A Corporation’s Agent Can’t Be Sued as a Lien Claimant

Section 53 of Saskatchewan’s Builders’ Lien Act (“BLA”) places liability on a lien claimant who constructively or actually knows that they do not have a valid lien or exaggerates its amount. However, does this section apply to an individual who executes the lien on behalf of the corporation? Does that individual retain liability for an exaggerated lien claim? Does that agent owe a personal duty of care to the party against whom the lien is registered? And finally, how does section 53 compare to the analogous provision in Alberta’s PPCLA?

Background

This appeal arose from a construction dispute wherein Ministikwan Lake Cree Nation contracted with JV&M for work on a water treatment plant and pump station. JV&M subcontracted the mechanical and electrical work to B&M through two subcontracts. B&M registered a lien, alleging that JV&M failed to pay it the full price of the subcontracts. Farnham, B&M’s manager, executed the lien. B&M also issued a statement of claim against JV&M.

JV&M defended against B&M’s claim, alleging that B&M knew or ought to have known that the lien was grossly exaggerated based on the amount that JV&M argued was its contractual right of set-off. JV&M claimed to be entitled to sue Farnham in his personal capacity because he knew or ought to have known that the lien was unsupported or grossly exaggerated, in keeping with section 53 of the BLA. Farnham and B&M applied to strike out the claim against Mr. Farnham in his personal capacity. Their argument was that the claim disclosed no reasonable cause of action against him. Thus, the claim was an abuse of process.

The Chambers judge agreed, and JV&M appealed. The Chambers judge highlighted that the test for whether a claim discloses no reasonable cause of action is whether it is plain and obvious that the action has no reasonable chance of success.

The Chambers judge held that JV&M’s claim that the lien was grossly exaggerated only existed against B&M, because B&M was the lien claimant, not Farnham. Thus, the claim was also an abuse of process because liability could not attach to Farnham. The Chambers judge relied on MHA Contracting Inc. v. Christie Mechanical Contractors Ltd. in its reasoning. In that case, the ONSC held that Ontario’s analogous legislation did not intend that an individual who executes a lien on behalf of a corporation should be personally liable for the consequences of doing so.

What the Court Said

On JV&M’s appeal, the SKCA first analyzed section 53. The SKCA noted that a modern view of the provision provides that liability only attaches to the lien claimant. All pronouns used in the section exclusively refer to the lien claimant. The SKCA also noted that the use of gender-specific words includes corporations.

Second, the SKCA found that the above interpretation aligned with the two purposes of the legislation. The first purpose is to protect those who provide services and materials on credit. The second is to protect the owner of the improvement. Holding a corporation’s agent liable gives that agent none of the benefits of being a successful lien claimant while foisting full liability on that agent. In this hypothetical (and untenable) situation, the principal corporation would receive all of the benefits without being liable. This imbalance contravenes legislative intent because it discourages lien claimants from registering liens in the first place.

JV&M then argued that the language used in section 22 of the BLA suggested that Farnham should be personally liable. This section limits the value of a lien claim to the price of the services or materials owing. JV&M argued that Farnham should be personally liable because he was required to assess the set-off between JV&M and B&M before executing the lien, and this assessment caused the lien claim to be exaggerated.

The SKCA disagreed with this interpretation, finding that the legislation exists to provide relief based on the contractual relationship between the parties in question, not their agents. Section 22 also states that the only person (including corporations) who provides services or materials on credit can possess a lien claim, which was B&M in this action.

The SKCA did not address JV&M’s abuse of process argument because it already found that the counterclaim against Mr. Farnham was properly struck.

Further, JV&M argued that it had a valid negligence claim against Farnham personally. This would arise from a statutory duty of care from the BLA related to his work in verifying the lien claim, including knowing the actual value of the lien. However, the SKCA found that the BLA does not create a duty of care from an agent to a contractor or owner. If the legislature’s intent was to impose a tortious duty of care on agents, the BLA would clearly state so. Thus, JV&M had no valid negligence claim against Mr. Farnham.

Last, the SKCA discussed costs. JV&M once again argued that Mr. Farnham should be personally liable for costs. The SKCA found that although section 97 of the BLA does provide for costs against an agent, potential liability for costs does not equate to potential liability for damages. In other words, even though JV&M retained the right to seek costs against Farnham at the lawsuit’s conclusion, JV&M lacked an independent basis for claiming costs at this time.

What About in Alberta?

Notably, Alberta’s version of Saskatchewan’s section 53 is section 40 of the PPCLA. This section is very similar to the Saskatchewan section except it provides an “out” for the lien claimant if they can prove that they registered the lien or calculated its amount in good faith and in a non-negligent manner.

Takeaways

Parties should not attempt to work around the lien legislation to sue an individual under a lien claim. It is unfair for an individual to receive no benefit from a lien claim while risking liability for it. Even if an individual does grossly exaggerate a lien claim on behalf of their principal corporation, the corporation is liable, not the individual. That individual is also unlikely to be found personally negligent for filing an exaggerated lien claim because the individual does not owe a duty of care to the party against whom they filed the lien.

Liens are complex, and the requirements of registration and consequences of any errors can have serious consequences. It is advisable to consult a lawyer without delay. Contact Anthony Burden in Calgary, Ryan Krushelnitzky in Edmonton, or any member of Field Law’s Construction Group for advice.

Link to Decision: JV&M Civil Constructors Inc. v. Farnham, 2025 SKCA 72