Good Morning!. What Good Are Liens Anyway? Fundamentals of Understanding the Act Read the Thing Pay Attention to the Parts Doesn’t Add Value Class Action.

Good Morning!Good Morning!

What Good Are What Good Are Liens Anyway?Liens Anyway?

Fundamentals of Understanding Fundamentals of Understanding the Actthe Act

Read the ThingRead the Thing

Pay Attention to the PartsPay Attention to the Parts

Doesn’t Add ValueDoesn’t Add Value

Class ActionClass Action

How Do I Make the Lien Act Work?How Do I Make the Lien Act Work?

Section 4Section 4

An agreement by any person who supplies An agreement by any person who supplies services or materials to an improvement services or materials to an improvement that this Act does not apply to the person that this Act does not apply to the person or that the remedies provided by it are not or that the remedies provided by it are not available for the benefit of the person is available for the benefit of the person is void.void.

Section 5(1)Section 5(1)

Every contract or subcontract related to an Every contract or subcontract related to an improvement is deemed to be amended in improvement is deemed to be amended in so far as is necessary to be in conformity so far as is necessary to be in conformity with this Act.with this Act.

Section 6Section 6

No certificate, declaration or claim for lien No certificate, declaration or claim for lien is invalidated by reason only of a failure to is invalidated by reason only of a failure to comply strictly with subsection 32(2) or (5), comply strictly with subsection 32(2) or (5), subsection 33(1) or subsection 32(4), subsection 33(1) or subsection 32(4), unless in the opinion of the court a person unless in the opinion of the court a person has been prejudiced thereby, and then has been prejudiced thereby, and then only to the extent of the prejudice suffered.only to the extent of the prejudice suffered.

A Matter of TrustA Matter of Trust

Owner’s View of Lien ClaimantsOwner’s View of Lien Claimants

Owner

Lien Claimants

Lien Claimants’ View of OwnerLien Claimants’ View of Owner

Part II - TrustsPart II - Trusts

s. 7 - Owner’s trusts. 7 - Owner’s trust

s. 8 – Contractor’s s. 8 – Contractor’s trusttrust

s. 9 – Vendor’s trusts. 9 – Vendor’s trust

s. 10 – Discharges. 10 – Discharge

s. 11 – Reductions. 11 – Reduction

s. 12 – Retainages. 12 – Retainage

s. 13 - s. 13 -


s. 7s. 7

7.--(1) All amounts 7.--(1) All amounts receivedreceived by an owner, by an owner, other other than the Crown or a municipalitythan the Crown or a municipality, that are to be , that are to be used in the financing of the improvement, used in the financing of the improvement, including any amount that is to be used in the including any amount that is to be used in the payment of the purchase price of the land and payment of the purchase price of the land and the payment of prior encumbrances, the payment of prior encumbrances, constituteconstitute, , subject to the payment of the purchase price of subject to the payment of the purchase price of the land and prior encumbrances, the land and prior encumbrances, a trust fund for a trust fund for the benefit of the contractorthe benefit of the contractor. .


Where amounts become Where amounts become payablepayable under a under a contract to a contractor by the owner contract to a contractor by the owner on a on a certificate of a payment certifiercertificate of a payment certifier, , an an amount that is equal to an amount so amount that is equal to an amount so certifiedcertified that is in the owner's hands or that is in the owner's hands or received by the owner at any time received by the owner at any time thereafter thereafter constitutes a trust fund for the constitutes a trust fund for the benefit of the contractorbenefit of the contractor. .


Where the substantial performance of a Where the substantial performance of a contract has been certifiedcontract has been certified, or has been , or has been declared by the court, declared by the court, an amount that is an amount that is equal to the unpaid priceequal to the unpaid price of the of the substantially performed portionsubstantially performed portion of the of the contract that is in the owner's hands or is contract that is in the owner's hands or is received by the owner at any time received by the owner at any time thereafter thereafter constitutes a trust fund for the constitutes a trust fund for the benefit of the contractorbenefit of the contractor. .


