on record MARCH 2016 CONSTRUCTION

on record MARCH 2016 CONSTRUCTION Can a Lien Bond Satisfy a General Contractor s Trust Obligations? Considerations of the Surrounding Circumstances in Contract Interpretation Post-Sattva Tendering Law Post-Bhasin: Questions about Honest Contract Performance Late is Better Than Never! Late Liens Under the Saskatchewan Builders Lien Act

2400, 525-8th Avenue SW Calgary, AB T2P 1G1 Phone: 403-260-0100 Fax: 403-260-0332 On Record Contents: See other BD&P articles under Publications on our web site www.bdplaw.com 1 Can a Lien Bond Satisfy a General Contractor s Trust Obligations? 3 Considerations of the Surrounding Circumstances in Contract Interpretation Post-Sattva 5 Tendering Law Post-Bhasin: Questions about Honest Contract Performance 7 Late is Better Than Never! Late Liens Under the Saskatchewan Builders Lien Act CONSTRUCTION, EDITOR-IN-CHIEF Marika Strobl mstrobl@bdplaw.com 403-260-0270 CONSTRUCTION, MANAGING EDITOR Rhonda G. Wishart rwishart@bdplaw.com 403-260-0268 GENERAL NOTICE On Record is published by BD&P to provide our clients with timely information as a value-added service. The articles contained here should not be considered as legal advice due to their general nature. Please contact the authors, or other members of our Construction Team directly for more detailed information or specific professional advice. Construction Team Craig O. Alcock coa@bdplaw.com...403-260-0120 Donald J. Chernichen, q.c. djc@bdplaw.com...403-260-0101 David de Groot ddegroot@bdplaw.com...403-260-0167 Susan Fader sfader@bdplaw.com...403-260-0343 David A. Grout dgrout@bdplaw.com...403-260-0326 David R. Haigh, q.c. drh@bdplaw.com...403-260-0135 Kelly Hannan khannan@bdplaw.com...403-260-0126 Mark T. Houston mth@bdplaw.com...403-260-0375 Trevor R. McDonald tmcdonald@bdplaw.com...403-260-0378 Douglas A. McGillivray, q.c. dam@bdplaw.com...403-260-0349 James D. Murphy jdm@bdplaw.com...403-260-0152 Jordan Otrhalek jotrhalek@bdplaw.com...403-260-0362 Jonathan Selnes jselnes@bdplaw.com...403-260-0360 Jeffrey E. Sharpe jes@bdplaw.com...403-260-0176 Marika Strobl mstrobl@bdplaw.com...403-260-0270 Melanie L. Teetaert mteetaert@bdplaw.com...403-260-0384 L. Grant Vogeli q.c. lgv@bdplaw.com...403-260-0171 If you would like any further information on any members of the team, please feel free to contact the team member(s) directly. You may also refer to our website at: www.bdplaw.com

PAGE 1 Can a Lien Bond Satisfy a General Contractor s Trust Obligations? An Analysis of the Recent Stuart Olson Dominion Construction Ltd v Structal Heavy Steel Decision By David A. de Groot and Kyle J. Isherwood, Student-at-Law Introduction The Supreme Court of Canada s ( SCC ) recent decision in Stuart Olson Dominion Construction Ltd v Structal Heavy Steel 1 ( Stuart Olson ) has important implications for the construction industry. In Stuart Olson, the SCC considered whether an unpaid subcontractor had valid and distinct claims against a general contractor under both the statutory trust and construction lien of Manitoba s Builders Liens Act ( Manitoba BLA ). 2 Facts Stuart Olsen Dominion Construction Ltd. ( Dominion ) was the general contractor for the construction of a stadium at the University of Manitoba. Dominion entered into a subcontract with Structal Heavy Steel ( Structal ) for the supply and installation of steel for the stadium. In April 2012, Dominion began withholding Structal s payments, originally stating it was because the owner was late in paying but later saying that it was due to delays attributable to Structal. As a result, Structal registered a builder s lien against the property for over $15 million. In response, Dominion filed a lien bond for the full amount in the Manitoba Court. Structal accepted the bond and vacated its lien on the property. However, Structal claimed that any further payments made to Dominion by the owner were still subject to the statutory trust provisions under the Manitoba BLA and Dominion could not use the money until it paid Structal. In the Manitoba BLA, the trust provisions require a general contractor to hold any money it receives from the owner in trust for unpaid sub-contractors until all sub-contractors are paid. 3 Dominion submitted that because the lien bond fully secured any amount unpaid to Structal, Dominion did not have to hold the money in trust and make payments to Structal. They also submitted that Structal s approach would require them to pay

