Registering a lien under the name of the company contracted to do the work seems straightforward enough. However, when the name on the lien isn’t the same as on the original contract, and the owner claims not to recognize it, can the lien be ruled invalid and any security held in trust returned?
“Blueprint Custom Homes c/o Scott Klippenstein” was hired to build a custom home. A year after work had begun, Klippenstein had not received payment. He registered a lien against the owners. However, he did so under the name of his corporation, Klippenstein Development Corp. (KDC).
The defendants’ position was that there was no indication Klippenstein was acting as an agent for KDC when he signed the contract, therefore KDC was not “engaged” by them to perform any work.
“They submit the contract was between Mr. Klippenstein, doing business as Blueprint Custom Homes, and the defendants,” writes Justice Young of the Supreme Court of British Columbia. “They say that misnaming a lien claimant constitutes a defect in the manner of filing a lien.”
The court learned Blueprint Custom Homes was, in fact, the registered trade name of KDC and Klippenstein was a shareholder and director.
By adding the words “c/o Scott Klippenstein” to the contract, Klippenstein was not intending to signify that he was operating a sole proprietorship, but rather that he was the authorized representative for dealings with the construction. In fact, he maintained it would be an error to name Blueprint Custom Homes on the lien since it was not a legal entity.
In any case, Klippenstein said the owners knew work was being done by Blueprint Custom Homes. They received the benefit of that work and KDC, as the legal corporation, was entitled to payment for that work.
The defendants responded a “stranger” to the owner can’t file a lien and that they had the right to know who was doing the work and who is claiming the lien.
“Knowledge of an improvement is not knowledge of the improver.”
They maintained they thought they were dealing with a proprietorship, and if otherwise, it would be up to the contractor to advise who they are acting for, lest they themselves become personally liable.
Justice Young sorted through the muddle of names used during the course of the project and summarized the situation.
“I accept that the work was performed and materials were supplied to the property, and that the defendants have benefited. I also accept that it was KDC who performed the work and supplied the materials. However, the owners did not ‘engage’ KDC; the construction manager named on the contract is ‘Blueprint Custom Homes c/o Scott Klippenstein.’ Therefore, KDC was not a ‘contractor’ as defined by the BLA. Since Blueprint Custom Homes is a trade name, the contractor under the BLA is Scott Klippenstein.”
However, the validity of the lien was the matter before the court, not the contract.
“It appears that the lien was filed by the correct legal entity, but the contract did not name the proper legal entity as the construction manager,” writes Justice Young. “KDC performed the work and supplied the materials.”
Since the lien was properly filed, the court ruled, “the security paid pursuant to the security agreement should remain in place until this matter is resolved either at trial or by consent of the parties.”
Using the correct names on a contract is obviously important and any subcontracts should be properly documented, write Clark Wilson LLP partner Rosalie Clark and associate Dan Melnick.
“A court will undertake to ensure that parties who performed work on construction projects receive payment for that work,” write Anthony Burden, partner with Field Law LLP and summer student Robin Young. “Also, subcontractors can rest assured that they are still eligible for a lien regardless of whether they had any direct dealings with the owner, or even if the owner has no knowledge of their existence.”
John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com.
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