Manitoba court upholds lien for Hydro distribution work, directs disputed funds into court

A Manitoba court has upheld a subcontractor’s right to claim a builders’ lien for work on Manitoba Hydro’s local electricity network, rejecting an argument that every Hydro project is exempt from the province’s lien legislation.

In Manitoba Hydro v. Wawasum Energy Inc. et al., 2026 MBKB 53, released April 17, 2026, Justice Rempel of the Manitoba Court of King’s Bench found that the exemption for generating stations and associated plants did not cover the wooden utility poles and lower-voltage lines at issue.

The ruling also provides a route for Hydro to pay out $921,521.30 it was holding and leave the litigation. It does not determine how much the subcontractor, Michels Canada Co., is ultimately owed or resolve Wawasum’s allegations about defective work and inaccurate invoices.

Competing claims to money Hydro was holding

Hydro contracted with Wawasum in 2019 and 2023 for maintenance work on subtransmission and distribution lines. Wawasum subcontracted some of that work to Michels.

After invoices exceeding $1.4 million went unpaid, Michels served a lien on Hydro and started a lawsuit to enforce it. Wawasum denied owing the amounts claimed and counterclaimed over the quality of Michels’ work and the accuracy of its invoices.

Hydro had retained $921,521.30 otherwise payable to Wawasum. That amount combined a statutory 7.5 per cent holdback with a separate 7.5 per cent contractual performance holdback. The Canada Revenue Agency also asserted claims against Wawasum, creating competing demands on the money.

Rather than risk paying one claimant and remaining liable to another, Hydro asked for interpleader relief. That procedure allows a neutral holder of disputed money to pay it into court, or distribute it as directed, while the competing claimants litigate their rights.

Before the lien lawsuit could proceed to trial, the court needed to decide whether the statutory Hydro exemption barred Michels’ lien and how the retained funds should be handled. The reasons state that trial of the underlying lien dispute was scheduled to begin in December 2027.

Power delivery is not the same as power generation

Section 3(3) of The Builders’ Liens Act excludes contracts connected with the construction, repair or maintenance of hydro-electric generating stations or facilities and plants appurtenant to them. Wawasum argued that the entire electricity network was connected to generating power: without local lines, electricity could not reach customers.

Hydro and Michels took a narrower position. The work involved replacing wooden poles and lower-voltage lines in the subtransmission and distribution network, not constructing or repairing generating facilities.

Justice Rempel examined both the English and French versions of the legislation, which have equal authority in Manitoba. The key was not simply whether infrastructure was connected to a generating station. It first had to qualify as a plant.

The English word “plant” can have a broad meaning. The French word “usine” pointed to an industrial establishment that transforms materials into something else. Reading the two versions together, the judge adopted that narrower shared meaning.

Wooden poles and the lines carrying electricity to homes and businesses did not perform that transformative function. They delivered power rather than constituting an industrial plant.

The decision did not require an exempt plant to sit directly beside or be physically attached to a generating station. Justice Rempel distinguished an earlier case involving a converter station, which qualified as a plant and was essential to the generating system. The distinction turned on the nature and function of the infrastructure, not distance alone.

An exception, not a blanket exclusion

The wider statutory scheme reinforced that reading. The Act generally binds Crown agencies, expressly including Hydro. For Crown-owned property, the lien operates against required holdback funds rather than attaching to the Crown’s land or structures.

The legislature could have excluded every contract anywhere on Hydro’s network, the judge reasoned, but it had not done so. A broad exclusion would also undermine the legislation’s protection for subcontractors working through layers of contracts, who may otherwise struggle to secure payment.

Justice Rempel contrasted the Hydro exemption with another exclusion for certain public infrastructure contracts. Those projects have an alternative statutory mechanism to protect unpaid subcontractors. No comparable replacement scheme existed for work falling within the Hydro exemption, supporting a restrained interpretation of that exception.

The judge also rejected the argument that Manitoba Hydro’s governing legislation required a broader result to protect electricity supplies. The evidence showed that the distribution grid could accommodate alternative routes; a subcontractor’s work stoppage and lien would not necessarily or automatically interrupt service to customers.

Tax payment first, remaining funds preserved

The CRA’s total claims for unremitted source deductions, GST, penalties and interest exceeded $535,000. However, the parties agreed that the enhanced requirements to pay, amounting to $148,300.73 plus accrued interest to payment, had priority over all competing claims for the purposes of this order.

Hydro was ordered to pay that amount and interest to the CRA. It could deduct $4,044.50 in agreed legal costs and was directed to pay the remaining funds into court. The order provides that payment discharges the lien and releases Hydro from the lien lawsuit.

The court did not decide that the CRA’s remaining tax demands outranked Michels’ lien. That priority question, along with the amount of Michels’ claim and Wawasum’s counterclaim, remains for the lien action. Costs of this motion can be addressed at the end of that trial.

The underlying action’s public registry later recorded October 8 correspondence setting a further pre-trial hearing for February 26, 2027. The registry entry does not establish which ordered payments have been completed.

For contractors, the decision draws a practical boundary: work on Hydro infrastructure is not automatically outside builders’ lien protection. But a valid lien is security for a claim, not a judgment establishing the final debt or guaranteeing recovery.