In a decision released September 30, 2016, Master Wiebe has provided clarity with respect to the requirements for a valid Written Notice of Lien pursuant to section 24 of the Construction Lien Act (the “CLA”).

Those familiar with section 24 of the CLA will know that it is a powerful tool for unpaid parties to use in holding up the flow of funds from an owner prior to taking the formal step of registering a construction lien.

Section 24 provides that a payer may pay a contractor or subcontractor up to 90 per cent of the price of services or materials supplied under that contract or subcontract unless, prior to making the payment, the payer has received a “written notice of a lien”.  Where the payer has received a written notice of a lien, they must retain an amount sufficient to satisfy that lien, in addition to the normal statutory holdback, before making further payment.

The question before the Court in the case of Trenchline Construction Inc. v. Unimac-United Management Corp., 2016 ONSC 6136, was what amounted to a “written notice of a lien” sufficient to require the owner to retain what is referred to as the “notice holdback”.

The Trenchline case involved Trenchline as subcontractor, Unimac as general contractor and Metrolinx as owner.  Trenchline ran into issues collecting payments from Unimac and therefore between May and December of 2011 issued what it argued amounted to ten written notices of a lien to Metrolinx claiming a total owed to it of $1,085,210.09.

Master Wiebe thoroughly reviewed the case law under both the CLA and the former Mechanics Lien Act and delineated five elements that must be present in order for a communication to amount to a “written notice of a lien”.

The first four elements identified by Master Wiebe arise directly from the definition of “written notice of a lien” found in section 1 of the CLA.  These are:

• The identity of the person having the lien;
• The premises;
• The defaulting payer; and
• The amount owed to the person having the lien.

The fifth element identified by Master Wiebe, which has its origins in the Ontario Court of Appeal decision in Craig v. Cromwel (1900), 27 O.A.R. 585, was described by the Master as being “a clear warning to the payer of the notice giver’s present intention to preserve a lien.”  Master Wiebe made it clear that it is not sufficient to simply notify the payer that there is an issue with payment or even that a lien might be registered at some time in the future.  The notice must be clear that the lien claimant wants the normal flow of money to stop.

In acknowledging that written notices of lien can be, and often are, delivered by non-lawyers, on site, in real time, Master Wiebe confirmed that it is substance, not form that is important.  There is no requirement to use the word “lien” and it can be as simple as stating that the payer should stop making payments.  The bottom line is however that the notice giver’s clear and present intention to lien or require payments to stop, must be communicated.

Tags: Construction Lien Act, liens, notice