The owner is the trustee of the trust fund The owner is the trustee of the trust fund created by subsection (1), (2) or (3), and created by subsection (1), (2) or (3), and the owner the owner shall not appropriate or convert shall not appropriate or convert any part of a fund to the owner's own use any part of a fund to the owner's own use or to any use inconsistent with the trustor to any use inconsistent with the trust until the contractor is paid all amounts until the contractor is paid all amounts related to the improvement owed to the related to the improvement owed to the contractor by the owner. contractor by the owner.

Section 10Section 10

Subject to Part IV (holdbacks)Subject to Part IV (holdbacks), every , every payment by a trustee payment by a trustee to a person the to a person the trustee is liable to paytrustee is liable to pay for services or for services or materials supplied to the improvement materials supplied to the improvement discharges the trust of the trustee making discharges the trust of the trustee making the paymentthe payment and the trustee's obligations and the trustee's obligations and liability as trustee and liability as trustee to all beneficiariesto all beneficiaries of the trust of the trust to the extent of the paymentto the extent of the payment made by the trustee. made by the trustee.


(1) Subject to Part IV, a trustee who pays in whole or in (1) Subject to Part IV, a trustee who pays in whole or in part for the supply of services or materials to an part for the supply of services or materials to an improvement out of improvement out of money that is not subject to a trustmoney that is not subject to a trust under this Part may under this Part may retainretain from trust funds an amount from trust funds an amount equal to that paid by the trustee without being in breach of equal to that paid by the trustee without being in breach of the trust. the trust.

(2) Subject to Part IV, where a trustee pays in whole or in (2) Subject to Part IV, where a trustee pays in whole or in part for the supply of services or materials to an part for the supply of services or materials to an improvement out of improvement out of money that is loaned to the trusteemoney that is loaned to the trustee, , trust funds trust funds may be applied to discharge the loanmay be applied to discharge the loan to the to the extent that the lender's money was so used by the trustee, extent that the lender's money was so used by the trustee, and the application of trust money does not constitute a and the application of trust money does not constitute a breach of the trust. breach of the trust.


Subject to Part IV, a trustee may, without Subject to Part IV, a trustee may, without being in breach of trust, being in breach of trust, retain from trust retain from trust fundsfunds an amount that, as between the an amount that, as between the trustee and the person the trustee is liable trustee and the person the trustee is liable to pay under a contract or subcontract to pay under a contract or subcontract related to the improvement, is related to the improvement, is equal to the equal to the balance in the trustee's favour of all balance in the trustee's favour of all outstanding debts, claims or damages, outstanding debts, claims or damages, whether or not related to the improvementwhether or not related to the improvement. .


But see:But see:

Bre-Aar Excavating Ltd. v. D’Angela Bre-Aar Excavating Ltd. v. D’Angela Construction (Ontario) Ltd. Construction (Ontario) Ltd.

(1975), 8 O.R. (2d) 598 (Ont. S.C.)(1975), 8 O.R. (2d) 598 (Ont. S.C.)


s. 13: s. 13:


In addition to the persons who are otherwise liable in an action for breach of trust under this Part, (a) every director or officer of a corporation; and(b) any person, including an employee or agent of the corporation, who has effective control of a corporation or its relevant activities, who assents to, or acquiesces in, conduct that he or she knows or reasonably ought to know amounts to breach of trust by the corporation is liable for the breach of trust.


s. 13(2)s. 13(2)

The question of whether a person has The question of whether a person has effective control of a corporation or its effective control of a corporation or its relevant activities is one of fact and in relevant activities is one of fact and in determining this the court determining this the court may disregard may disregard the form of any transaction and the the form of any transaction and the separate corporate existence of any separate corporate existence of any participantparticipant. .


s. 336 Criminal Codes. 336 Criminal Code

Every one who, being a trusteeEvery one who, being a trustee of anything for of anything for the use or benefit, whether in whole or in part, of the use or benefit, whether in whole or in part, of another person, or for a public or charitable another person, or for a public or charitable purpose, purpose, converts, with intent to defraud and in converts, with intent to defraud and in contravention of his trustcontravention of his trust, that thing or any part , that thing or any part of it to a use that is not authorized by the trust is of it to a use that is not authorized by the trust is guilty of an indictable offence and liable to guilty of an indictable offence and liable to imprisonment for a term not exceeding fourteen imprisonment for a term not exceeding fourteen yearsyears. .

