By Carter Moe and Tyler Williamson
In Lonsdale Quay Market Corporation v. Klondike Contracting Corporation, 2025 BCCA 461, the British Columbia Court of Appeal delivered an important reminder to owners and developers: continuing to pay a general contractor after receiving notice of a subcontractor’s lien can significantly increase an owner’s financial exposure.
The Court confirmed that the statutory holdback is not a guaranteed cap on liability. Where an owner pays a contractor after receiving actual notice of a lien, the owner may be required to pay both the holdback and the full amount of the lien to clear title.
The decision provides meaningful guidance on the interaction between sections 23 and 34 of the Builders Lien Act, SBC 1997, c 45 (the “BLA”) and underscores the risks of disregarding a lien notice.
Case Background
Lonsdale Quay Market Corporation (“Lonsdale”) retained Klondike Contracting Corporation (“Klondike”) as the general contractor for a $5.2 million construction project in North Vancouver. Klondike subcontracted portions of the work, including to J.A.W. Fabricators Co. Ltd. (“J.A.W.”).
Klondike failed to pay several subcontractors. Multiple lien claims were filed against Lonsdale’s property, including a lien by J.A.W. in the amount of $428,353.01. Notice of J.A.W.’s lien was served on Lonsdale.
Despite having actual notice of the lien, Lonsdale continued to make payments to Klondike totalling $807,535.67. Klondike subsequently became insolvent before completing the contract.
Lonsdale applied under section 23 of the BLA to clear the liens from title by paying into court only the 10% statutory holdback ($521,008.12). J.A.W. opposed the application, arguing that section 34(2)(c) required Lonsdale to deposit not only the holdback but also the full amount of its lien, because Lonsdale had continued to pay Klondike after receiving notice.
The chambers judge agreed with J.A.W. Lonsdale appealed.
The Court of Appeal’s Decision
The Court of Appeal largely dismissed the appeal and upheld the chambers judge’s interpretation of the BLA.
Payments After Notice
The Court confirmed that where an owner makes payments to a contractor after receiving actual notice of a lien, section 34(2)(c) prevents those payments from reducing the “amount owing” to the contractor to the extent of the lien.
In practical terms, Lonsdale could not rely solely on the statutory holdback to discharge the lien. Instead, it was required to deposit into court the actual holdback and the full amount of J.A.W.’s lien.
Section 34(3) Does Not Override Lien Protections
Lonsdale argued that section 34(3) of the BLA allowed it to offset the significant costs it incurred completing Klondike’s work. The Court rejected this argument.
The Court held that section 34(3) only permits an owner to apply funds held in excess of the required holdback to remedy a contractor’s default. It does not override or cancel the protections afforded to lien claimants under section 34(2)(c).
Since Lonsdale did not hold funds beyond the statutory holdback, section 34(3) offered no relief.
No Double Recovery
The Court also rejected the argument that the order would result in double recovery for J.A.W. The issue before the Court was the amount required to clear title under section 23 of the BLA, not how funds paid into court would ultimately be distributed among claimants.
Procedural Argument Rejected
Lonsdale attempted to argue on appeal that section 34 applies only to “lien holders” and not “lien claimants”. The Court refused to entertain this argument because it had not been raised at first instance. Allowing it would have prejudiced J.A.W., which could have taken steps to formally prove its lien had the issue been raised earlier.
The appeal succeeded only in correcting a minor omission in the form of order. The substantive ruling remained unchanged.
Key Takeaways
- The Holdback Is Not a Liability Cap
Owners often assume that the 10% holdback represents their maximum exposure. This decision confirms that assumption can be incorrect. Continuing to pay a contractor after receiving notice of a lien may expose the owner to liability well beyond the holdback.
- Timing is Critical
Once notice of a lien is received, payment decisions must be approached with extreme caution. Owners who continue to advance funds do so at significant risk.
- Section 23 vs. Section 24 Strategy
The Court left unresolved the “lien claimants” versus “lien holders” distinction. Depending on how that issue develops in future cases, section 23 applications to clear title may face procedural delays. Posting security for the full value of a lien claim pursuant to section 24 may be the more efficient mechanism to remove a lien from title.
- Prompt Payment Will Change the Landscape
With prompt payment and adjudication regimes coming into force, disputes of this nature may be resolved more quickly in the future. However, the fundamental protections under the BLA will remain intact, and owners must still comply strictly with its requirements.
Practical Guidance
- Owners should immediately assess payment strategy upon receiving lien notice and seek legal advice before advancing further funds.
- General contractors should move quickly to address subcontractor lien claims to avoid disrupting project cash flow.
- Subcontractors should ensure liens are properly filed and served in accordance with the BLA and contractual requirements to secure statutory protection.
Conclusion
This decision serves as a clear warning: ignoring a lien notice can significantly increase financial exposure. The BLA carefully balances owner protections with meaningful remedies for those who supply work and materials. Courts will enforce that balance, even where it produces harsh consequences for owners who continue to pay defaulting contractors.
In lien disputes, strategy and timing are critical. Early legal advice can prevent costly missteps. If you require assistance with a lien dispute or other construction matter, please contact a member of our Infrastructure, Construction & Procurement group at Clark Wilson.
