CREDITORS’

REMEDIES

Winter 2021

Instructor – Richard Horn

1
 INTRODUCTION
Focus on what happens when transactions go wrong
Practical approach to remedies
• Cost of recovery and ability to recover v. amount claimed
Focus on civil remedies (v. family maintenance)

2
SOURCES OF REMEDIES LAW
Remedies law comes from various sources:
• British law
• Federal law
• Provincial law
• Common law and equity

3
KEY STATUTES
• Court Order Enforcement Act
• Court Order Interest Act
• Creditor Assistance Act
• Business Practices and Consumer Protection Act
• Enforcement of Canadian Judgments and Decrees Act
• Fraudulent Conveyance Act
• Fraudulent Preference Act
• Infants Act / Age of Majority Act
• Law and Equity Act
• Limitation Act
• Indian Act (Federal)

4
SOURCES OF INFORMATION
Creditor’s Sources of Information:
• Registrar of companies
• Personal property registry
• Land titles office
• Motor vehicle registry
• Credit bureaus
• D & B (Dun and Bradstreet)
• Google (searches, streetview, etc.)
• Facebook
• Employer

5
ASSESSING AN ACTION
Considerations in assessing a legal action:
• Joint and several liability
• Guarantors / indemnitors
• Defenses
• Counterclaims
• Seize or sue laws (consumer goods - PPSA)
• Infants Act / Indian Act
• Corporate entity

6
TYPES OF CREDITORS

Two main types of creditors;

• Secured (Personal Property Security Act – “PPSA”)
• Take action based on security –need not
commence legal action
• Issue of priority as between secured creditors
(eg: PMSI)
• Unsecured
• Commence legal action to recover debt.

7
CONT’D
PPSA Concepts for Secured Creditors:
• Use of general security agreement (“GSA”) to
create a security interest
• Priorities:
• First to register gets priority
• Purchase money security interest (“PMSI”) –
super priority – allows debtor to get new
financing when debtor already has creditors

• Attachment and perfection:

• Attachment occurs when creditor gives value
(eg: loan) and debtor has rights to collateral
• Perfection occurs on possession or
registration of Financing Statement

8
CONT’D
Consumer goods = goods used
primarily for personal purposes
• Applies for the benefit of individuals, not
corporations
• “Seize or sue” – secured creditor can only
elect one remedy:
• Seize goods in satisfaction (unless 2/3
paid – in which case court application is
required to seize)
• Allow debtor to retain goods and sue or
• Accept goods from debtor in satisfaction
of debt

9
SUPREME COURT CIVIL RULES
Object of rules:
• “to secure the just, speedy and inexpensive
determination of every proceedings on its merits”
• Proceedings to be conducted in a way
proportionate to the amount of money involved,
the importance of the issues and the complexity

10
CONT’D
• Availability of a case planning conferences (CPC’s) (Part 5) –
upfront planning agreement on pre-trial procedures (i.e.
exchange of documents dates, use of experts, etc.)
• Reducing scope of document production to those used to
prove or disprove material facts at trial and those documents
intended to be relied upon at trial
• Limiting examinations for discovery to a maximum of 7 hours
for each party (unless consent) and allowing letter answering
of questions a deponent does not know the answer to in a
discovery (Part 7) - (Note: - interrogatories only allowed with
consent of parties or leave of court)

11
FAST TRACK LITIGATION PROCESS (PART 15):

• a single simplified fast track litigation procedure when:

• amount claimed is $100,000 or less or
• trial can be completed in 3 days or less or
• Consent or court order

 Either party can put the case into fast track by filing a “notice of fast track
action” (Form 61) or apply to court to have case removed – Note: once in
fast track, must include “subject to Rule 15-1” in all future documents
 In a fast track action, parties cannot file contested applications without
attending a CPC and oral examination for discovery is limited to 2 hours
(unless consent) and must be completed at least 14 days before trial –
no juries permitted
 Claim for costs (excluding disbursements) are limited to: $8,000 for 1 day
trial, $9,500 for 2 day trial and $11,000 for 3 day trial)