HoldbacksHoldbacks

When to Hold ’em – When to Fold emWhen to Hold ’em – When to Fold em

Part IV - HoldbacksPart IV - Holdbacks

s. 22(1) – Basic Holdbacks. 22(1) – Basic Holdbacks. 22(2) – Finishing Holdbacks. 22(2) – Finishing Holdbacks. 22(3) – Applies regardless of contracts. 22(3) – Applies regardless of contracts. 23(1) – Defaulting payer = owners. 23(1) – Defaulting payer = owners. 23(2) – Defaulting payer = contractors. 23(2) – Defaulting payer = contractors. 23(3) – Defaulting payer = subcontractors. 23(3) – Defaulting payer = subcontractors. 24(1) – What amounts an owner s. 24(1) – What amounts an owner cancan pay pays. 24(2) – What amounts an owner s. 24(2) – What amounts an owner can’tcan’t pay pay (written notice of lien)(written notice of lien)s. 25 – Payment where s. 25 – Payment where subcontractsubcontract certified certified completecomplete

Part IV - HoldbackPart IV - Holdback

s. 26 – Payment of basic holdbacks. 26 – Payment of basic holdback

s. 27 – Payment of finishing holdbacks. 27 – Payment of finishing holdback

s. 28 – Direct payment to lien claimants. 28 – Direct payment to lien claimant

s. 29 – Discharges. 29 – Discharge

s. 30 – How not to use holdbacks. 30 – How not to use holdback


Each payerEach payer upon a contract or subcontract upon a contract or subcontract under which a lien may arise under which a lien may arise shall retain a shall retain a holdback equal to 10 per cent of the price of holdback equal to 10 per cent of the price of the services or materials as they are actually the services or materials as they are actually suppliedsupplied under the contract or subcontract under the contract or subcontract until all liens that may be claimed against the until all liens that may be claimed against the holdback have expiredholdback have expired as provided in Part V, as provided in Part V, or have been or have been satisfied, discharged or satisfied, discharged or provided forprovided for under section 44 (payment into under section 44 (payment into court). court).


(1) (1) Subject to subsections (2), (3) and (4), an owner is Subject to subsections (2), (3) and (4), an owner is personally liable for holdbackspersonally liable for holdbacks that the owner is required to that the owner is required to retain under this Part to those lien claimants who have valid retain under this Part to those lien claimants who have valid liens against the owner's interest in the premises. liens against the owner's interest in the premises.

(2) Where the (2) Where the defaulting payer is thedefaulting payer is the contractorcontractor, the , the owner's personal liability to a lien claimant or to a class of owner's personal liability to a lien claimant or to a class of lien claimants as defined by section 79 lien claimants as defined by section 79 does not exceed the does not exceed the holdbacks the owner is required to retainholdbacks the owner is required to retain. .

(3) Where the (3) Where the defaulting payer is a subcontractordefaulting payer is a subcontractor, the , the owner's personal liability to a lien claimant or to a class of owner's personal liability to a lien claimant or to a class of lien claimants as defined by section 79 lien claimants as defined by section 79 does not exceed the does not exceed the lesser oflesser of, ,

(a) the (a) the holdbacks the owner is required to retainholdbacks the owner is required to retain; and ; and (b) the (b) the holdbacks required to be retained by the contractor holdbacks required to be retained by the contractor or a subcontractor from the lien claimant's defaulting payeror a subcontractor from the lien claimant's defaulting payer..


Payments made in accordance with this Payments made in accordance with this Part operate as a Part operate as a dischargedischarge of the lien to of the lien to the extent of the amount paid. the extent of the amount paid.


Where the contractor or a subcontractor defaults in Where the contractor or a subcontractor defaults in the performance of a contract or subcontract, the performance of a contract or subcontract, a a holdback shall not be applied by any payer toward holdback shall not be applied by any payer toward obtaining services or materials in substitution for obtaining services or materials in substitution for those that were to have been supplied by the those that were to have been supplied by the person in default, nor in payment or satisfaction of person in default, nor in payment or satisfaction of any claim against the person in default,any claim against the person in default, until all until all liens that may be claimed against that holdback liens that may be claimed against that holdback have expired as provided in Part V, or have been have expired as provided in Part V, or have been satisfied, discharged or provided for under section satisfied, discharged or provided for under section 44 (payment into court). 44 (payment into court).

