Davidson Well Drilling Limited (Re), 2016 ABQB 416

Court of Queen’s Bench of Alberta Citation: Davidson Well Drilling Limited (Re), 2016 ABQB 416 Date: 20160725 Docket: 1303 08651 Registry: Edmonton In Bankruptcy and Insolvency In the matter of Davidson Well Drilling Limited And in the Matter of Recognition of the Order of the Ontario Superior Court of Justice Dated April 16, 2013 Applicant Pricewaterhousecoopers Inc. in its Capacity as Court-Appointed Receiver of Davidson Well Drilling Limited Respondent Bank of Montreal Corrected judgment: A corrigendum was issued on July 26, 2016; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Reasons for Decision of the Honourable Madam Justice J.M.

Ross _______________________________________________________ Introduction [ 1 ] The Court-appointed Receiver of Davidson Well Drilling Limited [Davidson] seeks approval of its proposed distribution of lien funds.

Lien claimants Century Wireline Services [Century], Clean Harbors Energy and Industrial Services Corp [Clean Harbors], 72619 Alberta Ltd (o/a Roughrider International) [Roughrider], Bruno’s Trucking Ltd [Bruno’s] and Acme Energy Services Inc [Acme] [collectively, the Lienholders] bring cross-applications to have their liens declared valid. [ 2 ] The lien claims relate to work done by Davidson on two Syncrude Canada Ltd [Syncrude] sites known as the Aurora Mine Site and the Base Mine Site [jointly the Syncrude Sites]. The Syncrude Sites are open pit mine sites on lands subject to oil sands leases.

[ 3 ] The projects were described as the Methy Well Work and the Coring Work [jointly the Work]. [ 4 ] Davidson contracted with the Lienholders to assist in performing its obligations in relation to the Work. [ 5 ] Syncrude terminated its agreement with Davidson on February 25, 2013. The Receiver was appointed on April 16, 2013. [ 6 ] The Receiver reached a settlement with Syncrude regarding the accounts receivable by Davidson from Syncrude in respect of the Work, which was approved by the Court in an Order pronounced on November 6, 2015 and varied on November 30, 2015 [the Settlement Order].

The Settlement Order also provided that certain liens in relation to the Work were declared valid, and should be paid out from settlement funds. [ 7 ] The Settlement Order scheduled the following applications for hearing: a. The Receiver’s application for a declaration that the Syncrude Sites are open pit mines and that the Work was not done in relation to the extraction of oil or gas, nor was the work done, services performed or materials supplied to an oil and gas well site; b.

Applications and Cross Applications respecting the invalidity or validity of the balance of the lien claims registered against the Syncrude Sites. [ 8 ] An additional issue was set for hearing, whether the settlement payment constituted one lien fund or was broken down into two lien funds respecting each of the Aurora and Base Mine Sites. The parties have agreed that that matter does not need to be determined, as there are sufficient funds available under either project to cover the liens. The Work [ 9 ] The Receiver provided information from an employee of Syncrude describing the Work.

The Work consisted of resource coring, drilling, geotechnical testing, sonic/auger rig drilling, dewatering/depressurizing and exploration work (Affidavit of Christa Piercy). [ 10 ] The Lienholders provided further information about the Work. Some of this information was disputed by the Receiver as hearsay or opinion. However, the following facts regarding the nature of the Work are not disputed: 1. Davidson was a drilling contractor, specializing in environmental drilling; 2. The Work was performed on open pit mine sites (Affidavit of Christa Piercy); 3.

The Work did not involve mineral extraction or the direct recovery of oil and gas, whether in the form of petroleum, natural gas or bitumen (Affidavits of Christa Piercy and Robert Racz); 4. The Work involved drilling wells for resource coring. The purpose of resource coring was to explore the location of bitumen from which oil would be processed (Affidavit of Robert Racz; Supplemental Affidavit of Robert Racz); 5. The well holes penetrated a stratum capable of containing a pool or oil sands deposit (Affidavit of Robert Racz).

Was the Work with respect to improvements to an oil or gas well or to an oil or gas well site? [ 11 ] This is the primary issue on this application. It is an important issue, because it determines whether a 45-day or 90-day lien period applies. I have reframed the Receiver’s question somewhat to reflect the language of the Builders’ Lien Act , RSA 2000, c B- 7[ BLA ] that gives rise to the issue. Statutory provisions [ 12 ] Section 6(1) of the BLA provides in relation to the creation of a lien: 6(1) Subject to subsection (2), a person who (

a) does or causes to be done any work on or in respect of an improvement, or (

b) furnishes any material to be used in or in respect of an improvement, for an owner, contractor or subcontractor has, for so much of the price of the work or material as remains due to the person, a lien on the estate or interest of the owner in the land in respect of which the improvement is being made.

