Notice Holdback Under the Construction Lien Act: State Your Intention
February 13, 2017
In Trenchline Construction Inc. v Metrolinx, 2016 ONSC 6136, Master Wiebe released a thorough decision, touching on numerous contentious issues between the parties not the least of which revolved around what constitutes a written notice of lien under s. 24 of the Construction Lien Act (the “CLA“). Metrolinx was the owner of a project called the Willowbrook Rail Maintenance Facility Fuel Rehabilitation Project (the “Project”). Trenchline was a subcontractor that installed the piping system for the contractor Unimac. Trenchline alleged that it issued ten written notices of lien under s. 24 of the CLA to Metrolinx between May 24, 2011 and December 10, 2011 claiming the total sum of $1,085,210.09. In the event that Trenchline’s notices were deemed to be written notices of lien under s. 24 of the CLA, Metrolinx would have been required to maintain notice holdback of the entire $1,085,210.09.
Master Wiebe wrote a characteristically thorough and well-reasoned decision wherein he ultimately concluded that only one of the ten notices qualified as a written notice of lien pursuant to s. 24 of the CLA. Master Wiebe identified four items a written notice of lien must contain in order for same to constitute a valid notice, specifically: (1) the name of the lien claimant; (2) the premises; (3) the payor; and (4) the amount owed. However, he affirmed a fifth equally important component, namely, a warning to the payor by the notice giver of a present intention to preserve the lien. Without this fifth component, the correspondence does not constitute a notice of lien pursuant to s. 24 of the CLA.
Master Wiebe described this fifth component as a “clarion call” and he used this phrase five times in the decision. As stated, “[o]nly a clarion call to disturb the contractual flow of funds should cause the owner to do so.” He determined it is not necessary to use the word “lien” in the notice and there are no magic words that will trigger the determination. However, what is necessary is a warning from the lien claimant to the recipient that the dispute between the lien claimant and its payor reached “the lien stage” and the status quo flow of funds is to be interrupted immediately.
By way of example, one of the correspondences written by Trenchline to Metrolinx identified that Trenchline intended to place a lien on the Project, however this correspondence stated that it would only lien if the outstanding amount was not straightened out at a future site meeting. Master Wiebe determined this statement did not constitute a present intention to lien and therefore did not reach the threshold of becoming a written notice of lien pursuant to s. 24 of the CLA.
This decision is another example of the strict interpretation of the Construction Lien Act and the unforgiving operation of the statute. By failing to articulate a present intention to lien in nine of the ten written notices, Trenchline was denied approximately $800,000 in notice holdback liability that it otherwise could have asserted against Metrolinx. To borrow Master Wiebe’s phrase, this decision should act as a “clarion call” to all lien claimants that when delivering a written notice of lien it is imperative to articulate a present intention to lien.