Lien Enforcement: Resolving Limitation Period Contradictions

• Mikkel
  Arnston

  Mikkel
  Arnston

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Written By: Mikkel Arnston, Partner and Helena Rizzuto, Summer Law Student

The Alberta Court of King’s Bench recently addressed an appeal of the 2023 Lesenko v Wild Rose Ready Mix Ltd decision. The Appeal concerns the enforceability of court ordered limitation periods under the Prompt Payment and Construction Lien Act (PPCLA).

Background

Wild Rose (the “Subcontractor”) was hired to supply concrete for Lesenkos’ property.  Lesenkos (the “Owner”) did not pay for the concrete. Accordingly, the Subcontractor filed two liens on the property pursuant to the PPCLA.

Months later, the Court granted a Consent Order under which both parties agreed to have the outstanding amount owed paid into Court so that the liens could be discharged from the Owner’s title.

The Consent Order was based on a standardized template provided by the Courts which stated that the Subcontractor must commence action against the Owner within 180 days following the registration of the lien; failure to do so would result in termination of the lien. This aspect of the template mirrors section 43 of the PPCLA:

Expiry of registered lien

43(1) A lien that has been registered ceases to exist unless, within 180 days from the date it is registered,

(a)    an action is commenced under this Act

 (i)    to realize on the lien, or

(ii)    in which the lien may be realized,

and

(b)    the lien claimant registers a certificate of lis pendens in respect of the claimant’s lien in the appropriate land titles office.

The Issue

The Subcontractor failed to commence action against the Owner within the 180 days specified in the Consent Order.

Instead, the Subcontractor commenced their action in accordance with the 2-year period provided by the Limitations Act.

Initially, the Applications Judge upheld the 180-day timeline. He considered the timeline to be statutory in nature (as per section 43 of the PPCLA) and therefore required a “compelling” reason for its modification.

The Appeal concerns this timeline in the PPCLA and the template form of Order.

The Court’s Analysis

The Consent Order Contradicts Section 44 of the PPCLA

In his decision, Justice Feasby points to section 44 of the PPCLA which states:

According to 44(b), where money is paid into Court as “security”, expiration of the 180-day period does not terminate the lien. Instead, the Court suggested the default 2-year limitation period for civil actions would apply.

Resultantly, the Consent Order directly “overrides” section 44(b) of the PPCLA, according to Feasby.

The PPCLA can not be Modified by “Agreement”

PPCLA section 5 provides that “[a]n 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.”

Justice Feasby concluded that a Consent Order was a form of “agreement” under section 5 and therefore could not modify section 44(b).

As a result, 44(b) prevailed and the Court Order enforcing a 180-day period was deemed unenforceable. Accordingly, the Subcontractor’s lien was reinstated as action had commenced prior to termination of the 2-year limitation period.

Outstanding Concerns

Section 45 of the PPCLA

Justice Feasby did not discuss section 45(1) of the PPCLA:

Notice to commence an action

45(1)  Notwithstanding section 43 or 44, if an owner or another person affected by a lien serves written notice on the registered lienholder to commence an action to realize on the lienholder’s lien and the registered lienholder does not

(a)    commence an action to realize on the lien and pursuant to that action register in the appropriate land titles office a certificate of lis pendens, or

 (b)    where the lienholder is a party to an action commenced by another registered lienholder to realize on a lien, register in the appropriate land titles office a certificate of lis pendens in respect of the lienholder’s lien,

within 30 days from the day that the registered lienholder is served with the notice, the lien ceases to exist.

As discussed, Feasby held Section 44 eliminates the 180-day commencement period for “security” liens in favor of the default 2-year limitation period.

According to this recent judgement, a Consent Order cannot circumscribe this 2-year limitations period even for the limited purpose of the existence of a lien against security held by the Court.

However, section 45 suggests that mere “written notice” by the affected party can trigger a 30-day period during which failure to commence action will result in termination of the lien.

If the parties’ Consent Order was unenforceable as to the ascription of a fixed 180-day commencement period, did it not serve as sufficient notice to bring about an action within the 30-day period pursuant to section 45, which period the parties could choose to extend?

Consent Orders as “Agreements”

The 180-day commencement period was executed by Consent Order: both parties had agreed to the deadline. The deadline was not “legally binding” until executed by the Applications Judge.

Justice Feasby relied on precedent that consent orders have their “foundation in contract” (citing Ruffudeen-Coutts v Coutts, 2012 ONCA 65 at para 63) to support his contention that such orders constitute “agreements” under section 5 of the PPCLA.

This begs the question – does an order proposed without notice or opposed also constitute an “agreement” pursuant to section 5? Or will such orders, when executed, effectively modify section 44 of the Act to allow for a 180-day commencement period; and is this a reason to resist proceeding by consent?

Takeaway

The template consent order on the AB KB website for posting security into Court by consent still specifies the now unenforceable 180-day timeline.  Based on the reasoning in the decision of Justice Feasby, use of the template form may need to be adjusted; whether by use of a reference to section 45 or by proceeding absent consent, the adjustments will be untested and represent an adjustment to the present approach.  

_{This post is meant to provide information only and is not intended to provide legal advice. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this post to be outdated.}