Can A Lien Be Sheltered Under A Claim By A Lienholder Further Down The Supply Chain?


The sheltering rights under the Construction Lien Act are fundamental protections for contractors, subcontractors and suppliers on a building project. But the definitions of what circumstances give rise to protected sheltering are somewhat vague.  One question is whether the liens of “superior” contractors or suppliers can shelter under an action commenced by an “inferior” contractor. In other words, when a contractor hires a subcontractor or supplier, can the contractor shelter its lien under the claim of the subcontractor or supplier? It may seem odd that the word “shelter” could apply to a contractor in relation to a subcontractor hired by the contractor, and that the subcontractor’s lien could provide shelter for the contractor’s lien. But that was recently held to be valid sheltering in the decision of Master Wiebe of the Ontario Superior Court of Justice in The State Group Inc. v. Quebecor World Inc. and 4307046 Canada Inc.


The applicant, Kemp was a contractor on a project in which 4307046 was the owner. The project included a modification of an existing building and the construction of a new building.  The project was an owner-supervised project in which Kemp acted as a sort of general contractor and supervised other contractors, including Cee Elevator Services Ltd. (“Cee”) and George and Asmussen Limited (“GAL”).

Kemp sought to shelter its lien upon the perfected liens of Cee and GAL. The 90 day period for the perfection of the Kemp lien started to run on January 15, 2008.  So a lien which was perfected between January 15, 2008 and April 15, 2008 in relation to the same lands could potentially shelter the Kemp lien.  The purported perfection of the Cee and GAL liens took place within this time period. So those liens could potentially shelter the Kemp lien.

Reasons of the Court

Master Wiebe said that under section 36 of the Ontario Construction Lien Act the work of the lienholder (being Kemp) seeking to shelter its lien must be in respect to the same alterations, additions and repairs as the work of the lienholders, being Cee and GAL, under whose claim Kemp sought to shelter. The court also noted the Act does not require that “the work of the sheltering liens was in fact connected to the work of the sheltered lien.”  In the court’s view, such a requirement “smacks too much” of the proposition that sheltering must be “vertical”, a proposition which was essentially overturned by the Divisional Court in Sesco Ltd. v. Life Centre Non-Profit Housing Corp. (Ajax), (1998) 37 O.R. (3d) 764, 38 C.L.R. (2d) 66 (Div. Ct.; leave to appeal dismissed 1998 Carswell Ont 1430) (“Sesco”) . There is no need to establish a commonality of “services and materials,” as long as the work was “in respect of the same improvement.”   Master Wiebe said:

“I do not see how a party that supervises the work of the lien claimants under whose liens it purports to shelter can be doing its work on anything other than the same improvement.  To rule otherwise, would lead to the rather bizarre conclusion that the supervision of the work is somehow divorced from the work that is supervised to such an extent as to render them separate improvements.  This is not how the CLA section 36(4) was meant to be interpreted.”


Section 36(4) (b) of the Ontario Construction Lien Act states that a “sheltered claim for lien is perfected only as to the defendants and the nature of the relief claimed in the statement of claim under which it is sheltered.”  In Sesco, at first instance, Justice Ferguson held that the practical effect of second part of clause (b) was that the claim in the sheltering lien action had to refer to work claimed in the lien seeking to be sheltered.  He held that a lien could not be sheltered under a lien claim in another chain of work and payment on the project (which was the situation in Sesco), at least when that lien claim made no claim in respect of the work referred to in the lien sought to be sheltered.

In that decision, Justice Ferguson said:

 “I agree…that for practical purposes a lien seeking shelter can probably find it only under a perfected lien advanced by someone higher in the same payment stream.”  (emphasis added)

With Justice Ferguson’s decision having been over-turned, the court in State Group v Quebecor has now found that a circumstance is covered under the sheltering section which Justice Ferguson thought would not be covered, namely the sheltering by a higher lienholder under a lienholder’s claim lower in the payment scheme. So, not only is it not necessary that the sheltered lien be in the same payment stream as the sheltering claim (as held in Sesco).  In addition, within the same payment stream a lower claim can provide shelter for a higher lien.

As a result, the remedial reading of the Act in Sesco has resulted in much broader application of the sheltering provisions of the Ontario Act.

