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Sheltering

Posted on January 1, 1998 | Posted in Construction

We had previously referred you to two cases in which lien claimants failed to commence an action to enforce their liens at their peril (see November/95 & March/97 newsletters). They attempted to shelter (i.e. to rely on the actions commenced by other lien claimants) and found that their liens were discharged as result of their failure to commence their own actions. They relied on a provision of the Construction Lien Act that allows sheltering if “the nature of the relief claimed in the statement of claim under which it is sheltered” is the same as the relief being claimed by the lien claimant attempting to shelter under that statement of claim.

These two cases stated, in effect, that the sheltering lien must be a claim for work that is the same as or similar to the work for which the claim is being made in the statement of claim. For example, a general’s statement of claim would shelter its subcontractors’ claims. Conversely, a claim by one subcontractor (e.g. a plumber) would not shelter the claim of another subcontractor (e.g. an electrician).

These decisions have been heavily criticized. The purpose of the sheltering provisions was to reduce the expense of commencing a multitude of separate actions. These two cases have, in most situations, made the commencement of separate actions mandatory.

Dissent 

The situation arose again in Chute Construction Ltd. v. Biacan Construction Corp., a 1997 decision of the Ontario Court (General Division). The trial judge reviewed the two cases, noted that one was under appeal, and simply refused to follow them. The judge stated “when relief such as the enforcement of a lien has been claimed in a Statement of Claim by a party commencing an action, then others claiming the enforcement of lien rights should be able to shelter under the existing claim”.

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