Decision Holding That Demolition Is Not An Improvement Is Reversed

In my article dated December 11, 2011, I reported on a decision of the British Columbia Supreme Court holding that demolition is not an “improvement” for the purposes of the B.C. Builders Lien Act (the Act).  That decision has since been reversed by the B.C. Court of Appeal.  It was not reversed on the merits, but only on the basis that the B.C. Supreme Court did not have jurisdiction to make the order:  West Fraser Mills. Ltd v. BKB Construction Ltd

The Facts of the Case

As my earlier article reported, BKB and its subcontractor had filed builders’ liens against West Fraser’s property when they were not paid in full for their work in removing machinery from the property.  West Fraser had shut down its paper mill in Kitimat, B.C. and sold the paper machinery separately from the land.   Under the agreement by which West Fraser sold the machinery, the buyer was obliged to remove the equipment.  The buyer hired BKB to remove the machinery and BKB hired a subcontractor to assist in the removal.  BKB and its subcontractor were not paid in full by the buyer and so filed their builder’s liens.

The B.C. Supreme Court held that the removal of the machinery was not an improvement of the land.   Demolition work may be an improvement, it said, if undertaken as part of a project to create an altered structure, but work to preserve the value of removed or salvaged material which does not benefit the landowner qua landowner is not an improvement within the Act.

The B.C. Court of Appeal reversed this decision on the basis that the court had no jurisdiction to strike out the lien under sections 24 and 25 of the Act.  The Court of Appeal held that those sections were not intended to permit the court to rule on the merits of the liens or to grant summary judgment on the merits.  West Fraser did not contend that the lien was filed out of time or against the wrong property or had been satisfied by payment or litigated to conclusion.  Indeed, a lien action had not even been commenced.

The only provision in those sections under which the lien could be struck out was section 25(2) (b) on a showing that the lien claim was scandalous, frivolous or vexatious.  The Court of Appeal held that this test could not be met because it was at least arguable that the liens were valid, and not plain and obvious that they were invalid.  These sections could not be used to determine whether the liens had been proven, which is what the Supreme Court judge had done.

In the Court of Appeal, BKB argued that West Fraser had refused to produce the documents which might show the reason why West Fraser sold the equipment separately from the land, and had the equipment removed.  Those documents might show, BKB argued, that the removal work was an improvement to the land, having regard to West Fraser’s future  intended use of the building and the land.  The Court of Appeal said that this argument had “some merit.”

As a result, the issue of whether demolition can be an “improvement” under the Act has not yet been determined.  The B.C. Court of Appeal’s decision appears to support the conclusion that, at least in some circumstances, it can.  As in all things, the first chapter was not the end of the story, and we will have to wait for the next episode.

 Construction Law   –  Construction Liens  –   Removal of Equipment  –   Power of the Court to Strike Lien

West Fraser Mills. Ltd v. BKB Construction Ltd., 2012 BCCA 89

 Thomas G. Heintzman O.C., Q.C., FCIArb                                                                                                             April 4, 2012