Making Lunch Out of Lien Law Duncan W. Glaholt Glaholt LLP

Making Lunch Making Lunch Out of Lien LawOut of Lien Law

Duncan W. GlaholtDuncan W. Glaholt

Glaholt LLPGlaholt LLP

1. 1. Encounters with E-Reg.Encounters with E-Reg.

2. 2. David Goldman’s David Goldman’s Interesting ProblemInteresting Problem

3.3. What’s New and What’s New and Different Different with Liens?with Liens?

1. Encounters With E-Reg1. Encounters With E-Reg..

Concerns and Suggested Concerns and Suggested SolutionsSolutions

Prepared with the assistance of Roger J. Gillott, Prepared with the assistance of Roger J. Gillott,

Osler Hoskin & Harcourt LLPOsler Hoskin & Harcourt LLP

Concern 1: Ambiguities regarding Concern 1: Ambiguities regarding Affidavit of VerificationAffidavit of Verification

1.1. How can lawyer select statement 2521, “I How can lawyer select statement 2521, “I am the lien claimant”?am the lien claimant”?

2.2. Can cross-examination take place on Can cross-examination take place on electronic affidavit of verification?electronic affidavit of verification?

3.3. Who is to be cross-examined?Who is to be cross-examined?

Extracts from A.G. ReportExtracts from A.G. Report

In a recent Divisional Court decision, In a recent Divisional Court decision, Ken Ken Gordon Excavating Ltd. v. EdstanGordon Excavating Ltd. v. Edstan, the court held , the court held that an affidavit of verification was not required that an affidavit of verification was not required for the proper preservation of a lien, because of for the proper preservation of a lien, because of the substantial compliance provisions of the the substantial compliance provisions of the Mechanics’ Lien Act.Mechanics’ Lien Act. The Committee is strongly The Committee is strongly of the view that an affidavit of verification should of the view that an affidavit of verification should be mandatory, in the hope that this will help to be mandatory, in the hope that this will help to prevent spurious and exaggerated work was or prevent spurious and exaggerated work was or is to be doneis to be done..

Construction Lien ActConstruction Lien Act, s. 40, s. 40Cross-examination on claim for lienCross-examination on claim for lien

40.--(1) 40.--(1) Any person who has verified a claim for Any person who has verified a claim for lienlien that has been preserved is liable to be that has been preserved is liable to be cross-cross-examined without an orderexamined without an order on the claim for lien at on the claim for lien at any time, any time, irrespective of whether an action has irrespective of whether an action has been commencedbeen commenced. . Who may participateWho may participate (2) There shall be only one examination under (2) There shall be only one examination under subsection (1), but the contractor, the payer of subsection (1), but the contractor, the payer of the lien claimant, and the lien claimant, and every person named in the every person named in the claim for lien who has an interest in the premises claim for lien who has an interest in the premises are entitled to participate thereinare entitled to participate therein. .

Just How Long can a Cross-Just How Long can a Cross-Examination Go?Examination Go?

AMCA International Ltd. v. Ellis-Don LtdAMCA International Ltd. v. Ellis-Don Ltd. (1990), 42 . (1990), 42 C.L.R. 227 (Ont. Master)C.L.R. 227 (Ont. Master)

This cross examination has to date, occupied 13 days, This cross examination has to date, occupied 13 days, and transcripts of the cross examination have been made and transcripts of the cross examination have been made available to me. available to me. In these 13 days of examination there is In these 13 days of examination there is nothing approaching a clear admission which would nothing approaching a clear admission which would assist defendantassist defendant, and I see nothing which would suggest , and I see nothing which would suggest that any such admission will be forthcoming…that any such admission will be forthcoming…While I hesitate to say that there has been a deliberate While I hesitate to say that there has been a deliberate abuse of process here, the effect of this lengthy and abuse of process here, the effect of this lengthy and unfruitful examination is an abuse of process and unfruitful examination is an abuse of process and I am, I am, therefore, granting the motion and terminating the therefore, granting the motion and terminating the examination.examination.