12
CONT’D
Forms used for claims:
• Notice of Civil Claim (Form 1)
• must be served within 12 months
• Response to Civil Claim (Form 2)
• due within 21 days of service of Notice of Civil Claim
• Counterclaim (Form 3) (if any – to be filed with Response to
Civil Claim)
• Response to Counterclaim (Form 4) (if any)
• due within 21 days of service of Counterclaim

13
 FLOW OF A LEGAL
ACTION
Steps:
• Demand letter
• Note: “Without Prejudice” letters (when making
offer/concession and do not want used in court as
evidence)
• Notice of Civil Claim
• Response to Civil Claim (within 21 days)
• Case Planning Conference (Part 5)
• Document discovery (within 35 days of close of pleadings)
• Examination for discovery (Rule 7-2)
• Trial

14
LEVELS OF COURT
Provincial court / Small Claims
• Maximum claim $35,000.00

BC Supreme Court

BC Court of Appeal

Supreme Court of Canada

15
VENUE CHOSEN
Small Claims:
• Where Defendant resides or carries on business
• Where cause of action arose (i.e. where default
occurred)
• Plaintiff chooses if several apply
BC Supreme Court:
• Where Plaintiff chooses unless foreclosure, in which
event “local venue” applies

16
JURISDICTION OVER ACTIONS

Small Claims:
• Prohibits actions for libel, slander, malicious prosecution,
PPSA and builder’s liens.

BC Supreme court:
• Jurisdiction over all actions

17
BC SUPREME COURT RULES
BC Supreme Court Unique Rules:
• Rule 9-6 – Summary Judgment – set out evidence of
“genuine issue” for trial, if none, court grants judgment
• Rule 9-7 – Summary Trial – power of court to grant
judgment based on affidavit evidence or to give
directions to expedite
• Part 15 – “Fast Track Litigation Proceedings” used if
straightforward action that can be tried in three days or
less.
• Limited examinations for discovery - 2 hours per party
unless consent or court order and documents produced
more limited in scope, only trial by judge alone, etc.

18
LIMITATION PERIODS
Extinguishes causes of action upon expiry of limitation period
• Date cause of action arises is date limitation period starts to
run
• Running period for cause of action starts again when cause of
action “confirmed” (e.g.: payment made / written
acknowledgement given – maximum 15 years).

The limitation period for debts arising after June 1, 2013 is 2

years.
Actions based on unpaid Judgments are 10 years (note: can
extend for further 10 years)

19
BC LIMITATION ACT
• Revisions in force as of June 1, 2013
• Applies to actions arising on or after such date
• 2 year limitation period for most civil claims
• enforcement of civil judgements governed by 10 year
limitation period
• 15 year ultimate limitation period
(ie: claims not discovered right away, etc.)
PROCEEDING TO JUDGMENT
Default Judgment:
• Failure to file Response to Civil Claim

Motions for Judgment:

• By Consent
• Strike out pleadings
• Repeated non-compliance with Rules
• Withdrawal of Defense/Response to Civil Claim
• Summary judgment (Rule 9-6) / summary trial (Rule 9-7)

21
JUDGMENT INTEREST
Prejudgment interest:
• Federal: Interest Act – used if agreement to pay interest (if no
rate stated then it’s 5%)
• Provincial: Court Order Interest Act (Part I) – used if no
agreement to pay interest

22
CONT’D
Post Judgment Interest:
• Court Order Interest Act (Part II):
• Judgments paid at prime rate as set by courts on January
1 and July 1 each year.
Interest Act:
• Interest stated at a rate of less than a year (ie: monthly) must
state an equivalent yearly rate, otherwise only 5% per annum is
chargeable
Criminal Rate:
• Prohibits agreements for interest in excess of 60% per annum
(note: “interest” may include penalties, charges for late payment,
administration fees, etc.)

