In Lesenko v Wild Rose Ready Mix Ltd, 2024 ABKB 333, the Alberta Court of King’s Bench (the “Court”) confirmed that when security is paid into court and a lien is removed from the title to property, the lien does not cease to exist as a result of failing to take action to realize the lien within the 180-day time limit set forth in section 43(1) of the Prompt Payment and Construction Lien Act, RSA 2000, c P-26.4 (the “PPCLA”).

This decision invalidated the 180-day deadline in the template Consent Order used since 2017. As a result, the only way to set a deadline for the lien claimant to commence an action is now a Notice to commence action under section 45 of the PPCLA, which provides a 30-day deadline. Consequently, more Notices to commence action might be issued to enforce proceedings promptly.

Going forward, parties will have two years to commence a proceeding to enforce a lien when security has been paid into court and the lien has been removed from the title of the property, providing for the possibility of longer timeframes for resolving disputes related to lien enforcement, while also allowing parties more time to prepare.

Additionally, in some circumstances, confirmation of the two-year limitations period protects lienholders from having their liens dismissed due to procedural technicalities. However, this may lead to extended uncertainty for owners and contractors as lienholders will have more time to initiate proceedings to enforce a lien. This could also lead to lienholders using the extended period of enforcement as a strategic delay, providing for additional burdens on owners and contractors. 

Lienholders should ensure timely action in resolving these disputes, but recognize that there is a two-year window for enforcement even when security is paid into court. Likewise, owners should be prepared for this extended window of lien enforcement, and may need to prepare themselves for greater financial and legal uncertainty even when security has been posted.

Background

Wild Rose Ready Mix Ltd. (“Wild Rose”) supplied Lesenko with concrete for one of Lesenko’s properties. Lesenko did not pay and Wild Rose filed two liens in October 2019. In November 2019, through a Consent Order, Lesenko paid $99,182.60 into court as security for the liens, thereby discharging the liens from the title of the property, pursuant to section 48(2) of the PPCLA. The Consent Order used the Alberta Template Order (“Template Order”), which provided that although security had been paid into court, Wild Rose needed to commence enforcement proceedings within 180 days of registering the liens in order to preserve the lien.^[1]

Wild Rose did not commence enforcement proceedings within 180 days and instead began a new action before the general two-year period contemplated under the Limitations Act, RSA 2000, c L-12,^[2] expired. Lesenko then applied to have the liens dismissed and an order returning the security that had been paid into court. Wild Rose cross-applied for an order extending the timeframe pursuant to Rule 13.5 of the Alberta Rules of Court.^[3]

The Applications Judge ruled in favour of Lesenko, stating that the 180-day provision in the Consent Order is the same limitation as set out in section 43(1) of the PPCLA, and that proceedings to enforce a lien are “always mandatory. Otherwise, the lien ceases to exist.”^[4] Additionally, the Applications Judge ruled that the court does not have the power to extend the time ordered by statute unless the statute itself gives the court the power to do so.^[5] The Applications Judge filed the order and six days later released a Corrigendum, substantially changing aspects of the decision. Wild Rose appealed to the Court.^[6]

Anaylsis

In overturning the Applications Judge’s decision, the Court referenced and confirmed a decision from the British Columbia Court of Appeal where Consent Orders were held to be a type of agreement and, although not always treated like a typical contract, found that “the consent order [fell] within the scope of the word ‘agreement’ in the PPCLA”.^[7]

Section 44 of the PPCLA provides:^[8]

Notwithstanding section 43, if the court has ordered that a lien be removed under section 27 or 48(1) the lien, as a charge against the money paid into court or the security given, does not cease to exist by reason that […]

(b) an action has not been commenced within 180 days from the date that the lien is registered.

The Court held that the Consent Order and Template Order both contradict section 44(1)(b) of the PPCLA and are therefore inconsistent with the provision, which “makes it clear that the limitation period does not apply when funds have been paid into court.”^[9]

Section 5 of the PPCLA provides:

An agreement by any person that this Act does not apply or that the remedies provided by it are not to be available for the person’s benefit is against public policy and void.^[10]

As a result of finding that the Consent Order, as per the Template Order, is an “agreement” under the PPCLA, the Court found that section 5 of the Template Order is void for reasons of public policy.

Section 7(2) of the Limitations Act provides:

An agreement that purports to provide for the reduction of a limitation period provided by this Act is not valid.^[11]

The Court, in this decision, seems to indicate that if security has been paid into court and a lien is discharged from the title to property, then a party will have two years, from the date of the incident causing the lien to be registered, to bring proceedings to enforce that lien.

The Court, citing the Alberta Court of Appeal’s decision in TRG Developments Corp. v. Kee Installations Ltd., 2015 ABCA 187, found that the Court does have “the inherent power to reinstate liens in certain circumstances, even if there is no express or implied power to do so in the PPCLA.”^[12] However, in this case, the Court did not need to use its “discretion to reinstate the liens”.^[13]

Key Takeaways

• Consent Orders are a “form of agreement”^[14] and section 5 of the Template Order, stating that enforcement of a lien must commence within 180 days, is inconsistent with section 44(1)(b) of the PPCLA, section 5 of the PPCLA, and section 7(2) of the Limitations Act, and is void for reasons of public policy.^[15]
• As per section 44(1) of the PPCLA, if security is paid into court and the court orders the lien to be removed under section 27 or 48(1), the time limit in section 43(1) no longer applies and parties will presumably have two years to enforce a lien, pursuant to the Limitations Act.
• The 180-day deadline to commence an action still applies to situations where security has not been posted under section 48 of the PPCLA.
• The Court has the power to reinstate a lien in special circumstances, even though there is no direct or indirect authority given to the Court in the PPCLA.^[16]

[1]Lesenko v Wild Rose Ready Mix Ltd, 2024 ABKB 333, at paras. 4-6 [Lesenko].

[2]Limitations Act, RSA 2000, c L-12, s. 3(1)(a).

[3]Lesenko at paras. 7-8.

[4]Ibid at para. 87.

[5]Ibid at para. 88.

[6]Ibid at para. 10.

[7]Ibid at para. 108.

[8]Prompt Payment and Construction Lien Act, RSA 2000, c P-26.4, s 44 [PPCLA].

[9]Lesenko at para. 90.

[10]PPCLA, s 5.

[11]Limitations Act, RSA 2000, c L-12, s 7(2).

[12]Lesenko at para. 101.

[13]Ibid at para. 109.

[14]Ibid at para. 108, citing 269893 Alberta Ltd. v. Otter Bay Developments Ltd., 2011 BCCA 90 at para. 21.

[15]Lesenko at paras. 106-108.

[16]Ibid at para. 101.