Commercial Litigation and Dispute Resolution Blog

Builders’ lien claimants and owners alike should be aware of the recent decision of the Supreme Court of British Columbia in Pinnacle Living (Capstan Village) Lands Inc. v. Tarrier Group Inc.,^[1] which considers two noteworthy issues in relation to cancelling or removing claims of liens from project lands under British Columbia’s Builders Lien Act (the “Act”).^[2]

First, the decision demonstrates that a claim of lien may be cancelled from title upon posting nominal security where the lien is grossly overstated and the owner has counterclaims against the lien claimant.

Second, the decision also shows that an owner may not be able to remove a subcontractor’s claim of lien from title on paying holdback funds into Court where the owner had previously promised to pay the subcontractor directly for outstanding amounts.

Factual Overview

Pinnacle Living (Capstan Village) Lands Inc. (“Pinnacle”) was an owner developer of a development in Richmond, British Columbia. Pinnacle engaged Mondiale Development Ltd. (“Mondiale”) as its general contractor, and Mondiale engaged Tarrier Group Inc. (“Tarrier”) as one of its sub-trades. Tarrier subsequently entered into a number of agreements with its own subcontractors, and Tarrier’s subcontractors ultimately filed claims of lien with a collective value of $3,322,878.99.

In response, Mondiale began withholding payment to Tarrier, and Tarrier filed two claims of liens with a collective value of $3,690,932.92. Pinnacle and Mondiale advanced counterclaims against Tarrier for increased costs to complete the project in an estimated amount of $2,231,226 and costs to remediate the project in the approximate amount of $600,000.

Pinnacle and Mondiale together applied to the Court to have the claims of lien of Tarrier and its subcontractors cancelled or removed from the project lands under the Act.

The Grossly Overstated Claims of Lien

Under section 25 the Act, an owner, contractor, subcontractor or lien claimant may apply to the Court for an order to cancel a claim of lien if the Court is satisfied that “the claim of lien is vexatious, frivolous or an abuse of process.”

Pinnacle and Mondiale submitted uncontradicted evidence to the Court that the maximum amount owing by Mondiale to Tarrier was $366,135, and that the maximum possible lien was $379,785. It bears noting that Tarrier did not appear before the Court or file materials to challenge Pinnacle’s and Mondiale’s application. Pinnacle and Mondiale submitted to the Court that the claims of lien filed by Tarrier – again, in the collective amount of $3,690,932.92 – were so grossly overstated as to constitute an abuse of process.

The Court determined that the gross discrepancy between the amount of Tarrier’s claims of lien and the maximum possible amount was sufficient to amount to an abuse of process, and warranted relief under the Act. On the uncontradicted evidence before the Court, it was plain and obvious that all but $379,785 of Tarrier’s claims of lien were bound to fail.

Further, the Court stated that Tarrier’s claims of lien must be considered in light of the counterclaim in the total amount of approximately $2.6 million.

What is not apparent in the decision is the extent to which Pinnacle and Mondiale provided the court with evidence in support of their counterclaims relating to excess completion costs and costs to remediate defects. While the Court can consider a counterclaim in setting an amount to secure a claim of lien, the Court must be provided with sufficient evidence to support the counterclaim on a prima facie basis.

Further, in setting the appropriate amount of security, the Court must also take into account the objectives of the Act, which are to protect those who supply work and materials so long as the owner is not prejudiced, and to avoid injustice to the lien claimant, who is generally entitled to have its claim “fully adjudicated at trial.”^[3]

All told, the Court was satisfied that Tarrier’s claims of lien should be cancelled upon Pinnacle and Mondiale providing sufficient security.

The Court set the amount of security at one dollar.

The Owner’s Promise to Pay the Sub-Trade

Under section 23 the Act, an owner, contractor or subcontractor (among others) may apply to the Court for an order to remove claims of lien upon paying into Court an amount to be calculated under the Act – so long as the lien claimants are “other than a class of lien claimants engaged by an owner.”

In broad strokes, the amount to be paid into Court is the lesser of:

1. the total amount of the claims of lien; and
2. the amount owing to the person through whom the lien are claimed, which must be at least the amount of the statutory holdback withheld from that person.

