Northern Dynasty Ventures Inc v Japan Canada Oil Sands Limited, 2014 ABQB 727

Court of Queen ’ s Bench of Alberta Citation: Northern Dynasty Ventures Inc v Japan Canada Oil Sands Limited, 2014 ABQB 727 Date: 20141128 Docket: 1403 06762 Registry: Edmonton Between: Northern Dynasty Ventures Inc. and Tyalta Industries Inc. Plaintiffs - and - Japan Canada Oil Sands Limited Formerly Japan Oil Sands Alberta Limited Defendant And Highway Rock Products Ltd. Third Party Defendant _______________________________________________________ Reasons for Judgment of W. S.

Schlosser , Master in Chambers _______________________________________________________ [ 1 ] The issue here is ‘What constitutes a sufficient affidavit in response to a Notice to Prove Lien?’ The follow-up is whether a deficient affidavit is fatal to a lien claim. The answers are worth about two million dollars.

Facts [ 2 ] Tyalta and Northern Dynasty filed liens against a Japan Canada Oil Sand’s mineral interest. One lien was for $1.2 million. The other was for $800,000. [ 3 ] Japan made a

section 48 application, [1] to discharge the liens and to have money, in this case, Letters of Credit, stand in place of the land. My learned collegue allowed this application on the basis that Letters of Credit in the amounts of $880,0000.00 and $1,320,000.00 be posted; being the face value of the liens plus an allowance for costs. The Letters of Credit were provided and the liens were discharged. [ 4 ] By that time the lien claimants had sued. Tyalta, filed a detailed statement of claim which provided: 5.

The Plaintiff and Defendant entered into an Agreement on or about September 16, 2013 and ending on or about April 7, 2014 whereby the Plaintiff provided equipment to crush and screen gravel at a monthly rental rate for the Defendants use at their site in Fort McMurray, Alberta Equipment Rental per Month a) 2013 TC-51 Cone Crusher b) 2013 MCB J50M Jaw Crusher c) 2012 MCB R230 Screener d) 2012 Nor-Tech Feeder e) 20-10 415 KW Generator

f) MCB 36*125 E Conveyor g) 36*90 Telescoping Conveyor $62,000.00 $38,000.00 $25,000.00 $14,000.00 With cone crusher rental $10,000.00 $3,500.00 5. (sic) On or about April 7, 2014, the Plaintiff stopped crushing and screening gravel for the Defendant’s use due to an unpaid account in the sum of $800,000.00. [ 5 ] Northern Dynasty claimed: 5.

The Plaintiff and Defendants entered into an Agreement whereby the Plaintiff supplied the Defendant with crushed and screened sand and gravel beginning on or about September 16, 2013 and ending on or about April 7, 2014 for their use at their site in Fort McMurray, Alberta. 6. On or about April 7, 2014, the Plaintiff stopped providing the Defendant with crushed and screened sand and gravel due to an unpaid account in the sum of $1,200,000.00. [ 6 ] Japan defended and issued Third Party proceedings against an outsider to the lien dispute. The two actions have now been consolidated. Japan’s defence is very general.

It is not very helpful in defining the issues. It puts even an agreement between Japan and the lien claimants in issue. [ 7 ] At about the time the Letters of Credit were posted, Japan served Notices to Prove Lien. The time under the Act is short (15 days from service). The deadline was July 9, 2014. Affidavits in response were provided after the deadline; on August 7 and August 12 respectively. [ 8 ] The Affidavits provided: (

a) Northern Dynasty 2. The Plaintiff carries on the business of removing, crushing and screening sand and gravel from Surface Material Leases and Surface Material Exploration Rights on the following lands: 3. From the said lands, the Defendant was the equitable and beneficial recipient of $1,200,000.00 worth of crushed and screened sand and gravel for their Hangingstone Expansion Project in Fort McMurray, Alberta. (

b) Tyalta 3. The Plaintiff crushed and screened sand and gravel from Surface Material Leases and Surface Material Exploration Rights on the following lands: 4. The Defendant was the equitable and beneficial recipient of $800,000.00 worth of equipment used to crush and screen sand and gravel. [ 9 ] The Affidavits are only 4 and 5 paragraphs long with no exhibits.

[10] Japan brought this application in regular chambers to strike the lien claims, arguing that the Affidavits were not sufficient toprove the liens. Neither side could find much in the way of authority. The application was adjourned for further research and writtenargument. Rights and Remedies [11] The purpose of the Builders Lien Act is well known: it provides a mechanism for recovery against an owner who benefitedfrom work or materials when there might not otherwise be a contractual right of action against him. (“the right”).

It also provides for anexpeditious way to resolve lien disputes (“the remedy”). [12] As I read the decided cases, there is a watershed in the Act. The steps necessary to create the right are strict and unforgiving.There is no room for error and little or no room for discretion. [13] Applying the remedy however, is different. Some discretion is allowed. Sections 48(4) and (5) are virtually identical tosections 52(4) and (5).