Time PeriodsTime Periods

Part V - ExpiryPart V - Expiry

Key 1 – 45 day periodKey 1 – 45 day period

Key 2 – From a date readily ascertainable Key 2 – From a date readily ascertainable by each lien claimant:by each lien claimant:

Contractor: Contractor: Earlier ofEarlier of publication of publication of certificate of substantial performance, certificate of substantial performance, completion or abandonmentcompletion or abandonment

Others: Others: Earliest ofEarliest of last supply , certificate last supply , certificate of completionof completion

Part V - ExpiryPart V - Expiry

s. 32: 10 rules for ascertaining date for s. 32: 10 rules for ascertaining date for and certification of “substantial and certification of “substantial performance”performance”

(Meant to be idiot (i.e. lawyer) proof, but (Meant to be idiot (i.e. lawyer) proof, but are not)are not)

s. 33: same for subcontract “completion”s. 33: same for subcontract “completion”


(1) A lien may be preserved (1) A lien may be preserved during the supplyingduring the supplying of services or materials of services or materials or at any time before it or at any time before it expiresexpires, , (a) where the lien attaches to the premises, by (a) where the lien attaches to the premises, by the the registrationregistration in the proper land registry office in the proper land registry office of a claim for lien on the title of the premises in of a claim for lien on the title of the premises in accordance with this Part; andaccordance with this Part; and(b) where the lien does not attach to the (b) where the lien does not attach to the premises, by premises, by giving to the owner a copy of the giving to the owner a copy of the claim for lien together with the affidavit of claim for lien together with the affidavit of verification required by subsection (6).verification required by subsection (6).


Where a claim for lien is in respect of a Where a claim for lien is in respect of a public street or highway owned by a public street or highway owned by a municipality, the copy of the claim for lien municipality, the copy of the claim for lien and affidavit shall be given to the clerk of and affidavit shall be given to the clerk of the municipalitythe municipality. .


Where the owner of the premises is the Where the owner of the premises is the Crown, the copy of the claim for lien and Crown, the copy of the claim for lien and affidavit shall be given affidavit shall be given to the office to the office prescribed by regulationprescribed by regulation, or, where no , or, where no office has been prescribed, to the office has been prescribed, to the ministry ministry or Crown agency for whom the or Crown agency for whom the improvement is madeimprovement is made. .

PerfectionPerfection

45 days after 45 days after lastlast day to register lien day to register lien

Can mean up to 90 days or more to start Can mean up to 90 days or more to start action and register Certificate of Action!action and register Certificate of Action!

Section 37:Section 37:

Expiration PeriodExpiration Period

37. (1) 37. (1) A perfected lien expires A perfected lien expires immediately after the second anniversary immediately after the second anniversary of the commencement of the action that of the commencement of the action that perfected the lien, unless one of the perfected the lien, unless one of the following occurs on or before that following occurs on or before that anniversaryanniversary: : 1. An order is made for the trial of an 1. An order is made for the trial of an action in which the lien may be enforced.action in which the lien may be enforced.2. An action in which the lien may be 2. An action in which the lien may be enforced is set down for trial. enforced is set down for trial.

Vacating LiensVacating Liens

Vacating LiensVacating LiensWhenever I lien, I am told they will just Whenever I lien, I am told they will just bond me off and make me wait for bond me off and make me wait for payment. payment.

Can they do this?Can they do this?

What can I do about it?What can I do about it?


How does bonding off work?How does bonding off work?


How does this affect mortgage How does this affect mortgage advances?advances?


Who can post security to Who can post security to vacate my lien?vacate my lien?


Is there any difference Is there any difference between vacating a lien and between vacating a lien and discharging a lien?discharging a lien?


How do you ever get the How do you ever get the money out of court?money out of court?

Good Afternoon!Good Afternoon!

Playing to WinPlaying to Win


I’m just the little guy, I’m just the little guy, what can I do when the what can I do when the big guys get themselves big guys get themselves in trouble on the job?in trouble on the job?


