V. Reform of Other Commercial Lien Regimes

V. Reform of Other Commercial Lien Regimes2017-03-03T18:35:03+00:00

A.   Woodworker Lien Acts in Other Jurisdictions

In some jurisdictions, woodworker lien legislation similar to FWLWA has been repealed, presumably because it was deemed commercially obsolete. For example, Michigan’s legislation was quietly repealed in 2000.[178] In Quebec, provisions for the protection of forestry workers had existed under the Civil Code of Lower Canada[179] but were abolished when the Civil Code of Quebec was enacted in the early 1990s.[180] However, several other provinces in Canada, as well as U.S. states such as Washington and Oregon, continue to have woodworker lien legislation on the books.[181] These statutes are generally similar to FWLWA. In most of these jurisdictions, there has been no recent policy discussion of the law and recent case law is sparse. However, Alberta and British Columbia are exceptions here. Law reform projects reviewing woodworker lien legislation were conducted in both provinces and, in British Columbia, this was followed by legislative reform.

The Alberta Law Reform Institute (ALRI) reviewed its woodworker lien legislation in the early 1990s as part of a larger reform project on lien law.[182] It found that lien acts were outdated and there had been no significant developments in lien law for the past 60 years. The Report cited several reasons for reforming these acts, including growing obsolescence, lack of uniformity, lack of compatibility with the Alberta PPSA, need for a registry and need for improved enforcement methods.[183] It recommended that a new general lien act be developed which would apply to loggers as well as others such as garagemen and warehousemen. ALRI discussed the option of abolishing liens but rejected this on the basis that it would create uncertainty, particularly in respect of priority rules.[184] This, however, is not all that instructive in reconsidering Ontario’s Act. ALRI’s project encompassed all liens, including possessory liens. Abolition would have been a much more extreme proposition in that context. ALRI’s Report did not lead to reform and Alberta’s woodworker lien legislation remains on the books.[185]


B.   Woodworker Lien Reform in British Columbia

1.   The LRCBC’s Proposed Forest Work Security Act

British Columbia’s Woodworker Lien Act (WLA) is similar to FWLWA in Ontario with an important exception.[186] The WLA provides protection to logging employees but not to contractors.[187] In 1992, the LRCBC undertook a reform project in part in order to expand coverage of the WLA to logging contractors. It found that the rationale for the WLA remained because logging contractors were not able to negotiate consensual security agreements.[188]

The LRCBC’s 1994 Report recommended replacing the WLA with a new Forest Work Security Act (the proposed Act) which would be closely integrated with BC’s version of the PPSA.[189] The Report explained:

Incorporating the PPSA by reference into the new Act, as we have done, provides a central conceptual pillar which can then be altered or modified as may be needed to meet the exigencies of forest work. This also permits legislation which is relatively short and uncluttered.[190]

The proposed Act would create a forest work security interest securing money owed to a forest worker.  A “forest worker” was defined to include employees and contractors (as well as subcontractors) and “forest work” was given an open-ended definition as “all work incidental to a timber harvesting operation” with a non-exclusive list of activities serving as examples.

The forest work security interest would attach to all forest products at a harvesting or handling site owned by the licencee or contractor. This would obviate the need for a claimant to differentiate between individual logs. “Forest products” would be defined as logs or timber that may be cut or trimmed but not further processed. In an exception to the PPSA, the security interest would not attach to the proceeds from the sale of forest products. The security interest would be terminated once forest products left the harvesting or handling site (except when being hauled) or were processed.

The LRCBC chose to extend the proposed Act to subcontractors. It addressed the subcontractor problem by recommending that subcontractor claims be limited to the amount owed by the owner to the general contractor at the time the owner received notice of the lien.[191] Provision would be made for subcontractors to give notice of a lien claim to the owner, thereby preserving any amount not yet paid out by the owner for satisfaction of the subcontractor’s lien claim.

The security interest would be registrable under the BC PPSA and subject to the first-to-register rule in the PPSA, with the exception that $20,000 of the claim would have priority over all PPSA security interests.[192] This statutory cap on priority claims would allow third party lenders to anticipate potential exposure and order their affairs accordingly. Most other aspects of the forest work security interest, including enforcement rules, would be addressed by reference to the BC PPSA.

