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May 24, 2016
It’s now certain: in Newfoundland & Labrador, liens can’t be placed on Crown land or holdbacks with the possible exemption allowing for a lien to be placed on the holdback for public streets. Here’s how the Newfoundland and Labrador Court of Appeal’s decision in Brook Construction (2007) v. Blackwood Contractors Ltd. increases the risks for subcontractors in Crown infrastructure projects in Newfoundland & Labrador.
The Case. The NL Crown owned land in St. Anthony to construct a school. Brook was the general contractor for the project; Blackwood was the subcontractor for the supply and installation of heating, plumbing and ventilation. On November 2, 2012, Blackwood ceased work on the project and registered a lien under the NL Mechanics’ Lien Act (Act) on the Crown land for $604,513.84. The lien also claimed a charge against the holdback. On November 26, 2012, Blackwood filed a statement of claim against Brook alleging breach of contract and asserting it brought the action “to enforce the lien as provided in the Mechanics’ Lien Act”. However, it didn’t claim enforcement of the lien by sale of the property or name the Crown as a party to the action. Brook applied to the court to vacate the lien on the two grounds: that Blackwood failed to commence an action naming the Crown as owner, and that it can’t claim a lien against Crown land. The judge refused, ordered the lien be vacated upon Brook posting a bond, and concluded there’s a distinction between the rights to claim a lien on Crown land, and to claim a lien against the holdback – and the lien can exist against the holdback because an action can be taken under the Act even where the work was on Crown land. Brook appealed this decision.
The Appeal Decision. The key issue in the appeal was whether the Act allowed Blackwood to lien the Crown’s holdback funds, which the Court of Appeal said was a novel and important issue. The Court of Appeal concluded it doesn’t, ultimately addressing four key legal points:
The Three Key Risks. Practically, the ultimate decision that liens can’t be placed on Crown land or holdback, with the possible exception of the holdback for public streets, increases the risks for subcontractors in Crown infrastructure projects in NL:
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