They provide: 48(4) A registered lienholder served with a notice to prove lien shall, within 15 days from the day of the service of the notice on thelienholder, file with the court in which the proceedings were commenced an affidavit providing detailed particulars of the lienholder’slien.

(5) A registered lienholder on whom a notice to prove lien is served and who does not file the lienholder’s affidavit (

a) within 15 days from the day of the service of the notice, or (

b) within any further period that the court may order on application. Loses the lienholder’s lien. 52(4) A lienholder served with a notice to provide lien shall, within 15 days from the day of the service of the notice on the lienholder,file with the court in which the proceedings were commenced an affidavit providing detailed particulars of the lienholder’s lien. (5) a lienholder on whom a notice to prove lien is served and who does not file the lienholder’s affidavit (

a) within 15 days from the day of the service of the notice, or (

b) within any further period that the court may order on application Loses the lienholder’s lien. [14] The time for an affidavit in response can be extended, even after the deadline: Grinnell Fire Protection System Company v.Electrohome Limited, (AB KB), 1991 Carswell Alta 417 (Breitkreuz, M. and the cases cited there.); A.R. BaziukArchitect Ltd. v. Isaak Properties Ltd. (1984), (AB KB), 30 Alta LR (2d) 278 (QB) and TRG Developments Corp. vKee Installation Ltd., 2014 ABQB 482 and the cases cited there. [15] I agree with Master Robertson in Krupp Canada Inc. v.

JV Driver Projects Inc., 2014 ABQB 259, when he notes that theburden passes to the lienholder when a notice to prove lien is served. I also agree with the language chosen by Master Prowse in Dahl v.Sanispec Hld Inc., 2011 ABQB 589, at para. 4, and that of Master Robertson in Krupp, at para. 94; that the obligation to ‘prove the lien’is more appropriately thought of as having to provide, under oath, detailed particulars of the lienholder’s claim. [16] In my view, this would consist of (at the very least):

(1) A statement that the lien claimant did the work or supplied the materials;

(2) Disclosure of who requested the work and materials (which would be especially important if the owner did not make the requestdirectly);

(3) Sufficient particulars about the work or materials to allow the owner to make a reasoned judgment about payment.

(4) Finally, if there are pleadings, the affidavit should, ideally, address the issues raised in the defence. [17] As noted by those learned Masters, the affidavit also provides the function of exposing the lien claimants to examination ontheir affidavit so that matters left in doubt can be canvassed. There is no automatic right to the questioning in lien actions as there is inother actions (s. 53(1)(c)(2)). [18] Once the time for a defence has passed, the lien claimant may make a pre-trial application. The Affidavits in response to aNotice to Prove Lien might be enough for the court to make a determination.

Section 53 is striking. It is intended to be comprehensive.There is a wide latitude for directions, including oral evidence (s. 53(1)(c)(2)). [19] The affidavits in this case are plainly deficient. They do not even provide the same level of particulars found in the Statementsof Claim.

What’s on Second [ 20 ] A deficient affidavit can, in some circumstances, be cured by an extension of time to file a further and better affidavit. But filing a deficient affidavit is risky business. A deficient affidavit might mean that the right is lost. [ 21 ] The lien claimants say, though informally in their brief, that the dispute is about sand and gravel that was crushed, screened, hauled and actually put to use by Japan. However, despite the very general defence, this does not appear to be a situation where the owner is learning about the claim for the first time.

The lien claimants say that there are approximately 3500 tickets relating to the work and that the 15 day mandated by the Act simply wasn’t enough. The mystery is that there has been no formal application then or now to extend the time, or to file a further affidavit. [ 22 ] If this were a case of an owner and a subcontractor , it would be my inclination to treat the lien claimant’s cavalier approach to

section 48 as sufficient grounds to extinguish the lien. However, since we appear to be dealing with an owner-contractor situation and there will be significant overlap between the contractual claim and the lien claim, simply dismissing the liens on the basis of the lienholders’ malfeasance with respect to the responding affidavit would likely only mean duplicating steps in the long run. [ 23 ] It is easier to excuse defective performance than non-performance. But here the difference is slight. However, I am disinclined to simply extinguish the lien claims at this stage.

I am presuming that Japan, having been billed for the work, already knows the particulars of the claim in some detail. I acknowledge that there may be an element of costs arising from the delay. They have, after all, posted over 2 million dollars to get this claim resolved and for that they should expect expeditious progress towards resolution. It may well be that the lien claimants are conceding that the procedure under the Act won’t be enough.

But I am willing to give them the benefit of the doubt. [ 24 ] If no application is brought to extend the period to file further and better affidavits of lienholder within 14 days of the date of this decision the liens are extinguished and the letters of credit are to be returned to the Applicant. Costs can be addressed after that eventuality, or at the application to extend time. Heard on the 26 th day of August, 2014. Dated at the City of Edmonton, Alberta this 28 th day of November, 2014. W. S. Schlosser M.C.C.Q.B.A.

Appearances: Brent Boisvert Verhaeghe Law Office for the Plaintiff Brian Reid Bennett Jones LLP for the Defendant