23
FOREIGN JUDGMENTS
Judgments from outside BC can be enforced in BC by registration
of the judgment in BC, if from a Canadian/reciprocating jurisdiction
(Canadian Judgments and Decrees Act / Court Order Enforcement
Act) or used as basis for new action in BC.

24
PREJUDGMENT EXECUTION
Normally a judgment is required to proceed against
a debtor’s assets.
Exceptions:
• Mareva injunction:
• Granted without notice to Defendant and only in superior
court (BC Supreme Court)
• Prevents Defendant from disposing of assets prior to
disposition of action (a “freeze”)
• Extraordinary remedy – difficult to get, must show real
risk of assets being disposed of and irreparable harm

25
CONT’D
Anton Pillar order:
• A “civil search warrant” in collection proceedings allowing
creditor to search debtor’s premises
• Creditor must show:
• “prima facie” case
• Actual or potential damage to documents or things to
negatively impact case and
• Debtor possesses incriminating documents that debtor
will destroy if order is not granted
• Difficult order to get

26
CONT’D
• Prejudgment garnishment:
• Available in both Small Claims and BC Supreme Court
• Obtained by filing affidavit evidence and applying to
registrar after filing Notice of Civil Claim/Notice of Claim –
affidavit must exactly comply with requirements of Court
Order Enforcement Act and case law
• Applies against “debts due” – cannot garnishee wages
before judgment
• Funds held in court pending judgment / settlement

27
POST JUDGMENT EXECUTION
Debtor Examinations:
• Examination in aid of execution:
• Rule 13-4 – serve appointment and conduct money on debtor (similar to
examination for discovery - Part 7), or on any other person with knowledge
of debtor’s circumstances
• Subpoena to Debtor (Form 56):
• Rule 13-3 (1) – debtor served with subpoena and conduct money
• Forces debtor to disclose financial information and make payments
• Held before registrar who can make order for repayment
• Cannot be issued if a writ of execution is outstanding – if a subpoena is
issued, debtor protected from writs of execution and garnishment, unless
and except against portion in default
• Small Claims:
• Rule 12 – either debtor or creditor can apply for a payment hearing

28
GARNISHMENT
Statutory remedy under Court Order Enforcement
Act
• Against accounts and/or wages
• Available in Small Claims and BC Supreme Court
Process:
• File affidavit (Form B Schedule I) with draft garnishee
order and Form 2 Requisition
• Binds monies due by garnishee to debtor from time
of service
• Debt obligation of garnishee to debtor must arise
from trust or contract

29
CONT’D
• In BC garnishing orders do not attach “subsequent funds”
(funds payable after service of garnishee) except in some
maintenance enforcement
• Garnishment attaches to wages owing, payable or due
within 7 days after affidavit is sworn (new orders required
for subsequent pay periods)
• Maximum amount of wages subject to garnishment is
30% of net after statutory deductions

30
CONT’D
• Funds subject to Garnishment
• Wages of provincial government employees (note: federal
government employees bound by separate federal
Garnishment, Attachment and Pension Diversion Act)
• Rent payments from tenants
• Assets in bank but only at branch served
• Pensions and annuities
• Shareholders loans due and payable
• Lawyers’ trust accounts, unless held as retainer or subject
to conditions

31
CONT’D
• Funds not subject to garnishment:
• Payments due to doctors (statutory obligation to pay, not
contract/trust)
• Wages and salary or bank account of status Indian on a
reserve unless creditor is status Indian
• RRSP’s and RRIF’s (exempt from enforcement
procedures)
• Jointly owed obligations, unless all joint parties are
Defendants
• Monies paid into court
• Builder’s lien trust monies subject to beneficiaries claims
• Funds assigned as security

32
 EXECUTION AGAINST
REAL PROPERTY
Two main ways to execute against real property:
• Foreclosure proceedings (under a mortgage)
• Court Order Enforcement Act (s. 80 – 113):
• Register judgment against title (note: registered judgment expires
after 2 years)
• BC Supreme Court action is brought for sale (3 hearings: show
cause as to why not sell and apply to payment of judgment,
registrar hearing to determine title details and confirmation hearing
before court for sale order)
• Bailiff carries out order for sale
• Note: only debtor’s interest in jointly owned property can be
sold – apply to court for sale under Partition of Property Act
• Real property on a reserve of status Indian is exempt

