Liens And Cost Recovery

Consulting engineers are familiar with Builders Lien legislation. When an owner cannot pay for work that has already been performed on its project, the contractor, architect, consulting engineers and others can enforce a lien claim against the owner’s land to secure payment of the amounts outstanding. In these situations, the lien claimants seek an order from the court for the land encumbered by the lien to be sold so that they can recover the amounts owing to them. The lien legislation also provides the owners with the right to provide alternative security in place of the lands to secure the lien and the lien claimants’ legal costs.

Consulting engineers and other claimants have come to expect that when property owners seek to discharge a lien filed against their property by payment of security into court, that security will almost always include an amount to secure the claimants’ legal costs. The payment of security for costs is expressly contemplated in the relevant legislation in several provinces, such as Alberta and Ontario.

Requiring a property owner to pay security for costs in lien claims has also been the common practice in British Columbia for years. However, a recent decision of the B.C. Supreme Court may indicate that the courts in that province are going in a different direction on this issue. Inter-provincial consulting engineers ought to sit up and take note.

Until recently, it had been a common practice of the B.C. courts to require that the security deposited into court be equal to the value of the lien claim, plus a further 10%- 15% of the value of the lien deemed as security for the lien claimants’ costs. However, in the 2009 case of Tylon Steepe Homes v Pont, Mr. Justice Burnyeat brought an abrupt end to this long-held practice. It should be noted, however, that the particular facts in Tylon might cause the decision to be “distinguished” or overturned by future courts.

In Tylon, the contractor had invoiced the owners for $375,175, but had filed a claim of lien for $255,982, which the contractor declared was the value of the work done. The owners sought and obtained the traditional order discharging the lien upon payment of security into court, including security for costs.

The owners subsequently applied to have the lien cancelled on the basis that it was frivolous, vexatious and an abuse of process. At the hearing of this application, the contractor argued that it should have filed a lien for $375,175. The owners challenged the value of the work done and argued that after deducting various amounts, including the $211,571 they had paid to the contractor, the value owing was $43,549.

In deciding the application, Mr. Justice Burnyeat concluded that the contractor was entitled to a lien, but that the lien filed by the contractor was an abuse of process because it was excessive and included improper amounts. He then ordered that the amount of the security held by the court be reduced to $90,000.

Mr. Justice Burnyeat then considered whether the reduced amount should include an amount for security for costs. He noted that the wording of B.C.’s Builders Lien Act was silent on the issue of “costs.” His review of the relevant lien legislation of several other provinces showed that they expressly contemplated the payment of security for costs. However, he concluded that there was “no jurisdiction [in the B.C. legislation] to entertain such an inclusion” and to hold otherwise would add to the substantive rights of a lien claimant in a way that is contrary to the purpose of Section 24 of the Act.

The B.C. Court of Appeal refused to grant the contractor leave to appeal and upheld the lower court’s decision and appeared reluctant to consider the issue of whether the security ought to have included security for costs in the Tylon case. The court said that the owners should not have to respond to an appeal on the issue of security for costs at this stage of their litigation, and that it was open to Tylon at the end of the litigation to challenge the order refusing the inclusion of security for costs.

Until the decision relating to the posting of security of costs is reversed by a higher court, property owners will undoubtedly argue that they should not be required to pay into court an amount greater than the amount required to secure the lien. For now, consulting engineers have fewer tools at their disposal to enforce lien claims than they have come to expect and rely upon.

Charles Bois is a partner at Miller Thomson LLP (www.millerthomson.com),in Vancouver, tel. 604-643-1224, email cbois@millerthomson.com.

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The payment of security for costs is expressly contemplated in the relevant legislation in several provinces, such as Alberta and Ontario.