PAGE 2 However, general contractors who are faced with a lien registered after substantial completion have two options: first, they can file a lien bond and continue to hold owner-received funds in trust, or, they can pay the funds held in trust into the court to satisfy the lien and trust claim. twice. The owner of the property, at Structal s request, withheld over $3 million because of Dominion s alleged violation of the trust provisions of the Manitoba BLA. Dominion applied to the court for a declaration that the lien bond satisfied the Manitoba BLA s trust conditions. Structal sought its own declaration requiring full-payment, without deduction or set-off, once the owner paid Dominion. The issue was whether the lien bond satisfied Dominion s requirements under the trust provisions of the Manitoba BLA. Do Lien Bonds Satisfy a General Contractor s Trust Obligations? The SCC noted that the trust and lien provisions of the Manitoba BLA are separate remedies. 4 The SCC distinguished the two remedies by noting that the statutory trust is much broader, applying not only to subcontractors, but also to the Workers Compensation Board, workers employed by the general contractor, and the owner for any set-off or counterclaim. 5 Similarly, the SCC had distinguished between the application of liens and trust provisions in a previous decision, 6 and the Manitoba BLA itself recognized that the two remedies were distinct by expressly allowing a trust claim to be joined with a lien claim. 7 However, the legislation did not explain how these two remedies are to interact if a subcontractor claimed both at the same time. The SCC concluded that Structal had access to both remedies. In other words, filing a lien bond has no effect on the application of the statutory trust. 8 The purpose of the trust provisions is to ensure that the flow of money is not improperly diverted. If Dominion could satisfy the trust provisions through a lien bond, then the purpose of the trust would be compromised, 9 because a lien bond does not pay the subcontractor, it only secures the subcontractor s lien claim. Similarly, if the lien was found invalid for any other reason, including being registered too late, the subcontractor would lose all security. Filing a lien bond does not control the general contractor s use of money received and therefore a lien bond does not accomplish the purpose of the statutory trust. The SCC also rejected Dominion s submission that if the lien bond did not satisfy the trust provisions, then general contractors would essentially have to pay twice for the same services. Instead, the SCC found that paying the statutory trust funds to the court to vacate the lien would avoid any risk of double payment. Using the trust funds in this way is not an improper diversion; if the lien fails, then this money will remain in trust for the subcontractor, subject to the subcontractor proving the value of the work performed. 10 Practical Implications in Alberta This decision was based on the language of the Manitoba BLA; therefore it may apply differently in Alberta. The Alberta Builders Lien Act 11 contains its own trust and lien provisions. In Alberta, a statutory trust is only created after a certificate of substantial performance has been issued. 12 Therefore, general contractors only have trust obligations over money they receive after a certificate of substantial performance has been issued. As a result, subcontractors will not as frequently be able to make the statutory trust and lien claims as in Manitoba. As well, general contractors can still post lien bonds to satisfy builder s liens before the certificate of substantial completion is issued. However, general contractors who are faced with a lien registered after substantial completion have two options: first, they can file a lien bond and continue to hold owner-received funds in trust, or, they can pay the funds held in trust into the court to satisfy the lien and trust claim. The second option avoids the issue of the general contractor requiring double security for the same services. However, it will create cash flow issues, because general contractors will no longer have access to the money paid into court, which they could have if only a lien bond was required. For a lienholder, the importance of Stuart Olson is that they should include both a lien claim and a statutory trust claim in their pleadings if they are unpaid after a certificate of substantial completion has been issued. Importantly, subcontractors can make claims under the trust provisions even after the period to register a lien has expired or if services were provided before substantial completion, but paid by the owner after substantial completion. Footnotes 1 Stuart Olson Dominion Construction Ltd v Structal Heavy Steel, 2015 SCC 43 [Stuart Olson]. 2 Builders Liens Act, CCSM c B91 [Manitoba BLA]. 3 Manitoba BLA at s 4(1). 4 Stuart Olson at para 32. 5 Stuart Olson at para 32. 6 Stuart Olson at para 36. 7 Manitoba BLA at s 66. 8 Stuart Olson at para 39. 9 Stuart Olson at para 41. 10 Stuart Olson at para 46. 11 Builders Lien Act, RSA 2000 c B-7 [Alberta BLA]. 12 Alberta BLA at s 22(1).

