This chapter briefly discusses the history and current state of the law of liens. It starts with an outline of liens at common law, then proceeds to discuss the key features of the Forestry Workers Lien for Wages Act.[35]
A. What is a lien?
The common law lien dates back to at least the 18th century.[36] At its core, such a lien consists merely of a right for a person to retain property already in his or her possession until a demand of some sort, usually for payment, has been satisfied.[37] Typically it is given to people who have preserved or improved the value of that property.[38] The common law provides only this right to retain – the lien holder cannot sell the property to satisfy any debt without first obtaining a court order.[39] Further, the lien is lost if the lien holder gives up possession of the property.[40] The common law lien is thus a relatively narrow, restrictive method for ensuring the payment of a debt. [41]
From the 19th century onwards, however, legislatures around the common law world expanded the scope and content of lien rights via statute. This was particularly common in North America, where a number of liens that bear very little resemblance to a classic common law lien were developed.
One of these new types of statutory lien was a lien for workers engaged in various primary industries such as agriculture, forestry and mining.[42] They were developed as an early form of worker protection, in industries where employers were short of cash and workers could not be sure of being paid their wages when work was completed.[43] This paper is concerned primarily with forestry liens, but the other forms of liens developed at this time provide useful points of comparison, both in terms of the original policy intent and in terms of how they have been reformed (or not reformed) over the past century, and are therefore discussed below.
B. The Forestry Workers Lien for Wages Act
The Forestry Workers Lien for Wages Act (“the Act”) is a provincial statute designed to protect the financial interests of those engaged in logging work. It does this by giving logging workers a lien over timber they have worked on to secure monies that are owing to them. It also sets out processes for the seizure and sale of timber and for dispute resolution by a court if necessary.
The Act is largely unchanged from its passage in 1891 as the Woodsmen’s Lien for Wages Act.[44] This causes significant problems in the implementation of the Act, as its terminology and processes do not mesh well with the modern logging industry or the modern legal system. Perhaps due to its obsolete drafting, the Act is rarely used, with most of the activity in recent years arising out of one insolvency event.[45]
The key features of the Act are discussed below.
1. Persons entitled to a lien
Any person performing “labour” on logs or timber is entitled to a lien on those logs or timber for the amount owing for such “labour”.[46] “Labour” is broadly defined to mean “cutting, skidding, felling, hauling, scaling, banking, driving, running, rafting or booming any logs or timber and includes any work done by cooks, blacksmiths, artisans and others usually employed in connection therewith”.[47] Contractors who have “cut, removed, taken out or driven logs or timber” are also entitled to a lien.[48]
2. Property that is subject to a lien
Liens can be placed on “logs, cordwood, timber, cedar posts, telegraph poles, railroad ties, tan bark, pulpwood, shingle bolts, and staves….”[49] Recent court decisions have clarified that woodchips are also included in the type of wood products upon which liens can be placed.[50] The Act specifically states that sale of the logs or lumber does not extinguish a lien.[51] Once wood has been processed at a mill, however (into lumber, veneer or paper, for example), it is no longer able to be liened, and any existing liens are lost.[52]
3. Filing requirements
Liens are claimed by filling out the form required by the Act and verifying its details in an accompanying affidavit.[53] The form and affidavit are then filed at the Superior Court of Justice for the area in which the work for which a lien is being claimed was carried out.[54] The time allowed for filing depends on exactly when work was carried out, with a firm deadline of filing by the 30th of the next April applying to work done in the autumn or winter, and a 30 day deadline after work is completed applying to spring or summer.[55]
4. Enforcement
The Act sets out a comprehensive though confusing mechanism for enforcing the lien.[56] Depending on the monetary value, enforcement actions can be taken in either the Small Claims Court or Superior Court of Justice.[57] However, even if the claim is filed in the Superior Court of Justice, the bulk of the process is required to follow, as closely as possible, the procedures of the Small Claims Court.[58]
Of particular note in the enforcement process is the ability to apply to the Court for a sheriff or bailiff to seize the logs or timber where the claimant is in danger of losing his or her claim.[59] Regardless of whether the logs have been seized or not, ultimately they can be sold to pay the money owing once a lien claim is proved in court.[60]
5. Priority
The Act gives extremely high priority to the liens it creates. It states that “the lien has precedence over all other claims or liens thereon”, except for Crown liens for stumpage fees and the like and a very narrow priority given to the owners of timber slides or booms used in the transport of logs (this method of log transport is no longer used).[61]
C. Problems with the Act
As noted above, the Act is outdated and has had very little attention paid to it for a century. Since expanding lien rights to contractors in 1901 and a cosmetic restructure in 1907, almost nothing has been changed. This has led to an Act that is both legally and practically obsolete. It suffers from confusing and outdated processes for proving and enforcing liens, and has ineffective costs provisions. The biggest problem with the Act, however, is that it rests on assumptions about the logging industry that have not been true for decades.
