Nearly four years after liens were registered on a Calgary condominium project, the Alberta Court of Appeal has dismissed the owner’s appeal, and in doing so, has confirmed the liens are valid.
In 2019, Avli BRC Developments Inc. (“Avli”), constructed a condominium building in Calgary. Avli hired BMP Construction Management Ltd. (“BMP”) as general ontractor. BMP in turn hired various subcontractors to construct the building. A dispute arose between Avli and BMP resulting in unpaid invoices and BMP and several of its subcontractors registering liens. All of the liens were filed in time. There were no disputes over the amounts being claimed. Rather, Avli raised several novel arguments challenging the validity of the liens. The Court of Appeal’s decision in Avli BRC Developments Inc v BMP Construction Management Ltd, 2023 ABCA 147 upholds the Chambers Justice’s finding, which in turn upheld the Applications Judge’s decision that the liens were valid.
Procedural History
The liens were registered in late 2019. The lien claimants thereafter commenced actions to preserve and pursue their liens. In April 2021, the parties appeared before the Applications Judge to determine, amongst other things, the validity of the liens. In his detailed decision in Avli BRC Developments Inc v BMP Construction Management Ltd, 2021 ABQB 412, Applications Judge Robertson dismissed Avli’s arguments, finding the liens were valid. Our office wrote an article about this decision in the Canadian College of Construction Lawyers Legal Update No. #160.
Avli appealed the Applications Judge’s decision to a Justice in Chambers, which was heard in a half-day special chambers application in December 2021. The Chambers Justice dismissed the appeal from the bench. Avli appealed the decision to the Court of Appeal. The appeal was heard in April 2023 with reasons issued May 5,2023, dismissing Avli’s appeal.
Avli’s Arguments
Avli argued that the subcontractor liens were invalid for a variety of reasons. The two main arguments were as follows: (1) lien claimants who liened only the condominium additional plan sheet (the “CS”) liened the wrong interest and as such these liens were invalid; and (2) liens against individual units were only valid to the extent of the work actually performed on those specific units rather than the project as a whole.
Liens Against the CS Only – Valid or Not?
In October 2019, Avli registered the condominium plan. This resulted in creation of the condominium corporation (the “CC”). After registration, Avli owned all of the units and, as a result, all of the common property. However, Avli failed to constitute an interim condominium board as required by the Condominium Property Act (the “CPA”). Avli also did not advise BMP or the subcontractors that the condominium plan had been registered. Avli argued that liens against the CS were invalid because the CC had not requested the work be done. However, there was no CC because Avli failed to set it up. Further, BMP and its subcontractors continued to work on the project without any knowledge that the CC had been created.
The Applications Judge found Avli controlled the CC and that Avli, as “acting CC”, requested the work be done. He also held Avli, as CC, adopted the pre-incorporation contract for work done before the plan was registered such that it was a post-incorporation contract. In doing so, the Applications Judge relied on the Supreme Court of Canada’s decision in Owners, Strata Plan LMS3905 v Crystal Square Parking Corp, 2020 SCC 29 (“Crystal Square”).
On appeal to the Chambers Justice, Avli argued it wore different hats as developer and owner, which resulted in Avli having separate and distinct obligations under both the Builders’ Lien Act (the “BLA”) and the CPA. Avli argued that it did not control the CC and did not request, as CC, that the subcontractors continue to perform work on the project. Avli argued the Applications Judge erred in finding Avli was fully in control of the CC, and as such, the test setout in Crystal Square had not been met. Avli relied on its separate roles as developer and owner, saying the mere creation of the CC, controlled in the interim by Avli, did not, on its own, constitute ratification of the construction contract. The Chambers Justice pointed out, however, that Avli did not require the work be stopped or disavow the contract when the CC was created. Rather, work continued, and Avli, in both of its capacities, knew that it continued. In the Chambers Justice’s view, continuation of the work was a manifestation of the adoption and ratification of the contract.
