In Lonsdale Quay Market Corporation v. Klondike Contracting Corporation 2025 BCCA 461, the British Columbia Court of Appeal confirmed that if an owner, despite receiving notice of a subcontractor’s claim of lien, continues to pay a defaulting contractor, the payments will not reduce the “amount owing” to the contractor. To discharge the lien, the owner will have to pay into the court the sum of its holdback and the amount of the notified claim of lien.
Facts
The appellant, Lonsdale Quay Market Corporation (“Lonsdale”) hired Klondike Contracting Corporation (“Klondike”) to act as the general contractor for a construction project located at 123 Carrie Cates Ct., North Vancouver (the “Property”).
Klondike retained subcontractors including J.A.W. Fabricators Co. Ltd. (“J.A.W.”), and the other respondents, to complete work on the project. Klondike stopped paying its subcontractors which resulted in 18 lien claims being filed totalling approximately $2.1 million. J.A.W. served a lien claim on Lonsdale and Lonsdale continued to pay Klondike after receiving notice of J.A.W.’s lien. Klondike later became insolvent and Lonsdale terminated the contract.
The Petition
Lonsdale filed a petition pursuant to Section 23 of the Builders Lien Act (“BLA“) to discharge its liability in respect of the lien claims, as well as cancellation of the liens on the Property, upon paying a 10% statutory holdback of the Contract price into court. Only J.A.W. opposed the discharge.
Lonsdale argued that it was entitled to relief under s. 23(1) upon payment of “the amount of the required holdback” ($521,008.12) because that amount is greater than the “amount owing” by Lonsdale to Klondike. Lonsdale took the position that there was in fact no “amount owing” because Lonsdale would bear the cost of completing the remainder of the work upon Klondike’s default, and that amount far exceeded $515,758.14—the amount actually held back from the Contract price.
J.A.W. disagreed, relying on s. 34(2)(c) of the BLA to support its position that Lonsdale must pay into court both the statutory holdback plus the amount of J.A.W.’s lien (being $428,353.01) because Lonsdale chose to ignore its lien.
The chambers judge concluded that the “amount owing” by Lonsdale to Klondike under s.23(1) of the BLA included the amount of J.A.W.’s lien as well as Lonsdale’s Holdback (totalling $944,111.15) and this is the amount to be paid into court to discharge the liens.
On Appeal
On appeal, Lonsdale argued amongst other things, that the judge erred in her interpretation of s.34(3) of the BLA by failing to take account of the significant costs it incurred to remedy Klondike’s defaults. The Court of Appeal disagreed, stating that the judge’s interpretation of s.34(3) was consistent with the context and underlying purpose of the BLA.
It further stated that Lonsdale’s proposed interpretation would tip the balance to favour the owner much more than the subcontractor and leave subcontractors with incomplete recourse even if they take the necessary steps to provide notice to the owner of their claim of lien. The court further agreed with J.A.W.’s submission that it is unjust to allow Lonsdale to benefit from its own intentional actions in making further payments to the defaulting contractor, despite having notice of J.A.W.’s lien.
J.A.W. in its cross appeal argued that the chambers judge was mistaken in her calculation of the “amount owing” to be the sum of the amount Lonsdale actually held back from Klondike ($515,008.12) and the amount of the J.A.W. claim of lien ($428,353.01), instead of the sum of the amount of the required statutory holdback ($521,008.12) and the amount of the J.A.W. claim of lien. The court rejected this argument and stated that the judge was not mistaken in her calculation.
The court allowed the appeal only to the limited extent ofadding an omitted term to the order, with ordinary costs for the appeal to J.A.W, and dismissed the cross appeal without costs to either party.
Key Takeaways
- For Owners: If you receive notice of a subcontractor’s lien claim and continue paying the general contractor anyway, those payments will not reduce the “amount owing” for purposes of discharging the liens under s. 23 of the BLA. You will effectively pay twice. This is not optional advice. It’s a financial trap.
- For subcontractors: Serve your claim of lien promptly and ensure the owner has actual notice. This decision confirms that s. 34(2)(c) protects you — payments made by the owner after receiving your notice do not reduce the amount owing.
If you are an owner or a subcontractor in a similar position, contact our team to discuss your options.