Suggested SolutionsSuggested Solutions

Ministry to issue practice direction clarifying that:Ministry to issue practice direction clarifying that:

(a) cross-examination on affidavits will proceed as (a) cross-examination on affidavits will proceed as before under s. 40 of the Act; before under s. 40 of the Act;

(b) Where statement 2521 is selected (“(b) Where statement 2521 is selected (“I am the lien I am the lien claimantclaimant”, the lawyer is understood to be the recording ”, the lawyer is understood to be the recording the fact that his client is swearing the affidavit;the fact that his client is swearing the affidavit;

(c) where statement 2522 is selected (“(c) where statement 2522 is selected (“I ___ am the I ___ am the agent of the lien claimantagent of the lien claimant”), the individual named will ”), the individual named will be cross-examined, even if that person is a lawyer for be cross-examined, even if that person is a lawyer for the lien claimant.the lien claimant.

Until Ministry Makes Suggested Until Ministry Makes Suggested Changes:Changes:

Ministry has issued direction to Land Ministry has issued direction to Land Titles Offices to allow Titles Offices to allow paper claim for paper claim for lien, including the affidavit of verificationlien, including the affidavit of verification, , to be scanned into Statement 61.to be scanned into Statement 61.

Concern 2: Limit on the Number of Concern 2: Limit on the Number of PINs that can be Affected by Single PINs that can be Affected by Single

LienLien

1.1. Current limit is 250 PINs.Current limit is 250 PINs.

2.2. When liening common elements, more When liening common elements, more may be required.may be required.

Suggested SolutionSuggested Solution

Until number of PINs is increased, Until number of PINs is increased, Ministry recommends that documents be Ministry recommends that documents be registered in paperregistered in paper..

Concern 3: Field for “Owner” not Concern 3: Field for “Owner” not long enough to include multiple long enough to include multiple

partiesparties

Solution:Solution:

Until size of field is increased, Until size of field is increased, a list of a list of owners should be scanned into Statement owners should be scanned into Statement 61 as a schedule61 as a schedule..

Concern 4: Vacating Lien Concern 4: Vacating Lien Instruments Using Court OrdersInstruments Using Court Orders

Problem:Problem:

Statement 702 does not account for the fact that Statement 702 does not account for the fact that a a court ordercourt order which discharges a lien, and which which discharges a lien, and which is to be registered on title, will always involve is to be registered on title, will always involve vacating the registration of a claim for lien, but vacating the registration of a claim for lien, but may or may not involve vacating the registration may or may not involve vacating the registration of a certificate of actionof a certificate of action (if the lien has not been (if the lien has not been perfected, no such instrument will exist).perfected, no such instrument will exist).


The Ministry recommends, where the The Ministry recommends, where the Statements do not match the situation, Statements do not match the situation, that the that the generic “Application to Amend generic “Application to Amend Based Upon a Court Order” be usedBased Upon a Court Order” be used, and , and the Court Order is to be scanned into the Court Order is to be scanned into Statement 61Statement 61. This is viewed as a . This is viewed as a temporary measure.temporary measure.

Concern 5: Statement 708Concern 5: Statement 708Problem:Problem:

A court order providing that the registration of a claim for lien and/or A court order providing that the registration of a claim for lien and/or a certificate of action is to be vacated could result from posting a certificate of action is to be vacated could result from posting security with the court, security with the court, oror from an order of the court upon some from an order of the court upon some other basis. other basis.

If the order is not scanned into Statement 61, and Statement 708 is If the order is not scanned into Statement 61, and Statement 708 is left in its current form, an left in its current form, an individual reviewing title will have no way individual reviewing title will have no way of knowing whether there is money in court to the credit of the lien of knowing whether there is money in court to the credit of the lien that has been vacatedthat has been vacated. .

It will be necessary for that individual to do a court file search to It will be necessary for that individual to do a court file search to obtain a copy of the order, based upon the court file number and obtain a copy of the order, based upon the court file number and date currently provided in Statement 708. This process date currently provided in Statement 708. This process involves involves going outside the land registration system to get the informationgoing outside the land registration system to get the information..


