Expiry of Lien Security for Failure to Enforce

In the recent case of 1951789 Alberta Ltd. v. Britannia Block General Partnership Inc.,^[1] Applications Judge Farrington made the decision to release the alternate security paid into court by the defendant pursuant to section 46 (2) of the Prompt Payment and Construction Lien Act (the “PPCLA”).^[2]

This decision is one of few where courts have enforced the PPCLA’s timelines for the trial of a lien and provides useful guidance for both lienholders and parties who are responding to a lien.

Alternate security, often in the form of cash or a bond, can be paid into court to have a construction lien removed from a certificate of title. Section 46(2) of the PPCLA permits a party to apply to have a certificate of pending litigation (“Certificate”) vacated and the lien associated with it discharged where no trial has been held within two years from the date of registration of the Certificate. This decision clarifies that Section 46(2) applies not only to a construction lien but also to the security that stands in place of the land.

Facts

The defendant property owner, Britannia Block General Partnership Inc., made an application to release or reduce security that it posted for the plaintiff’s construction lien registered against the subject land. The lien was registered on February 4, 2020, and the Statement of Claim and a Certificate were filed on June 30, 2020. Another Applications Judge then permitted the posting of security on July 27, 2021. The application associated with this decision was filed on July 8, 2024, and heard in April 2025; well over two years after the construction lien was registered, even after accounting for some delay caused by court booking procedures.

The Law

As outlined in section 46 of the PPCLA and confirmed by the Court, there are two bases on which a release or reduction of security might be available:

1. If the facts justify a reduction in the amount that is necessary as security for any lien registered; or
2. Pursuant to s. 46 of the Prompt Payment and Construction Lien Act, RSA 2000, c P-26.4 (“PPCLA”).

Findings

The Court confirmed that once alternate security is paid into court (i.e. held by the courts), the lien is no longer registered against the land, accordingly reductions are to be done with caution. The Court found that the plaintiff’s claims were arguable and therefore was not inclined to reduce or vacate the security solely on the facts and merits of the dispute relating to part one of the above test.[3]

Applications Judge Farrington emphasized that a party posting security cannot be expected to do so indefinitely and the entity defending an unproven claim incurs costs of the proceedings . This is a tradeoff; the PPCLA gives security where there would otherwise be none in recognizing the contribution of lien claimants to permanent improvements, but it imposes an obligation to pursue lien claims more promptly than many other types of claims.[4]

Applications Judge Farrington agreed with the reasoning in 1361556 Alberta Ltd v Ristorante Cosa Nostra Inc,[5] that the two-year period is a guideline and is not mandatory.[6] However, the PPCLA generally, and section 46 in particular, encourages prompt resolution of lien claims.[7]

Therefore, because the matter did not seem particularly close to a resolution or trial and was well past the two-year goal, the security was released.

Takeaways

Lien holders must comply with the timeline set out in section 46 of the PPCLA to preserve security on the lien. Lien holders should work to resolve claims as promptly as possible. When a lien (or alternate security) languishes or the parties fail to advance the claim, the Court may enforce these timelines especially where the delay appears to be excessive.

Parties who have posted security in court for a lien should also be mindful of the timelines in section 46 as it may be possible to bring an application to have their security reduced or removed if the lien claim has not gone to trial in over two years.

This decision serves as a reminder that security granted under the PPCLA is a special remedy and requires lien filing parties to promptly advance their claims or risk losing the security associated with the claim.