The short answer: Possibly sometimes, maybe.
I recently had a case where this was one of the primary issues. My client was supplying coated structural steel for a large steel building. Raw (uncoated) steel was purchased in the US, shipped to Ontario to be coated by a third party subcontractor and, once coated, the steel was then shipped to the project site (located in another Province). A dispute arose between my client and the subcontractor coating the steel regarding price and claimed extras and the subcontractor asserted a construction lien in relation to the steel already delivered to the project site and a possessory lien under section 3 of the Repair and Storage Liens Act (RSLA) over the steel still in the subcontractor’s possession.
In my view, the subcontractor’s invocation of the RSLA to assert a possessory lien over the steel in its possession (effectively holding my client’s steel hostage until my client posted security with the Court to secure its release) was a twisted and tortured application of legislation ostensibly designed to provide security to an unpaid “repairer” who had fixed a sailboat or a car or a wristwatch or some other widget (you get the idea). However, the definitions of “article”, “repair”, and “repairer” under the RSLA are so expansive that, at least at first blush, it can be argued to apply to individual items (i.e. steel) in the manufacturing process. The relevant definitions are:
“article” means an item of tangible personal property other than a fixture;
“repair” means an expenditure of money on, or the application of labour, skill or materials to, an article for the purpose of altering, improving or restoring its properties or maintaining its condition and includes,
(a) the transportation of the article for purpose of making a repair,
(b) the towing of an article,
(c) the salvage of an article;
“repairer” means a person who makes a repair on the understanding that the person will be paid for the repair;
As you can see, these definitions are extremely broad and almost any item is capable of being an “article” and almost anything that someone can do to that item (with the expectation of compensation or profit) can be considered a “repair”. The real pinch, though, is just how powerful (and some might say draconian) the RSLA is – without getting into the fine legal details, it gives the party asserting the possessory lien the ability to hold the item(s) hostage, name its price, and barring early and expensive court challenge or the posting of security, sell the item(s) without any trial or court Order. No other statute in Ontario, that I’m aware of, gives a self-declared creditor that kind of power without any kind of pre-execution/pre-sale judicial process.
Realistically, this apparent potential for misapplication of the RSLA in the manufacturing/construction process is not likely to have a frequent or significant effect on the general construction industry – the problem my client ran into with the RSLA can only practically arise when Party A delivers its own material to party B for Party B to “alter” or “improve” that material and then a dispute arises between Party A and Party B while Party B still has Party A’s “articles” in its possession. This is where Party B can hold Party A’s own material hostage to extract payment (or the posting of security) for Party A to secure its release. In the more common scenario where Party A is paying Party B money to build or “alter” or “improve” Party B’s own material, the RSLA doesn’t really work because Party B would simply be refusing to release its own material to Party A – doesn’t pack quite the same punch.
If your business (or that of one of your clients if you are a lawyer or professional advisor) involves delivering materials to someone else for them to be altered or improved, beware the RSLA. Where this is the case, the RSLA permits the parties to contract out of the repairer’s right to a possessory lien (the opening words of section 3) and doing so should be given some very serious consideration.