A recent decision from the Saskatchewan Court of Appeal has helped clarify a couple of important questions surrounding the law of builders’ liens in Saskatchewan. In Grey Owl Engineering Ltd. v Propack Systems Ltd., 2015 SKCA 108, the Court considered two important questions. First, why do we have a Builders’ Lien Act (“Lien Act”) in the first place and second, what constitutes an “improvement” for the purposes of the Lien Act.
Why do we have a Builders’ Lien Act?
The Court found at paragraph 30 of the Grey Owl decision that:
“ Two factors dictate the Saskatchewan Legislature’s approach to its builders’ lien legislation. The first factor is that, unlike any other commercial endeavour, the work, services and materials supplied to an improvement are provided on credit in a pyramidal structure, where payment often depends on whether the parties in the pyramid above the lien claimant are paid. The second factor is that the ordinary law of contract does not provide sufficient remedies to ensure that the contract funds flow from the top of the construction pyramid to those entitled to receive them. The statute supplements the law of contract and fosters the provision of credit in a complex piece of legislation designed to assist and facilitate construction…”
How should the term “improvement” be interpreted?
In the context of this question, the Court found that a technical restrictive interpretation of the term “improvement” should not be adopted. Instead of looking at each subtrade and subcontractor in a piecemeal fashion to see whether or not the work each performed is an “improvement” within the meaning of the Lien Act, the Court will focus on the project as a whole.
In Grey Owl, the lower Court found that storage tanks provided in relation to an oil extraction project were capable of being moved beyond the site once the project was finished. As a result, the lower Court judge found that the storage tanks were not an improvement within the meaning of the Builders’ Lien Act as the definition of an “improvement” in the Lien Act provides an exception for things that are “not affixed to the land or intended to become part of the land“.
The Court of Appeal reversed the lower Court and adopted a broad interpretation of the term “improvement”. Our Court of Appeal held that a restrictive reading of the term “improvement” does not serve the interests of those who provide services and materials on credit. The Court found that it would be a mistake to look solely at the definition of the term “improvement” without looking at the broader language of the Act and in particular, section 22 of the Act. Ultimately the Court found that rather than looking at each individual contractor to determine whether or not the work performed by that trade meets the definition of an “improvement”, a broader view, one which looks at the project as a whole is to be used. Ultimately, in Grey Owl, the Court said it would be a mistake to look at the storage tanks in isolation. The installation of the storage tanks must be viewed in the context of the project as whole, being a project that will lead to the extraction of oil. This project was clearly an improvement and therefore work done in aid of this project was an “improvement” within the meaning of the Lien Act.
What does this mean for you?
The law is now clear. We cannot look at the work of any subtrade in isolation. We need to look at the project as whole to determine whether or not a subtrade has a valid lien. A subtrade who delivers storage tanks that are not affixed to the land may still be able to lien for this work if the services provided relate to a project that would result in an “improvement” within the meaning of the Lien Act. This broad interpretation of the Lien Act will no doubt help subtrades going forward and require that owners and contractors alike be even more careful when advancing funds and releasing holdback amounts.