(2) When work is done or materials are furnished (

a) preparatory to, (

b) in connection with, or

(

c) for an abandonment operation in connection with, the recovery of a mineral, then…the lien given by subsection (1) attaches to all estates and interest in the mineral concerned… [ 13 ] An “improvement” is “anything constructed, erected, built, placed, dug or drilled, or intended to be constructed, erected, built, placed, dug or drilled, on or in land except a thing that is neither affixed to the land nor intended to be or become part of the land”: BLA , s. 1(d). [ 14 ] “Work” includes “the performance of services on the improvement” ( BLA , s 1(p)) and rental of equipment while it is “on the contract site or in the immediate vicinity of the contract site” ( BLA , s 6(4). [ 15 ] The lien period is addressed in sections 18 and 41 (emphasis added): 18(1) Irrespective of whether a contract provides for instalment payments or payment on completion of the contract, an owner who is liable on a contract under which a lien may arise shall, when making payment on the contract, retain an amount equal to 10% of the value of the work actually done and materials actually furnished for a period of 45 days from (

a) the date of issue of a certificate of substantial performance of the contract, in a case where a certificate of substantial performance is issued, or (

b) the date of completion of the contract, in a case where a certificate of substantial performance is not issued.

(1.1) Notwithstanding subsection (1) and irrespective of whether a contract provides for instalment payments or payment on completion of the contract, an owner who is liable on a contract with respect to improvements to an oil or gas well or to an oil or gas well site under which a lien may arise shall, when making payment on the contract, retain an amount equal to 10% of the value of the work actually done and materials actually furnished for a period of 90 days from (

c) the date of issue of a certificate of substantial performance of the contract, in a case where a certificate of substantial performance is issued, or (

d) the date of completion of the contract, in a case where a certificate of substantial performance is not issued. 41(1) A lien for materials may be registered at any time within the period commencing when the lien arises and (

a) subject to clause (b), terminating 45 days from the day that the last of the materials is furnished or the contract to furnish the materials is abandoned, or (

b) with respect to improvements to an oil or gas well or to an oil or gas well site , terminating 90 days from the day that the last of the materials if furnished or the contract to furnish the materials is abandoned.

(2) A lien for the performance of services may be registered at any time within the period commencing when the lien arises and (

a) subject to clause (b), terminating 45 days from the day that the performance of the services is completed or the contract to provide the services is abandoned, or (

b) with respect to improvements to an oil or gas well or to an oil or gas well site , terminating 90 days from the day that the performance of the services is completed or the contract to provide the services is abandoned…

(4) In cases not referred to in subsections (1) to (3), a lien in favour of a contractor or subcontractor may be registered at any time within the period commencing when the lien arises and (

a) subject to clause (b), terminating 45 days from the day the contract or subcontract, as the case may be, is completed or abandoned, or (

b) with respect to improvements to an oil or gas well or to an oil or gas well site , terminating 90 days from the day that the contract or subcontract, as the case may be, is completed or abandoned. [ 16 ] The terms “oil or gas well” and “oil or gas well site” are not defined terms under the BLA . [ 17 ] The terms “oil well”, “gas well”, “well”, “mine site” and “oil sands site” are defined in other Alberta legislation involved in the regulation of the energy industry in Alberta; primarily the Oil and Gas Conservation Act , RSA 2000, c O6 ( OGCA ) and the Oil Sands Conservation Act , RSA 2000, c O-7 ( OSCA ). [ 18 ] Under the Oil and Gas Conservation Rules, Alta Reg 151/1971 (O&G Regs), “oil well” is defined as: 1.020(2)(8)(

i) a well that produces primarily liquid hydrocarbons from a pool or portion of a pool in which the hydrocarbon system is liquid or exhibits a bubble point on reduction of pressure… and “gas well” is defined as: 1.020(2)(12)(

i) a well that produces primarily gas from A. a pool or portion of a pool in which the hydrocarbon system is gaseous or exhibits a dew point on reduction of pressure, or B. coal by in situ gasification…

