Parties seeking to pay money into court to vacate liens should take note of the Ontario Superior Court’s decision in LaFarge Canada Inc v B Gottardo Construction Ltd. Parties may point tosection 44(2) of the Construction Lien Act (“CLA”) to argue for the posting of security that is “reasonable in the circumstances”.

The Facts

Sundial, the owner, entered into a contract with Gottardo, the contractor, for the supply and installation of underground services and roads for the owner. The contractor abandoned the project and shortly thereafter was adjudged bankrupt. Ultimately, a total of eight lien claims were registered against title to the project lands by the contractor’s subcontractors, totalling $2.9 million.

A consultant retained by the owner on the project had the responsibility of certifying amounts owed by the owner to the general contractor. The consultant certified approximately $1 million as owing to the general contractor – much less than the total amount of the subcontractor claims.

The owner brought a motion to vacate all of the registered liens upon payment of security into court. The owner asserted that the quantum of security posted to vacate the liens should be $1 million: the maximum amount certified to be owing to the contractor. The subcontractors asserted that the owner should be required to post $2.9 million, or the full value of all of the subcontractor liens.

The court was asked to determine the quantum of security required to vacate all eight liens and the quantum of security for costs.

The Law

“Vacating a lien” means removal of a lien from title to real property. This is allowed under section 44 of the CLA via the payment of money, a lien bond or a letter of credit into court which will stand in the place of the property to secure the lien and allow for the clearance of title to the property:

Vacating lien by payment into court

Without notice

44. (1) Upon the motion of any person, without notice to any other person, the court shall make an order vacating,

(a) where the lien attaches to the premises, the registration of a claim for lien and any certificate of action in respect of that lien; or

(b) where the lien does not attach to the premises, the claim for lien,

where the person bringing the motion pays into court, or posts security in an amount equal to, the total of,

(c) the full amount claimed as owing in the claim for lien; and

(d) the lesser of $50,000 or 25 per cent of the amount described in clause (c), as security for costs.  R.S.O. 1990, c. C.30, s. 44 (1).

On payment in of reasonable amount

(2) Upon the motion of any person, the court may make an order vacating the registration of a claim for lien, and any certificate of action in respect of that lien, upon the payment into court or the posting of security of an amount that the court determines to be reasonable in the circumstances to satisfy the lien.  R.S.O. 1990, c. C.30, s. 44 (2).

In LaFarge Canada Inc., Justice Edwards relied on section 44(2) of the CLA, which gives the court discretion to determine the amount of security to be posted, as well as section 17 of the CLA which limits the value of a lien to “the least amount owed in relation to the improvement by a payer”.  

When vacating liens, there is no legal basis to require the owner to post security reflecting the total amount of subcontractor's lien claims where the subcontractor liens exceed the contractual amount that might be found owing by the owner to the contractor.

As long as an owner has complied with its holdback obligations, the entitlement of subcontractor lien claimants is limited to the maximum potential amount that may be owed by the owner to the contractor.

The Decision

Justice Edwards allowed the owner to post $1 million to vacate all eight subcontractor liens and limited the quantum of security for costs required to be posted by the owner to $50,000.