PAGE 3 Considerations of the Surrounding Circumstances in Contract Interpretation, Post-Sattva By Marika Strobl and Kylan Kidd, Student-at-Law Introduction Historically, Alberta courts have tended to downplay the importance of pre-contractual evidence and the surrounding circumstances in determining the meaning of contractual terms. The typical approach to contract interpretation looks to read the contract as a whole, construed in a commercially reasonable manner. In the normal course, there was little reason to bring in evidence of the surrounding circumstances when interpreting contractual language. The Supreme Court of Canada s ( SCC ) blockbuster 2014 decision in Sattva Capital Corp v Creston Moly Corp 1 ( Sattva ) has expanded the use of surrounding circumstances when interpreting a contract. The most common examples of the surrounding circumstances in the construction industry are pre-contractual documents, including letters of intent ( LOIs ), memorandums of understanding ( MOUs ), term sheets and pre-contract meeting minutes. Following Sattva, it is now clear that the surrounding circumstances leading to a contract, including pre-contractual documents, can play a significant role in the determination of contractual meaning. However, two years following Sattva s release, the decision continues to raise questions. Among them: Are all pre-contractual communications now potentially relevant to determining the parties intent? And when should the surrounding circumstances be applied to contract interpretation only in cases of ambiguity, or in all cases? What is the Scope of the Surrounding Circumstances? Sattva established that the range of potentially relevant evidence of the surrounding circumstances is broad in scope and includes all knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting, 2 subject to two key limitations: (1) The evidence must be objective, and (2) Evidence of the surrounding circumstances cannot be relied upon to the extent that it deviates from the written words of the contract such that the court effectively creates a new agreement. The effect of these two limitations is to narrow the scope of the surrounding circumstances, making it clear that: Relevant evidence of the surrounding circumstances must be evidence that speaks to what both parties to the contract actually knew (or reasonably ought to have known) in reaching their agreement or at the time of contracting. 3 Relevant evidence of the surrounding circumstances is to be used as an interpretive aid for determining the intended meaning of the words of the contract as the contract was written and cannot be used to change the contract language. Examples of potentially relevant precontractual documents or communications that are likely to be considered as part of the surrounding circumstances include: LOIs, term sheets, MOUs, pre-contract meeting minutes, as well as other precontractual communications, including emails and letters, that show: The parties mutual understanding of the objectives and subject matter of the agreement or the meaning of particular language. The parties objective reasons for negotiations and entering into the agreement. The objective negotiating or commercial context leading up to the contract. 4 Prior, related, or surrounding contracts known to the parties that evidence the parties understanding of the meaning of language in the later contract (for example, a pre-construction service agreement). 5 Objective evidence of the parties awareness of technical, customary or trade language. 6 Examples of evidence not likely to be considered as part of the surrounding circumstances: Subjective evidence or pre-contractual communications and documents which do not speak to or indicate the parties consensus, such as: Prior drafts of the contract. 7 Pre-contractual communications capturing one party s perspective, feelings or beliefs about the meaning or context of the contract (for example, emails on one side discussing the meaning of contractual terms).