[19] “Well” is defined in the OGCA: 1(1)(eee) “well” means an orifice in the ground completed or being drilled (

i) for the production of oil or gas… (iii) as an evaluation well or test hole, or (iv) to or at a depth of more than 150 metres, for any purpose… [20] The OSCA provides the following

definitions in s. 1: (j) “mine site” means an area within which mining operations are being conducted or that is the subject of an approval under this Act fora mining operation… (l) “oil sands” means (

i) sands and other rock materials containing crude bitumen, (ii) the crude bitumen contained in those sands and other rock materials, and (iii) any other mineral substances, other than natural gas, in association with that crude bitumen or those sands and other rock materialsreferred to in subclauses (

i) and (ii)… (n) “oil sands site” means an in situ operation site, a mine site or a processing plant, or any one or more of them… [21] The OGCA defines the Regulator as the Alberta Energy Regulator. By virtue of the OSCA, s 5, and the OGCA, s 94, except asotherwise provided in those or other Acts, the Regulator has exclusive jurisdiction to examine, inquire into, and determine all matters orquestions arising under those Acts. The Regulator has designated both the Aurora Site and the Base Mine Site as mines. Interpretive principles and case law [22] The following principles apply to the

interpretation of the BLA: 1.

Interpretation Act, RSA 2000, c I-8, s 10: “An enactment shall be construed as being remedial, and shall be given the fair, large andliberal construction and

interpretation that best ensures the attainment of its objects.” 2. Re Rizzo & Rizzo Shoes Ltd, (SCC), 1998 1 SCR 27 (SCC) at para 21: “Today there is only one principle orapproach, namely, the words of

an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniouslywith the scheme of the Act, the object of the Act, and the intention of Parliament. 3. Maple Reinders Inc v Eagle Sheet Metal Inc, 2007 ABCA 247 at para 31: “[The BLA] is remedial in character; its purpose is tosecure the parties entitled to its benefits for the value of work done and materials supplied.” Accordingly, a “technical argument [that]fails to accord with these established principles” should be rejected: para 24. 4. Tervita Corporation v ConCreate USL (GP) Inc, 2015 ABCA 80, para 5, citing Clarkson Co v Ace Lumber Ltd, (SCC), [1963] SCR 110 at p 114: A liberal

interpretation of the BLA is called for with regard to the scope of lien rights, while a strictinterpretation applies to the procedure that is required to enforce a lien. [23] The 90-day period for liens “with respect to improvements to an oil or gas well or to an oil or gas well site” defines the periodduring which an owner is obligated to retain an amount equal to 10% of the value of the improvements, and during which a lienholder isentitled to register a lien. This is not a matter of procedure to enforce a lien, it relates to the scope of the lien right before any enforcementsteps are required or taken. I conclude that a liberal

interpretation, consistent with the remedial purpose of the BLA, is called for. [24] Counsel located one case dealing with the definition of an “oil or gas well” or “oil or gas well site”: Williams Scotsman ofCanada Inc v Farm Kitchens Inc (30 April 2014), Calgary 1301-06799 (ABQB) [Williams Scotsman]. Master Mason consideredwhether the Sawn Lake facility fell within the definition of “oil or gas well” or “oil or gas well site”. The Master noted that the site hadthe following features: (

a) The plant located on site was an oil battery and gas plant; (

b) The plant was connected to the extraction site by pipeline; (

c) Minerals were extracted from the extraction site, and flowed into the plant where they were processed and placed in tanks forshipment by pipeline off site; and (

d) There were no oil and gas wells on site and no extraction took place on site. [25] In determining that the Sawn Lake facility did not fall within the definition, Master Mason commented: (

a) Both “oil or gas well” and “oil or gas well site are not defined in the BLA; (b) “Courts have long adopted Driedger’s modern principle as to the method to follow for statutory

interpretation:…the words of an Actare to be read in their entire context, in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the

Act and the intention of Parliament”; (c) “The grammatical and ordinary meaning of the words ‘oil or gas well’ or ‘oil or gas well site’ relate to the well itself and the area around the well that serves the extraction process”; and (d) “Had the legislature intended that a longer lien period be granted to providers of services and materials to [a]broader extent…it could easily have included such language, as it did, for example, in section 6(2) of the Act.