In this case, the Court determined that no amounts were owing by Mondiale to Tarrier and that the statutory holdback was the amount of $95,812.50, and so this was the amount to be paid into Court to remove the claims of lien of Tarrier’s subcontractors – except for one.

The lone outlier was the claim of lien filed by Fairway Recycle Group Inc. (“Fairway”). Fairway had been engaged by Tarrier, supplied work and materials to Tarrier, invoiced Tarrier, and went unpaid by Tarrier. Fairway had threatened to file a claim of lien, and in response, Mondiale informed Fairway that Pinnacle would pay the outstanding balance if Fairway would refrain from filing a claim of lien. Ultimately, Pinnacle did not pay Fairway the amounts it was owed by Tarrier, and so Fairway filed its claim of lien.

Fairway submitted to the Court that because of its direct agreement with Pinnacle, there was no other entity between it and Pinnacle, and it was therefore beyond the scope of the application brought by Pinnacle and Mondiale under section 23 of the Act. Pinnacle and Mondiale, meanwhile, emphasized that Tarrier – not Pinnacle or Mondiale – retained Fairway to perform the work on the project, although they acknowledged Pinnacle’s promise to pay Fairway’s invoices.

The Court referred to the decision in Port Royal Riverside Development v. Vadasz,^[4] where Master Joyce, as he then was, noted that for the purposes of section 23 of the Act, there must be at least one person between the owner and the lien claimant in the contractual chain. The Court found that while Pinnacle did not engage Fairway to perform the work, when Pinnacle agreed to pay Fairway’s invoices, “it created a situation in which there was not at least one party between it and Fairway in the contractual chain” and that “[w]hat it agreed to pay were invoices which could give rise to the right of a lien.”

It does not appear that the Court found that Fairway’s original contract with Tarrier to perform the work was assigned to Pinnacle, but rather, that there was a separate agreement between Fairway and Pinnacle that was formed after Fairway had performed the work on the project. Nor did the Court expressly find that Fairway fell within “a class of lien claimants engaged by an owner,” where such a class means all lien claimants engaged by the owner “in connection with an improvement,” such that Fairway’s claim of lien could not be captured by section 23.

Further, the Court did not comment on whether Fairway’s claim of lien was or was not claimed “through” Tarrier, which is language used in section 23 to determine the amount to be paid into court, and that potentially informs which lien claimants do and do not fall within the scope of section 23.

In any event, the Court determined that Fairway no longer fell within the same class as Tarrier’s other subcontractor lien claimants, and so Pinnacle could not remove Tarrier’s claim of lien upon paying funds into Court.

Conceivably, Pinnacle could subsequently apply to the Court under section 24 of the Act to provide sufficient security to cancel Fairway’s claim of lien, but that was not the application brought before the court in this case.

In Closing

To reiterate, two lessons can be gleaned from this decision, one for lien claimants, and one for owners.

For lien claimants, the decision is a stark reminder that a lien claimant’s security and leverage may be diminished, if not effectively eliminated, if the amount of the claim of lien is well in excess of what can be supported on an application to cancel the claim and/or if the claim claimant faces counterclaims against it.

For owners, the decision demonstrates that an owner should be careful when it considers side arrangements with sub-trades, or else the owner’s statutory protection against claims of lien filed by those sub‑trades may be eroded.

_{[1] Pinnacle Living (Capstan Village) Lands Inc. v. Tarrier Group Inc., 2023 BCSC 1315.}

_{[2] Builders Lien Act, S.B.C. 1997, c. 45.}

_{[3] See, for example: Troico Home Solutions & Manufacturing Inc. v. Kandakou, 2022 BCSC 1172 at paras. 52 to 57, and Iraca Construction Services Corp. v. Ghorbankhani, 2023 BCSC 855 at paras. 38-43, both considering Q West Van Homes Inc. v. Fran-Car Aluminum Inc., 2008 BCCA 366. See also: West Fraser Mills Ltd. v. BKB Construction Inc., 2012 BCCA 89.}

_{[4] Port Royal Riverside Development v. Vadasz, 1998 CanLII 2175, 65 B.C.L.R. (3d) 367 (S.C.).}