The British Columbia Court of Appeal recently issued a decision involving a dispute over construction payments and lien claims at the Lonsdale Quay Market in North Vancouver1. The case, known as Lonsdale Quay Market Corporation v. Klondike Contracting Corporation, 2025 BCCA 461 (CanLII), centers on the financial fallout from a renovation project that ran into serious trouble when the general contractor became insolvent. The ruling serves as a detailed reminder for property owners about the risks of continuing to pay a general contractor after receiving formal notice that a subcontractor has not been paid for their work.
The story began in 2021 when the Lonsdale Quay Market Corporation hired Klondike Contracting Corporation to serve as the general contractor for a construction project at the market’s property on Carrie Cates Court. The total value of the contract was approximately $5.2 million. As the project moved forward, Lonsdale made regular payments to Klondike, eventually paying out about $4.7 million. However, the project began to face financial difficulties in early 2023. One of the subcontractors on the job, J.A.W. Fabricators Co. Ltd., realized they were not being paid for the work they had completed.
In May 2023, J.A.W. Fabricators took formal legal action by filing a claim of lien under the British Columbia Builders Lien Act. A lien is a legal claim against a property that ensures those who work on a project or provide materials are paid. If they are not paid, the lien stays on the property title, making it difficult for the owner to sell or refinance the land. Crucially, J.A.W. Fabricators did not just file the paper with the land title office; they also served a copy of the claim directly to Lonsdale Quay Market Corporation. This provided the owner with actual, documented notice that the subcontractor was owed money.
Despite receiving this notice, Lonsdale continued to make payments to Klondike Contracting. Between June and November 2023, Lonsdale paid the general contractor more than $800,000. During this same period, several other subcontractors also filed their own lien claims against the property as they too stopped receiving payments from Klondike. By October 2023, the situation grew worse when Lonsdale discovered that a court had appointed a receiver over Klondike, signaling that the general contractor was insolvent and could no longer meet its financial obligations. Lonsdale terminated the contract shortly after learning about the insolvency.
By early 2024, there were 18 different lien claims registered against the Lonsdale Quay Market property, totaling approximately $2.1 million. Lonsdale wanted to clear these claims from the property title so the project could move forward without the legal cloud of the liens. Under Section 23 of the Builders Lien Act, a property owner can ask a court to cancel the liens if the owner pays a specific amount of money into court to act as security. Lonsdale argued that they should only have to pay the 10 percent statutory holdback required by law, which they calculated to be about $521,008.
The central dispute in the case arose because J.A.W. Fabricators opposed Lonsdale’s plan. The subcontractor argued that because Lonsdale had continued to pay the general contractor after being told about the unpaid subcontractor bills, the owner should have to pay more than just the standard 10 percent holdback. J.A.W. pointed to Section 34 of the Act, which states that payments made after an owner has notice of a lien do not reduce the “amount owing” for the purposes of the lien. In other words, J.A.W. argued that Lonsdale should have kept the money for the subcontractor instead of giving it to the failing general contractor.
The British Columbia Supreme Court heard the initial petition in August 2024. The judge at that level agreed with the subcontractor. The judge found that when Lonsdale paid over $800,000 to Klondike after receiving notice of J.A.W.’s lien, those payments could not be used to reduce the amount Lonsdale was considered to owe for the purpose of the lien security. Consequently, the judge ordered Lonsdale to pay $944,111 into court to clear the liens. This amount represented the money Lonsdale was still holding plus the full value of J.A.W.’s $428,353 lien claim. Lonsdale appealed this decision, bringing the matter before the Court of Appeal.
On appeal, Lonsdale raised several technical legal arguments. First, they tried to argue that J.A.W. Fabricators was only a “lien claimant” and not a “lien holder.” They suggested that Section 34 of the Act only protects those who have already proven their liens in court. However, the Court of Appeal refused to even consider this argument. The justices noted that Lonsdale had not raised this distinction during the first hearing. The court explained that allowing a party to bring up a brand new legal theory on appeal is unfair to the other side, who might have changed their legal strategy or gathered different evidence if they had known about the argument earlier.
Lonsdale’s second major argument involved Section 34(3) of the Act. This section allows an owner to use money held in excess of the 10 percent holdback to fix defaults or finish work if a contractor fails to do so. Lonsdale argued that since Klondike had defaulted, Lonsdale had to spend over $1.4 million to finish the project and fix mistakes. They believed this cost should cancel out the requirement to pay the subcontractor’s lien amount into court. They argued that there was essentially no “amount owing” to the contractor because the cost of repairs was so high.
The Court of Appeal rejected this interpretation as well. Justice Winteringham, writing for a unanimous three-judge panel, explained that the purpose of the Builders Lien Act is to balance the interests of property owners and the people who do the actual work on a project. The court found that if an owner has notice that a subcontractor is unpaid, the owner must protect that subcontractor. If the owner chooses to ignore that notice and continues to pay the general contractor anyway, the owner must bear the consequences. The court stated that allowing an owner to use those “bad faith” payments to cover repair costs would leave subcontractors with no protection, even when they follow all the rules of the Act.
The court emphasized that the rules in the Act are precise and are meant to ensure that money flows correctly through a construction project. By providing notice of a lien, a subcontractor is essentially telling the owner to stop paying the contractor that specific amount of money. If the owner fails to listen, the law does not allow them to later claim they have no money left for the subcontractor. The justices agreed that the lower court judge had correctly interpreted the law by requiring the owner to pay the additional funds.
The court also dealt with a cross-appeal from J.A.W. Fabricators. The subcontractor argued that the judge had made a small mathematical error by using the amount Lonsdale actually held back rather than the higher 10 percent statutory holdback figure in the final calculation. The Court of Appeal dismissed this cross-appeal, finding that the judge’s calculation was legally sound under the specific sections of the Act being applied. The justices also declined to interfere with the lower court’s decision regarding legal costs, noting that both sides had won on different parts of the original case.
In the end, the Court of Appeal allowed Lonsdale’s appeal only on one very small point that both sides agreed upon. The original court order had accidentally left out a standard term stating that once the money was paid into court, there could be no further claims against Lonsdale by the subcontractors regarding this specific work. The court added that term to the order but otherwise left the lower court’s decision standing. This means the Lonsdale Quay Market Corporation must leave the higher amount of money in the court’s hands while the various subcontractors continue to litigate how that money should be divided among them.
The decision is a significant one for the British Columbia construction industry because it clarifies how the courts will treat owners who ignore lien notices. It reinforces the idea that the “amount owing” to a contractor is not just a simple balance sheet calculation, but is instead governed by strict rules meant to protect those lower down the construction chain. Owners who receive notice of a lien must be extremely careful to ensure they do not pay out funds that the law requires them to keep as security for the people doing the work on their land.
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