The LRCBC Report was not adopted by the British Columbia legislature and the WLA remains in force to this day.


2.     B.C.’s Forestry Service Providers Protection Act

In 2010, the British Columbia government introduced new legislation protecting loggers. However, it adopted a different approach to that recommended by the LRCBC. It left in place the existing WLA applying to logging employees and enacted a two-part statute, the Forestry Service Providers Protection Act (FSPPA), specifically to protect logging contractors and subcontractors.[193] The FSPPA was fully brought into force in April 2013.

Under Part 1 of the FSPPA, a logging contractor has a lien for the amounts due under a harvesting contract.[194] A contractor is defined broadly as someone carrying out “services” for the forest products owner. “Services” are defined in relation to a list of specific activities such as felling, bucking and yarding including “any other prescribed activity”. On its face, this definition is perhaps narrower than the scope of the LRCBC’s proposed Act but it does make provision for regulations expanding the definition of “services” as new logging functions develop in the industry.

The FSPPA goes further than the LRCBC’s proposed Act in expanding the property subject to the lien. The lien attaches to all of the owner’s forest products no matter where they are located and includes products acquired after the services are rendered. Forest products are broadly defined to include prescribed products in addition to raw timber. Then, in addition to the lien, a contractor is given a charge over the accounts receivable of the owner. Of course, this does not increase the overall value of the lien claim. The lien and charge secure only the fair value of the services provided. However, it removes the concern that the property will disappear before a lien can be enforced.

Subcontractors are dealt with separately in the FSPPA. Only contractors have a lien against the owner’s forest products. Subcontractors are protected with a statutory charge against the contractor’s accounts receivable.[195] Payment for the forest products that is received by the contractor is bookmarked for the subcontractor and so on down the supply chain. This is an elegant solution to the subcontractor problem in that it maintains the privity of each contractual relationship and does not require complex administration. However, it denies subcontractors the security of having a direct claim over specific property.

Forestry service provider liens and charges under the BC FSPPA are registered as financing statements in BC’s PPSR. It is not necessary that a lien or charge be registered in order to enforce it against the debtor. However, registration is necessary for the lien or charge to have priority over subsequently registered or enforced PPSA security interests.

Significantly, liens and charges under the FSPPA do not have the super-priority status provided for in Ontario’s FWLWA and other historical statutory lien regimes. The FSPPA provides that a lien or charge is subordinate to previously registered PPSA security interests (including future advances). Practically speaking, this minimizes the likelihood of loggers recovering in insolvency. The FSPPA counterbalances this by establishing a Compensation Fund on which loggers may draw in cases of insolvency.[196] The government has made an initial payment into the Fund of $5 million but it is not yet clear who will contribute to the Fund in the future. In legislative debates, the idea was that all stakeholders would contribute.[197] The government has set up a private entity to administer the Fund.[198]

The rationale for the FSPPA’s two-pronged approach to protecting logging contractors and subcontractors was articulated by a government member in the B.C. Legislature:

As the member opposite likely knows, unsecured creditors typically receive a very small portion of the money that’s owed to them in insolvency. But the compensation fund protects the contractor at that stage.

If there was only a compensation fund in place but no lien in place, and then if the licencee chose to make life difficult for the contractor out of an insolvency situation, there’d be no protection, there’d be no lien ability for that contractor to lever and ensure that they are paid for those services, other than the normal court processes that exist today, which are deemed to be bulky and unworkable.[199]

The reason that the government chose to depart from the super-priority traditionally accorded to lienholders is explained earlier in the debates:

The challenge comes in ensuring that we’re not negatively impacting licencees’ availability of credit by displacing the order that various credit providers are involved in, in an insolvency situation, secured versus unsecured creditors.[200]

