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In some jurisdictions, woodworker lien legislation similar to FWLWA has been repealed, presumably because it was deemed commercially obsolete. For example, Michigan’s legislation was quietly repealed in 2000. In Quebec, provisions for the protection of forestry workers had existed under the Civil Code of Lower Canada but were abolished when the Civil Code of Quebec was enacted in the early 1990s. 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. 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. It found that lien acts were outdated and there had been no significant developments in lien law for the past 60 years.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. 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. 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.
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. The WLA provides protection to logging employees but not to contractors. 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.
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. 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.
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. 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. 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. 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. 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. 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. 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. The government has set up a private entity to administer the Fund.
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.
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.
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. 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.
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. However, before 1989, both repair liens and warehousemen liens were exclusively