As was discussed in more detail in Chapter II, when the Act was passed in 1891, logging crews would trek into the forest to semi-permanent logging camps at the start of the winter and stay there, cutting and doing some preparatory work on the logs, until the spring thaw. The camps would have everything that was needed for a long stay in the forest, including cooks to prepare food for the woodsmen and blacksmiths to repair equipment.[62] The logs would then be driven out down the river to be processed at a mill downstream. This is no longer the case at all, with most logs now being trucked out of the forest along private bush roads and then along public roads to the mill.
This section discusses the most problematic parts of the Act, both in terms of the processes used and its disconnection from the modern logging industry.
1. Process for enforcement
The Act sets out a relatively comprehensive process for how liens should be filed and enforced. This process is confusing and is not appropriate for the sometimes very large liens being filed today. Lien claims of up to $25,000 are enforced by making an originating application in the Small Claims Court.[63] Lien claims over that amount must be enforced in the Superior Court of Justice.[64] However, regardless of the court in which the application is filed, the procedure must follow as closely as possible the procedures of the Small Claims Court.[65] Where the person in possession of the wood products[66] is not the wood owner,[67] notice of the originating application must be given to the owner, who may also apply to be joined as a defendant (or be directed to be so by the judge).[68]
To complicate the picture, if there is an imminent threat of the lien being defeated before an originating application has been filed (for example if it looks as if the wood is about to be processed or taken out of province), the lien claimant can start the process by obtaining a writ of attachment from the court and having the wood seized by a sheriff.[69] A writ of attachment can also be obtained after an originating application has been filed if it looks as if the lien will be defeated.[70] Wood cannot be seized while it is in transit, seemingly because interrupting a log drive would leave a river blocked and all the logs involved (as opposed to just those subject to a lien claim) tied up.[71] An owner or other defendant can have possession of seized logs restored and the liens discharged upon the payment of a bond, or deflect seizure and have the liens discharged by paying the amount claimed into court upon being served with a writ of attachment.[72] If the defendant does not accept the amount claimed, the defendant has up to 14 days from the date of being notified of the seizure to file a notice of dispute.[73] After this, the judge sets a date for a hearing to resolve all disputes and claims relating to the liened logs.[74] This hearing must be widely advertised.[75] Once all claims and disputes are resolved, the judge orders the payment of the amounts owing to the relevant parties and, if necessary, orders the sale of the logs to meet the amounts owed.[76]
This process is cumbersome, slow, and complicated, especially for a regime that was originally intended to be largely summary in nature and navigable without legal assistance.
2. Costs provisions
The costs provisions of the Act have not been updated in a century. As they stand, they prevent a successful lien claimant from fairly recovering the costs they incur in proving a lien claim. In particular, costs associated with proving a non-contentious lien are capped at $5 in the Superior Court of Justice and $2 in the Small Claims Court.[77] Where a claim is contested, costs are capped at $10 in the Superior Court of Justice and $5 in the Small Claims Court.