British Columbia’s new legislation suggests that there is still a commercial need for logging lien legislation in some situations. However, there are some important differences between the British Columbia and Ontario logging industries which limit the analogy. British Columbia is Canada’s largest logging industry by far and forest products companies and loggers are both active politically.[201] Furthermore, unlike in Ontario, the British Columbia WLA applies only to logging employees. The impetus for reform was to expand the scope of the WLA to include contractors. The possibility of repealing the lien legislation was never really on the table. The relative quantity of case law originating from British Columbia also suggests that that jurisdiction may have more of a commercial need for the Act than does Ontario.[202]

 

C.   Analogous Commercial Lien Regimes

The LCO also examined other instances of statutory lien reform as possible comparators for reforming FWLWA. Although these models are analogous to the Act to varying degrees, there are distinctions in the nature and purpose of forestry worker liens which limit the lessons to be learned.

 

1.   Ontario’s Repair and Storage Lien Act

At common law, repairers had a possessory lien over items they worked on, entitling them to retain the items until paid for the work. The repairer lien did not protect storers of goods (historically known as “warehousemen”) since warehousemen merely preserved, rather than enhanced, the value of goods. Eventually, a statutory lien was created extending a possessory lien to warehousemen.[203] However, before 1989, both repair liens and warehousemen liens were exclusively possessory, disappearing once possession was lost.

Ontario’s Repair and Storage Lien Act was enacted in 1989 to update this historical regime. The impetus for reform was to address circumstances where repairers and storers gave up possession of the goods before being paid. This was a commercial necessity in cases where debtors required possession of the goods in order to generate funds to pay for their repair or storage. In other cases, it was the repairer or storer who wished to give up possession of the goods in order to avoid the cost of storing them while awaiting payment.[204]

The RSLA creates both a possessory and a non-possessory lien in favour of repairers and storers.[205] It appears that a repair lien attaches to an article even where the debtor does not own the article and has not been authorized by the owner to have it repaired. However, this is not made clear in the legislation. At common law a repair lien was recognized only if authorized by the owner.[206] In contrast, it is clear under the RSLA that a lien for unauthorized storage services does attach. The RSLA specifies that, where a storer has reason to believe that the owner of an article has not authorized the storage, the value of the lien is capped at 60 days storage fees unless the storer provides the owner with notice of the lien.[207] Apparently, this provision was primarily intended to address the case of cars being impounded by police or parking authorities and then sent to an impound lot.[208]

The subcontracting problem that arises under FWLWA is addressed in the RSLA in a somewhat different context, that is, where repairers or storers take possession of an article but then forward it on to another person to actually do the work. The RSLA provides that the repairer or storer taking possession of the article is deemed to have performed the services and may exercise the right to a lien unless that person merely acted as an agent in transferring the article to the eventual repairer or storer.[209] This provision makes it clear that only one or the other, but not both, may claim a lien. Therefore, there is no concern, as there is with FWLWA, that the owner may be subject to a lien claim even after he or she has paid for the repair or storage.

Where a repairer or storer does not have possession of an article subject to a lien, it is more difficult to establish the validity of the lien claim. In order to prevent spurious claims, the RSLA provides that non-possessory liens are not enforceable unless the lien claimant has obtained a signed acknowledgement of indebtedness supporting the claim.[210]

The RSLA provides for non-possessory liens to be registered in the PPSR. Once registered, they rank behind possessory liens but are generally prior to security interests under the PPSA.[211] A non-possessory lienholder may enforce the lien by directing the sheriff to seize the goods and deliver them to the lienholder.[212]

Forestry worker liens bear some similarity to repair liens. Both protect workers who provide services enhancing the value of goods. A rationale arguably underlying both lien regimes is that the owner of goods should not profit from their enhanced value without paying for the improvements.[213]  However, there are also a number of important distinctions between forestry worker liens and repair and storage liens:

