Funds paid as security for builder’s lien did not prevent accrual of interest: BC Court of Appeal

The British Columbia Court of Appeal reversed an order denying contractual interest, ruling that funds paid as security in substitution for land subject to a builder’s lien and remained in the control of the debtor did not prevent accrual of interest.

Highridge Homes Ltd. was contracted by Vanessa and Dirk de Boer to build a home. However, they had a falling out over excavation costs. As a result, De Boer refused to pay the final invoice. Highridge sued for payment, lost profits, and a builder’s lien against the title to the property. De Boer filed a counterclaim for additional costs in finding a new contractor.

At trial, Highridge was largely successful. The judge found mutual termination of the contract and ordered De Boer to pay most of the invoiced costs. He however declined to order contractual interest from the date the overdue amount was paid into Highridge’s lawyer’s trust account.

Highridge appealed the contractual interest order. De Boer cross-appealed, alleging error in finding that the contract was mutually terminated.

The appellate court allowed the appeal and dismissed the cross-appeal.

In Highridge Homes Ltd. v. de Boer, 2023 BCCA 74, the appellate court ruled that Highridge was entitled to contractual interest. First, the judge erred in ruling that the contract was silent as to the definition of “paid”, since it provided that paid meant receipt by Highridge’s lawyer, said the court. As such, de Boer’s payment to their own lawyer of the dispute amount did not prevent the accrual of interest, said the court.

Further, the appellate court ruled that despite payment pursuant to the security agreement, de Boer did not relinquish control over the funds, since it was deemed as security in substitution for the land subjected to, the builder’s lien. The issue of whether the funds were due remained unresolved, said the court.

As for the cross-appeal, the appellate court ruled that the mutual termination of the contract was a question of law and thus reviewable on a deferential standard. Upon review, it was available to the judge to conclude there was mutual termination upon finding that neither party made effort to restore a working relationship, said the court.