The system should be changed, and two possibilities The system should be changed, and two possibilities present themselves:present themselves:

1. Make it a requirement of registering an order 1. Make it a requirement of registering an order which vacates the registration of a claim for lien which vacates the registration of a claim for lien and/or a certificate of action that the order be and/or a certificate of action that the order be scanned in to Statement 61.scanned in to Statement 61.

2. Provide the following optional field, to be 2. Provide the following optional field, to be inserted into Statement 708:inserted into Statement 708:

““Security in the form of <Security in the form of <a lien bond/a letter of a lien bond/a letter of credit/cashcredit/cash> in the amount of $XXXX was posted > in the amount of $XXXX was posted

with the courtwith the court.”.”

Concern 6: Statement 705Concern 6: Statement 705

Problem:Problem:It seems It seems inappropriateinappropriate to have a lawyer who is arranging to have a lawyer who is arranging to vacate the registration of a certificate of action make a to vacate the registration of a certificate of action make a definitive statement that a lien or liensdefinitive statement that a lien or liens are are sheltering sheltering under his client’s certificate of action, since this is not under his client’s certificate of action, since this is not something the lawyer could possibly know for certain.something the lawyer could possibly know for certain.It would seem more appropriate to make the statement It would seem more appropriate to make the statement that another lien that another lien may bemay be sheltering behind the certificate sheltering behind the certificate of action.of action.Accordingly, Accordingly, Statement 705 should be amendedStatement 705 should be amended to read, to read, ““Another lien or liens may be sheltering under the Another lien or liens may be sheltering under the Certificate of Action registered as number ……..”Certificate of Action registered as number ……..”

Concern No. 7:Concern No. 7:

Never (NEVER!) use the document Never (NEVER!) use the document “Registration of Court Order” when you are “Registration of Court Order” when you are dealing with liens. It will not amend the dealing with liens. It will not amend the register to delete the instrument that the register to delete the instrument that the order deals with.order deals with.

Instead, use the form “Application to Instead, use the form “Application to Amend Based on Court Order”.Amend Based on Court Order”.

Concern No. 8:Concern No. 8:

Certain Land Registry Offices are Certain Land Registry Offices are encouraging (insisting!) that solicitors who encouraging (insisting!) that solicitors who want to vacate liens select the document want to vacate liens select the document “Discharge of Lien”.“Discharge of Lien”.

Unless you mean to wipe out the lien for Unless you mean to wipe out the lien for all purposes, forever, DO NOT all purposes, forever, DO NOT DISCHARGE THE LIEN.DISCHARGE THE LIEN.

Construction Lien ActConstruction Lien Act, s. 48, s. 48

A discharge of a lien under this part is A discharge of a lien under this part is irrevocable and the discharged lien cannot be irrevocable and the discharged lien cannot be revivedrevived, but no discharge affects the right of the , but no discharge affects the right of the person whose lien was discharged to claim a person whose lien was discharged to claim a lien in respect of services or materials supplied lien in respect of services or materials supplied by the person subsequent to the preservation of by the person subsequent to the preservation of the discharged lien.the discharged lien.

See See Southridge Construction Group Inc. v. Southridge Construction Group Inc. v. 667293 Ontario Ltd667293 Ontario Ltd. (1993), 2 C.L.R. (2d) 177 . (1993), 2 C.L.R. (2d) 177 (Ont. Div. Ct.)(Ont. Div. Ct.)

Best Practice No. 1Best Practice No. 1

An informal polling of lien practitioners An informal polling of lien practitioners indicates that the practice is to indicates that the practice is to scan and scan and paste into statement 61 (a text file paste into statement 61 (a text file schedule), the entire claim for lien form, as schedule), the entire claim for lien form, as executed by the client, including affidavit executed by the client, including affidavit of verificationof verification..