  • Repair and storage liens are typically justified on the basis of implied contract theory in that the owner of the goods does not expect to regain the goods without paying for the services rendered.[214] However, subcontracting is more prevalent in the logging industry than it is in the repair and storage industry. Implied contract theory does not easily extend to the logging context where many lien claimants have no contractual relationship with the licencee and, therefore, no commercial expectation that the licencee should pay the amount owing.
  • Repair and storage liens were originally exclusively possessory. The purpose of the RSLA was to extend this pre-existing remedy to address non-possessory circumstances. In contrast, forestry worker liens do not have a possessory origin. They lie further afield from the traditional concept of a lien.[215]
  • As a result of the non-possessory nature of forestry worker liens, it may be more difficult for loggers to establish evidence of a lien claim. Subcontractors may not be in a position to require that they receive an acknowledgement of indebtedness as a condition of passing the logs on.
  • The goods subject to repair and storage liens (automobiles, for example) are typically easily identifiable. In contrast, identifying the logs or timber subject to a forestry workers lien can be a significant problem detracting from the effectiveness of a public registry.
  • Repair and storage liens typically represent a much smaller proportion of the lienholder’s receivables than do forestry worker liens.
  • Unlike many repairers and storers, loggers tend to form long-term contractual relationships with certain licencees and may be unwilling to file a lien claim for fear of jeopardizing a future relationship.

These distinctions limit the usefulness of the RSLA as a model for reforming forestry worker liens in Ontario.

 

2.     ALRI’s Proposed Liens Act

As noted above, in 1992 ALRI undertook a reform project to consolidate several non-consensual liens, including repair and storage liens, carrier liens, innkeeper liens, stable keeper liens, thresher liens and woodworker liens, into a single statute. This proved to be difficult in respect of woodworker liens which were distinguishable from the others in some important respects.

For example, ALRI recommended that liens not attach to goods owned by third parties, even in the case of innkeepers and carriers where traditionally this had been allowed. Instead, liens should operate only in the context of a direct contractual relationship. ALRI noted that “there is little justification for permitting a lien to be claimed against goods of a third party who has not authorized the transaction”.[216] However, ALRI exempted woodworker liens from this rule due to the fragmented nature of the industry. Subcontractors were so common in the logging industry that it would be unfair to exclude them from protection. Therefore, ALRI recommended that logging subcontractors be permitted to file woodworker liens. In order to partially protect owners, it recommended that a subcontractor lien be restricted to the amount still owing by the owner to the contractor after having received notice of the lien.[217]

ALRI also recommended that lien claimants who give up possession of goods must obtain from the debtor a written acknowledgement of indebtedness as evidence in order to enforce their lien. Once again, however, woodworker liens (and thresher liens) were exempted from this rule. Woodworkers could not give up possession of goods since they typically did not have possession in the first place. Therefore, unlike the other liens covered by the Report, woodworkers could not demand written proof of the debt as a condition of delivering the goods to the debtor. Although ALRI did not discuss this point, the effect of this exemption would have been to allow woodworker lien claims to proceed with less of an evidentiary basis than other lien claims. Commercial parties might have less confidence in such a system, particularly in cases where woodworker liens were asserted against third parties.

ALRI did find that woodworker liens, in common with the other liens being discussed, should be made subject to a central registry system. Registration would be by way of a financing statement under the Alberta PPSA.[218] The proposed Act would preserve the priority of the liens over PPSA secured interests so long as the liens were perfected either by registration or through possession.[219] However, liens would be subordinate to third party buyers acquiring the collateral in the ordinary course of business. Liens would be enforced using similar procedures to those set out in the PPSA whereby the sheriff would be responsible for seizing goods subject to the lien but the lienholder would be responsible for their sale.[220]

ALRI’s proposed legislation was not adopted in Alberta. However, the Report is valuable for having examined woodworker liens in the context of statutory liens generally. Woodworker liens share with repair and storage liens, innkeeper liens and stable keeper liens a concern for protecting those who enhance or maintain the value of goods. According to the Report, all non-possessory statutory liens should be subject to a registration requirement in concert with the PPSA regime. However, the Report also illustrates the functional differences between woodworker liens and other statutory liens. These differences complicate the development of a woodworker lien regime that accords with PPSA principles.

