Lien claims are made without supporting evidence or are exaggerated far beyond the amount actually owed for work done, resulting in the amount being reduced or completely waived. There is a risk of
Two recent appeals in British Columbia provide insights that may provide guidance in other jurisdictions.
The first alleged that a contractor providing drywall, insulation, and steel stud work on a multi-story commercial project was not paying wages as agreed. It was also alleged that the project owner interfered with the work, resulting in additional costs. The contractor filed a lien for $1,136,000, far exceeding the $575,576 owed for work completed. The owner paid the deposit in full, but filed a counterclaim claiming that the contractor's lien was grossly inflated and an abuse of process.
“The trial judge awarded $575,576 for the work the contractor did on the project, but did not show the total balance of the lien,” said Dan Melnick of Clark Wilson LLP. The interference claim was dismissed.”
However, despite the contractor's project manager providing false information regarding the alleged interference by the owner, the judge did not feel there was an abuse of process. The owner was therefore denied compensation for damages arising from the financing costs incurred by posting the full deposit.
The British Columbia Court of Appeal (BCCA) reversed this decision.
“Contractors abused the mechanisms of this law to secure funds to which they knew or should have known they were not entitled to, thereby burdening owners with damages. “The time value of money held in court as collateral is the time value of a lien related to an interference claim,'' Melnick wrote.
Therefore, the contractor was ordered to pay damages equivalent to the interest on the security deposit related to the obstruction claim from the date of payment of the security deposit until the date of the trial decision.
Lessons were learned not only by contractors but also by owners. Because the owner did not provide evidence of the actual interest accrued, interest damages were calculated under B.C.'s Court Order Enforcement Act and were lower than the amount the owner would have paid.
The second case involved a grossly exaggerated lien claim.
Thomson Law Firm partners Emma Johnston and Kobi Dayan, and summer student Annie Redmond, have announced that Darwin Construction (BC) is paying $3 million to PC Urban Glenaire Holdings. Explain the circumstances surrounding the application for a lien.
The first contract was awarded to Darwin for $14,758,947. The approved change order brought his total amount to $15,958,282. By the end of the contract, Darwin had claimed his $15,619,761 from the partnership and was paid a total of $14,004,124, including the lien.
“The developer (PC Urban Glenaire) applied to have the lien canceled in full or the lien security amount reduced to a nominal amount of $1,” Johnston, Dayan and Redmond wrote.
A Chamber of Commerce judge ruled that the $3 million claim was clearly excessive and reduced the bond PC Urban Grenair had paid against the lien to $500,000.
In a decision described as “the first of its kind,” the BCCA completely canceled the lien, citing inflated claims and other obvious abuses of process.
Although not common, Johnston, Dayan, and Redmond states allow courts to set aside or cancel improper liens and award costs and damages for exaggerated or false claims. It notes that it has its own lien laws and other statutes.
The Court of Appeals acknowledged that “in their haste to secure a lien claim after a contract is terminated, a lien claimant may miscalculate its lien claim.''
However, it added that “a lien claimant must be prepared to support a contentious case as to both the lien rights and the amount of the lien.”
John Bleasby is a freelance writer based in Coldwater, Ontario. Send comments and legal memo column ideas to editor@dailycommercialnews.com.