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Provincial Builders Lien Legislation Collides With Constitutional Law- (Construction Law Letter)

Anna Esposito (Construction Law Letter)

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Vancouver International Airport Authority v. British Columbia (Attorney General)

When incompatible pieces of legislation collide and they are not reconciled by the courts the impact can be felt Canada-wide.  This is the outcome of one collision between provincial builders’ lien legislation and constitutional law.

Prior to 1994, the federal government owned and operated over 150 airports, many of which were under-used and over- subsidized. The National Airports Policy was created as a strategy to enable the federal government to download the responsibility for the “operation, management and development” of Canadian airports to various Airport Authorities. This was done through long-term leasing arrangements. The Vancouver Airport Authority and all other Canadian airport authorities are creatures of this Policy.

The federal government has exclusive jurisdiction over aeronautics and owns the Vancouver International Airport lands. The Vancouver Airport Authority operates and maintains the Airport under a lease for a term of 60 years.

Two contracts were entered into by the Authority, one for the expansion of the taxiways and the other for the expansion of a holding area for passengers waiting to board aircrafts. A number of suppliers of services or materials filed builders’ liens against the Authority’s leasehold interest in the Airport lands. The Authority demanded that the Land Titles Register refuse the registration of the liens. That request was denied and the Authority asked the courts to judicially review the Registrar’s decision.

In the course of that judicial review, the Authority also sought a declaration that certain provisions of the Builders Lien Act were constitutionally inapplicable to the Authority’s leasehold interest pursuant to the doctrine of “interjurisdictional immunity”.

The Attorney General of British Columbia became involved because a constitutional question was raised. The constitutional question was heard by Justice Pitfield who ruled that, (i) the impugned provisions of the Act had to be “read down” and were thus rendered inapplicable to the extent that they purported to apply to the leasehold interest of the Authority; and (ii) the builders liens filed against that interest were invalid and had no force or effect. The Attorney General appealed.

The B.C. Court of Appeal upheld Justice Pitfield’s decision and the Supreme Court of Canada refused to give leave to appeal further. Therefore, the Court of Appeal decision is the law in British Columbia. However, the National Airports Policy resulted in the creation of many local airport authorities across the country all under similar long-term lease models. With this decision, the Vancouver Airport Authority managed to obliterate the right to exercise a lien remedy against the leasehold interest of improved airport lands. If judges in other provinces adopt the reasoning of Justice Pitfield then all suppliers of services or materials for the improvement of airport lands in Canada will have lost an important remedy. For this reason, Justice Pitfield’s reasoning warrants attention.

This doctrine of inter-jurisdictional immunity was applied by Justice Pitfield to grant the Vancouver Airport Authority immunity from the application of the Builders Lien Act. Historically, the doctrine began with the granting of immunity from provincial legislation that had the effect of “sterilizing” or “paralyzing” the activities of federal undertakings. Then, the doctrine was expanded to include the protection of “essential” parts of federal undertakings. In time, the scope was further broadened to give immunity from provincial legislation that “affects” a vital or essential part of a federal undertaking.

In 2007, two related Supreme Court of Canada decisions arguably returned the test of impairment to the earlier more restrictive one by holding that a level of government is not put into jeopardy (such that immunity is necessary) until the adverse impact of a law imposed by another level of government increases in severity from “affecting” to “impairing” the “core” competence of the one seeking immunity.

The Court stated that airports are “an integral and vital part of aeronautics and aerial navigation” while acknowledging that not every aspect of the construction of airports may rise to the level of being a “vital part” of aeronautics. In this case, the improvements were a “vital part” of the Authority’s development, management and maintenance of the Airport, according to the Court. The ability to impede aircraft from taking off and landing would impair the operation of the Airport. The ability to create a registrable lien against the Authority’s leasehold interest also impaired a vital and essential part of its operations, particularly because it created the risk of impairment by limiting the ability of the Authority to obtain financing for the construction of improvements and operational requirements necessary for it to fulfill its mandate. For these reasons, the Court of Appeal argued that immunity was warranted.

The Attorney General’s argument that the Builders Lien Act already exempted federal lands from operation of the Act and, therefore, the freehold interest of the federal government could not be sold and was not jeopardized but was rejected. The Attorney General’s alternative argument, that the laws of both levels of government could be accommodated by “reading down” only the provision of the Builders Lien Act which gives a right to sell improved land, while leaving intact the provisions creating the lien and its filing, was also rejected. Instead, the Vancouver Airport Authority was given complete immunity from the Builders Lien Act.

The Court of Appeal held that, while Justice Pitfield had used the word “affects” to describe his finding of intrusion, his reasons as a whole described a level of intrusion that was “significant or serious” to support his conclusion that a grant of immunity was necessary. The Court of Appeal concluded that Justice Pitfield did not make an error when he applied the doctrine of interjurisdictional immunity by reading down the impugned provisions of the Act so as to render them inapplicable to the Authority’s leasehold interest in the Airport Lands.

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