As Ontario governments continue to invest in transportation infrastructure, the question arises: Can these public projects be subject to liens by the trades who work on them? The short answer is “yes, potentially”. That was the finding of Master Short in the decision of Advanced Construction Techniques Ltd. v. OHL Construction, Canada, 2013 ONSC 7505.
In this case, a lien was registered against York University by Advanced Construction Techniques (“ACT”), a subcontractor who was working on the extension of Toronto’s University/Spadina subway line through York University lands. The general contractor, OHL Construction (“OHL”) bonded off the lien, and then moved to have the lien claim dismissed and its bond returned.
The nature of the public infrastructure project at issue, and the variety of novel arguments advanced by counsel for OHL, prompted Master Short to comment that the case before him was “in the nature of test cases and thus deserving of a fulsome analysis”.
Two central arguments were raised. First, OHL argued that ACT’s lien rights were unenforceable on public policy grounds, since the ultimate remedy under the Construction Lien Act is the sale of the statutory owner’s interest in the improved lands, and that remedy could not reasonably apply to public works such as a subway tunnel. In rejecting OHL’s argument, Master Short found that since the lien was promptly bonded off and vacated from title by the general contractor, pragmatically no threat actually existed that part of an unfinished subway tunnel may have been sold off to satisfy a lien claim. These circumstances did not support overriding the statutory protection of tradespeople with enforceable lien rights, which protection itself is the driving public policy objective of the Construction Lien Act. The Master found it was untenable to suggest that “a party having done work to improve lands, could have absolutely no potentially enforceable lien rights,” (emphasis added).
Second, the Master considered whether the work was in respect of a “Railway right of way” – lands which are specifically exempt from being the subject of a lien attaching to title under the Construction Lien Act – and whether the TTC, whose project was at issue, or York University, whose lands were at issue, were owners under the Construction Lien Act. Consideration of both these issues did not defeat ACT’s lien claim. Based on the contractual relationships entered into between the TTC and York, the Master found that the lands on which the work was conducted were not a “Railway right-of-way”; rather, the express agreement was that all lands remained the property of the University (until the project was completed and approved). The University, however, as owner of the lands, consented to the work which was found to be to its benefit. Accordingly, it was an owner for the purposes of the Construction Lien Act.
For all these reasons, ACT’s lien was found to be valid. As this motion was heard on an interlocutory basis, there is no right of appeal under the Construction Lien Act.
The decision makes clear that the circumstances of each case are important to the analysis. For example, repeatedly the Master made note that the TTC had no registered interest in the lands on which the work was conducted. Query whether a different conclusion would have been reached if the owner was in fact the TTC, which is a “street railway”, as defined under statute.
Likewise, a key factor was that the lien had been bonded off and vacated from title. This was a compelling fact in balancing the rights of the parties. Indeed, the Master suggests throughout the decision that there are other tools which could have been available to address the lien had it remained on title. For example, an easement of necessity could have been found which would have created a “Railway right-of-way” and exempted the lands from a lien. Section 47(1) of the Construction Lien Act, which gives the Court a general discretion to discharge a lien, could have been used to avoid absurd results, such as the sale of subway lands. This section, as the Master pointed out, was used in an earlier case to specifically discharge a lien from lands on which a subway was built. Further, had the lien remained on title, the public policy concerns raised by OHL would likely have had more weight.
In the end, the balance in this case weighed in favour of the lien rights afforded by the Construction Lien Act. This does not, however, prevent the balance to be tipped otherwise where doing so may be necessary and just to protect public projects. Since the analysis will always be fact specific, owners of these projects should continue to make use of common contractual provisions requiring the general contractor to bond off all liens, which – like in this case – will assist in relegating the debate to one between contractors and their subs, leaving the owner and the project lands out of it.