The primary purpose of construction lien legislation is to protect those who perform work or provide construction services to improve lands under construction. Alberta’s Prompt Payment and Construction Lien Act, R.S.A. 2000, c. P-26.4 (“PPCLA”) provides unpaid contractors, trades and suppliers, with a construction lien – a form of security that they otherwise would not have. The PPCLA added adjudication as one accessible option for smaller trades to obtain unpaid balances. But adjudications do not themselves give lien rights or enforce liens. Have the PPCLA’s amendments made lien remedies more available to smaller lienholders in Alberta? 

This article reviews recent case law in Alberta and suggests that lien remedies may remain cost-prohibitive for smaller lien claimants given that the PPCLA:

  1. does not allow lien claims to be adjudicated; and
  2. requires that any civil court proceedings to enforce a construction lien be commenced in the Court of King’s Bench (“ABKB”) as opposed to the Alberta Court of Justice (“ACOJ”), formerly Small Claims Court.

The ACOJ cannot enforce liens

At first blush, the PPCLA appears to provide an inexpensive avenue for individuals to collect outstanding balances on construction projects. The cost to register a lien is negligible. But that lien must be enforced in court to obtain a judgment, and ultimately, sell the land which has been improved to pay off the lienholder. 

The amendments made by the PPCLA tried to provide an avenue by which unpaid parties could avoid the lengthy and costly court process by adding adjudication—a summary form of arbitration—as one accessible option for smaller trades to obtain unpaid amounts. While adjudication is proving to be a cost efficient and effective way to address construction disputes, adjudications cannot be used to enforce liens. Liens can only be enforced in court. Per Section 1(c) of the PPCLA, that “court” is only the ABKB and not the “small claims” court: the ACOJ.

Cost ramifications for smaller lienholders

This has two key ramifications that can make lien enforcement cost-prohibitive for smaller lien claimants:

  • In the ACOJ, a corporate lienholder can be represented in court by their officers; in the ABKB, corporations must be represented by legal counsel.
  • In the ACOJ, the court sets timelines, usually resulting in a trial within two years; in the ABKB, the parties (usually) control the timelines (unless the court intervenes), so it can take years longer to get to trial.

Both factors can increase cost – sometimes, beyond the value of the lien at stake.  

We saw the ACOJ grapple with these issues in Quality Reno Construction Ltd. v Boss Development Corp., 2015 ABPC 236 (“Quality Renos”). Four claimants registered liens. The owner paid security into the ABKB to remove the liens from the land, and the ABKB referred determinations of the lien values to the ACOJ. After four days of trial at the ACOJ, the owner argued the ACOJ did not have jurisdiction to determine the lien values.

Though the ACOJ judge noted that “If I were to decline jurisdiction and refer the matter back to [King’s] Bench, I am mindful that these matters may not be adjudicated upon for perhaps another year,” he reluctantly held that the ACOJ does not have the jurisdiction to decide lien claims. The ACOJ thus referred the matter back to the ABKB.

MCL Group decision

The trend continues in 844170 Alberta Inc v MCL Group Ltd, 2024 ABCJ 120 (“MCL Group”), which again tasked the ACOJ with determining whether it had jurisdiction to consider a lien claim.

The supplier of clay to a water treatment plant for MCL Group sued to enforce a lien of about $55,000. MCL argued the supplier wrongfully registered its lien, and asked for compensation under section 40 of the PPCLA. That section provides that a party who wrongfully or improperly registers a lien can be liable for the damages and costs incurred as a result.

As in Quality Renos, the ACOJ held that it does not have jurisdiction to hear lien matters. Specific to section 40, it held that the section required MCL Group to satisfy the “court” that the lien’s registration was wrongful, and the “court” meant the ABKB. The ACOJ thus referred the matter to the ABKB.

The MCL Group decision highlights the existing issues for small lienholders under the PPCLA framework, as they will have to continue enforce their liens only in the Court of King’s Bench. Smaller lienholders may face higher costs to enforce lien claims in the ABKB than if they simply pursue the same unpaid balances as a debt claim in the ACOJ. This appears to run contrary to the intent of the PPCLA, which is to provide for a simple and cost-effective way for individuals and businesses to collect balances due for construction work.

Key takeaways

  • The Court of King’s Bench remains the sole forum to enforce liens.
  • Corporate lienholders enforcing a lien in the Court of King’s Bench are required to be represented by legal counsel.
  • Small lienholders will continue to face cost barriers in enforcing their liens.

Smaller lienholders can still use the ACOJ and adjudication to pursue outstanding balances as debt claims, rather than relying on their liens as security for the unpaid amounts owed to them.

Construction lien laws are similar in each of the common law provinces. This Building Brief article relates to the construction lien laws of Alberta. The specific laws of other provinces will need to be considered in order to assess how that province’s construction lien laws deal with liens and small claims courts.

If you have any questions about this article, please contact the authors or a member of Gowling WLG's Infrastructure and Construction Group, or subscribe to our Building Brief newsletter to stay informed.