33
 EXECUTION AGAINST
PERSONAL PROPERTY
Process:
• Court Order Enforcement Act s. 55 – all goods of judgment
debtor liable to seizure and sale under writ of execution unless
exempt
• Writ of execution s. 42 – obtained on application to court
registry (valid for 1 year and can be renewed s. 42(15))
• Provided to bailiff to enforce

34
CONT’D
Exempt goods (s. 71 and BC Reg 28/98):
• $4,000 household items
• $10,000 work tools
• $5,000 car -$2,000 if maintenance debtor
• $12,000 equity in house ($9,000 outside
Vancouver/Victoria)
• Essential clothing
• Essential medical aids
(Note: debtor has 2 days from seizure to chose exemption
selection or lose exemption)

35
EQUITABLE EXECUTION
Two forms of equitable execution in BC (“clean
hands” doctrine applies) – limited use due to
modern day execution laws
• Charging Orders:
• Used to attach funds in court in another action in favour
of debtor (via order nisi and order absolute)
• Equitable Receiver:
• Law and Equity Act s. 39 and Supreme Court Rule 10-2
• Court applies equitable principles and discretion when
granting order

36
CONT’D
• Receiver stands in place of judgment debtor to receive assets
for benefit of creditor
• Allowed by court when:
• Creditor seeks to execute against an equitable interest of
debtor (i.e.: execution by writ of execution or other statutory
method is not available), or
• Court deems “special circumstances”

37
EXECUTION PRIORITIES
Creditor Assistance Act (s.3):
• Monies collected by bailiff under writ of seizure and sale
distributed pro rata amongst all execution creditors whose writs
are provided to bailiff at time of levy or within one month of when
bailiff enters notice of his levy in bailiffs record book.

38
DEBTOR’S REMEDIES
Attack judgment itself (eg: entered in default)
Remedies against enforcement:
• No exigible assets
• Seek stay of execution due to extenuating circumstances - s.48
Court Order Enforcement Act
• Negotiate payment by installments

39
ADDITIONAL CREDITOR REMEDIES
Additional Statutory remedies of Creditor
• Recovery of goods – Law and Equity Act s. 57 – Rule 10-
1/Rule 13-2 – interim return of property in property recovery
action
• Fraudulent Preferences and Conveyances – Fraudulent
Preference Act and Fraudulent Conveyance Act – claim to
assets wrongfully transferred
• Repairer’s liens – Repairers Lien Act – right to hold goods
until paid and right to sell goods for payment
• Indian Act – status Indian’s real and personal property on
reserve not exigible unless creditor is status Indian. Off
reserve assets generally are exigible.

40
SETTING ASIDE TRANSACTIONS
Other BC statutes used to set aside a transaction:
• Fraudulent Preferences Act
• Fraudulent Conveyances Act
• Both used when transaction of debtor makes assets
unavailable to other creditors
• Both Acts are in addition to rights under BIA

41
BANKRUPTCY AND INSOLVENCY

Two key federal legislative Acts:

• Bankruptcy and Insolvency Act (“BIA”)
• Companies Creditors Arrangement Act
(“CCAA”)

42
CONT’D
Reasons for Bankruptcy:
• Creditor wants to get paid
• Creditor gets information about bankrupt and trustee
can investigate
• Creditor wants to set aside suspicious transactions
• Creditor seeks favorable priority for distribution (s.136
BIA)
• (“preferred claims” eg: 6 months wages (up to $2,000
per person), maintenance, 2 years municipal taxes, 3
months rent both before and after bankruptcy, statutory
deductions – claims thereafter paid pro rata)

