Western Canada Business Litigation Blog

Pulling in the Reins – Lien Holdback Liability Scaled Back

Posted in Construction
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Ever since the BC Court of Appeal (“BCCA”) decision in Shimco, practitioners and others have cried out for legislative amendments to the B.C. Builders Lien Act (the “Act”) which would see the elimination of a lien against holdback monies retained by owners and others down the contractual chain.  Prior to Shimco, such a lien was not generally thought to exist.  However, the BCCA confirmed the lower court’s ruling that a lien against the holdback is a separate and distinct lien from the lien against the land and can therefore be asserted even where a lien against the land is no longer available to a lien claimant.

Recently, the BCCA once again had to examine a claim to a lien against the holdback (as distinct from a lien against the land) but this time the spin on Shimco was that the owner did not in fact maintain a holdback as it was required to do under the Act.  Therefore the question for the court was whether a lien could exist against a non-existent holdback fund.  The court unanimously held that no such lien could exist as, among other things, there was no fund against which the lien could attach.  In so holding, the court made some interesting comments about the potential need for the legislators to step in and respond to the court’s interpretation of the Act which they have refused to do thus far. 

The result in this case was not remarkable.  The lien claimant sought to expand the reasoning in Shimco, to a limited extent, and it was clear the court did not want such an expansion beyond the four corners of the Act.  In fact, the undertones of the decision were that the court perhaps does not agree that a lien against the holdback ought to exist but the Act is clear such a claim can be asserted.  The court could have even gone farther and determined when the lien against the holdback no longer exists but it did not strictly need to do so in this case.  Eventually that issue, among others, may need to be sorted out by the courts if the provincial legislators don’t abolish the lien in its entirety.  In order to bring more certainty to the practical operation of the Act and its impact on construction projects generally in BC, perhaps that would not be such a bad result.