CONSTRUCTION LIENS – ADDING PREVIOUS CONTRACTUAL BALANCES TO CURRENT DEBTS OUTSTANDING

A recent decision arising from the Superior Court of Justice in Ontario, Trillium Masonry Group Inc v Marydel Homes (Beaverton) Inc. et al, 2025 ONSC 4194, tackled with the issue of whether the Construction act prohibits a lien claimant from registering a lien for the full amount of an agreed upon price for lienable services where the same price includes an outstanding debt that is no longer lienable.

The Court held that the Construction Act permits the parties to agree on a price for lienable services, and that this price can include an unpaid balance from prior non-lienable work if incorporated into the contract.

In this case, the Plaintiff Trillium first entered into contract with the Defendant Marydel in 2016 for masonry services covering 43 lots, excluding one Lot 121, with liens for the same being dealt with on a lot-by-lot basis. The parties then disagreed regarding unpaid amounts of $193,191.70 associated with the 2016 contract. However, subsequently in 2022 the parties executed a second contract in relation to Lot 121, which stipulated that the balance owed of $193,191.70 shall be forwarded to Lot 121 and shall form part of the contract price. The Plaintiff then registered a lien for $228,632.12, which incorporated the previously disagreed upon amount of $193,191.70.

The Defendant argued that the Construction Act prohibits a lien for the full amount of the agreed upon price where it includes non-lienable amounts, and in its position, the unpaid amount from the first contract.

On the other hand, the Plaintiff argued that the parties are free to contract for any price for lienable services, and the agreed upon price in the second contract, including the unpaid balance, is enforceable under the Construction Act as it improved Lot 121.

In reaching its decision, the Court noted that the Construction Act does not limit the parties’ freedom to contract for a price for lienable services, as long as the price is agreed upon and reduced to writing, which is what happened here. The Court further noted that the 2022 contract explicitly included the contested and unpaid balance from the 2016 contract as part of the price for the masonry services on Lot 121, which was then agreed upon by the parties.

In arguing its position, the Defendant relied on case law, which was distinguished and deemed inapplicable by the Court as those cases did not involve a contract that explicitly included non-lienable amounts, which was the case here. The Defendant also argued that accepting the Plaintiff’s argument could have unintended effects on the Construction Lien Regime, such as:

• a party could secure any debt with a lien, regardless of what the nature and extent of the debt was;
• that an agreement could be used to circumvent Section 48 of the Construction Act which states that a discharge of lien is irrevocable and cannot be revived; and
• that other lien claimants can be prejudiced if one contractor “forwarded” a significant amount of old unrelated debt into a project and liened that forwarded debt.

While the Court considered the policy concerns, it was not convinced of the same as they are premised on the unlikely event that an owner would contract with a person to revive expired or discharged liens.

Given this ruling of the Court, it is important for parties to review new contracts before finalizing the same especially if there has been a previous disagreement between the same parties regarding payments on previous contracts. The Court in this case arguably held the way that they did as it did not want the Plaintiff contractor to not be made whole considering the masonry services they provided under both the 2022 and 2016 contracts. Arguably the main consideration that made the Court decide in the Plaintiff’s favor is the 2022 contract, which clearly stipulated that the balance of $193,191.70 shall be forwarded to Lot 121 and shall form part of the contract price, which was agreed to by the Defendant.