John Kulik QC
John Kulik QC, Lawyer, McInnes Cooper
 

There is an old expression about “selling the Brooklyn Bridge”. Recently, a bankrupt subcontractor attempted to register a lien against the MacDonald Bridge spanning Halifax Harbour. If it succeeded and the lien were not then paid out, the subcontractor’s ultimate remedy would be to sell the Bridge to satisfy its lien. Fortunately (and not too surprisingly), the N.S. Supreme Court decided the MacDonald Bridge cannot be liened nor sold to satisfy a lien. McInnes Cooper’s Douglas Tupper QC represented the successful contractor.

The decision is a good reminder of against what and whom a lien can be registered and how it can quickly be challenged.

THE LIEN

The Angus L. MacDonald Bridge between Halifax and Dartmouth, N.S. is being renovated in “The Big Lift” project. The Halifax Dartmouth Bridge Commission owns and operates the Bridge and is the registered owner of various properties at both ends of its span. The Bridge Commission hired American Bridge to perform the renovations. American Bridge hired Cherubini Metal Works to fabricate replacement deck panels for the Bridge, and Cherubini in turn hired Certified Coating Specialists to put certain coatings on the panels. Certified Coating performed all its work at Cherubini’s workshop, then transported, raised and inserted the panels into the Bridge’s span. Certified Coating did not perform any work on any properties the Bridge Commission owned, excepting the Bridge span itself. After it performed its work, Certified Coating Specialists declared bankruptcy. Its receiver and trustee, The Bowra Group Inc., registered a lien against various properties that the Bridge Commission owned to secure a claim for approximately $400,000.00 against Cherubini. Cherubini denied it had any obligation to pay the claim and applied to the N.S. Supreme Court under the summary procedures available under Section 29(4) of the N.S. Builders’ Lien Act to vacate the lien on the basis the lien was legally invalid.

THE DECISION

On September 22, 2016, the Nova Scotia Supreme Court in Certification Coating Specialists v. Cherubini et.al. decided that while Bowra is entitled to pursue its claim against Cherubini (which claim Cherubini is entitled to defend), it is not entitled to register a lien against the Bridge or any related properties as security for its claim.

THREE LIEN REMINDERS

The court’s decision offers a good reminder of against what and whom a lien can be registered, and how it can quickly be challenged. Construction industry participants in other Canadian provinces and territories, however, should check their own lien legislation since if could differ from that of N.S.

  1. Public Streets and Highways Cannot be Liened. Section 3(1) of the S. Builders’ Lien Act says it does not apply to work performed with respect to public streets or highways. However, the Act does not define a public street or highway. There are other statutes that define those terms, but since the Act does not specifically refer to them, their definitions do not apply. The court decided it was entitled to look at the common usage of the words “public streets or highways” as well as dictionary definitions to determine the meanings of those words, and concluded the MacDonald Bridge is indeed a public street or highway:
  • Traffic enters directly into the street systems of Halifax and Dartmouth from the Bridge.
  • Both private and public vehicles, including scheduled transit buses, use the Bridge.
  • There are posted speed limits and traffic signals on the Bridge.
  • Although a toll is required, it is automated and the Bridge is available to all drivers.

Since Certified Coatings’ work was done solely on the deck panels, the Bridge itself was the only property owned by the Bridge Commission that Certified Coatings could possibly have the right to lien. But since the Bridge span itself was a public street or highway, the lien was invalid.  Bowra Group (as Certified Coatings’ Trustee) could still advance a claim against Cherubini, but it could not be secured by a builders’ lien against any of the Bridge Commission’s properties.

  1. There is a quick way to challenge liens. Under Section 29(4) of the Act, the N.S. Supreme Court has jurisdiction to vacate a lien upon the posting of security or “upon any other proper ground”. Frequently a party that is subject to a lien but disputes the amount owed wants to have the lien vacated as quickly as possible so project funding can flow. This involves the posting of security with the court in the form of a bond, a letter of credit or even cash, usually in the amount of 1.25 times the face value of the lien claim. This security takes the place of the land subject to the lien and the court then vacates the lien from the land. But if the validity of the lien itself is questionable (for example, it was filed out of time or the Act does not cover the work in question), a party can apply to the court for a quick ruling whether the lien is valid in law. There is a heavy onus on the applicant because the court will not lightly dispose of the security the Act grants a contractor, but it will vacate an improper lien where the facts and the law are clear. This process can be of great benefit to the party subject to a lien as they can avoid either paying bond premiums or interest on a letter of credit, or tying up cash.
  2. Provincial Crown property cannot be liened. Section 3(2) of the Act specifically says liens cannot be registered against Provincial Crown property. However, under section 3(4) an unpaid contractor can give notice of a potential claim to the Provincial Crown and thus is entitled to a secured claim against the lien holdback that the Act requires the Provincial Crown to maintain. Although the contractor has no security against the project on which it was working, it at least has security against that holdback fund. The Provincial Government sought leave to intervene and argue the Bridge Commission is part of the Provincial Crown, so the Bridge cannot be subject to a lien. Although the issue was argued in full, the court declined to rule on the point since it already decided the Bridge is a public street or highway and not subject to the Act. So the question of whether the Bridge Commission is a Provincial Crown entity, such that its property is Crown property and cannot be liened, remains to be answered another day.

 To discuss this or any other legal issue, contact any member of McInnes Cooper’s Construction Law Team. Read more McInnes Cooper Legal Publications and subscribe to receive those relevant to your business.

McInnes Cooper prepared this article for information; it is not legal advice.  Consult McInnes Cooper before acting on it. McInnes Cooper excludes all liability for anything contained in or any use of this article. © McInnes Cooper, 2016.  All rights reserved.

About the author:

John Kulik is an experienced construction and insurance lawyer at McInnes Cooper. He represents a broad range of clients in the construction industry, conducting construction-related litigation and arbitrations and preparing and reviewing construction contracts, with a special focus on construction liens. You can reach John at john.kulik@mcinnescooper.com.