 

3.     ULCC’s Uniform Liens Act

The ALRI Report inspired the Uniform Law Conference of Canada (ULCC) to undertake a similar reform project to harmonize commercial lien law. The resulting Uniform Lien Act (ULA) addresses repairers, storers and common carriers.[221] The ULCC decided not to include woodworker liens within the legislation on the basis that these liens, along with thresher and beet liens, were local in nature and not suitable for inclusion in a uniform act.[222]

The ULA bears some similarity to Ontario’s RSLA although there remain significant distinctions.[223] In designing the ULA, the ULCC maintained a conceptual distinction between statutory liens and PPSA security interests, reasoning that: “[p]ersons who improve or add value are generally not in the same position as persons who lend money or sell property”.[224] However, the ULCC recommended that PPSA provisions should be applied to the lien context where possible.

Unlike the RSLA, the ULA fuses storage, repair and carrier liens into a single lien for “services”. Where the issue of authorization for services remains somewhat murky in the RSLA, the ULA makes a clear policy choice to permit a lien to attach even where the work is authorized by someone other than the owner of the goods. The commentary explains, “[this] is intended to permit the widest possible lien creation without considerations of apparent authority or ownership.”[225] However, the ULA makes no provision for notice to the owner of the goods in such circumstances.

As with the RSLA, the ULA provides an evidentiary basis for non-possessory liens by requiring that such a lien is enforceable only where the lien claimant has obtained either a signed authorization for the services giving rise to the lien or a signed acknowledgement of indebtedness.[226] The ULA also subjects a non-possessory lien to a registration requirement under the PPSA. The priority rules are complex but registered liens maintain priority over other interests in the property in most circumstances.

For registration of a non-possessory lien to be valid, the financing statement must name both the owner of the goods and the person requesting the services (where they are not the same). This provision addresses the scenario where a lien claimant does not know the owner of the goods and so registers a financing statement naming only the debtor but a third party subsequently searching the Registry does not know the debtor and searches only under the name of the owner. The drafters of the ULA made a policy choice to protect the interests of third parties over lien claimants in these circumstances, reasoning that “it is the lien claimant who is in the best position to prevent the problem from arising” since “[h]e or she can demand proof of ownership of goods with respect to which services are being requested”.[227]

The only province that has implemented the ULA in its entirety is Saskatchewan with its Commercial Liens Act.[228] Nova Scotia has passed legislation to implement the Act but this has not been brought into force.[229] In 2003, the British Columbia Law Institute recommended that BC adopt the ULA but this has not happened to date.[230]

Although broader in scope than Ontario’s RSLA, the ULA is still designed to protect a limited group of workers: those providing labour and materials for the purpose of repairing, storing or transporting goods at the request of a person possessing the goods. Again, the unique features of forestry worker liens limit the usefulness of the ULA as a reform model.

 

4.     Ontario’s Construction Lien Act

Ontario’s Construction Lien Act (CLA) is, conceptually speaking, a step removed from FWLWA and the other statutory lien regimes discussed above. This is because it provides for a lien attaching to real property rather than to personal property. However, the two lien regimes share a similar background. The 1891 predecessor to FWLWA was enacted in response to industrial conditions that were similar to those existing in the construction industry at the time. Ontario’s first construction lien regime preceded the 1891 Act by roughly 20 years and provided a model for legislators drafting that Act.[231] At that time, the construction and logging industries were both strong candidates for legislative protection given their importance to the development of the young province.[232] And both industries tended to be undercapitalized resulting in frequent insolvencies.[233]

Today, it is widely accepted that the modern CLA remains essential to the health of the construction industry.[234] However, the extent to which the same policy rationale continues to exist in the logging industry is a matter of debate. Certainly both industries remain highly fragmented with the potential for several degrees of separation between the worker and the owner of the property. According to Stephen Fram,

…[T]he eventual chance of a particular constructor obtaining payment for the work he has done is often contingent upon the ultimate state of accounts between persons with whom he has no contractual dealings and the solvency of those persons. That solvency may be difficult for the supplier to determine and may also fluctuate widely during the course of construction as unexpected costs are encountered.[235]