These limits were much more reasonable at the time the Act was passed, but are now patently absurd. As noted above in chapter III(C)(1) of this paper, even though the hearing for proving claims is a summary one, designed to proceed without lawyers, the Act is complicated enough that the assistance of a lawyer in preparing and filing the lien and preparing for the hearing is all but essential. To illustrate the absurdity of the costs provisions, $10 would pay for six minutes of a lawyer’s time at the rate of a very junior legal aid lawyer(if legal aid were available).[78] The costs provisions therefore stop a lien claimant from recovering a reasonable proportion of the expenses incurred in proving their claim.
3. Definition of “labour”
The change in transportation methods from log drives to truck haulage makes it difficult to apply the Act in a modern context. Section 1 defines “labour” to include “driving, running, rafting or booming any logs or timber,” none of which really describes hauling logs using modern forwarders or trucks. The definition of “labour” is exhaustive, calling into question whether persons who haul logs, which performs exactly the same function as log driving (i.e., getting cut logs to the mill), are entitled to a lien.[79]
To increase the confusion, the situation may be slightly different for contractors (as opposed to employed workers). Under section 3, a contractor is entitled to a lien where it has “cut, removed, taken out or driven logs and or timber”. This wording is more flexible, and could certainly encompass hauling by road. However, the words “removed” and “taken out” are not included in the general definition of “labour” in section 1, meaning that they do not apply to those undertaking “labour” generally, only contractors who come under section 3. This seems to be as a result of poor drafting rather than any particular legislative intent.
We thus have an obsolete and inconsistently applied definition of “labour,” which makes the scope of work that gives rise to a lien difficult to determine and apply. In addition, the inclusion in the definition of “labour” of jobs such as cooks and blacksmiths reflects an obsolete economic model which, as discussed in Chapter II above, bears no resemblance to the modern logging industry.
4. Time for filing lien claims
The filing times set out in the Act are also tied to an obsolete picture of the logging industry. Under section 5(4), if work is undertaken between 1 October and 1 April, a lien claim must be filed by the end of that April. This corresponds to the time where woodsmen would typically be living in the forest long-term, and thus unable to file a lien claim until they had driven timber to the mill in the spring. If, on the other hand, work is undertaken between 1 May and 30 September, a lien must be filed within 30 days of the completion of the work. The assumption here appears to be that during the late spring and summer, when they were not in the forest (perhaps working on a log drive or at a mill), it would be easier for woodsmen to file liens in a timely fashion. This difference in filing times no longer makes sense, and can produce unfair results. For example, a logger who completes work at the end of October will have six months to file a lien, while anyone completing work between April and September will have only 30 days.
The picture is further complicated by yet another rule that applies to contractors but not employed workers. Under section 5(3), contractors must file their claim by 1 September, regardless of when the work was undertaken. Thus contractors can have anywhere between 1 year and 1 day to file lien claims, clearly a bizarre result. This provision may have made sense in the days of semi-permanent logging camps and logs drives, but it certainly does not make sense today.
5. Types of wood products covered
In addition to the outdated idea of how lumber is harvested discussed above, the Act also has an outdated view of what is harvested. For example, the list of wood products defined as “logs or timber” includes “tan bark” and “shingle bolts”. Tan bark is a particular sort of bark that is used in some of the more old-fashioned processes for tanning leather. Shingle bolts are pieces of wood from which wooden shakes are split. Neither tan bark nor shingle bolts are produced to any significant extent in the modern logging industry. Their specific inclusion in the definition of “logs and timber” (as opposed to being covered by a category such as “or any other wood products) is now arguably unnecessary.