At the time the client attends to execute the At the time the client attends to execute the paper copy of the lien, have them execute an paper copy of the lien, have them execute an acknowledgement and direction to your firm and acknowledgement and direction to your firm and your E-Reg. clerk:your E-Reg. clerk:1. that you were authorized and directed to 1. that you were authorized and directed to register the lien electronically;register the lien electronically;2. that they have provided you with all of the 2. that they have provided you with all of the information to be contained in the electronic information to be contained in the electronic version of the lien, which they represent to be version of the lien, which they represent to be accurate and reliable;accurate and reliable;3. that they understand that electronic 3. that they understand that electronic registration of the lien has the same registration of the lien has the same consequences as ordinary registration.consequences as ordinary registration.


Always use the document Always use the document “Application to Amend Based “Application to Amend Based on Court Order”on Court Order”..

Special Bonus Track !Special Bonus Track !

Electronic TenderingElectronic Tendering

What is Electronic Tendering?What is Electronic Tendering?

Two versions exist today:Two versions exist today:

(a) Internet based system that displays a (a) Internet based system that displays a description of the commodity being description of the commodity being procured.procured.

(b) Same as (a), plus option to download (b) Same as (a), plus option to download and pay for tender documents.and pay for tender documents.

Future of E-tenderingFuture of E-tendering

(a)(a) Internet based system that displays a Internet based system that displays a description of the commodity being description of the commodity being procured, plus option to download and procured, plus option to download and pay for tender documentspay for tender documents

PLUSPLUS

(b) (b) Submission of tender in purely Submission of tender in purely electronic formatelectronic format, without any paper , without any paper being produced.being produced.

Two Potential Problems With Pure Two Potential Problems With Pure Electronic Tendering and an Electronic Tendering and an

Unanswered QuestionUnanswered Question

First Problem: Security !First Problem: Security !(a) threat of others accessing information (a) threat of others accessing information sent through the internetsent through the internet

(b) threat of others altering information (b) threat of others altering information sent through the internetsent through the internet

Two Potential Problems With Pure Two Potential Problems With Pure Electronic Tendering and an Electronic Tendering and an

Unanswered QuestionUnanswered Question

Second Problem: TechnologySecond Problem: Technology

(a) software compatibility, updates, anti-(a) software compatibility, updates, anti-virus, encryption issuesvirus, encryption issues

(b) internet and server size, reliability and (b) internet and server size, reliability and speedspeed

Unanswered QuestionsUnanswered Questions

When has a purely electronic tender been When has a purely electronic tender been sent and received? sent and received?

How will courts apply the existing rules in How will courts apply the existing rules in a construction setting?a construction setting?

Will this change the carefully erected Will this change the carefully erected superstructure created by the S.C.C. in a superstructure created by the S.C.C. in a series of cases beginning with series of cases beginning with Ron Ron Engineering?Engineering?

Electronic Commerce Act 2000Electronic Commerce Act 2000, S.O. 2000, c. 17., S.O. 2000, c. 17.

Time of sending of electronic informationTime of sending of electronic information or documentor document22. (1) Electronic information or an electronic document is sent 22. (1) Electronic information or an electronic document is sent when when it enters an information system outside the sender's controlit enters an information system outside the sender's control or, if the or, if the sender and the addressee use the same information system, sender and the addressee use the same information system, when it when it becomes capable of being retrieved and processed by the addresseebecomes capable of being retrieved and processed by the addressee. . Contracting outContracting out(2) Subsection (1) applies (2) Subsection (1) applies unless the parties agree otherwiseunless the parties agree otherwise. . Presumption, time of receiptPresumption, time of receipt (3) Electronic information or an electronic document is (3) Electronic information or an electronic document is presumed to be presumed to be received by the addresseereceived by the addressee, , (a) if the addressee has designated or uses an information system for (a) if the addressee has designated or uses an information system for the purpose of receiving information or documents of the type sent, the purpose of receiving information or documents of the type sent, when it enters that information system and becomes capable of being when it enters that information system and becomes capable of being retrieved and processed by the addresseeretrieved and processed by the addressee; or; or(b) if the addressee has not designated or does not use an information (b) if the addressee has not designated or does not use an information system for the purpose of receiving information or documents of the system for the purpose of receiving information or documents of the type sent, type sent, when the addressee becomes aware of the information or when the addressee becomes aware of the information or document in the addressee's information system and it becomes document in the addressee's information system and it becomes capable of being retrieved and processed by the addresseecapable of being retrieved and processed by the addressee..