However, there are also distinctions. Logging work is now predominantly carried out by incorporated contractors and subcontractors. Although a significant proportion of construction workers are also self-employed, they are less likely to be incorporated and more likely to be independent operators.[236] Unionization is also more prevalent in the construction industry.[237]

Construction workers are at financial risk since, although they contribute to the improvement of real property, they may not produce anything tangible that can be repossessed if they are not paid.[238] As the Northwest Territories Committee on Law Reform explained, construction workers are “essentially producing an immovable object, on someone else’s property, on credit. Mechanics lien legislation stands as an attempt to deal more fairly with these parties”.[239] In contrast, loggers produce a tangible item – logs. Although logs are then transformed into other wood products, their value is consolidated at each stage of the process.[240]

On the other hand, loggers experience challenges not experienced by construction workers. Since improvements to real property are fixed, they are more easily identifiable for the purpose of proving a lien claim. Logs, however, are fungible and difficult to identify once mingled with other logs. Furthermore, logs disappear once processed, thereby restricting the life span of a forestry worker lien.

Another distinction is the relative use being made of the CLA as compared to FWLWA. The CLA remains entrenched within the construction industry and is regularly relied on in the courts. Even if desirable on policy grounds, repeal would not be a practical option. As Kevin McGuinness states:

It is clear that the mechanics’ lien and its sister remedies have become the central feature of credit granting practice within the construction industry. Certainly, their abolition would have a highly disruptive effect upon that industry.[241]

In contrast, there is relatively little use being made of the Act by forestry workers.[242] The distinctions between the modern construction and logging industries, as well as the different nature of these two lien regimes, limit the usefulness of the CLA as a model for reforming the Act.


D.   Forestry Worker Liens are Distinct from Other Commercial Lien Regimes

This review of some reformed statutory lien regimes illustrates that there are varying approaches to coordinating statutory liens with the principles underlying the PPSA. Leaving aside the CLA (which, as discussed above, operates in a very different industrial context), these approaches may be roughly divided into two conceptual models. First are models designed to emulate the PPSA’s protection of consensual security interests. Second are models more concerned to preserve traditional lien concepts, particularly in respect of workers who add value to goods.

Although elements of both conceptual models can be found in all of the examples above, the LRCBC’s proposed Act and, to some extent, the British Columbia FSPPA are closer to a PPSA model. In both cases, the statutory security interest extends beyond the logs or timber worked on and attaches to other forest products owned by the licencee and, in the case of the FSPPA, to accounts receivable. Also, both statutes constrain, to different extents, the traditional super-priority given to lien holders in favour of the PPSA priority system.

In contrast is the model represented by the RSLA, ALRI’s proposed Act and the ULA. These statutes preserve more attributes of the traditional concept of a lien. They provide for liens attaching primarily to the property being improved. Although they adopt the registration system in the PPSA, their priority schemes are based more on the traditional super-priority accorded to liens (with some legislative refinements) rather than the first-to-register priority scheme of the PPSA.

Forestry worker liens do not fit easily into either of these conceptual models. Unlike the consensual security agreements subject to the PPSA, forestry workers tend not to negotiate formal agreements.[243] This limits the extent to which they can be subsumed into the PPSA. For example, a possible challenge in enforcing forestry worker liens may be determining the point at which they arise. This is not an issue with consensual security agreements. Also, PPSA enforcement mechanisms may not be appropriate where a debtor has not had the opportunity to negotiate the terms of the security agreement giving rise to the lien.

On the other hand, forestry worker liens are also distinct from more traditional statutory lien regimes as acknowledged by the drafters of each of the RSLA, ALRI’s proposed Act and ULA. Unlike repairers and storers, loggers typically do not have possession of the logs they work on. Furthermore, logging is frequently subcontracted out and logs are not easily identifiable.

Of the various statutory lien regimes discussed above, BC’s FSPPA is most useful as a model of what a reformed forestry worker lien regime in Ontario might look like. However, there remain significant challenges to designing a reformed Act in Ontario and a “made in BC” solution is not necessarily appropriate given the different commercial conditions existing in Ontario’s logging industry. Some of the more problematic design challenges are as follows.