There, the Legislature created a lien for the furnishing of work and materials ‘preparatory to, in connection with, or for an abandonment operation in connection with the recovery of a mineral’. Such language was not used in section 41(2)(b).” Hansard [ 26 ] Both the Receiver and the Lienholders refer to the Alberta Hansard, Bill 22, the Builder’s Lien Amendment Act, 2001, November 13 & 14, 2001 at 997-1000 and 1055-1057 for assistance in the

interpretation of the terms “oil or gas well” and “oil or gas well site”. [ 27 ] The mover of second reading of the Bill which amended the BLA to include the extended 90-day lien period stated: For some years now we have been hearing from members of the oil and gas industry that the Builders’ Lien Act is not working well for them in certain situations. The Canadian Association of Oilwell Drilling Contractors and the Petroleum Services Association of Canada have told us that typically payments for certain work in the oil and gas sector are not made within 45 days from the completion date.

As a result, legal remedies against nonpayments that are now provided by the Builders’ Lien Act are not in practice available to this industry sector. The industry has requested that we extend the present 45-day filing period for liens to 90 days. …Bill 22 extends the filing period for liens to 90 days effective April 1, 2002.

However, it specifies that this extension only applies to contractors that drill oil and gas wells or service oil and gas well sites as they are the only ones that are affected by the unique industry payment practices… [ 28 ] Comments by other Members of the Legislative Assembly included: We would never obstruct the ability of any organization or group of companies to earn income and to get paid for services once they have provided those services, and this certainly seems to be a streamlining kind of process for what is really a small piece of the oil and gas industry in this province.

They don’t have some of the same options as larger organizations have, which would be interim billing or any kind of prorated payment structure. These folks need to wait till the very end of their project to get their money, and if for some reason the money isn’t forthcoming, then they have a real tough time securing those dollars at a later date.

So to give them a little extra time to put a lien in if necessary… … [T]his amendment will be beneficial for the oil and gas sector in this province because it will better reflect and enhance the oil and gas industry payment practices, where payment is typically not made in full, as I understand it, within the 45-day period. …It is an amendment that while other people may consider it just a matter of routine, we need to recognize and understand the importance of the oil and gas well drilling industry and the fact that this drilling and service industry is seasonal in this province… As well, it has its ups and downs, which are reflected in the international prices of both oil and gas. [ 29 ] I note that, other than the comments in Hansard, there was no evidence before me as to what industry payment practices were intended to be accommodated by the extended lien period, or the scope or extent of those practices within the industry, or whether they applied to Davidson and the Lienholders either generally or in relation to the Work. [ 30 ] There is evidence that the drilling involved in the Work was seasonal in nature.

For economic, safety and efficiency reasons, sites are accessible only after spring break-up. Positions of the parties [ 31 ] The Receiver’s position is that the terms “oil or gas well” and “oil or gas well site”, which were added to the BLA in 2001, refer to wells drilled for the purpose of producing oil or gas, as defined in the O&G Regs, and the sites where such wells are located. The Receiver submits that the Work was not done in respect of improvements to an oil or gas well or an oil or gas well site. The Syncrude Sites are open pit mines subject to oil sands leases.

The wells drilled as a part of the Work were not for the purpose of extracting oil or gas. [ 32 ] The Receiver submits that the legislation and Hansard indicate that the intention was for the 90-day lien period to apply to drillers and service providers on oil or gas wells and well sites. Oil sands sites were not mentioned in the legislation or in Hansard.

Had the legislature intended to include oil sands sites, they would have said so. [ 33 ] The Lienholders submit that the definition of oil or gas wells in the O&G Regs, as wells for the production of oil or gas, is not an appropriate guide to the term in the BLA . The BLA is not concerned with production of oil and gas. The intention of the extended lien period in the BLA is to benefit “contractors that drill oil and gas wells or service oil and gas well sites”. It was the activities, and the importance of those activities to the economy of the province, that was important to the legislators.

Analysis [34] The 90-day lien period was intended to apply to the part of the oil and gas industry that drills and services oil or gas wells. Thelien period applies both to the drilling of oil or gas wells, and to sites where oil or gas wells are serviced. [35] “Oil or gas wells” include exploratory wells, evaluation holes or test wells.

This is consistent with the definition of wells inthe OGCA, and with the general scope of lien rights under the BLA, which extend to preparatory work: Peter Hemingway Architect Ltd vAbacus Cities Ltd, 1980 ABCA 182 , [1980] 6 WWR 348, at para 10 (Alta CA) [Hemingway]. [36] In Hemingway, the Alberta Court of Appeal held that “improvements” under the BLA are not limited to work directlyperformed on a physical construction on land, but also apply to preparatory work for the purpose of an intended construction. The Courtnoted that the definition of improvement “speaks of the future as well as the present”: para 10.