More Unanswered QuestionsMore Unanswered Questions

How does one make sure that it has been How does one make sure that it has been received in the same form it was sent?received in the same form it was sent?

How does a purely electronic tender How does a purely electronic tender remain “sealed”?remain “sealed”?(see S.N. Bunston, “Electronic Tendering: (see S.N. Bunston, “Electronic Tendering: Potential Risks and How to Avoid Them”, Potential Risks and How to Avoid Them”, Toronto, Canadian Institute, 2002)Toronto, Canadian Institute, 2002)

2. David Goldman’s 2. David Goldman’s Interesting ProblemInteresting Problem

1.1. Strip mallStrip mall2.2. Purchased at arm’s lengthPurchased at arm’s length3.3. Usual affidavits, declarations, covenants Usual affidavits, declarations, covenants

and undertakings (no lienable work, no and undertakings (no lienable work, no liens, no notice of liens)liens, no notice of liens)

4.4. Usual searches on closing: no liensUsual searches on closing: no liens5.5. Closing & mortgage registeredClosing & mortgage registered6.6. Architect registers lien for services for Architect registers lien for services for

previous ownerprevious owner

Problem:Problem:

Section 78(5):Section 78(5):

““Where a Where a mortgage affecting the owner's mortgage affecting the owner's interestinterest in the premises is registered in the premises is registered after the after the time when the first lien arosetime when the first lien arose in respect of an in respect of an improvement, improvement,

the liens the liens arisingarising from the improvement from the improvement have have priority over the mortgage to the extent of any priority over the mortgage to the extent of any deficiency in the holdbacksdeficiency in the holdbacks required to be required to be retained by the owner under Part IV.” retained by the owner under Part IV.”

Q 1Q 1: Does the New Mortgagee Lose : Does the New Mortgagee Lose Priority Over Deficiency in Priority Over Deficiency in

Holdback?Holdback?

A:A: Probably not, as long as the Probably not, as long as the purchaser (mortgagor) is not an purchaser (mortgagor) is not an “owner”.“owner”.

(more about this later)(more about this later)

Q 2:Q 2: Do architects Do architects have lien rights? have lien rights?

A:A: Yes! Yes!

Former s. 3(4) Former s. 3(4)

““Despite subsection 14(1), an architect or Despite subsection 14(1), an architect or the holder of a certificate of practice under the holder of a certificate of practice under the the Architects ActArchitects Act and the employees and the employees thereof do not have a lien.”thereof do not have a lien.”

Repealed 1997, c. 23, s. 4(1)Repealed 1997, c. 23, s. 4(1)

Q 3:Q 3: How can a lien How can a lien exist after a closing?exist after a closing?

A:A: Liens “arise” and Liens “arise” and then “subsist” unless then “subsist” unless and until they expire. and until they expire.


A person's lien arises and takes effect A person's lien arises and takes effect when the person first supplies services or when the person first supplies services or materials to the improvement. materials to the improvement.

Construction Lien ActConstruction Lien Act, s. 31(1), s. 31(1)

Unless preserved under section 34, the Unless preserved under section 34, the liens arising from the supply of services or liens arising from the supply of services or materials to an improvement expire as materials to an improvement expire as provided in this section. provided in this section.

Q 4 :Q 4 : But what about s. But what about s. 78(5)? 78(5)?

A:A: Depends on Depends on whether purchaser is whether purchaser is an “owner”.an “owner”.