First is the nature of the property that serves as security for a forestry worker lien regime. Fungible property such as logs are difficult to describe for the purposes of a registry system and difficult to identify for the purpose of enforcing a lien. BC’s FSPPA has circumvented this problem by defining the property subject to a lien broadly so that, even if particular wood cannot be identified, the lienholder may look to other assets to satisfy the claim. This is an effective approach to the problem. However, as pointed out in the LCO’s Consultation Paper, there is the possibility that this may result in disputes among creditors over the property available to satisfy lien claims.[244] Furthermore, there remains the conceptual problem that, unlike most forms of property subject to statutory lien regimes, logs are, by their very nature, intended to disappear as they are processed into wood products. This is a signal that a lien regime is not necessarily suitable in this commercial environment.

Second, there is no clear solution to the problem of protecting subcontractors within a forestry worker lien regime without prejudicing licencees. Lien regimes primarily directed at repairers and storers have varying approaches to the issue of whether liens should attach without owner authorization. But these do not typically involve subcontracting and, therefore, are not apposite to the logging context. For example, statutes like the ULA that provide for a lien in respect of unauthorized services to goods are justified on the basis that the owner of the goods generally gains some value from those unauthorized services. This rationale does not apply where services have been subcontracted. A licencee does not gain additional value from subcontracted harvesting services since it must pay the general contractor for the services.

Reformed woodworker lien regimes all acknowledge that protecting subcontractors is a practical necessity given the structure of the logging industry. The challenge then would be to design a mechanism to protect the licencee from paying twice for the same services. Each of the approaches discussed above have some drawbacks. The approach in BC’s FSPPA of limiting subcontractor claims to a charge on the accounts receivable of the contractor is perhaps the most workable in the modern context and given the size and informal business practices of Ontario’s logging industry. However, subcontractors would have to be content with a relatively less secure claim than typical of a lien regime.

Third, since the advent of the PPSA, it is no longer generally acceptable for a non-possessory commercial lien regime to operate in the absence of some form of notice to third parties. However, a registry system would be administratively unwieldy in the logging industry which is small, fragmented and operates informally on the basis of long-term relationships. One challenge would be to determine who should be named in registering a lien claim. The ULA imposes a duty on the lienholder to identify and name both the owner and the debtor (where these are not the same). The BC FSPPA avoids this problem by providing that subcontractors may register a charge only against the party with whom they have contracted. This latter option seems more workable in a licensed industry where ownership may not always be clear. However, another challenge would be to support logging contractors and subcontractors in accessing a registry system and in inputting the exact information necessary to file a valid claim.  Finally, it remains questionable whether a registry system would be cost-effective given the small number of forestry worker lien claims that are typically filed in Ontario.

Fourth, there is the challenge of integrating forestry worker lien claims into the priority scheme under the PPSA while being cognizant of the impact on other creditor claims. The BC FSPPA adopts the first-to-register priority scheme of the PPSA. However, the BC government addressed the concern that logging contractors would not recover in insolvency by establishing a Compensation Fund. A compensation fund would be a controversial proposition in Ontario. During the LCO’s consultations, a number of stakeholders from both the forest products industry and the logging community expressed distaste for the idea of more government regulation in the industry. Ontario licencees already pay a portion of their stumpage fees into two funds. The Forestry Renewal Trust Fund is used to fund forest regeneration and the Forest Futures Trust Fund insures against natural disasters such as insects, diseases or forest fires. In 2011/ 2012, in addition to stumpage charges averaging around $3.06 per cubic metre, licencees also paid $3.71 per cubic metre into these Funds.[245] Depending on who would be required to contribute, a compensation fund would likely raise the cost of business even further.

Certainly, it would be possible to draft a new Act for Ontario that addressed each of the above design challenges.  BC’s FSPPA is an example of a complete overhaul of a traditional forestry worker lien regime that achieves its purpose using contemporary commercial law norms and concepts. However, the challenges discussed here illustrate that, at best, a lien regime has become an awkward legal tool for protecting logger’s interests in the 21st century and, at worst, signals that such a regime is simply no longer commercially or legally appropriate.

 

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