See Heintzman and Goldsmith on Canadian Building Contracts, 4th ed., Chapter 11, part 2(f)

The State Group Inc. v. Quebecor World Inc. and 4307046 Canada Inc. 2013 ONSC 2277, 2013 CanLII 19660 (ON SC).

Building Contracts  –  Construction and Builders Liens  –  Validity of liens  –  Sheltering

Thomas G. Heintzman O.C., Q.C., FCIArb                                                                                                               June 25, 2013


Construction Liens: Two Thorny Issues: Can non-lienable work be sheltered? Can off-site work be liened?

In John Barlot Architect Ltd. v. 413481 Alberta Ltd, the Alberta Court of Appeal has recently dealt with two thorny issues relating to a consultant’s services and construction liens: Can a lien shelter non-lienable work?  And can a consultant’s services provided to one project be liened on a second project if they were also used on the second project?

The plaintiff architect undertook three kinds of services to the owner defendant, and filed a lien for those services when its contract was terminated and it was replaced as the architect on the project.

First, it provided rezoning, subdivision and development services for the project.

Second, the architect did some work for a Sales Centre for the project, and that work was properly the subject of a lien.

Third, the architect submitted plans to the owner which were actually plans that had been previously prepared to construct another building in another location.  The owner used those plans to develop cost estimates.  The plaintiff architect claimed that the work to prepare these plans was also protected under its lien.

The Alberta Court of Appeal applied prior judicial authority in Alberta and held that the services relating to rezoning, subdivision and development were not sufficiently connected to the construction to constitute an “improvement” to the land.  Therefore, the lien was improperly filed in respect to that work.

The Court also confirmed the trial judge’s finding that the plans for the other project were not in fact connected to the owner’s project because they were not seen or used by the replacement architect.  The plans which the plaintiff architect had prepared were different and “too far removed from the intended construction process” to support a lien.

Most importantly, the Alberta Court of Appeal arrived at two further legal conclusions.  First, the Court held that even if the evidence of the plaintiff architect was accepted and the plans for the other building and the plans for the present project were similar, the plans for the other building were “not prepared ‘in respect of’ an improvement intended to be constructed on the subject land”.   Accordingly, while the plaintiff might have a claim in contract against the owner for the work in relation to those plans, the plaintiff had no lien rights.   That conclusion means that work prepared for a first project and site but useable on a second project and site cannot, as a matter of statutory interpretation, give rise to lien rights in relation to the second project.

Second, the Court held that the valid lien for the Sales Centre work could not shelter the rezoning, subdivision and development work. The Court noted that there was little authority on the proposition that a valid lien in respect of some work could shelter other non-lienable work.  However, it concluded that such a proposition was inconsistent with the whole scheme of the Act.  The word “improvement” cannot be interpreted to include the words “plus any related work not in respect of the improvement”.  That proposition would also play havoc with the application of the words “price of the work” and the hold back and trust fund provisions of the Act.  The owner and others receiving money on the project would never know what amount of non-lienable work was to be included in the hold back and trust funds.  In addition, a contractor or supplier which had delivered a small amount of lienable work or supplies but a large amount of non-lienable work would be unfairly preferred over one who had provided no lienable work or supplies.

Two important conclusions can be drawn from this decision.  First, the sections of the Construction and Builders’ Lien Acts are highly integrated.  Each provision depends on the others. Changing the impact of one section may change the impact of other sections. The Alberta Court of Appeal concluded that expanding lien rights to protect work on other projects, or other non-lienable work, would stretch the Act unfairly and unworkably.

Second, the decision also shows that the Construction and Builders’ Lien Acts provide uncertain protection for “soft services” such as those provided by consultants.  Originally, those services were not protected by some of these Acts, probably because the connection to the actual improvement of the land was thought to be indirect and debatable.  When they are protected, courts will be careful not to expand the net of lienable consulting services to those which do not directly relate to the improvement to the lands.

Building Contract – Consultant- Construction Lien – Improvement- Sheltering:  

John Barlot Architect Ltd. v. 413481 Alberta Ltd, 2010 ABCA 51 (CanLII)                                                                                                                                                                       March 20, 2011