Dryco Building Supplies Inc. v. S.G.H. Drywall Inc., 2012 ABQB 226

Court of Queen ’ s Bench of Alberta Citation: Dryco Building Supplies Inc. v. S.G.H. Drywall Inc., 2012 ABQB 226 Date: 20120405 Docket: 1103 11157, 1103 10942 Registry: Edmonton Between: 1103 11157 Dryco Building Supplies Inc. Plaintiff - and - S.G.H. Drywall Inc., Dawson Wallace Construction Ltd. and the City of Drumheller Defendant And Between: 1103 10942 Dawson Wallace Construction Ltd. Applicant - and - Berson Construction Ltd., Dryco Building Supplies Inc. and S.G.H. Drywall Inc. Respondents _______________________________________________________ Memorandum of Decision of L. Smart, Master in Chambers _______________________________________________________ Background

[1] The City of Drumheller constructed a community facility. Dawson Wallace Construction Ltd. was the general contractor andsubcontracted with Berson Construction Ltd. to complete some of the work. Berson Construction Ltd. in turn subcontracted with S.G.H.Drywall Inc. (SGH) for supply and installation of drywall. SGH subcontracted with Dryco for supply of material. A dispute arosebetween Dawson Wallace and Berson resulting in Berson leaving the jobsite before the contract was complete. Liens were filed by SGHand Dryco resulting in Dawson Wallace paying into court the amount outstanding to SGH (which included the Dryco lien amount) plusan amount for security for costs under

section 48 of the Builders Lien Act. [2] Dryco applied for and received an order declaring its lien valid and a judgment against SGH. It also seeks to have its lienpaid from the monies paid in under

section 48. Dawson Wallace says that payment out is premature and the amount available forapplication on the Dryco lien will be determined when the lien fund is set. Dawson Wallace’s counsel notes that as between DawsonWallace and Berson there will be a number of setoffs which will significantly reduce the lien fund. Discussion [3] In support of Dryco’s application in morning chambers, counsel provided a six-page written brief plus authorities. It isexcellent material on the law of legal and equitable set off.

The gist of the argument is that as between Dryco and SGH there is no rightof setoff available as there are no factual circumstances which would support it. The materials provided were satisfactory, incorporatedinto the improvement and there is no warranty claim available. Furthermore, Dawson Wallace and ultimately the City of Drumhellerwould be unjustly enriched if they were to receive the benefit of those materials without compensating the supplier.

In thesecircumstances, Dawson Wallace has no factual basis in which to support legal or equitable setoff as against the claim of Dryconotwithstanding it may have rights of setoff against Berson or SGH. [4] The reasoning is sound in the context of setoff; however, what we are dealing with is a builder’s lien under the Builders LienAct. Under that legislation contractors and subcontractors are entitled to receive only that which is specified.

The lien fund prescribed bysection 18 (3) of the Act is 10% of the value of the work actually done or materials actually furnished plus any additional sum due andowing but unpaid to that contractor or subcontractor for work done or materials furnished. It is clear from the decision of JusticeMahoney in Maple Reinders Inc. v W. Dalton Energy Corp., 2007 ABQB 247 that payment under

section 48 does not in any way affectthe calculation of the lien fund. No setoff is permitted as against the lien fund on the 10% of the value of the work done. Regardless, it isopen for the City of Drumheller to argue that the balance of the lien fund may be subject to claims of setoff for deficiencies, or cost tocomplete if it is found that the project was abandoned by Berson (Lloydminster Roman Catholic Separate School District No. 34 v.Border City Transit Mix

(1980) Ltd., (AB KB), [1988] A. J. No. 47, 57 Alta L.R. (2d) 146. [5] The information required to determine the lien fund was not before me nor was I asked to set a lien fund. That is for anotherday. Despite the often stated purpose of the Builders Lien Act to provide a mechanism to enforce their liens at a minimal expense and in aprocedurally uncomplicated manner, Dryco must nonetheless wait until the lien fund is ascertained. Decision [6] The application by Dryco for payment out of the funds is dismissed. There will be no costs to either party with respect to thisapplication. Dated at the City of Edmonton, Alberta this 4th day of April, 2012.

L. Smart M.C.C.Q.B.A. Appearances: Michelle M. Simpson, Simpson Law for the Plaintiff: Dryco Building Supplies Inc. Kentigern A. Rowan, Ogilvie LLP for the Defendants: Dawson Construction Ltd.