PAGE 4 Documents setting out or tracking the nuances of the parties respective or changing positions. Any evidence about surrounding facts or commercial circumstances that are not known (or not reasonably ought to have been known) to both parties at or before reaching their agreement. When is Evidence of the Surrounding Circumstances Applied? Several recent decisions, applying Sattva, suggest that evidence of the surrounding circumstances has limited (if any) application where the contract language is clear and unambiguous. In a recent Alberta Court of Queen s Bench decision, 8 the Court interpreted a clearly worded release and commented that where a contract is clear and unambiguous, the courts should not be required to consider the surrounding circumstances as there is no need for interpretive aids. 9 The Alberta Court of Appeal also commented recently that where parties employ a standard form or boilerplate contract, it is not reasonable to consider extrinsic evidence. In order for the courts to determine the objective intentions of the parties through evidence of the surrounding circumstances, the parties must actually negotiate the terms of the contract and be present when the terms were set. 10 But caution: the question of whether contractual language is ambiguous may itself turn on evidence of the surrounding circumstances. In the majority of cases where the language of the contract is at issue, the parties are likely to disagree over whether the language in question is clear. Further, the question of whether contractual language is clear (or ambiguous) may itself turn on evidence of the surrounding circumstances. In emphasizing the important role of the surrounding circumstances in contract interpretation, the SCC in Sattva reasoned that words do not have fixed meanings and therefore, looking to the surrounding circumstances known to the parties at the time of formation of the contract, can actually give meaning to the words chosen by the parties. Until the dust settles on this issue, a cautious approach would be to assume that relevant evidence of the surrounding circumstances could potentially be applied to any exercise of contract interpretation, with the possible exception of very clear cases involving boilerplate contracts where there is truly no reasonable argument that any ambiguity exists. Entire Agreement Clauses While the SCC in Sattva did not comment on the effect of entire agreement provisions (or other similar clauses that purport to exclude extrinsic evidence or previous agreements regarding the subject matter of the contract), following Sattva, these clauses should be more closely scrutinized. Since Sattva is consistent with the parol evidence rule (evidence that would add to, subtract from, vary or contradict the written contract in question would not be admissible in any event), the typical entire agreement clause would not affect the scope of relevant evidence of the surrounding circumstances contemplated by Sattva. It can be expected that one of the effects of Sattva will be more fighting over what constitutes relevant evidence in a contract interpretation dispute. A specifically worded entire agreement clause (that, for example, expressly excludes reference to such items as draft contracts and precontractual negotiations to be used as interpretative aids) may reduce the scope of these disputes. Concluding Thoughts on Contract Interpretation Following Sattva The primary goal of contract interpretation continues to be to determine the intended meaning of a contract. Following Sattva, it is now clear that when parties are in a dispute over the intended meaning of the words of a contract, evidence of the surrounding circumstances, including pre-contractual documents, may be used as evidence in the event of a dispute and affect how decision-makers (i.e., judges and arbitrators) interpret the final contract. Relevant evidence of the surrounding circumstances could include precontractual communications, such as LOIs, term sheets, MOUs, precontract meeting minutes and other communications, if they speak to the parties consensus and intentions giving rise to the agreement or to parts of the agreement. Parties to a contract should pay closer attention to these documents and ensure they do not contain misleading statements about the parties agreement. Prior contract drafts and pre-contractual negotiations that are subjective and do not speak to the parties consensus and mutual understanding of the meaning of the contract, are not relevant evidence of the surrounding circumstances. The jury is still out on whether the surrounding circumstances will, in practical terms, be applied by decisionmakers only in cases of ambiguity. Entire agreement clauses in contracts should be looked at more closely. Parties should consider adding specific language to explicitly exclude precontractual documents (such as drafts of the contract) from being used as interpretative aids. Footnotes 1 2014 SCC 53 [Sattva]. 2 Sattva, at para 58. 3 Sattva, at paras 59-60. 4 Primo Poloniato Grandchilden s Trust (Trustee of) v Browne, 2012 ONCA 862 at para 69, leave to appeal to SCC refused. 5 Kentucky Fried Chicken Canada v Scott s Food Services Inc. (1998), 41 BLR (2d) 42 at para 33. 6 Georgia Construction Co v Pacific Great Eastern Railway, [1929] SCR 630 at para 7. 7 1298417 Ontario Ltd. v Lakeshore (Town), 2014 ONCA 802 at para 59. 8 Terwillegar Towne Residents Association v Brookfield Residential (Alberta) LP, 2015 ABQB 14 [Terwillegar]. 9 Terwillegar, at para 15. 10 Ledcor Construction Ltd. v Northbridge Indemnity Insurance Co.2015 ABCA 121, at para 14; leave to appeal to SCC granted, [2015] SCCA No. 18.