43
CONT’D
Reasons to avoid Bankruptcy:
• Cost (legal, trustee)
• Time and effort by creditor
• Could decrease or eliminate chance of payment if
insufficient assets
• Could destroy relationship of creditor-debtor or put debtor
out of business
• Could motivate other creditors to realize on security (e.g.:
secured creditors)
• There may be alternate recovery processes
(garnishment, set-off)
• Could put existing creditor transaction with debtor at risk
(e.g.: allow other creditors to challenge under BIA)

44
PURPOSE OF BIA AND CCAA
BIA:
• Applies to both individuals and corporations
• Permits honest but unfortunate individual to obtain
discharge from debts (automatic discharge after 9
months if no opposition and first time individual bankrupt
s.168.1)
• Note: Corporations cannot get discharge unless
creditors’ claims are satisfied s.169(4)
• To provide for fair and orderly distribution of bankrupt’s
assets
• Allow for investigation of bankrupt’s affairs
• Set aside fraudulent transactions

45
CONT’D
CCAA:
• Applies only to debtor companies, not to individuals
• Gives debtor company opportunity to get out of financial
difficulties without bankruptcy by submitting a plan to meet
creditors’ demands
• Debtor company remains in business even though
insolvent, to permit orderly distribution of assets or to get
approval of creditors to remain in business

46
 HOW TO DECLARE
BANKRUPTCY AND PROPOSALS
Three ways to go bankrupt:
• Receiving order:
• Creditor petitions to court alleging debts owed to creditor over
$1,000 and debtor committed “act of bankruptcy” (e.g.: failing to
meet liabilities as they become due) within 6 months of petition s.
43
• Trustee is appointed over property of bankrupt - s.43 (9) BIA

47
CONT’D
• Assignment:
• Insolvent debtor files assignment with official receiver who
then appoints a trustee – s. 49 BIA
• Proposals:
• Can be filed by corporate debtors (most common) s. 50-
66.4 BIA or individual insolvent consumer s. 66.4-66.11
BIA (if total debts excluding debts secured by principal
residence are less than $250,000)
• Note: A failed proposal will also result in bankruptcy

48
BIA AND CCAA – CORPORATE
RESTRUCTURING
Corporate restructuring by debtor done under either:
• BIA “proposal” sections (Part III)
or
• CCAA “plan of arrangement” (used for larger more complex
restructuring)
• Key objective is for creditors and debtor corporation to
agree to a restructuring plan/proposal
• CCAA more flexible than BIA: CCAA has few rules and uses
court for direction v. BIA structured rules

49
CONT’D
BIA Proposal:
• Can be made to all creditors including secured creditors
(Note: 1) secured creditors not normally affected by
bankruptcy and 2) proposal must ensure payments
deducted from employee salaries for pension are remitted
to pension fund)

• Creditors must agree by majority and 2/3 value of those

present at vote (Note: creditors with “equity claim” not
permitted to vote unless court permits)

50
CONT’D
• Debtor retains control of assets and business – Debtor can
only dispose of assets outside of the ordinary course of
business with court approval and only if wages and
pension plan payments are made – no sales to related
persons unless good faith efforts are made to sell to
unrelated party and value of payment made is superior

• Rejection of proposal results in immediate assignment into

bankruptcy

51
CONT’D
CCAA Plan of Arrangement:
• To seek relief under CCAA, company must be insolvent and have claims
exceeding $5,000,000

• CCAA stays creditor proceedings for 30 days (extensions usually

sought) to allow restructuring plan to be developed (Note: court will only
sanction a plan of arrangement if employees wages , salaries,
commissions and compensation for services get paid)

• Debtor can only dispose of assets outside of the ordinary course

of business with court approval and only if wages and pension
plan payments are made – no sales to related persons unless
good faith efforts are made to sell to unrelated party and payment
made by related person is superior

52
CONT’D
• Creditors must agree by majority and 2/3 value of those present
at vote (Note: creditors with “equity claim” not permitted to vote
unless court permits)

• If plan rejected, no automatic consequences

• If plan accepted and sanctioned by court, it’s binding on all

creditors affected by plan

• Court can declare a person a critical supplier to debtor and

compel critical supplier to supply goods, but only if a security
charge is given to the critical supplier. The security charge may
be ordered by court to rank in priority to other security.

