Tervita on July 232, 2012 seems to have doomed its later assertion that the subcontract had not been abandoned. But what if it had not written that email? Would its lien rights have continued for ever, since it was the contractor which precluded the subcontract from being completed? Probably not. At some point the objective facts would have established that the subcontract was abandoned even though the subcontractor wished to complete it.   The Court of Appeal appears to have been willing to find that the subcontract was not abandoned by reason of the appointment of the receiver for ConCreate, as long as there was a possibility that ConCreate’s receiver would continue with the contract and the subcontractor intended to do so.

There are a number of lessons to be learned from this decision. Contractors and subcontractors should be careful to determine whether the conduct of others on the site might be construed as an abandonment of the contract or subcontract. They should be careful when they, or others on the project, make definitive statements about whether the contract is abandoned. In either event, a lien claimant is well advised to immediately take all steps to preserve and protect the lien if the conduct on the project or statements of the parties on the project might lead to the conclusion that the contract or subcontract has been abandoned. Thus, if a party sends or receives a letter stating that the contract is terminated, then there is a distinct possibility that the contract is abandoned and immediate steps should be taken to register a lien.

Tervita Corp. v. ConCreate USL (GP) Inc. 2015 CarswellAlta 289, 2015 ABCA 80

Construction law – construction and builders’ liens – abandonment – time for registration of lien

Thomas G. Heintzman O.C., Q.C., FCIArb                                                                              May 16, 2015

www.heintzmanadr.com

www.constructionlawcanada.com