Legal Boundaries of Builder’s Liens: Pre-Construction Activities and Constructive Trusts Examined in Cape Group Management Ltd. v 0793231 B.C. Ltd.

In Cape Group Management Ltd. v 0793231 B.C. Ltd., 2024 BCSC 493, Mr. Justice Milman found that a general contractor’s pre-construction activity could not support a claim of builder’s lien because physical construction had not begun. The case is notable because it re-affirms the common law restriction of ancillary construction services to lien rights under the Builders Lien Act (“BLA”) and bars a constructive trust claim that attempts to evade this longstanding principle.

In the case, the parties entered a multi-staged partnership agreement whereby the defendants would provide lands that the plaintiff would develop into a nine-storey, mixed-used building. Once the building was constructed, the parties would share its ownership. To that end, the Plaintiff incurred $1,996,334.20 in pre-construction costs between 2019 and 2022. The Defendants refused to pay for these works, resulting in a breakdown in the parties’ partnership. In July 2023, the parties’ mortgagee commenced foreclosure proceedings against the land. At no material time did the plaintiff perform any physical construction activities on the land. 

On application, the Defendants sought to have the plaintiff’s claim of builder’s lien and associated certificate of pending litigation removed from title. They argued the plaintiff’s above-noted works did not constitute an improvement under section 2 of the BLA and, therefore, the Plaintiff’s lien was defective. Next, they argued that the Plaintiff’s CPL could not survive if its underlying lien was found to be defective. Here, the Plaintiff buttressed their CPL with a claim of constructive trust as a remedy for an alleged unjust enrichment of the property. The Defendants asserted that such a trust could not support a claim against land. 

Justice Milman held that pre-construction works are not improvements from which lien rights arise under the BLA until physical construction begins. In support, he cited John Perkins/Peter Wardle Partnership v. Domus Design Co. (1984), 1984 CanLII 747 (BC CA), for the principle that pre-construction services, such as drafting plans, designs, or applications, do not fit within the BLA definition of an improvement—i.e. an alteration of or addition to land. Therefore, they cannot support a claim of lien under section 2 of the BLA, regardless of their actual effect on the land’s value. More importantly, Justice Milman found that the Plaintiff’s constructive trust claim was their defective lien under another guise. As a matter of policy, he found that the court could not permit such an attempt to buttress a doubtful lien.

Notwithstanding the foregoing, Justice Milman appears to have partially rejected the defendants’ argument that constructive trusts cannot support a CPL. According to our reading, the decision leaves ample room for cases where pre-construction activities have unjustly enriched the defendant, and a monetary award would be an insufficient remedy. However, those cases will be rare and likely outside a traditional commercial context.

For the construction industry, Cape Group Management Ltd. v 0793231 B.C. Ltd., 2024 BCSC 493 serves as a reminder that lien rights are limited to improvements to actual land, not legal property. Therefore, pre-construction works will not result in lien rights until physical construction begins. This strict interpretation of the BLA has not yielded under the modern approach to statutory interpretation, nor will the courts permit such security under the guise of a constructive trust.