The appellant in Wah Fai Plumbing & Heating Inc v. Ma, 2011 BCCA 26 sought to extend the decision in Shimco Metal Erectors Ltd. v. Design Steel Constructors Ltd., 2002 BCSC 238, affirmed in Shimco Metal Erectors Ltd. v. North Vancouver (District), 2003 BCCA 193, to situations where an owner fails to retain a holdback. The decision in Shimco is widely regarded as establishing the “dual lien” theory. Section 2(1) of the Builders Lien Act, S.B.C. 1997, c. 45, allows a subcontractor to place a lien on the land. The Court of Appeal in Shimco interpreted section 4(9) of the Act as establishing a lien against the holdback that is distinct and independent from the lien against the land. Tysoe J., as he then was, held that because an action on the holdback was commenced prior to the holdback being paid out, the plaintiff’s lien against the holdback was not extinguished when the lien against the land was extinguished.
In Wah Fai, the subcontractor sought a declaration that it was entitled to a lien against the amount the owners were supposed to keep as a holdback. The subcontractor completed its work on November 1, 2001 and invoiced the contractor.
On November 14, 2001 the subcontractor filed a lien on the owner’s property. The contractor abandoned the contract with the owners on January 2, 2002, and did not pay the subcontractor because it had not been fully paid by the owner. The owners did not retain a holdback as required by s.4 of the Act, and denied that they owed any money to the contractor.
On August 29, 2002 the subcontractor commenced an action against the contractor and the owners, but alleged breach of contract rather than commencing an action on the lien. On November 14, 2002 the lien was extinguished because it had not been perfected within one year.
On August 17, 2006 the subcontractor filed an amended statement of claim in which it claimed a lien against the holdback. The trial judge held that the subcontractor had waited too long to bring its claim against the holdback. The primary issue on appeal was whether a subcontractor could claim a lien against a holdback pursuant to the Act where no holdback was retained by the owners. Levine J. considered section 8(4) of the Act, and found that if the owners had retained a holdback, then the holdback period would have expired on February 22, 2002.
On February 22, 2002 the subcontractor had filed a lien on the land, which would have kept the owners from paying out the holdback. The subcontractor’s lien on the land was extinguished on November 14, 2002, and at this time the owners would have been entitled to pay out the holdback had they kept one because the subcontractor had not commenced an action to enforce a lien against the holdback. The principle difference between this case and Shimco is that in the latter, a holdback was kept. Levine J. held that even if the subcontractors had commenced an action before its land lien was extinguished, there was nothing against which a lien could be placed. Chiasson J. concurred with Levine J., and noted that a lien is a right in rem and thus must attach to property. Where a holdback is kept, it is the money retained to which the lien attaches. Where no holdback is kept the Act does not provide a subcontractor with a remedy.
Associate Lawyer – Construction Law & Litigation
Lindsay Kenney – Vancouver Office