The Chambers Justice dismissed Avli’s appeal. Avli appealed. In its factum, Avli discussed the Supreme Court of Canada’s decision in Crystal Square at some length, likely because it was central to the Application Judge’s decision and the queries of the Chambers Justice during the special chambers application. Interestingly, the Court of Appeal does not mention Crystal Square. Instead, the Court focused on the curative provision of the BLA, noting that since none of the units had been sold at the time the liens were registered and there was no interim board of directors of the CC, Avli was in control of the CC. As such, it was “open to the applications judge to validate the respondents’ liens against all the condominium units” [para 16], and there was no basis for the Court of Appeal to intervene.
Given the importance placed on Crystal Square in the lower Court decisions, it would have been helpful to hear the Court of Appeal’s views on pre- and post-incorporation contracts in the context of condominium corporations. However, the closest the Court of Appeal comes to addressing the issue of post-incorporation contracts is in paragraph 14 where it says, out of an “abundance of caution…lien claimants may also register their liens against the Additional Sheet though it might, as occurred here, raise an issue under s. 78(1)(b) of the Condominium Property Act…about whether the condominium corporation requested the work(particularly that done pre-incorporation) or agreed to be bound by the terms of the pre-incorporation construction contract”.
How Many Units Must One Lien Claimant Lien?
In this case, some lien claimants only liened one individual unit. Before both the Applications Judge and the Chambers Justice, Avli argued these lien claimants were limited in their recovery to the value of thework actually performed on that individual unit, a fraction of what was owed. The Applications Judge disagreed, citing the common purpose doctrine and related case law, finding that “…subject to evidence of prejudice, the validity of the registration against land in respect of which there is a common purpose, including some geographical proximity, does not invalidate the lien because of the error in respect of not registering against all of the land on which work was done” [para 141]. Having found no prejudice, the Applications Judge held the liens could be “saved” under Section 37 of the BLA and as such were valid as against the entire project. Avli made the same arguments before the Chambers Justice, attempting to distinguish the authorities relied on by the Applications Judge. The Chambers Justice was not persuaded.
In dismissing Avli’s appeal, the Court of Appeal id not specifically address the common purpose doctrine. Rather, they focused on the curative section of the BLA and lack of prejudice, finding it was “…opento the applications judge to validate the respondents’ liens against all the condominium units pursuant to s. 37 of the Builders’ Lien Act. The applications judge’s findings that (i) the respondents’ liens were insubstantial compliance with s. 34 of the Builders’ Lien Act; and that,(ii) no person was prejudiced by the respondents’ failures to comply with the requirements of s. 34, were supported by the record” [para 16].
What Does it all Mean?
In its decision, the Court of Appeal says this litigation “could have been avoided had [the lien claimants] registered their liens against the certificates of title for all the condominium units”, which it says is the “standard approach… for lien claimants seeking to secure payment for their work against condominium common property” [para 14]. Whether this truly is the “standard approach” is debatable. Regardless, this statement is over-simplistic and fails to recognize that liening every unit on a project is not always practical given the expense and short timelines to lien.
If a lien claimant is owed a significant amount of money, you would obviously go to the cost and effort to register liens against all units and, out of an abundance of caution, the CS. However, this advice might change where a lien claimant is owed a smaller amount. In that case, it would be impractical and cost-prohibitive to lien every unit. In Avli, it would have cost nearly $2,400 to register liens against every unit and the CS. It would have cost another $1,600 to pull title to each of those units, which a prudent lien claimant would do twice: once when preparing the liens for registration and once afterward, to confirm the liens are registered. In Avli, two of the liens were less than $20,000; not a lot of money to litigate over, but an important debt to those parties. If a lien claimant is self-represented, which is not uncommon, it would be onerous for them to determine the legal descriptions to all titles and prepare and file liens against those titles, all within either45 or 60 days (depending on whether the BLA or the Prompt Payment and Construction Lien Act applies).
The takeaway from the Avli decisions is that the best practice when liening a condominium project is to lien as many units as might be necessary to satisfy the debt in the event the units have to be sold to pay the lien. This too has practical issues in that you will not always know what other liens, and in what amounts, might be registered after yours. However, to avoid arguing over lien validity (and years of protracted litigation), it is prudent to lien multiple units, or, if the circumstances justify it, each and every unit in the building, as well as the CS, to maximize the chance of recovery.
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