Disputing a Lien via Counterclaim Is Allowed, Within Limits

Total Oilfield Rentals Ltd. ("Total") rented oilfield equipment to Prosper Petroleum Ltd. ("Prosper") for projects in Saskatchewan. When Prosper failed to pay for the equipment rentals, Total registered builders' liens against Prosper's well sites and commenced a lawsuit to recover the outstanding amounts.

Rather than simply defending the claim, Prosper filed a counterclaim. It alleged that years earlier, while transferring tubing between locations in Alberta, Total had stolen or lost 159 joints of tubing that Prosper owned. Prosper argued that because the tubing had gone missing, it should not have to pay Total's Saskatchewan invoices in full and that any amount owing should instead be offset by the value of the missing tubing.

What the Court Said

The Court rejected Prosper’s argument. It held that the counterclaim was not permitted by the Saskatchewan Builders’ Lien Act, (“BLA”), which governs the registration and enforcement of liens.

Unlike the lien legislation in other provinces and territories, the BLA specifically deals with the scope of a counterclaim in a lien action. Section 89(2) only permits counterclaims that are made “in respect of a matter related to the making of the improvement.” In other words, arguments in a counterclaim must be grounded in an issue related to the work or improvement that the lienholder provided or completed.

The Court noted that generally, a defendant has wide latitude in filing a counterclaim. Counterclaims can typically proceed unless doing so would unduly complicate or delay the trial of the main action, or cause undue prejudice to any party. But this general rule is altered in the context of lien actions.

Section 89(2) aligns with the broader purpose of the BLA, and lien actions generally. Lien claims are meant to be dealt with in a summary fashion. Lien legislation exists to help service providers completing work on credit obtain repayment while avoiding legal quagmire, and to ensure that lienholders resolve actions quickly rather than encumbering land long-term.

The Court held that Prosper’s counterclaim was wholly unrelated to the scope of Total’s lien claim. Total’s alleged failure to manage the tubing joints properly in Alberta had nothing to do with its unpaid invoices in Saskatchewan. All of the tubing transport had taken place in a different province years before Prosper neglected to pay its rental fees. The Court also disapproved of the complication and delay that the counterclaim would add to the proceedings.

Prosper’s complaint that the tubing was lost was therefore not sufficiently related to the service provided by Total (equipment rental). To reiterate the words of the BLA, Prosper’s counterclaim was not made “in respect of a matter related to the making of the improvement.”

Takeaways

While all provinces and territories do not have a similar clause in their lien legislation dealing with counterclaims (neither Alberta’s Prompt Payment and Construction Lien Act or Ontario’s Construction Act deal with the scope of counterclaims, while BC’s Builders Lien Act allows counterclaims in lien actions “arising out of the same transaction”), the same overarching goals of lien legislation are present:

• Liens are an extraordinary remedy allowing unpaid parties to encumber the lands of an owner whom they have no privity of contract with.
• As a consequence, lien claims should be adjudicated summarily where possible.

As such, even in provinces or territories whose lien legislation does not restrict the scope of counterclaims, a similar argument to Total’s could be made. If a counterclaim is not directly tied to the underlying lien claim, adjudicating it at the same time as a lien action would cause undue delay and frustrate the underlying purpose of lien legislation.

This decision also underscores the nuances and differences between lien legislation across jurisdictions. For this reason, it is always advisable to engage a lawyer called in the jurisdiction in which a lien dispute arises.

To ensure any proposed lien steps comply with the governing legislation, please contact Anthony Burden in Calgary, Ryan Krushelnitzky in Edmonton, or any member of Field Law’s Construction Group for guidance and assistance.

Link to decision: Total Oilfield Rentals Ltd. v Prosper Petroleum Ltd., 2026 SKKB 99

Thank you to Dylan Taylor, Legal Summer Student, for assistance with the preparation of this article.