A THEORY OF MECHANICS' LIENS (AND RELATED REMEDIES)

This thesis examines the role of the remedies provided to construction suppliers under Ontario's law of mechanics' liens. Study is focused upon Bill 139, the proposed Construction Lien Act. The four remedies examined are the construction lien, the holdback, the trust obligations created by the Act, and the provisions of the Act allowing for the appointment of a trustee. The thesis developed is that these remedies play a key role in ensuring the health of the industry. The remedies provide construction suppliers with the coercive power and salvage protection of secured creditors. It is concluded that such protection is necessary because of the extent to which suppliers are required to extend credit within the industry. The provision of credit is found to be an inherent feature of construction activity. In granting such credit, construction suppliers are exposed to an unusually high risk of non-performance (ie. non-payment) by their customers. This risk creates a need for a performance-securing mechanism. The remedies provided by the Act create such a mechanism. The statutory perscription of these remedies is justified on the basis of the informational and general transaction cost obstacles which exist to prevent the free negotiation of an optimal level of protection to creditors within the construction industry. The efficacy of the remedies created by the Act in achieving their purpose in assessed, and they are generally found to provide an adequate level of protection. Study is also given to the characteristics of the construction industry in England, where the law does not provide for remedies analogous to those provided under Ontario's mechanics' lien law.