I’ve heard there are power-I’ve heard there are power-of-sale proceedings on my of-sale proceedings on my job. What does this mean job. What does this mean and what can I do about it?and what can I do about it?


I know there are a bunch I know there are a bunch of mortgagees, but some of mortgagees, but some of them are fake. What of them are fake. What can I do?can I do?


I cannot afford all this I cannot afford all this lien litigation. Is there lien litigation. Is there anything lien claimants anything lien claimants can do as a group?can do as a group?


What can I include on my What can I include on my lien action?lien action?


What about other What about other contractual breaches?contractual breaches?


What about architects What about architects and engineers?and engineers?


What is all this I hear What is all this I hear about salvage costs?about salvage costs?

Owner’s RightsOwner’s Rights

Settlement MeetingSettlement Meeting

Section 19 – Where Owner’s Interest Section 19 – Where Owner’s Interest LeaseholdLeasehold

Structural Contracting Ltd. v. Westcola Structural Contracting Ltd. v. Westcola Holdings IncHoldings Inc. (2000), 48 O.R. (3d) 417 . (2000), 48 O.R. (3d) 417 (C.A.).(C.A.).

Financing IssuesFinancing Issues

PrioritiesPriorities

Complete statutory codeComplete statutory codePart XIPart XI

ss. 72 – 85ss. 72 – 85

Overall Priorities SchemeOverall Priorities Scheme

ss. 72 – 75: Administrative

s. 72: Lien enforceable in spite of default

s. 73: Lien Assignable

s. 74: General Lien

s. 75: OK to take other security



ss. 76 – 77: Over-arching priority

s. 76: Purchaser pro tanto

s. 77: General priority over all executions, unless recovered upon



ss. 76 – 77: Over-arching priority

s. 78: Priorities over mortgages

s. 79 – 80: Priorities among lien claimants

s. 79: Persons who comprise class

s. 80: Priority between and within class

Overall Priorities SchemeOverall Priorities Schemess. 72 – 75: Administrative ss. 76 – 77: Over-arching prioritys. 78: Priorities over mortgagesss. 79 – 80: Priorities among lien claimantsss. 81 – 85: Special priorities

s. 81: Workerss. 82: General lienss. 83: Insurance proceedss. 84: Proceeds of sales. 85: Priorities on insolvency

Overall Mortgages SchemeOverall Mortgages Schemes. 78(1): Over-arching priority of lien

s. 78(2): Except: Building mortgage

s. 78(3): Except: “Prior” mortgages (prior advance)

s. 78(4): Except: “Prior” mortgages (subs. advance)

s. 78(5): Except: Special priority against subsequent mortgages

S. 78(6): Except: General priority against subs. mortgages

s. 78(7): Except: Some trustees

s. 78(11): Except: All home buyer mortgages

s. 78(8): Postponement

s. 78(9): (2) and (5) don’t apply to mortgages before 1983

s. 78(10): Financial Guarantee Bond

The Whole Prior/Subsequent Thing

First lien arisesFirst lien arises

Prior mortgages mortgages Subsequent mortgages mortgages

Prior advancesPrior advances Subsequent advances advances

Value of land determi- of land determi-

nativenativeAdvances without without

notice determinativenotice determinative

Building mortgage mortgage

exceptionexception

Building mortgage mortgage

exceptionexception

Special Special priority for defi- for defi-

ciency in holdbackciency in holdback

Advance

Registration

Before 1Before 1stst lien arose lien arose After 1After 1stst lien arose, but lien arose, but before registration of before registration of written notice of lienwritten notice of lien

Before 1Before 1stst lien aroselien arose

s. 78(3), priority for s. 78(3), priority for actual value of actual value of premises at time premises at time lien arose / total lien arose / total value of all value of all advances to that advances to that datedate

s. 78(4), priority for s. 78(4), priority for everything in s. 78(3) everything in s. 78(3) plus all advances before plus all advances before registration or written registration or written notice of liennotice of lien

After 1After 1stst lien lien arosearose

s. 78(6) prioritys. 78(6) priority s. 78(6), priority for all s. 78(6), priority for all advances before advances before registration or written registration or written notice of lien, less any notice of lien, less any deficiency in holdbacksdeficiency in holdbacks

