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Sheltering

Posted on May 1, 1998 | Posted in Construction

The Construction Lien Act requires that a lien claimant preserve and perfect its lien within specified time periods. A lien is preserved by registration of the claim. A lien is perfected when the lien claimant commences an action to enforce its claim for lien and registers a certificate of action.

The Act does not require all lien claimants to commence an action. It allows lien claimants to shelter under an action commenced by another lien claimant and states:

“A sheltered claim for lien is perfected only as to the defendants and the nature of the relief claimed in the statement of claim under which is sheltered.”

What does this mean?  Does it mean that a sub can only shelter under an action commenced by its general?  Does it mean that a sub can shelter under an action commenced by another sub? These questions were decided in the case of Metric Masonry Amalgamated Ltd. v. Life Centre Non-Profit Housing Corporation. We reported on the trial decision in our newsletter of March 1997. The case was appealed and a decision has now been rendered

Trial Decision 

A flooring sub registered a claim for lien but did not commence an action to perfect it. Instead, it attempted to shelter under a claim for lien perfected by way of an action commenced by another sub. The surety of the general brought a motion to vacate the claim for lien on the grounds that it had expired as a result of not having been perfected within the appropriate time limit.

The motions court judge first had to decide whether the sheltering rules should be interpreted liberally or strictly. He decided that they should be interpreted strictly. He then decided that a lien could be sheltered under another lien, only if the work of the sheltering lien claimant was similar to the work of the lien claimant who had commenced an action.

Using this interpretation, if a general commenced an action, any of its subs could shelter under it. Conversely, if, for example, an electrical sub commenced an action, a roofing sub could not shelter under the electrical sub’s action. None of the work completed by the roofing sub would have been similar to the work completed by the electrical sub.

In the result, the claim for lien of the flooring sub in this action was vacated. The flooring sub appealed and the appeal was heard in the Ontario Divisional Court.

On Appeal 

The Divisional Court, an appellate court that is one rung lower than the Court of Appeal, first determined whether the sheltering provisions should be interpreted liberally or strictly. It reviewed the report of the Ontario Attorney General’s advisory committee that had considered the 1982 draft Construction Lien Act. It reviewed other cases, other commentators, and the Interpretation Act of Ontario. It stated that “the sheltering provisions are part of the mechanism designed to bring about the realization in as summary and expeditious a manner as possible. Such an interpretation recognises the remedial nature of the Act, and is neither inconsistent with the intent or object of the Act nor inconsistent with the context”. Accordingly, the court concluded that the sheltering provisions in the Act should be given a liberal interpretation.

Even if the Act was to be interpreted liberally, the Divisional Court still had to determine the meaning of the sheltering provisions. The court ultimately concluded that the words in the sheltering provisions “the nature of the relief claimed” entailed a claim for relief that addressed the remedies sought against the defendant, not the work being claimed. In essence, as long as the theories of liability were the same, one claim could be sheltered under the other. For example, if the sub who commenced an action claimed no priority over a mortgage, the sub attempting to shelter under that action could not claim priority over a mortgage. However, as long as one sub claimed for monies owed and a lien against the lands, another sub could shelter under the first sub’s action, regardless of the actual type of work done by each.

The Result

Given this interpretation, the flooring sub’s appeal was allowed and the flooring sub’s claim for lien was allowed to shelter under the action commenced by the other sub.

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