PAGE 5 Tendering Law Post-Bhasin: Questions about Honest Contract Performance By Matthew Kuhl, Student-at-Law Introduction The Supreme Court of Canada s ( SCC ) recent decision in Bhasin v Hrynew ( Bhasin ), 1 creating a general duty of fairness in Canadian contract law, may have implications for the law of tendering in Canada. By establishing a duty of fairness and honest contract performance as a general doctrine of law (that limits freedom to contract), Bhasin could make it more challenging for Owners to avoid their obligations in Canada s Contract A/Contract B tendering framework. The Ron Engineering Framework and Subsequent Developments The SCC first established the Contract A/Contract B tendering framework in R. v. Ron Engineering and Construction (Eastern) Ltd. 2 ( Ron Engineering ). According to this framework, submitting a bid in a tender process for a construction contract (Contract B) leads to an implied contract (Contract A) between each bidder and the issuer (typically an Owner, but potentially general contractors or major subcontractors as well). Contract A leaves unsuccessful bidders with a contractual remedy against an owner that does not follow the bidding rules outlined in the tender documents. 3 The Ron Engineering framework is important because it protects the integrity of the bidding process by imposing a duty on the bid issuer to treat all bidders fairly and equally in Contract A. 4 This duty often leads courts to find an implied term in Contract A that bid issuers will only consider compliant bids. Without this implied term, it would make little sense for a contractor to undergo the expense of making a bid that strictly follows the rules, if the Owner could simply turn around and accept any bid, regardless of whether it follows the rules. 5 After Ron Engineering, the SCC issued two decisions that narrowed the Contract A remedies available to contractors. First, in MJB Enterprises Ltd. v. Defence Construction (1951) Ltd ( MJB ), 6 the SCC held owners could rely on privilege clauses to expressly avoid implied terms in Contract A, if the language of the privilege clause was sufficiently clear. While the SCC did not hold that the privilege clause in MJB was sufficiently clear, the implication was clear, and Owners started wording privilege clauses more clearly and expansively to reserve more discretion for accepting bids. Second, in Tercon Contractors Ltd v British Columbia (Minister of Transportation & Highway) ( Tercon ), 7 the SCC, once again, adopted a framework in which express contractual language could be used to oust any implied terms from Contract A. In particular, the SCC held that a clearly worded exclusion clause could prevent a contractor from recovering any damages against an Owner. Enter Bhasin: Honest Contractual Performance as a Principle of Law At first glance, Bhasin (which is not a construction case and does not specifically address tendering) may not appear to have any application for construction disputes. However, a closer look reveals that Bhasin could raise Owners fairness obligation to bidders, and limit their ability to rely on privilege and exclusion clauses in tender documents. 8 Both MJB and Tercon established that clearly-worded, express contractual terms in bid documents could override any implied fairness obligations arising from the Ron Engineering Contract A/Contract B framework. Given the obvious implications, commentators raised concerns that these decisions threatened to undermine the Ron Engineering framework by allowing Owners

PAGE 6 In Bhasin, the SCC may have created a remedy for this exact concern. By establishing that the duty of honest performance is more than an implied term it is a doctrine of contract law Bhasin imposes an obligation of honest contractual performance as a minimum standard that operates regardless of the intentions of the parties. to contract out of implied fairness obligations. In the absence of such implied terms, there would be no legal framework to protect the integrity of the tendering process, 9 which is necessary to ensure bidders have the financial certainty to submit bids in the first place. In Bhasin, the SCC may have created a remedy for this exact concern. By establishing that the duty of honest performance is more than an implied term it is a doctrine of contract law Bhasin imposes an obligation of honest contractual performance as a minimum standard that operates regardless of the intentions of the parties. 