An “improvement” is “anythingconstructed, erected, built, placed, dug or drilled, or intended to be constructed, erected, built, placed, dug or drilled”: BLA, s. 1(d). [37] Hemingway is not directly applicable to this case. The issue here is not whether the Work was “in respect of animprovement”. It had to be in respect of an improvement to give rise to entitlement to either a 45-day or a 90-day lien. The Receiveracknowledged that the Work was in respect of an improvement when it obtained Court approval to pay out liens registered within 45 daysof termination of the contract.

The issue is whether the improvement was “to an oil or gas well or to an oil or gas well site.” However,the broad definition of improvement provides a guide to the

interpretation of these terms, and an indication that the narrow definition inthe O&G Regs should not be adopted. Just as an improvement includes preparatory services; an oil or gas well includes an exploratorywell. [38] The

definitions of “oil well” and “gas well” in the O&G Regs are not a useful guide to

interpretation of the BLA. The O&GRegs are secondary legislation enacted 30 years before the amendments to the BLA. Nothing in the language of the BLA or the Hansarddiscussion suggests that the O&G Regs were in the minds of the legislators. [39] Hansard is consistent with the view put forward by the Lienholders; that the concern of the legislators was the activity of oilor gas well drilling or servicing, and the industry associated with those activities. The inclusion of oil or gas well sites ensured thatservice providers’ lien rights would be included, as well as drillers’ lien rights.

Nothing in Hansard or the language of the BLA suggeststhat lien rights of drillers should be restricted depending on the location of their work. [40] The Work performed by Davidson, resource coring, involved the drilling of exploratory oil or gas wells. The purpose of thewells was to locate bitumen, from which oil would be processed. As the wells were exploratory, there was also the potential that oil orgas could be discovered. In my view these features bring the wells within the ordinary and grammatical meaning of oil or gas wells. [41] The decision in Williams Scotsman is not inconsistent with this

interpretation. Master Mason held that the terms relate “to thewell itself and the area around the well that serves the extraction process”. She did not suggest that both features must be present. TheSawn Lake facility had neither. [42] The language in s 6(2) of the BLA providing lien rights to work “preparatory to”, “in connection with”, or “for anabandonment operation in connection with the recovery of a mineral” may include types of work not covered in s 41(2)(b), such as,perhaps, work in connection with an abandonment of an oil or gas well or oil or gas well site. But s 41(2)(

b) applies to “improvements”,which includes preparatory work. [43] This

interpretation best protects the drilling contractors and those providing services or materials to them, who were intendedto benefit from the 90-day lien period. The

interpretation urged by the Receiver would mean that drilling contractors and subcontractors,doing the same work on different sites, would be subject to different lien periods. Depending on the location of their work, they could bedenied the benefit of the extended lien period. [44] This

interpretation does have the consequence that different lien periods may apply to work on a site. For example, if therewas other construction on the Syncrude Sites unrelated to the drilling of wells, the 45-day lien period would apply. That is a complicationfor those managing or working on a site; but it is a natural consequence of the legislation, which provides different lien periods fordifferent types of work. [45] In my view, this

interpretation best accords with the language and purpose of the BLA. To the extent that there may beambiguity, it finds further support in the principle calling for a liberal

interpretation of provisions of the BLA regarding the scope of lienrights. [46] The lien period in relation to the Work, and in relation to lien claims for all work or services on or in respect of the Work, is90 days. Other issues respecting the invalidity or validity of the balanceof the lien claims Century [47] Century provided well bore depth measuring services on the Base Mine site. It filed a lien for $134,872.50 on May 1, 2013. [48] In written materials filed in advance of the hearing, the Receiver claimed that Century’s lien was registered against the wrongSyncrude lease. This argument was withdrawn at the hearing, based on the Ed Miller Sales & Rentals Ltd v R, (1990)

(AB KB), 22 Alta LR (2d) 9, 42 AR 350, at para 53, which held that “work performed anywhere on the large tract covered by theSyncrude leases is work performed on the contract site”, for the purpose of lien registration. [49] The 90-day lien period runs from “the day that the performance of the services is completed or the contract to provide theservices is abandoned”: BLA s. 41(2)(b). [50] Century last provided services at the site on March 5, 2013.

Century was not notified that Syncrude had terminated itsagreement with Davidson on February 25, 2013, and anticipated that it would be required to return to the site in May or June 2013. OnMay 1, 2013, Century become aware that Davidson was in receivership. [51] Regardless of which of these dates applies, the lien was filed within the 90-day lien period. [52] The Century lien included amounts for standby and demobilization of its equipment.