53
 ADDITIONAL PROVISIONS
APPLICABLE TO BOTH BIA AND CCAA
• Debtor undergoing reorganization can apply to court for interim
financing to grant security over property to a lender
• Creditors are prohibited from terminating, amending or
accelerating payments of an agreement by reason only of a
debtor’s bankruptcy/insolvency or commencing of restructuring –
Creditor can however require payments to be made in cash or for
debtor to provide advance confirmation of credit – Creditor can
also apply to court for order to declare that this provision would
cause creditor significant hardship to avoid application of this
provision

54
CONT’D
Trustee (BIA)/Debtor (CCAA) can apply to court for order to
assign rights and obligations of debtor under an agreement
(financial agreements and collective agreements excluded)

Corporate debtors have right to disclaim agreements

(commercial leases, financial agreements and collective
agreements excluded) with approval of the Trustee, failing which
debtor can apply to court for approval (s.65.11 BIA/s.32 CCAA)

55
GENERAL BANKRUPTCY
PRINCIPLES
General:
• Bankrupt ceases to have capacity to dispose or deal with
property (property passes to trustee subject to rights of: 1)
secured creditors, 2) property held in trust for others and 3)
exempt property)
• Proof of claim must be filed with trustee if creditor is claiming
against bankrupt property
• Unpaid supplier can repossess within 30 days of date of
delivery, if either bankruptcy or proposal occurs, and if goods
in bankrupt/debtor possession, are identifiable, in the same
state and not resold s.81.1/s.81.1(4)

56
CONT’D
All proceedings against bankrupt are stayed s.69.3(1) – Note:
not applicable to secured creditors s. 69.3(2)

Trustee can set aside transactions where assets disposed of

by giving a creditor a preference s.95 – within 3 months of
bankruptcy if arm’s length and within 12 months of bankruptcy
if non arm’s length

Trustee can set aside transactions where assets disposed of

by way of “transfers at undervalue” s.96, if:

57
CONT’D
Arm’s Length Transaction:
within 1 year of bankruptcy if
• Insolvent at the time of transfer and
• Intended to defeat creditor
 Non Arm’s Length Transaction:
 within 1 year of bankruptcy or
 within 5 years of bankruptcy if
 Insolvent at time of transfer or
 Intended to defeat creditor

 Note: BIA provisions regarding preferences and “transfers at

undervalue” also apply to CCAA

58
DISCHARGE OF BANKRUPT
Automatic discharge after 9 months from date of bankruptcy for
individuals, not applicable to corporations unless creditors claims
satisfied
Bankruptcy does not discharge:
• Fines, restitution orders of court
• Judgments relating to intentional harm, sexual assault, wrongful death
• Debt for alimony
• Debt for maintenance and support
• Debt for embezzlement or fraud
• Debt for property obtained under false pretenses
• Liability for claims not disclosed to trustee
• Debts under Canada Student Loan Act (Note: cannot declare bankruptcy
to get discharge of student loans until 7 years after graduation )

59
BUILDER’S LIENS
Builder’s Lien Act - BC statute
Creates rights not available at common law:
• Right to lien property to which labour or materials supplied
• Ability of owner to limit liability for liens to holdback
amount
• Right of unpaid workers and subcontractors to claim
against monies paid to contractor by owner, as being
monies held in trust for their benefit

60
CONT’D
Lien arises when work done or materials supplied
• Filing a lien at Land Titles Office (LTO) preserves lien
Three classes of lien claimants:
• Contractor
• Subcontractor or sub-subcontractor
• Worker (rarely file lien, usually Employment Standards Act
certificate issued)
• Note: subclasses to above categories:
• Architects, engineers, material supplier