ExampleExample

MortgageMortgageA (Land)

Advance Advance

A1A1Advance Advance

A2A2AdvanceAdvance

A3A3MortgageMortgage

B (Building)B (Building)

AdvanceAdvance

B1B1AdvanceAdvance

B2B2

Lien # 1Lien # 1

ArisesArises

Lien # 1Lien # 1

ExpiresExpiresLien # 2Lien # 2

RegisteredRegistered

ExampleExample

MortgageMortgage

A (Land)A (Land)Advance Advance

A1A1Advance Advance

A2A2AdvanceAdvance



AdvanceAdvance

B1B1AdvanceAdvance

B2B2

Lien # 1Lien # 1

ArisesArisesLien # 1Lien # 1



1.1. Mortgagee B advanced in the face of a lien, Mortgagee B advanced in the face of a lien,

so that advance B2 loses priority to all liens so that advance B2 loses priority to all liens

ExampleExample

MortgageMortgage


A1A1Advance Advance

A2A2AdvanceAdvance



AdvanceAdvance

B1B1AdvanceAdvance

B2B2

Lien # 1Lien # 1




2. Advance B1 is a good advance. 2. Advance B1 is a good advance.

ExampleExample

MortgageMortgage


A1A1Advance Advance

A2A2AdvanceAdvance



AdvanceAdvance

B1B1AdvanceAdvance

B2B2

Lien # 1Lien # 1




3.3. Mortgage B is a building mortgage and a Mortgage B is a building mortgage and a

subsequent mortgage, so it loses priority to subsequent mortgage, so it loses priority to

the extent of any deficiency in the holdbackthe extent of any deficiency in the holdback

ExampleExample

MortgageMortgage


A1A1Advance Advance

A2A2AdvanceAdvance



AdvanceAdvance

B1B1AdvanceAdvance

B2B2

Lien # 1Lien # 1




4.4. Advance A3 is a subsequent advance (after Advance A3 is a subsequent advance (after

Lien 1 arose). Therefore, unless Lien 1 was Lien 1 arose). Therefore, unless Lien 1 was

registered or notified, Advance A3 is additionalregistered or notified, Advance A3 is additional

priority for Mortgagee Apriority for Mortgagee A

ExampleExample

MortgageMortgage


A1A1Advance Advance

A2A2AdvanceAdvance



AdvanceAdvance

B1B1AdvanceAdvance

B2B2

Lien # 1Lien # 1




5.5. Advances A1 and A2 are prior, so priority isAdvances A1 and A2 are prior, so priority is

lesser of actual value of land at the time the lesser of actual value of land at the time the

lien arose or total of A1 & A2.lien arose or total of A1 & A2.

Questions & Answers Questions & Answers

Q: What if a mortgagee has more Q: What if a mortgagee has more

than one intention?than one intention? Is it still a Is it still a building mortgage?building mortgage?

A: Yes.A: Yes.A mortgage can be segmented for the A mortgage can be segmented for the purposes of determining priorities. Where purposes of determining priorities. Where first intention was the acquisition of land, the first intention was the acquisition of land, the first advance was held not to be building first advance was held not to be building mortgage.mortgage.Royal Bank v. Lawton Developments Inc.Royal Bank v. Lawton Developments Inc.(1994), 16 O.R. (3d) 450 (Ont. Gen. Div.)(1994), 16 O.R. (3d) 450 (Ont. Gen. Div.)

Q: When is an advance actually Q: When is an advance actually “made”? When the mortgagee “made”? When the mortgagee

releases the money?releases the money?

A: No, when the mortgagor gets the money.A: No, when the mortgagor gets the money.

An advance is made not when the An advance is made not when the mortgagee releases the funds, but only mortgagee releases the funds, but only when the owner acquires actual control of when the owner acquires actual control of the money advanced.the money advanced.Marsil Mechanical v. A. Reissing – Reissing Enterprise Marsil Mechanical v. A. Reissing – Reissing Enterprise Ltd.Ltd. (1996), 26 C.L.R. (2d) 148 (Ont. Gen. Div.) (1996), 26 C.L.R. (2d) 148 (Ont. Gen. Div.)