Section 1 - DefinitionsSection 1 - Definitions

"owner""owner" means any person, including the means any person, including the Crown, having an Crown, having an interest in a premisesinterest in a premises at at whose request whose request andand, , (a) upon whose credit, (a) upon whose credit, oror

(b) on whose behalf, (b) on whose behalf, oror(c) with whose privity or consent, (c) with whose privity or consent, oror(d) for whose direct benefit,(d) for whose direct benefit,an improvement is made to the premises an improvement is made to the premises but does not include a home buyerbut does not include a home buyer

Section 1 - DefinitionsSection 1 - Definitions

"home buyer""home buyer" means a means a person who buys the interest of person who buys the interest of an owner in a premises that is a homean owner in a premises that is a home, whether built or , whether built or not at the time the agreement of purchase and sale in not at the time the agreement of purchase and sale in respect thereof is entered into, respect thereof is entered into, providedprovided, , (a) (a) not more than 30 per cent of the purchase pricenot more than 30 per cent of the purchase price, , excluding money held in trust under section 53 of the excluding money held in trust under section 53 of the Condominium Act, Condominium Act, is paid prior to the conveyance, andis paid prior to the conveyance, and(b) (b) the home is not conveyed until it is ready for the home is not conveyed until it is ready for occupancyoccupancy, evidenced in the case of a new home by the , evidenced in the case of a new home by the issuance of a municipal permit authorizing occupancy or issuance of a municipal permit authorizing occupancy or the issuance under the the issuance under the Ontario New Home Warranties Ontario New Home Warranties Plan ActPlan Act of a certificate of completion and possession of a certificate of completion and possession

L.D. Ducharme Systems Inc. v. Denamer L.D. Ducharme Systems Inc. v. Denamer Homes IncHomes Inc. (1994), 17 C.L.R. (2d) 107 (Ont. . (1994), 17 C.L.R. (2d) 107 (Ont.

Gen. Div.)Gen. Div.)

The The exclusion of "home buyer"exclusion of "home buyer" from the definition of from the definition of "owner" in s. 1(1) of the Construction Lien Act "owner" in s. 1(1) of the Construction Lien Act reflects the reflects the fact that a purchaser who pays less than 30 percent of fact that a purchaser who pays less than 30 percent of the purchase price prior to closing is clearly not financing the purchase price prior to closing is clearly not financing the construction of the homethe construction of the home. . In essence therefore, those who supply services or In essence therefore, those who supply services or materials to the building are forced to look to the vendor materials to the building are forced to look to the vendor for payment and cannot create lien rights in the property. for payment and cannot create lien rights in the property. A "home buyer" is not a person whose interests can be A "home buyer" is not a person whose interests can be the subject of a alien. The answer to the question the subject of a alien. The answer to the question whether or not a "home buyer" has an interest in which a whether or not a "home buyer" has an interest in which a lien can be created, cannot in my view be different when lien can be created, cannot in my view be different when the "home buyer" acquires title after a lien is registered…the "home buyer" acquires title after a lien is registered…

L.D. Ducharme Systems Inc. v. Denamer L.D. Ducharme Systems Inc. v. Denamer Homes IncHomes Inc. (1994), 17 C.L.R. (2d) 107 (Ont. . (1994), 17 C.L.R. (2d) 107 (Ont.

Gen. Div.)Gen. Div.)

The plaintiffs' submission that a "home The plaintiffs' submission that a "home buyer" has a responsibility to protect buyer" has a responsibility to protect himself if a lien is registered before his himself if a lien is registered before his conveyance is registered does not reflect conveyance is registered does not reflect what I see is the reality of the "home what I see is the reality of the "home buyer' exemption to s. 14(1). buyer' exemption to s. 14(1). That is, that it That is, that it is the vendor/builder and not the "home is the vendor/builder and not the "home buyer" who is financing the constructionbuyer" who is financing the construction. .

Q 4 :Q 4 : If the architect had a If the architect had a contract with the contract with the previous owner, previous owner,

then then why bother to why bother to lien?lien?

