This is a part of The Worker’s Liens Casebook, by Robert Fenwick Elliott. Copyright © 2010
Copies of text of no more than 500 words may be made, provided they are accompanied by due attribution.
- Unlike the trend with more modern legislation, there are no anti-avoidance provisions in the Act which prevent the parties from agreeing to contract out, a point that has been noted in the reports for at least 80 years[1].
- For the purpose of head contractor’s liens, this is easily done. If the head contractor agrees with the owner not to exercise its rights under the Act, then it seems that the courts will give effect to such agreement. If the head contractor, in breach of such agreement, seeks to register a lien, it may be some really removed pursuant to section 32[2]. It is a matter of some surprise that owners, typically not shy of onerous contract conditions, do not more often insert provisions in their head contracts to such effect.
- Excluding the rights of subcontractors and suppliers to liens and charges is somewhat more involved. It is not uncommon to see head contracts including provision to the effect that the head contractor must produce a statutory declaration confirming payment of all his subcontractors before he gets paid interim payments. These provisions are less than entirely effective. First, experience shows that head contractor have often provided those declarations without in fact having paid sums that are due down the contractual chain. Secondly, the provision affords little or no protection against the case where a subcontractor makes a claim which the head contractor does not accept as being due. In these circumstances, the head contractor properly makes his declaration, on the basis that he has paid all that he says is due to his sub-contractor, but the sub-contractor nevertheless registers his lien, which will adversely affect the owner’s title until it is eventually demonstrated, by lengthy litigation, whether the sum in question is payable or not. Thirdly, the provision affords no protection against liens brought by sub subcontractors.
- A more effective way for owners to protect their position would be to include a provision in their head contracts requiring their subcontractors to undertake not to exercise their rights under the Act, and furthermore, not to sub-subcontract without extracting a similar undertaking. To be effective, this needs to be coupled with a provision to the effect that any payment into court in response to any sub-contractor’s claim to a lien or a charge is to be treated, for the purpose of the head contract, as a payment under the head contract, regardless of whether such claim was all proves valid or not. Such a provision addresses the difficulty identified at paragraph 108 et seq above. Some owners might regard it as appropriate also to provide for indemnity against legal and other costs in such circumstances, on the basis that if the head contractor had policed the undertaking arrangement, then the claims for liens or charges would not have arisen in the first place.
[1] See paragraph 28 of Pitt v Glenelg at page 467 below.
[2] See page 56 below.