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Case Comment: J.D. Strachan Construction Limited v. Egan Holdings Inc. and Egan Funeral Home

J.D. Strachan Construction Limited v. Egan Holdings Inc. and Egan Funeral Home, 2019 ONSC 522, serves as a cautionary tale to those with lien rights. Even when engaged in settlement discussions, if you have lien rights, the lien rights should be preserved or perfected, because once lien rights expire, they are lost forever.

J.D. Strachan Construction Limited registered two liens against a property in Bolton owned by the defendants Egan for additions and renovations. One lien was for work done before the date of publication of the certificate of substantial performance (“CSP”), and the other was for work done after. The case focuses on the lien registered before the date that the CSP was published.

On June 26, 2014, Egan’s lawyers advised J.D. Strachan that the holdback would be paid. It was not, so J.D. Strachan preserved their pre-publication lien on June 26, 2014. Their period to perfect their pre-publication lien ended August 11, 2014 under section 36(2) of the Construction Lien Act.

On June 30, 2014, Egan’s lawyers advised that the holdback would be paid. It was not. On August 1, 2014, Egan’s architect and payment certifier and J.D. Strachan had a meeting. The architect told J.D. Strachan that Egan agreed to pay J.D. Strachan what it was owed, and the parties were to meet in person to finalize the details. They all agreed to meet on August 12, 2014, one day after J.D. Strachan’s period to perfect its lien ended. Relying on the architect’s statements alleged to have been made on behalf of Egan, J.D. Strachan believed the payment dispute was resolved and did not take any steps to perfect its lien.

On August 12, 2014, Egan, J.D. Strachan, and the architect met and agreed to terms of settlement. Minutes of settlement were drafted, but never executed by Egan. Egan did not pay J.D. Strachan for amounts owed with respect to the pre-publication lien. On September 17, 2014, more than a month after the pre-publication lien had expired, J.D. Strachan issued a statement of claim and registered a certificate of action.

Egan brought a motion to discharge the pre-publication lien and argued that the lien was expired because it was not perfected within 45 days pursuant to section 36(2) of the Construction Lien Act. Based on the first meeting with the architect, J.D. Strachan relied on promissory estoppel to argue that Egan was estopped from asserting what was referred to as a “limitations” argument.

The Court’s Analysis

Justice Doi of the Superior Court of Justice came to the correct result when he declared J.D. Strachan’s pre-publication lien expired and allowed the claim to continue in contract.

Justice Doi reasoned that promissory estoppel was not engaged by the first meeting that J.D Strachan had with the architect. Egan did not indicate they would waive or not enforce the “limitation” period for perfecting the lien. In fact, there was no reference to the “limitation” period. J.D. Strachan was influenced by the promise to pay, but as things stood at the first meeting, the promise to pay was unclear as the parties needed to agree on the terms of payment. Justice Doi reasoned that an admission of liability and a promise to pay later was not sufficient to engage promissory estoppel.

The difficulty with Justice Doi’s analysis regarding promissory estoppel is that such an argument is not consistent with the Construction Lien Act or the Construction Act. The period to perfect a lien under section 36(2) of the Construction Lien Act is an expiration period, not a limitation period. The wording of section 36(2) is clear that a preserved lien expires unless it is perfected in time. Once the expiration period to preserve or perfect a lien has lapsed, the lien cannot be revived (see, for example, Monaco Electric Ltd. v. Empire Myers Road Inc., 2004 CarswellOnt 773 at para 30). Since the period to perfect a lien is not a limitation period, it cannot be extended as such.

In the analysis by Justice Doi, he referenced that there was no indication that the lien period would be waived or not enforced. Consider, for example, where Egan advises that the time for perfecting the lien is waived, the parties meet but are not able to agree on terms of settlement. Just as a claimant cannot be required to waive its lien rights, owners are permitted to rely on the expiration period for preserving and perfecting liens set out in the Act.

In his analysis, Justice Doi referenced cases that were decided under the Mechanic’s Lien Act, which was overhauled in 1983. The Mechanic’s Lien Act allowed parties to contract out of lien rights. The Attorney General's office set up an Advisory Committee to assist with the drafting of the Construction Lien Act. The Advisory Committee noted that matters involving the expiration of lien rights were in great need of clarification.   

Pursuant to the advisory committee’s recommendations, the Construction Lien Act clarified the expiration of lien rights. Parties can no longer contract out of lien rights. Similarly, the wording of the Construction Lien Act is clear that the expiration period for preserving and perfecting liens cannot be extended. The promissory estoppel analysis should have addressed whether such a doctrine could apply to expiration periods in the Act. In reference to the two-year period to obtain an order for trial or set a lien action down for trial, our courts have clearly indicated that it is an expiration period and that the court has no jurisdiction to extend the expiration period (see, for example, Ravenda Homes Ltd. v. 1372708 Ontario Inc., 2010 ONSC 881 (S.C.J.)). The same analysis should apply to the time to preserve or perfect liens.

Practice Notes

When you have lien rights, preserve and perfect the lien. Once lien rights are expired, they are lost forever and cannot be revived. A lien claimant can always discharge its lien at a later date if a settlement is reached. If a lien claimant is having settlement discussions, it should be very wary about a request to meet the day after an expiration period to preserve or perfect ends.

Take the expiration periods for preserving and perfecting liens seriously. The court will not extend these expiration periods and has no jurisdiction under the Act to do so. Be sure to mark the dates in your calendar and set reminders to preserve and perfect your lien within the time allowed.