Timeliness Of Lien Litigation, Consent Orders And Lesenko v Wild Rose Ready Mix Ltd

A recent decision from Justice Feasby of the Alberta Court of King's Bench saw a curious result with respect to a commonly used practice in lien proceedings that will likely have broad (and possibly unintended) implications.¹ It is widely known that Section 5 of the Prompt Payment and Construction Lien Act² provides that an agreement by any person that the PPCLA, or the remedies provided for in it, does not apply is against public policy and void. However, the full extent of that provision is rarely considered.

Background

In the matter before the Court, the appellant, Wild Rose Ready Mix Ltd (“Wild Rose”), appealed the decision of Applications Judge Schlosser in which he determined that Wild Rose had failed to commence lien enforcement proceedings within the time stipulated by a consent order (the “Consent Order”), pursuant to which the owners of the liened lands, Todd and Elizabeth Lesenko (the “Lesenkos”), paid security into court under section 48 of the PPCLA in order to secure the liens' removal.

At the centre of the dispute was the validity of the following provision in the template Consent Order:³ (emphasis in original)

5. Without prejudice to any party's right to seek other applicable remedies under the Builders' Lien Act, the Lien Claimant shall, not later than 180 days following the date of the registration of the applicable Lien with the Registrar of Land Titles, either;
   
   
   1. commence a separate court action to enforce the Lien;
   2. commence a separate court action to preserve remedies under the Builders' Lien Act and commence arbitration proceedings where the agreement between the parties authorizes or requires such proceedings; or
   3. if authorized by separate Court Order, file a “statement of the plaintiff's claim” in these proceedings,(collectively, the “Lien Enforcement Proceedings”), failing which the Lien shall cease to exist.

Applications Judge's Decision

In his decision, Applications Judge Schlosser determined that:

1. the 180-day limit in section 43(1) of the PPCLAwas incorporated into the Consent Order. In doing so he also commented that “a proceeding to enforce liens is always mandatory. Otherwise, the liens cease to exist;”⁴ and
2. he did not have the power, pursuant to Rule 13.5 of the Alberta Rules of Court,  Alta Reg 124/2010, to vary the 180-day limitation in the Consent Order on the basis that “the Court is not to extend the time fixed by statute unless the statute gives that power.”⁵

As a result, he granted an order:

1. dismissing an Action that Wild Rose had commenced in furtherance of its lien claims (which was filed well beyond the 180-day period contemplated under the Consent Order but shortly before the expiry of the two-year limitation period under the Limitation Act,  RSA 2000, c L-12);
2. returning the security paid into court by the Lesenkos pursuant to the Consent Order; and
3. dismissing a cross-application by Wild Rose for an extension of the time specified to commence lien enforcement proceedings pursuant to Rule 13.5.

Decision on Appeal

On appeal, Justice Feasby found Applications Judge Schlosser's decision in this respect to be incorrect and, therefore, allowed Wild Rose's appeal and reinstated its liens. Although his decision addressed a number of matters arising out of the appealed decision, with respect to the 180-day deadline contemplated under the Consent Order, Justice Feasby's reasoning can be broken down as follows:

1. The provision in the Consent Order that the liens would cease to exist if enforcement proceedings were not commenced within 180 days is inconsistent with section 44(b) of the PPCLA, which provides that where security is paid into court in order to discharge a lien, the lien does not thereafter cease to exist “by reason that an action has not been commenced within 180 days from the date that the lien is registered.”⁶
2. A consent order is a form of agreement and the Consent Order before the Court fell within the scope of an “agreement” as used in section 5 of the PPCLA (which provides that “^an agreement by any person that this Act does not apply or that the remedies provided by it are not to be available for the person's benefit is against public policy and void.”)⁷
3. On this basis, paragraph 5 of the Consent Order amounted to an impermissible agreement that section 44(b) of the PPCLAdid not apply to the parties. In this respect, Justice Feasby further remarked that the fact that a statutorily prohibited agreement was embodied in the form of a court order did not make it less objectionable.⁸
4. As a result, he ultimately found the term of the Consent Order requiring Wild Rose to commence an action within 180 days of the registration of its liens failing which they would cease to exist to be void ab initio.⁹

Takeaways

1. This decision stands as authority for the proposition that the standard template wording of consent orders (requiring lien enforcement proceedings to be taken within 180 days failing which a lien will expire) is currently  unenforceable and cannot be relied upon.
2. We would agree with Justice Feasby that the deadline set out in the standard form of Section 48 Order is relied upon as enforceable by virtue of it being a court order and not as a result of the provisions of the PPCLA. However, the suggestion that the Court cannot make an order further to an agreement between the parties in this respect in order to maintain the purpose of the PPCLA is concerning, particularly as orders of this ilk are common (for instance in receivership proceedings) and lien claimants are regularly directed to proceed through a claim process failing which they will lose their liens.

As a result of this decision, parties would appear well advised not to seek these orders on a consent basis due to such an order amounting to an agreement that could potentially offend Section 5 of the PPCLA insofar as it is inconsistent with any of the Act's provisions.

3. In order to keep lien proceedings moving forward (which is often of primary interest for the parties, particularly those responsible for the payment of security into court), it will be unsurprising if parties instead try to incorporate Section 45 (Notice to Commence an Action) wording into orders for the posting of security and thereby trigger a 30-day deadline for a lien claimant to initiate proceedings failing which their lien will be lost.
4. Lien claimants and their counsel should carefully review proposed orders pursuant to Section 48 to ensure the proper deadlines are met, as a 30-day deadline pursuant to Section 45 is likely to become more common.

Footnotes

1. Lesenko v Wild Rose Ready Mix Ltd, 2024 ABKB 333 (“Lesenko”)

2. Prompt Payment and Construction Lien Act, RSA 2000, c P-26.4 (the “PPCLA”)

3. Lesenko, supra  at para. 6

4. Lesenko, supra at para. 87

5. Lesenko, supra  at para. 88

6. Lesenko, supra  at para. 107

7. Lesenko, supra  at para. 108

8. Lesenko, supra  at para. 109

9. Lesenko, supra  at para. 109

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