The Saskatchewan Court of Appeal recently upheld1 the decision of the Queen's Bench ("QB") in PCL Construction Management Inc. v Saskatoon (City).2 This case is instructive on when The Builders' Lien Act ("BLA") will apply to road construction projects – especially those involving overpasses.
In 2018, a dispute arose involving two overpass projects (the "Project") in the City of Saskatoon (the "City") when subcontractors served Written Notices of Lien on the City for materials and/or services provided to the Projects. The General Contractor, PCL Construction Management Inc. ("PCL") applied to the Saskatchewan Queen's Bench ("QB") to have some of the liens declared invalid. PCL's central argument was that the BLA did not apply to these Projects as they were for the construction of overpasses; i.e. "bridges". The Court disagreed and found that the BLA did apply and declared all liens to be valid. PCL appealed.
The Court of Appeal agreed with the QB and confirmed the BLA applied and the liens were valid. The central question at issue was the interpretation of section 5 of the BLA, which reads:
Application of Act to Crown
5(1) Except as otherwise provided, the Crown is bound by this Act.
(2) This Act does not apply where services or materials are provided:
(a) in connection with a contract entered into under or pursuant to The Highways and Transportation Act; or
(b) in connection with the construction or improvement of a street or highway owned by the Crown.
(3) Notwithstanding subsection (2), this Act applies where services or materials are provided in connection with the construction or improvement of a bridge owned by the Crown other than a bridge constructed or improved under or pursuant to The Highways and Transportation Act.
The Court found the determination of whether the BLA applies to a street or a highway is a three-stage test.
1. Is the road owned by a government entity, including a municipality? (In this case, there was no contest on this point)
2. Is the project being performed under or pursuant to The Highways and Transportation Act ("HTA")?
If the answer is "yes", the BLA does not apply. End of inquiry.
If the answer is "no", move on to question #3:
3. Does the project include a bridge?
If the answer is "yes", the BLA applies.
If the answer is "no", the BLA does not apply.
The first question at issue was whether the Project was performed under or pursuant to the HTA. In this case, partial Project funding came from the Province and there was an element of delegation of the Project from the Province to the City. Both circumstances ostensibly arose from powers in the HTA. PCL took the position that the HTA exception at section 5(3) should be read broadly, so it would be engaged if any part of the project was impacted by the HTA, rather than if the contract was governed by the HTA, as section 5(2)(a) requires.
The subcontractors took the opposite position arguing sections 5(2)(a) and 5(3) should mean the same thing – that the HTA exception in either section is only engaged if the contract itself is governed by the HTA. The QB and Court of Appeal both agreed with this interpretation, finding the exceptions to the BLA's application should be read restrictively and that 5(2)(a) and 5(3) should be read harmoniously with each other.
The second question was whether the work and materials behind the liens needed to be directly related to the bridge portion of the Project. The Projects involved significant work around the overpasses, including road construction connecting the overpasses as well as earth moving around the overpasses. PCL sought a narrow interpretation of section 5(3) so that the BLA would only apply to the work and materials specifically provided for the bridge/overpass portions of the project. The QB and Court of Appeal preferred the broader interpretation advanced by the subcontractors. The Court of Appeal found the words "in connection with" at section 5(3) indicated a legislative intention that went beyond the BLA applying solely for work and materials provided on the bridges themselves.
The Court of Appeal further found PCL's interpretation would lead to confusion and uncertainty, leading to continual litigation over whether certain work or materials were solely for the bridge portion of a project, noting that "[r]equiring subcontractors to keep bridge work and nonbridge work separate would be inconvenient, awkward, and duplicative, especially if services or materials were to overlap between different elements of a project." The Court found it would be more commercially practical to keep the inquiry simple: does the head contract involve a bridge.
This ruling by the Saskatchewan Court of Appeal provides clarity and predictability for all project stakeholders.
Owners, consultants, and general contractors would be well advised to take this decision into account when deciding how broad to make bridge construction projects. It is up to them if they want to include the construction of a bridge in a public road construction project or just the area around the bridge. If they wish to limit the application of the BLA, they would be well advised to draft separate head contracts for the bridges.
Subcontractors in the road-building industry should be aware the BLA does not apply to most public road construction and improvement projects.
Our experienced lawyers at Miller Thomson can assist in all aspects of the conception and drafting of construction project agreements and can advise you whether the BLA applies to your project. If you have any questions please feel free to contact Troy Baril or Jonathan Martin of our Saskatchewan Construction Team at firstname.lastname@example.org or 306.667.5630 or email@example.com or 306.347.8369.
1 2020 SKCA 12.
2 2018 SKQB 119.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.