A:A: Good Question! All Good Question! All architect needs is s. 9 architect needs is s. 9

(vendor’s trust)(vendor’s trust)

Section 9(1)Section 9(1)Where the owner's interest in a premises is Where the owner's interest in a premises is sold by sold by the ownerthe owner, , an an amount equal toamount equal to, , (a) the value of the consideration received by the (a) the value of the consideration received by the owner as a result of the sale, owner as a result of the sale, lessless, , (b) the reasonable expenses arising from the sale and (b) the reasonable expenses arising from the sale and the amount, if any, paid by the vendor to discharge the amount, if any, paid by the vendor to discharge any existing mortgage indebtedness on the premises,any existing mortgage indebtedness on the premises,constitutes a trust fund for the benefit of the constitutes a trust fund for the benefit of the contractorcontractor. .

Section 9(2)Section 9(2)

(2) The (2) The former ownerformer owner is the trustee of the is the trustee of the trust created by subsection (1), trust created by subsection (1), and and shall not appropriate or convertshall not appropriate or convert any any part of the trust property to the former part of the trust property to the former owner's own use or to any use owner's own use or to any use inconsistent with the trust inconsistent with the trust until the contractor is paid all amounts until the contractor is paid all amounts owedowed to the contractor that relate to the to the contractor that relate to the improvement. improvement.

New & Interesting DevelopmentsNew & Interesting Developments

What Constitutes a Lienable What Constitutes a Lienable Interest in Land?Interest in Land?


""interest in the premisesinterest in the premises" means " means an estate an estate or interest of any natureor interest of any nature, and includes a , and includes a statutory right given or reserved to the statutory right given or reserved to the Crown to enter any lands or premises Crown to enter any lands or premises belonging to any person or public authority belonging to any person or public authority for the purpose of doing any work, for the purpose of doing any work, construction, repair or maintenance in, construction, repair or maintenance in, upon, through, over or under any lands or upon, through, over or under any lands or premises premises

Pankka v. ButchartPankka v. Butchart[1956] O.R. 837 (C.A.)[1956] O.R. 837 (C.A.)

Facts IFacts I

Veteran entered into agreement with the Veteran entered into agreement with the Director, The Veterans’ Land Act, to purchase a Director, The Veterans’ Land Act, to purchase a parcel of land registered in the name of the parcel of land registered in the name of the Director.Director.Under Under Veterans’ Land ActVeterans’ Land Act, purchaser had right , purchaser had right to:to:(a)(a) balance of surplus remaining in hands of balance of surplus remaining in hands of Director after sale;Director after sale;(b) refund of down-payment in certain (b) refund of down-payment in certain circumstances;circumstances;(c) notice in case of default;(c) notice in case of default;(d) in the event of rescission, the surplus over (d) in the event of rescission, the surplus over and above the amount owing under the contractand above the amount owing under the contract

Did any of these interests constitute an Did any of these interests constitute an interest in land for the purposes of the interest in land for the purposes of the Construction Lien ActConstruction Lien Act??

Court of Appeal:Court of Appeal:

The provisions to which I have made reference make it The provisions to which I have made reference make it plain, beyond all doubtplain, beyond all doubt, that the subject of a mechanics' , that the subject of a mechanics' lien created by the Act is lien created by the Act is intended to be an estate or intended to be an estate or interest in land which can be sold and vested by order of interest in land which can be sold and vested by order of the Court in a purchaserthe Court in a purchaser. The lien attaches "to the land" . The lien attaches "to the land" and to the estate or interest of an owner "in the land." A and to the estate or interest of an owner "in the land." A sale made under the Act is a sale made under the Act is a sale of real propertysale of real property, and , and the estate and interest which may be vested in a the estate and interest which may be vested in a purchaser is an estate or interest in rem. It is realty, and purchaser is an estate or interest in rem. It is realty, and not personalty. not personalty. There is nothing in the Act to suggest There is nothing in the Act to suggest that a person can have a lien attaching to a right of a that a person can have a lien attaching to a right of a personal naturepersonal nature. .