10 Unlike implied terms, this duty cannot be avoided by express contractual terms. On this basis, contractors could argue that Bhasin closes the doors that MJB and Tercon were opening. On the other hand, not being a tendering decision, Owners can submit that Bhasin supports the proposition that clearly worded privilege clauses and exclusion clauses are enforceable, if the Owner otherwise honestly performs its Contract A obligations. Some Developments After Bhasin Tilting Towards Bidders? The Alberta Court of Queen s Bench had the opportunity to apply Bhasin to the tendering process in Elan Construction Limited v South Fish Creek Recreational Association( Elan ). 11 The Owner, South Fish Create Recreational Association ( SFCRA ), set out a points-based system to assess each bid, and was to award the bid to the bidder with the most points. Points were awarded for total cost, completion date, experience and references. SFCRA awarded the contract to a contractor, which had a higher cost and later completion date than Elan Construction, but excellent experience and references. However, evidence revealed that SFCRA assessed the completion date and experience components with considerations that were not disclosed in the bid documents. The Court noted that the interpretation of Contract A must reflect the parties reasonable expectations in the tendering process. Applying Bhasin, the Court found a breach of Elan Construction s reasonable expectations, and therefore Contract A, when the SFCRA considered factors that were not disclosed in the bid documents. The Court then commented on exclusion and privilege clauses as follows: Accordingly, I find that SFCRA breached the Bid Contract in respect of its evaluations of both substantial completion and experience. I find also that SFCRA is not relieved from liability for those breaches by the exclusion and privilege clauses in the Bid Documents. The case law set out above demonstrates that such clauses do not obviate an owner s obligation to treat all bidders fairly and equally and to disclose all criteria by which bids will be evaluated. 12 Elan suggests that Alberta courts will be inclined to find that Bhasin has raised Owners obligations to contractors in the tendering process. Concluding Thoughts Bhasin creates a general duty of fairness in Canadian contract law that has implications for owners and developers who issue calls for tender. Contract A (or the bid contract that is created between a bidder and the issuer of the tender when a bid is submitted) must reflect the parties reasonable expectations in the tendering process to treat all bidders fairly and equally and to disclose all criteria by which bids will be evaluated. Selecting the winning bid using criteria that departs from what is disclosed in the tender documents could lead to damage claims for alleged breaches of Contract A. Post-Bhasin it will likely be more challenging for Owners to shield themselves from liability relating to breaches of Contract A through express contractual terms, including privilege and exclusion of liability clauses. Prior to issuing calls for tenders, Owners should pay very close attention to the bid criteria to ensure they are willing and able to judge bids solely in accordance with this disclosed criteria. Footnotes 1 2014 SCC 71 [Bhasin] 2 [1981] 1 SCR 111 [Ron Engineering] 3 Tercon Contractors Ltd v British Columbia (Minister of Transportation & Highways), 2010 SCC 4, at para 87. [Tercon] 4 Martel Building Ltd v R, 2000 SCC 60, at para 88. 5 MJB Enterprises Ltd v Defence Construction (1951) Ltd, [1999] 1 SCR 619, at para 41. [MJB] 6 MJB, supra, note 5. 7 Tercon, supra, note 3. 8 Privilege clauses reserve the right of the bid issuer to accept a bid even if it is not the lowest bid, or even if it does not otherwise comply with certain terms of the bid documentation. Exclusion clauses limit and/or exclude any damages for which an owner may be liable to a contractor for a breach of Contract A. 9 See e.g., Jassmine Girgis, Tercon Contractors: The Effect of Exclusion Clauses on the Tendering Process, (2010) 49 Can Bus LJ 187 at 190. 10 Bhasin, supra note 1 at para 74. 11 2015 ABQB 330. 12 Ibid. at para 97.