A larger problem is that some current wood products did not exist when the Act was passed, and thus were not included in the definition of “logs or timber”. In particular, the invention of mobile chippers has meant that pulpwood can be chipped on site instead of at the mill. This was not possible when the Act was passed, and therefore woodchips are not specifically covered by the Act. The issue of whether woodchips could in fact be liened was raised in the most recent series of cases concerning liens under the Act. In Re Buchanan Forest Products Ltd, Regional Senior Justice Pierce was required to determine a number of issues preliminary to a full lien claim, including whether “logs and timber” included pulpwood that had been chipped in the forest.[80] She determined that pulpwood chips were covered, stating that
[43] Wood chips result when pulpwood logs are chipped either in the forest or at the mill site. Chips are not different in substance from pulpwood. It would be an absurd result if claimants received priority under the Act for pulpwood cut large but not for a pulp log cut very small. There is no rational reason for including “pulpwood” in the definition of “logs or timber” yet excluding wood chips that are a form of pulpwood.
[44] In my view, the size of pulpwood is not material to the application of the Act. Wood chips constitute pulpwood for purposes of the Act.
This ambiguity in the definition of “logs or timber” illustrates the difficulty of construing the Act in modern circumstances.
6. Application to sub-contractors
As the preceding discussion makes clear, the Act applies to contractors, albeit in a confusingly different way than to wage earners. The application to subcontractors, however, is not so clear. On the plain words of section 3(2), there is no reason why subcontractors could not be covered. The section states that liens are available to a contractor “who has entered into any agreement under the terms of which the contractor personally or by others in the contractor’s employ have cut, removed, taken out or driven logs or timber.” There is no reference to the contract having to be with the wood owner or the holder of the forestry licence, meaning that a person contracted by a lead contractor to do a portion of the work ought to be allowed to lien.
Complicating the picture, however, is a Supreme Court of Canada case from 1928, Keenan Bros Ltd v. Landgon.[81] This case, the sole consideration of the Act by the Supreme Court, considered the meaning of “contractor” in section 3(2). Writing for the Court, Mignault J stated:
The contractor contemplated is a contractor who has entered into any agreement to do this work. An agreement with whom? Obviously with the person for whom the wood is to be cut, that is to say, in my opinion, with the owner of the timber.…But it is a totally different proposition to say that the “contractor” can give a sub-contract, and that the sub-contractor has the same lien as the contractor. Were that the true construction of the subsection, it would follow that, although the owner had paid the contractor, or discharged any lien belonging to him, he would not be secure against a claim made by a sub-contractor. In effect, this is what has been decided in the present case. [82]
Mignault J’s concern was that a lien may be placed on logs multiple times for the same work – once by the lead contractor and again by a sub-contractor who actually performed the work. This could lead to the situation where the owner of some wood could pay the lead contractor all that was owed for work done but then, due to a failure of the lead contractor to pay his or her subcontractors, still have a lien placed on the wood.
Such a situation is clearly unfair, and Mignault J’s concern is understandable. However, the narrow construction of the contractor provision in section 3(2) laid down in Keenan Bros is problematic in the context of the modern logging industry. In Buchanan, for example, the logging contractors were engaged by one of two companies wholly owned by Buchanan, but which did not technically own the wood. Does this mean that the logging contractors in Buchanan are unable to lien at all, because they technically do not have a contract with the wood owner? Although the issue ultimately was not decided in Buchanan, there is certainly some doubt as to whether liens are available in such a situation.
In addition, allowing liens only when there is a direct contractual relationship between the logging contractor and the timber owner would bar a large number of contractors from seeking protection under the Act. When the Act was drafted, extensive networks of contracts and subcontracts were not common. Nowadays, however, subcontractors are extremely common, and even large, “stump to dump” full-service contractors typically employ subcontractors to perform at least some of the work involved in the process of getting wood from the forest to the mill. These subcontractors are just as vulnerable as a lead contractor, and excluding them from the coverage of the act seems just as unjust as the risk of double liability on the part of wood owners.
The application of the Act to sub-contractors (and logging contractors engaged by shell companies) is therefore extremely murky. Further, even if subcontractors are entitled to file liens, the Act’s processes result in an injustice to the wood owner. This part of the Act clearly does not work.
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