Exploitation of Lien Rights - Part II: Policy
Historical Background - Pre-1983 Remedies
Prior to section 35, the main remedy to combat exploitative lien rights came in the form of actions for slander of title. These actions arose from an application of the generic tort of malicious falsehood[1] and could be used when the Court made a finding that lien proceedings were completely devoid of any legal foundation and were initiated for an “unlawful purpose, namely to obtain a settlement by means of legal blackmail.”[2] In such instances, the Court provided damages for interest and legal fees for the removal of the lien.
Unlike section 35, actions for slander of title did not limit the remedy to pecuniary loss prior to the cause of action arising and allowed for the inclusion of future damages. In an action for slander of title, the applicant had to prove four elements in his or her cause of action. Namely:
that the respondent published words in disparagement of the applicant’s property;
that such words were false;
published with actual malice; and
that the applicant sustained damages as a result.[3]
The difficulty in proving slander of title was establishing evidence of direct malice. As opposed to section 35 of the Construction Lien Act (“CLA”), proof and a finding of malice were vital to successful claims brought under slander of title.[4] Therefore, when section 35 was introduced, it created an entirely new remedy capable of bringing actions that for factual scenarios that normally did not satisfy the requirements for actions in slander of title.[5] It is important to note that section 35’s introduction did not void the use of this common law remedy, and that it is still relied-upon in recent litigation.
Current Law - The 1983-2017 Period
The legislature added section 35 in 1983 as a statutory remedy for “all those who may be injured as a result of an exaggerated claim for lien, not just the registered owner who would have an action in slander of title in such circumstances.”[6] In a way, section 35 created a check against the lien claimants’ otherwise unencumbered right to registered liens on title. Since the goal of the CLA was to protect all members of the construction industry, this section could be interpreted as establishing a middle ground for owners.
But does Ontario’s CLA provide enough? For example, British Columbia’s equivalent of the CLA allows Courts to cancel liens where they are found to be vexatious, frivolous, or an abuse of process.[7] This greatly differs from Ontario’s CLA, which only allows the Court to dismiss actions where liens are proven to be expired, this provides additional consequences and deterrent for claimants to exploit their right.
Future - Section 35 under the Construction Act
In preparing Bill 142[8], and on request from the Attorney General for Ontario, experts of the CLA canvassed over sixty stakeholders of the industry to identify the most outstanding issues in construction. When asked about exploitation of lien rights, many stakeholders suggested that no change was necessary. Some indicated that exploitation of lien rights – or at the least the dispute of such exploitation – was not frequent and that section 35 already provided methods of protection.[9]
On the other hand, stakeholders such as the Ontario Bar Association’s CLA Reform Committee suggested that section 35 provided no deterrence, and that a provision granting statutory damages – for example – would provide greater dissuasion of lien exploitation.[10]
In concluding this section of their report, the experts suggested that stronger sanctions were needed to both discourage lien exploitation and compensate parties who were forced to expend resources defending those claims.[11] As a result, the experts suggested replacing the wording “grossly exaggerated” with “wilfully exaggerated – a recommendation that was ultimately implemented through Bill 142.[12] In addition to the change in language, Bill 142 created a “good faith” defence for claimants who did not intend to exploit their lien rights. In such cases, claimants will be able to request a reduction from the lien amount found to be excessive.
However, this change may have instead weakened the protections under section 35 in a way that was not originally intended. If you’re interested in learning more about the changes to section 35, and how they may alter the current treatment of the provision, please do not hesitate to contact our firm!
Next time, we will take a step back and look more closely at the definitions found in the CLA.
Until then!
The foregoing is for informational purposes only and should in no way be relied upon as legal advice. For legal advice tailored to your circumstances and business, please contact any of Sutherland Law's lawyers by email or telephone.
[1] Patrick Milmo et al, Gatley on Libel and Slander, 9th ed (London: Sweet & Maxwell, 1998) at 490 [Milmo].
[2] Guilford Industries Ltd v Hankinson Management Services Ltd (1973), 40 DLR (3d) 398, 1973 CarswellBC at para 28 (Sup Ct).
[3] Almas v Spenceley (1972), [1972] 2 OR 429, 1972 CarswellOnt 971 at para 11 (CA).
[4] Garrett v Ayr Ventures Inc (1995), 18 CLR (3d) 300, 1995 CarswellOnt 201 at para 50 (Gen Div)
[5] Milmo, supra note 1, at 310.
[6] Duncan W Glaholt & David Keeshan, The 2017 Annotated Ontario Construction Lien Act (Toronto, Ont: Thomson Reuters Canada Limited, 2016) at 278
[7] Builders Lien Act, SBC 1997, c. 45, s 25(2).
[8] Bill 142, An Act to amend the Construction Lien Act, 2nd Sess, 41st Parl, Ontario, 2017, cl 26 (assented to 12 December 2017), SO 2017, c 24 [Bill 142].
[9] Bruce Reynolds & Sharon Vogel, “Striking the Balance: Expert Review of Ontario’s Construction Lien Act” (30 April 2016), online at: (last accessed 14 February 2018) at 49.
[10] Ibid.
[11] Ibid at 50.
[12] Bill 142, supra note 8, cl 30(2).