PAGE 7 LATE IS BETTER THAN NEVER! Late Liens Under the Saskatchewan Builders Lien Act By Jordan Otrhalek and Allie Laurent, Student-at-Law In most provinces, if a contractor fails to register a builders lien within the applicable registration period, the lien expires and the rights associated with that lien are extinguished. However, a unique provision of The Builders Lien Act 1 in Saskatchewan (the BLA ) allows builders liens to be registered after the expiry of the registration period. As a result, contractors in Saskatchewan may be able to use late liens to collect debts they would not be able to collect in other provinces where late filing is not an option. What is a Builders Lien? The purpose of builders lien legislation is to provide some level of protection to all of the parties involved at the various levels of the construction pyramid, adding a level of efficiency to these often complex business relationships. The BLA attempts to ensure that parties who contribute work or materials get paid and, at the same time, also give security and predictability to owners. 2 Builders liens are necessary to protect parties further down the construction pyramid who have no direct legal or contractual relationship with those further up the pyramid. Parties further down in the pyramid, such as sub or subsubcontractors, have few legal remedies against the owner in circumstances where the party they actually contracted with fails to pay. The builders lien provides those parties with a form of security interest over the owner s interest in the land that is being improved. Ultimately the lien claimant could force the sale of the owner s interest in the land to satisfy its claim. 3 From the owner s perspective, the danger is that the owner s land remains at risk to any lien claimant regardless of whether the owner pays under its contracts. This danger is alleviated so long as the owner complies with the BLA s detailed holdback requirements. The BLA requires the owner, and every other payer under a contract or subcontract, to establish a holdback that stands in place of the owner s interest in the land (or interest in minerals). So long as the owner complies with the holdback requirements, lien claimants can only claim against the holdback and not the owner s interest in the land. Saskatchewan Registration Period and Expiry In Saskatchewan, a builders lien arises and takes effect from the time the lien claimant first provides services or materials to a project. 4 Lien claimants then have 40 days after the issuance of the certificate of substantial performance or 40 days after the completion or abandonment of the contract to register a lien. Unlike builders lien legislation in other provinces, the Saskatchewan BLA allows a lien claimant to register a late lien even after the expiration of the registration period. It is important to understand that even though a party can register a lien after the expiry period, they cannot be put into a better position than they would have been had they registered on time. A late lien is only effective against that portion of the contract price that has not yet been paid. So if the holdback has been completely paid out prior to the registration of a late lien, the lien claimant will have no pool from which to recover what is owed. Additionally, a late lien is not effective against any intervening interest that may have arisen prior to the registration of the late lien. Therefore, a creditor who registers an interest after expiry of the holdback may have priority over a lien that is registered after the expiry period. Concluding Thoughts While the BLA makes it possible to register a late builders lien in Saskatchewan after the registration period expires, the longer a claimant waits, the less likely it is that there will be any unpaid amounts left from which to claim. While late liens can prove useful for parties who inadvertently fail to register their liens, contractors should not simply ignore the registration and assume they can file a late lien to collect unpaid debts. An owner can protect itself against the risk of late liens by strictly adhering to the holdback provisions and timing for holdback payouts. Ultimately, given the complexity of the BLA in general and the practical difficulties involved in precisely determining the date of substantial completion and proper holdback amounts, owners and contractors would be well served by familiarizing themselves with builders lien legislation or seeking the advice of legal counsel with lien expertise. Footnotes 1 The Builders Lien Act (Saskatchewan), SS 1984-85-86, c B-7.1 [BLA]. 2 Town-N-Country Plumbing & Heating (1985) Ltd v Schmidt (1991), 93 Sask R 278 (CA). 3 W Brent Gough & Collin K Hirschfeld, Saskatchewan Builders Lien Manual, 2d ed (Regina: Law Society of Saskatchewan Library, 2014) at 35. 4 BLA, supra note 1, s 27.

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