When registering a lien, ensuring the information included is accurate is crucial to lien validity. Getting the date work was completed, or the legal land location, wrong, is often fatal. But where does the court draw the line between permissible errors, and fatal errors? An Ontario court considered these issues, holding that prejudice to the owner is key to determining which errors can be fixed.
The McCanns were giving up their home in the city and moving to live at their cottage full time. They undertook a large renovation project on the cottage to convert it into a permanent home and decided to construct a new detached garage. They hired Northwood Window and Door Centre to supply and install all new doors and windows for the cottage and new garage.
The construction commenced in September 2017 and continued until July 2020 when the relationship between the parties broke down over payment disputes. Work on the project took much longer than anticipated. Northwood felt this was a big job, and wanted to address all issues the McCanns had as they went. At various points throughout the project, Northwood reached out to the McCanns proposing they pay for the completed work they were content with and to set a payment schedule for the outstanding work. The McCanns either neglected to respond to the payment proposals or took the position the requests were attempts to extort them for payment before the full project was completed.
After Northwood made a final request for payment in August 2020, they registered a construction lien on the property to secure the remaining amounts owing on the construction contracts.
The lien was registered in the amount of $36, 081.57 for the work completed between September 12, 2017, and July 7, 2020. There were two mistakes with the lien:
- First, the lien amount failed to take into account a credit note issued for $1,209.33 towards the beginning of the project.
- Second, the date on which Northwood stopped supplying services or materials was July 9, 2020 instead of July 7, 2020 as noted on the lien.
The McCanns took the position the lien placed on their property was null and void because it misstated the amount owing under the contract and incorrectly stated the last day of supply.
What the Court Said
Although the Court found two irregularities with the lien, it declined to find it void for those irregularities.
The Court noted that Section 35(2) of the Ontario Construction Act allows a court to reduce a lien by an exaggerated portion if the person who preserves or gives written notice of a lien was acting in good faith. Further, section 6 of the Act provides that no claim for a lien is invalidated only because of failure to strictly comply with certain provisions of the Act, unless the court believes that a person has been prejudiced as a result. This provision has been interpreted to allow a court to refuse to find a claim invalidated because of minor or technical irregularities.
Here, the Court accepted the exaggerated amount registered in the lien was the result of an accounting oversight and found no evidence the McCanns had suffered prejudice as a result of the amount claimed. Further, the Court held that misstating the last day of supply was of no practical consequence. The McCanns again were not prejudiced by this slight inaccuracy. In any event, the inaccuracy extended the time in which Northwood could register its lien, as the lien noted work was last performed July 7, when it was actually July 9.
Takeaways / Impact in Albert
Alberta's Prompt Payment and Construction Lien Act sets out the registration requirements for a lien in section 34(2). The statement of lien should set out items such as the date when work was completed, and the sum claimed as due. Section 37 of PPCLA dealing with the validity of liens operates similarly to the Ontario Act. A lien will be valid if it substantially complies with the registration requirements but won't be invalidated for failure to strictly comply with all requirements unless the failure prejudices another person. If someone is prejudiced by an error in the registration of the lien, the lien will only be invalidated to the extent of that prejudice.
Overall, if there is a minor irregularity or error in a registered lien, it is unlikely that a court will find the lien claim to be null and void. However, if a party is prejudiced by a defect, the court will invalidate the lien to the extent necessary to remedy any prejudice.
Link to decision: 1593095 Ontario Ltd. (Northwood Window and Door Centre) v. McCann, 2024 ONSC 163
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