Bravo Cement v. University of Bravo Cement v. University of TorontoToronto (1991), 46 C.L.R. 207 (1991), 46 C.L.R. 207

(Ont. Div. Ct.)(Ont. Div. Ct.)

Facts IFacts I

University of Toronto leases land to Sunnybrook University of Toronto leases land to Sunnybrook Hospital, save as to lands conveyed to third Hospital, save as to lands conveyed to third parties.parties.Conveyances contained provision reserving the Conveyances contained provision reserving the Grantor the right at any time to enter upon said Grantor the right at any time to enter upon said lands and to there lay down, repair, maintain or lands and to there lay down, repair, maintain or remove storm or sanitary drainage installations remove storm or sanitary drainage installations for the benefit of all abutting lands now owned for the benefit of all abutting lands now owned and retained by the Grantor.and retained by the Grantor.Description of lands in Schedule A also reserved Description of lands in Schedule A also reserved a right of way.a right of way.

Did reservations in conveyances amount Did reservations in conveyances amount to an interest in land as required by the to an interest in land as required by the Construction Lien ActConstruction Lien Act??

Divisional Court Decision:Divisional Court Decision:

Reversionary provisions described as “Reversionary provisions described as “a a fee simple upon condition precedentfee simple upon condition precedent” or as ” or as ““a determinable fee simplea determinable fee simple” do not amount ” do not amount to an interest in the land. to an interest in the land.

They are mere rights which can be They are mere rights which can be exercised should the circumstances exercised should the circumstances permit.permit.

Graham Mining Ltd. v. Rapid-Eau Graham Mining Ltd. v. Rapid-Eau Technologies IncTechnologies Inc. (2000), 7 C.L.R. (3d) . (2000), 7 C.L.R. (3d) 279 (Ont. S.C.J.); aff’d [2001] O.J. No. 279 (Ont. S.C.J.); aff’d [2001] O.J. No. 4183 (Div. Ct.); aff’d April 22, 2002, File 4183 (Div. Ct.); aff’d April 22, 2002, File

No. M28063 (C.A.)No. M28063 (C.A.)

Lien claimants had done a significant amount of Lien claimants had done a significant amount of surface and underground work on a small hydro-surface and underground work on a small hydro-electric project in Northern Ontario, including electric project in Northern Ontario, including blasting and tunneling pursuant to a revocable blasting and tunneling pursuant to a revocable series of work permits and land use permits, to series of work permits and land use permits, to create a generating station on federal Crown create a generating station on federal Crown land. land.

The developers’ ultimate goal was to apply for The developers’ ultimate goal was to apply for and obtain a provincial Water Power Lease and obtain a provincial Water Power Lease which would give them some security of tenure.which would give them some security of tenure.

Facts IFacts I

In the meanwhile, the land remained In the meanwhile, the land remained unpatented and all that the developers had unpatented and all that the developers had was a realistic expectation that they would was a realistic expectation that they would be treated fairly by the provincial be treated fairly by the provincial government when they finished the government when they finished the project. project.

Could this equitable interest support a Could this equitable interest support a lien?lien?

Facts IIFacts II

Court of Appeal Decision (April 22, Court of Appeal Decision (April 22, 2002):2002):

"Despite [counsel’s] argument to the "Despite [counsel’s] argument to the contrary, contrary, an interest in the improvement by an interest in the improvement by itself cannot constitute a lienable itself cannot constitute a lienable interestinterest. At the risk of being repetitive, s. . At the risk of being repetitive, s. 14 of the Act is clear, it is the 14 of the Act is clear, it is the interest of interest of the owner in the premisesthe owner in the premises which can be which can be liened. liened. Premises include the landPremises include the land. . If the If the owner has no interest in the land then owner has no interest in the land then there's no interest which can be liened by there's no interest which can be liened by virtue of the Act".virtue of the Act".

The EndThe End

Documents

Making Lunch Out of Lien Law Duncan W. Glaholt Glaholt LLP