Volume 30 Number 5 CONSTRUCTION LAW LETTER

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CASE SUMMARY
COURT AFFIRMS LIEN
ACTS PRECEDENCE
OVER CONTRACTUAL
PAYMENT PROVISIONS
Bradhill Masonry Inc. v. Simcoe County District
School Board
In a cautionary note to parties who might try to rely
on contractual provisions to resist a lien claim,
a recent decision of the Ontario Superior Court
makes clear that contractual provisions impacting
payment, including pay when paid clauses, will not
relieve a payer from liability under the Construction
Lien Act.
A pay when paid clause provides that payment be-
comes due and payable by a payer (the party who
owes money on a contract) to a payee (the party
who is owed money) only when the payer itself
receives payment from higher up the construction
pyramid.
In the case of Bradhill Masonry Inc. v. Simcoe
County District School Board [Bradhill], a masonry
subcontractor, Bradhill Masonry Inc. (Bradhill),
advanced a lien claim against the general contrac-
tor, BWK Construction Co. Ltd. (BWK). BWK
referred to certain provisions in its subcontract,
arguing that at the time that Bradhill preserved its
lien rights by registering a claim for lien, no mon-
ey was due and owing to Bradhill under its sub-
contract with BWK. BWKs position was that
because no money was due and owing according
Jay Nathwani
Associate
Glaholt LLP
CONSTRUCTION LAW LETTER Volume 30 Number 5


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to the terms of the subcontract, Bradhills claim
under the Construction Lien Act could therefore
not succeed.
Justice Howden considered BWKs argument and
rejected it. He found that BWKs position was an-
tithetical to the Construction Lien Act and
amounted to a clever shell game. To begin with,
Justice Howden made clear that in the case before
him, since BWK had, in fact, eventually been paid,
the law governing pay when paid clauses had no
bearing on the case. The real argument was that
(1) the contract terms for when moneys became
due and payable under the contract should govern
and take precedence over the provisions of the
Construction Lien Act and (2) there was no liena-
ble amount owing unless and until an amount be-
came due and payable under the contracts
accounting terms.
Justice Howdens reasons pointed to several im-
portant provisions of the Act. Perhaps most im-
portantly, parties are not allowed to contract out
of the Act. Section 5 states that every contract is
deemed to be amended in so far as is necessary
to comply with the Act. As a result, the Act hovers
over all construction contracts like the Sword of
Damocles, ready to fall on any provision that tries
to deprive a lien claimant of its statutory rights.
While the action in Bradhill was a lien action ra-
ther than a trust action, Justice Howden also made
reference to the trust provisions of s. 8, which state
that all amounts owing to a contractor or subcon-
tractor on account of contract price or improve-
ment are trust funds whether or not those amounts
are due or payable. In so doing, the court drew
attention to the fact that the Act as a whole is less
concerned with contractual entitlement to immedi-
ate payment and more concerned with ensuring
that those who supply valuable goods services to
an improvement are paid for their work.
The court also referred to s. 14the key provision
of the Act, which creates statutory lien rights.
Notably, the Act gives those who supply materials
or services to an improvement the right to a lien
for the price of those services or materials, not
for amounts due and owing under a contract.
Taken together, these provisions make it clear that
regardless of what a contract says, the Act gives
rise to lien rights, and to entitlement to payment,
when services or materials are supplied. In other
words, while a contractor may not yet have con-
tractual liability for payment to its subcontractor,
it most certainly does have statutory liability to
that subcontractor once the subcontractor has done
the work.
In addition to relying on its pay when paid clause,
the general contractor BWK also argued that it had
no liability to Bradhill because of BWKs contrac-
tual right to reject invoices for extra work,
Bradhills alleged failure to complete required
forms, and backcharges owed to BWK. In Justice
Howdens view, accepting these arguments would
mean that if the general contractors lawyer is
sharp enough in drafting the contract, the Acts
remedy for subcontractors who have not been paid
for the fair value of their work would be rendered
worthless.
Underlying Justice Howdens reasons is a determi-
nation that parties should not be able to frustrate
the intention of the Construction Lien Act, which is
to ensure that contractors, subcontractors, and sup-
pliers are paid for the work they have done. The
Bradhill decision serves as a reminder that sophis-
ticated contract drafting will only take parties so
farstatutory liability for the value of services and
materials supplied will exist irrespective of wheth-
er a party is required to make immediate payment
on a contract.
Ontario Superior Court of Justice
July 11, 2013
Howden J.