Court Clarifies When “Termination” And “Abandonment” Occur Under The Builders Lien Act

By Mark Danielson
Categories: Blog, Construction

The Builders Lien Act, S.B.C. 2007, c. 45 and the Strata Property Act, S.B.C. 1998 set out five triggering events from which the time to file a claim of lien starts to run:

1.    The issuance of a certificate of completion;

2.    Actual completion of a head contract or improvement;

3.    Abandonment of a head contract or improvement;

4.    Termination of a head contract or improvement; and

5.    Conveyance of a strata lot to a purchaser.

A claim of lien filed more than 45 days after the occurrence of any of these triggering events is invalid. Therefore, it is significant when the circumstances under which these triggering events will be found to have occurred are clarified by the courts. In Alexander Construction Ltd. v. Al-Zaibak, 2011 BCSC 590, the Supreme Court of British Columbia clarified the circumstances under which “termination” and “abandonment” will be found to have occurred.

Background

The defendant in Alexander Construction contracted for the plaintiff to oversee construction of a home in West Vancouver. The contract provided that construction of the home would start in August 2001 and finish in June 2002, subject to custom finishing. This deadline was, in the Court’s words, “wildly optimistic”. The plaintiff was still working on the home in December 2006 when a dispute arose about invoice amounts, with the result that the plaintiff refused to continue construction until the invoices were paid. The parties tried, unsuccessfully, to resolve the dispute in the following months. In August 2007, the defendant hired another contractor to finish the home and his architect advised the plaintiff of this in writing. The plaintiff continued to maintain hoarding, pay utilities, and perform routine maintenance at the project site throughout 2007. The plaintiff did not do any substantial work on the home until December 2007, when it finished cutting a concrete wall at the project site – work that the plaintiff’s principal allegedly told the defendant was done to preserve its right to file a claim of lien. The plaintiff filed a claim of lien against the property on January 15, 2008, which the defendant argued was invalid because the contract was either terminated or abandoned more than 30 days before that date.

The Alleged Termination(s) of the Contract

The defendant argued that he terminated the contract either (a) orally, as a result of the unsuccessful meetings in Spring 2007, or (b) in writing, when his architect advised the plaintiff another contractor was hired to complete the contract in August 2007. The plaintiff argued that the contract was not validly terminated until January 23, 2008, by which time it had given the defendant written notice of both default and termination, as was required by the contract.

After reviewing several authorities, the Court held that for the purposes of the Builders Lien Act, a formal contract, where one exists, must be terminated in accordance with its provisions. Consequently, the defendant’s efforts to terminate the contract were ineffective.

The Alleged Abandonment of the Contract

The Court then considered whether the plaintiff had abandoned the contract. The defendant alleged that the plaintiff had not done any work in connection with the contract from August 2007 until December 2007 when it finished cutting the concrete wall at the project site. Under the Builders Lien Act, a contract is deemed to be abandoned on the expiry of 30 days during which no work is done in connection with the contract. However, this “deemed abandonment” is rebuttable by evidence of contrary intention, as was recently confirmed by our Court of Appeal in McManamna v. Chorus, 2008 BCCA 471.

The Court held that the plaintiff’s continuous activities at the project site, albeit minimal, were sufficient to constitute “work” such that abandonment had not occurred. Further, it held that even if the plaintiff was deemed to have abandoned the contract by not doing any work in connection with the contract for more than 30 days, its correspondence to the plaintiff demonstrated an intention to complete the contract. The Court further held that even if the plaintiff’s activities and services at the project site did not constitute “work” for the purposes of the Builders Lien Act, they demonstrated the plaintiff’s “ongoing sense of responsibility” towards the project which supported a finding that the plaintiff did not intend to abandon the contract.

Conclusion

The Alexander Construction decision is interesting for two reasons. First, it demonstrates the importance of adhering to the terms of a contract for the purposes of the Builders Lien Act by confirming that a contract cannot be orally terminated where its provisions envision a more formal method. Second, it suggests that the threshold for what constitutes “work done in connection with an contract” is low. Although the Court of Appeal in McManamna confirmed these words should be read liberally, it extended the time to file a claim of lien in that case on the grounds that weather conditions caused the work stoppage, and did not determine whether the plaintiff’s activities (which were similar the plaintiff’s in Alexander Construction) were sufficient to delay the occurrence of abandonment under the Builders Lien Act. The decision also implies that a court may look to those activities which it determines are insufficient to delay the occurrence of abandonment as evincing an intention not to abandon the contract, which further lowers the bar with respect to overcoming the deemed abandonment provision of the Builders Lien Act.