61
 RIGHTS INDEPENDENT OF
BUILDER’S LIEN CLAIM
Shimco Metal Contractors Ltd. v. North Vancouver
District (2003 BCCA) – allows for claims against
holdback by way of Notice of Civil Claim (instead of filing a
lien at LTO), without any limitation period, as long as
holdback remains in possession of owner
• Note: Property owners must now search BC Supreme Court
for actions in addition to searching LTO for liens before
releasing holdback funds

62
CLAIM OF BUILDER’S
LIEN
Builder’s Lien: - made by filing claim of lien in Form 5
at LTO
• Damages and interest not recoverable as a builder’s lien
• Must be filed within 45 days of:
• Date certificate of completion issued by “payment certifier”
(architect/engineer) or
• Head contract substantially completed (objective test based
on % formula of remaining amount of work required to
complete - eg: 3% first $500,000, 2% next $500,000, 1% on
balance), terminated or abandoned (no work for 30 days
unless eg: strike, etc.) or
• Improvement substantially completed (subjective) or
abandoned

63
CONT’D
Strata Property Act:
• Substantial completion occurs no later than date of first
occupation
• Lien period limited to earlier of: - the time to file a lien
under the Builder’s Lien Act expires and 45 days after
conveyance (Note: strata purchasers from owner /
developers must holdback 7% from purchase price until
earlier of the time to file a lien under Builder’s Lien Act
expires and 55 days after strata lot is conveyed)

64
 LIABILITY OF OWNERS FOR
BUILDER’S LIENS CAUSED BY OTHERS
Improvements done with prior knowledge of owner,
but not at owner’s request deemed done at owner’s
request unless owner files a Notice of Interest at LTO
(s.3)
Purchaser of property can be liable for lien filed
within time for filing of lien, which occurs after
property is transferred to purchaser
• Thus purchaser should temporarily withhold holdback
amount from purchase price if recent work has been done
to property.

65
 HOLDBACK
Holdback amount is intended to limit liability of owner, contractors
and subcontractors
Multiple holdback system in BC:
• Each of owner, contractor and subcontractor(s) must retain a holdback
equal to the greater of 10% of:
• Value of work or materials supplied or
• Payments made

Holdback cannot be retained from workers, engineers, architects or material

suppliers
Owner must establish a separate holdback account to be jointly administered
between owner and contractor unless:
• Mortgagee retains holdback or
• Total value of work and materials is less than $100,000

Holdback period expires 10 days after the lien filing period (45 days v. 55 days)

66
TRUST RIGHTS
A trust arises for the benefit of those engaged to do
improvements, when a contractor or subcontractor
receives money on account of the contract price
• Note: money held as a holdback is not considered held in
trust because it has not yet been “received” by the
contractor / subcontractor. Claim of lien allows claimants to
attach to holdback
The right to claim monies held in trust is a separate
and distinct remedy from lien rights

67
PRIORITY OF BUILDER’S LIENS
• Liens take effect from date work commenced or materials
delivered (not necessarily from when lien is filed)
• A mortgage has priority over a claim of lien but mortgage
advanced after a claim of lien is filed will rank after the claim of
lien
(note: mortgagee can apply to court for priority in such cases if
advance to be applied to improvement and increases value of land)
• Lien claimants share pro rata
• Claim of lien takes priority over:
• receiving orders (BIA)
• Certificates under Employment Standards Act for unpaid wages
• Certificates under Workers Compensation Board claims

Canada Customs and Revenue Agency has a super-priority and takes

priority over a claim of lien

68
ENFORCING A BUILDER’S LIEN
Action to enforce claim of lien must be taken in BC Supreme Court
within the judicial district in which the land is located and a certificate
of pending litigation (“CPL”) registered against title
Action to enforce claim of lien must be commenced within one year
of date of filing of claim of lien or within 21 days of owner serving
Notice to Commence Action, otherwise lien is extinguished.

Note: Action to enforce “trust” claim against holdback must be

commenced within one year of:
• Completion, abandonment or termination of head contract
or
• Completion/abandonment of improvement

69