The respondent subcontractor entered into a construction contract containing a clause waiving its mechanics' lien rights.
When the contractor failed to make progress payments, constituting a fundamental breach, the respondent treated the contract as at an end and filed a lien.
The Supreme Court of Canada affirmed that the question of whether an exclusionary clause applies following a fundamental breach is a matter of construction of the contract.
The Court held that the waiver clause ceased to bind the respondent upon the fundamental breach, and section 5(1) of the Mechanics' Lien Act did not foreclose the lien irrespective of the fate of the contract.