Q: What if the land is worthless? Q: What if the land is worthless? What is the “actual value of the What is the “actual value of the premises when the first lien arose” premises when the first lien arose”

then?then?

A: Zero, A: Zero, nono priority for the mortgagee. priority for the mortgagee. Environmental contamination can render the Environmental contamination can render the premises’ value “nil” for the purposes of premises’ value “nil” for the purposes of determining priorities between prior mortgagee determining priorities between prior mortgagee and lien claimants. and lien claimants. Park Contractors Inc. v. Royal Bank of Canada Park Contractors Inc. v. Royal Bank of Canada (1998), 38 O.R. (3d) 290 (Ont. Gen. Div.)(1998), 38 O.R. (3d) 290 (Ont. Gen. Div.)

Q: Who gets the benefit of a Q: Who gets the benefit of a single lien claimant’s priority?single lien claimant’s priority?

A: All lien claimants.A: All lien claimants.

All lien claimants have the benefit of All lien claimants have the benefit of that priority to all advances made that priority to all advances made subsequent to the registration of the subsequent to the registration of the first lien.first lien.Norwon Electric Sault Co. v. Ross Norwon Electric Sault Co. v. Ross

(1984), 7 C.L.R. 1 (Ont. H.C.)(1984), 7 C.L.R. 1 (Ont. H.C.)

Q: What if a mortgagee makes an Q: What if a mortgagee makes an advance in the face of a lien? advance in the face of a lien? Does it lose priority for that Does it lose priority for that advance against all liens or just advance against all liens or just the prior registered liens? the prior registered liens?

A: All liens.A: All liens.

Priority is lost against all liens, even Priority is lost against all liens, even if the preserved lien is later vacated if the preserved lien is later vacated from title.from title.Boehmers v. 794561 Ontario Inc. Boehmers v. 794561 Ontario Inc.

(1995), 21 O.R. (3d) 771 (Ont. C.A.)(1995), 21 O.R. (3d) 771 (Ont. C.A.)

Q: Do advances include interest? Q: Do advances include interest?

A: Yes.A: Yes.

Principal and interest are equally Principal and interest are equally secured under a mortgage. Advances secured under a mortgage. Advances include interest. Interest payments on include interest. Interest payments on mortgages therefore have priority over mortgages therefore have priority over lien.lien.830889 Ontario Inc. v. 607643 Ontario Inc. 830889 Ontario Inc. v. 607643 Ontario Inc.

(1990), 43 C.L.R. 181 (Ont. Gen. Div.)(1990), 43 C.L.R. 181 (Ont. Gen. Div.)

Q: What if a mortgagee advances Q: What if a mortgagee advances negligently, to the prejudice of lien negligently, to the prejudice of lien claimants? Can the lien claimants claimants? Can the lien claimants sue for negligence?sue for negligence?

A: No.A: No.

No. In view of the sweeping benefits of s. 78, No. In view of the sweeping benefits of s. 78, courts have held that even a mortgagee’s courts have held that even a mortgagee’s negligence will not avail lien claimants, as no negligence will not avail lien claimants, as no independent duty of care exists.independent duty of care exists.Con-Drain Co. (1983) Ltd. v. 846539 Ontario Con-Drain Co. (1983) Ltd. v. 846539 Ontario Ltd. Ltd. (1997), 35 C.L.R. (2d) 230 (Ont. Gen. Div.), (1997), 35 C.L.R. (2d) 230 (Ont. Gen. Div.), aff’d. [1998] O.J. No. 5041 (Ont. C.A.)aff’d. [1998] O.J. No. 5041 (Ont. C.A.)

The Top 10 ListThe Top 10 List

10. Class Actions

9. Salvage Costs Work

8. Can’t be Waived

7. Contracts Deemed Amended

6. No Priority Among Class

5. Power of Notice

4. Power of Certifier

3. Trusts Work

2. Lien Doesn’t Add Value, Just Preserves it

1. Use it, It’s Yours!

Good Morning!. What Good Are Liens Anyway? Fundamentals of Understanding the Act Read the Thing Pay Attention to the Parts Doesn’t Add Value Class Action.

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