Ruling allows subcontractors to feel confident about imposing liens to secure payment rights
A recent Saskatchewan Court of Appeal decision makes it easier for subcontractors on provincial infrastructure projects to feel confident that, if necessary, they can impose a builders’ lien on the contractors they are working for to secure their rights in getting paid for their work.
“The [Saskatchewan] Builders’ Lien Act ensures that parties who contribute work or materials to a construction project are paid for their services, while also providing security and predictability for owners,” says MLT Aikins LLP lawyer Josh Morrison. His firm acted in Regina Bypass Design Builders v Supreme Steel LP, 2021, on behalf of Supreme Steel LP, which refused to vacate a lien it had served Regina Bypass Design Builders. “This decision provides clarity.”
He adds that the case clears up any ambiguity over whether exemption provisions in the act apply to all parties who provide labour and materials to construction and improvement projects on public highways or only to the Crown and those parties who contract directly with the Crown.
The majority of the Court of Appeal, with judges Brian Barrington-Foote and Jeffery Kalmakoff writing the decision and fellow panel Justice Ralph Ottenbreit dissenting, held that the relevant section of the act, s. 5(2), renders the act inapplicable only to the Crown and those parties who contract directly with the Crown.
Says Morrison: “Accordingly, the BLA still applies to contracts between non-government contractors and their sub-contractors, even where the work is performed in connection with a public street or highway project.”
The case stems from the Saskatchewan Ministry of Highways and Infrastructure contract with SGTP Highway Bypass Limited Partnership to design, construct, and manage the Regina Bypass Project. The project entailed the construction of 12 overpasses, 40km of new four-lane highway and 55km of new service roads.
After SGTP retained Regina Bypass Design Builders (RBDB) to undertake construction of the project, RBDB, in turn, retained Supreme Steel to fabricate, supply, deliver and install the steel for the Project’s bridges.
Supreme performed its work under the subcontract. It later served RBDB with a Written Notice of Lien for more than $7.5 million. However, RBDB argued s. 5(2) of the Builders’ Lien Act did not apply to its subcontract with Supreme, which provides for certain exemptions.
When Supreme refused to vacate its lien, RBDB applied to the Saskatchewan Court of Queen’s Bench for a declaration that s. 5(2) of the BLA did not apply to any work performed by or on behalf of it, or, alternatively, to any work performed by Supreme, under the subcontract.
In the initial application, the chambers judge sided with Supreme Steel and concluded s. 5(2) of the BLA did apply in the agreement between RBDB and Supreme. RBDB appealed that ruling, claiming there is nothing in the language of the relevant section of the act to limit the scope of the exemptions only to parties who contract directly with the Crown.
Supreme argued that the primary purpose behind the BLA is to ensure that parties who supply work or materials to real property projects are paid for their services and that RBDB’s interpretation would defeat that purpose.
The appeal court ruling noted that reading s. 5(2) harmoniously within the entire statute, the provision could support more than one interpretation. As a result, a “contextual and purposive approach” should play a more significant role in interpreting the section.
However, in the end, a majority of the appeal panel agreed with the chambers judge. It held that s. 5(2) renders the BLA inapplicable only to the Crown and those parties who contract directly with the Crown.
“It does not restrict the application of the BLA as between non-government contractors and their subcontractors,” the appeal court ruled. “It is our view that the scheme and object of the act support the Chambers judge’s conclusion that s. 5(2) does not preclude, but rather favours, the application of the Act to contractors and subcontractors.”
“There is nothing in the plain wording of s. 5(2) that explicitly limits the scope of the exemption to the Crown or those parties who contract directly with the Crown,” Barrington-Foote and Kalmakoff wrote in the decision. “Nor is there anything in the plain wording that explicitly declares whether the exemption applies or does not apply to subcontractors.”
As a result, the appeal court ruled Supreme was entitled to file its lien, and the Court dismissed RBDB’s appeal.
The majority observed that the principal objective of the BLA is to ensure that those parties who supply work and materials to the improvement of real property are paid for doing so. The legislative history behind the BLA also suggests the legislature intended for s. 5(2) to spell out the situations in which the BLA would not apply to the Crown.
The majority of the appeal court also found that jurisprudence favoured the application of the BLA to non-government contractors and subcontractors. The majority held that s. 5(2) speaks to the question of whether or not the Crown is subject to the BLA, not to the question of whether or not the project is subject to the BLA.
MLT Aikins’ Morrison says the implications of this decision “are significant” for contractors and subcontractors. “It is now settled law in Saskatchewan” that the BLA applies to subcontractors who supply services to exempt projects under The Highways and Transportation Act and those in connection with the construction or improvement of a government-owned street or highway.
“From a subcontractor’s perspective, this clarity provides some security for payment - that they will be paid for the work and services that they provide in connection with the project.”
It also makes Saskatchewan a more attractive place to do business in the province because subcontractors know that they have lien rights that extend to these projects. Saskatchewan has been an outlier until this decision compared to laws in other provinces dealing with similar circumstances.
“Until this case was decided it appeared there was a gap,” he says, but now the Saskatchewan act is more in line with how other jurisdictions handle these issues.
However, there is no indication yet if this decision will be appealed.
