Filing a lien is serious. Given the time and resources associated with a lien action, any amounts claimed should be accurate and reflect work completed.
Two cases illustrate what can happen when the claimant, for whatever reason, goes too far.
The first concerns an agreement for the decontamination of an unoccupied home. The house owner agreed to pay the original invoice of $124,173.34 promptly in order to avoid a second clean-up charge of $8,648.
However, before paying, the owner decided to involve an insurance adjuster. The restoration company immediately reissued its invoice for the new amount of $163,400.38. The homeowner said the new amount was excessive, included work not previously agreed to, and did not pay. The restoration company then filed a lien for the new amount.
The owner argued the lien was “wilfully exaggerated and an abuse of process.”
There were, of course, back and forth claims and counter claims during the course of the dispute concerning the scope of work, billable hours and other issues. However, it is the final decision of the court that is instructive.
The court ruled the restoration company was “only entitled to lien for the agreed price or value of services supplied under its contract. The agreed or authorized scope of contractual work is thereby directly relevant to the quantum of (the contractor’s) lien.”
The lien was not dismissed but instead reduced by $48,041.80, the amount deemed to have been “wilfully exaggerated.”
A second dispute between parties saw their contracted relationship break down partway through the job. The original contracted value was $109,400. The client paid the contractor $60,905.50 for work completed, including some extra work performed outside the agreement.
However, the contractor filed a lien for over $70,000. It argued that “its agreement…was for a fixed price and that (the contractor) was entitled to register its lien based on the value the agreement attributed to the services and materials provided.”
The client wanted the lien discharged entirely, claiming the contractor, “knowingly registered an exaggerated lien (and) acted in bad faith.”
During communications between the parties after filing the lien, the contractor offered to reduce the lien to $47,796.83, but the client refused.
In the end, the court did not dismiss the lien entirely but instead reduced the amount close to what had been offered by the contractor during discussions. Although a substantial reduction, the court ruled it was not satisfied that “the amount of the (original) lien, although too high, can properly be characterized as having been wilfully exaggerated.”
“Even if I should have found that the lien was wilfully exaggerated,” the judge wrote, “I would not be prepared to find that (the) claim for lien was an abuse of process. As such, there is no basis for discharging the lien.”
In commentary offered to the Daily Commercial News, Andrea Gorys and Kyle Kuczynski, associates with Cassels Brock & Blackwell LLP, write, “when it comes to outstanding amounts owed, a lien claimant may be tempted to ‘throw everything against the wall to see if it sticks.’”
The risk is that the court may see through that. It has the power to rule that the lien “is frivolous, vexatious or an abuse of process” and could discharge the lien entirely and possibly award costs.
However, these two cases emphasize how challenging it can be to discharge or vacate a lien entirely. In the case of the restoration contractor, the court, while not satisfied there was actual abuse, reduced the lien nevertheless.
In the second case, Gorys and Kuczynski write, “The court found that the lien claimant made an honest mistake. It was likely swayed by the communications between the parties following the lien registration.”
Gorys and Kuczynski also pointed out that a party wanting to vacate an inflated lien filed against it could find it costly when posting security.
Next week, we will look at two liens that were, in fact, discharged and the commentary from the respective judges.
John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to email@example.com.