The Receiver submits that these amountsshould be deducted from the lien, citing Ashwood Development Corporation Ltd v Douglas Rentals Ltd, 1982 ABCA 2 [Ashwood]andHusky Oil Operations Ltd v Ledcor Industries Ltd, 2002 ABQB 294 [Husky Oil]. [53] Ashwood involved a lien claim under s 4(4) of the BLA, which provided: 4(4) A persons who rents equipment…shall be deemed, for the purposes of this Act, to have performed a service and has a lien for areasonable and just rental of the equipment while used on the contract site. [54] The Court of Appeal held that, under this provision, standby charges for equipment were not included in the lien (at para 6): Equipment standing idle on a construction site contributes nothing to the improvement of the site.

It is the working of it which creates theimprovement and section 4(4) is in consonance with the general purpose of the Act when it restricts the lien for rental of equipment to a“reasonable and just rental of the equipment while used on the contract site. [55] The BLA has since been amended and now provides in s 6(4): 6(4) For the purposes of this Act, a person who rents equipment…is, while the equipment is on the contract site or in the immediatevicinity of the contract site, deemed to have performed a service and has a lien for reasonable and just rental of the equipment while it isused or is reasonably required to be available for the purpose of the work. [56] Century’s lien was filed under s 6(1) for “work on or in respect of an improvement.” No policy reason has been offered tointerpret lien rights under s 6(1) more narrowly than lien rights of a renter of equipment under s 6(4). [57] Century’s standby work was work as defined by BLA s 1(p).

The service provided by Century was the service of beingavailable at a moment’s notice to start working. Neither the equipment nor the employees required to be near it could otherwise be usedby Century at these times since their services were pledged to Syncrude’s benefit. [58] I conclude that Century’s standby charges are included in its lien. [59] In Husky Oil this Court held that the cost of removing equipment from a site did not give rise to lien rights.

The Court notedthat the Alberta Court of Appeal in Schlumberger Holdings (Bermuda) Ltd v Merit Energy Ltd, 2001 ABCA 190 , [2001] 10WWR 631 [Schlumberger] held that the cost of transportation of equipment to a site is essential to the performance of work on animprovement, but declined to apply the same reasoning with respect to the costs of removing equipment from the site. With respect, Idisagree. In my view, it clearly follows from the reasoning in Schlumberger that transportation costs of equipment from the site areproperly included in a builder’s lien.

Where equipment is required on site on a temporary basis for the purpose of construction, it isessential to completion of the improvement both that the equipment be delivered to the site when it is needed, and that it be removedfrom the site afterwards. [60] I conclude that Century’s demobilization costs are included in its lien. [61] Century’s lien in the amount of $134,872.50 is declared valid. Clean Harbors [62] Clean Harbors supplied water trucks, vac trucks and porta-potties to the sites for Davidson.

Clean Harbors registered twoliens: one in the amount of $605,621.36 regarding work on the Aurora Site, and one in the amount of $798,042.90 on the Base Mine Site.Both liens were registered on April 19, 2013.

Clean Harbors claimed that its last day of work on the Aurora Site was January 25, 2013and on the Base Mine Site was January 28, 2013. [63] The Receiver raised a number of issues regarding the Clean Harbors liens, including whether there was a single contract or aprevenient arrangement pursuant to which the work was undertaken, whether recovery fees could be included in the lien, and whetherthe liens were filed against the correct Syncrude lease.

At the hearing the Receiver withdrew all objections to the liens other than theissue of whether the lien period was 45 days (in which case the liens were filed out of time) or 90 days (in which case the liens wereconceded to be valid). [64] As I have found that the applicable lien period was 90 days, the Clean Harbors liens are declared valid in the claimedamounts. Roughrider

[65] Roughrider provided site services related to repair and maintenance of Davidson’s rigs and support equipment. Roughriderregistered a lien in the amount of $38,525.55 on April 16, 2013. It last provided services on January 16, 2013.

As the lien period is 90days, Roughrider’s lien was filed in time. [66] The Receiver withdrew its objection to the Roughrider lien based on whether a prevenient arrangement had been established.The sole remaining issue regarding the Roughrider lien is whether its work was provided “in respect of an improvement”. [67] The equipment that Roughrider provided maintenance services to was not affixed to the lands or intended to become part ofthe lands.

The Receiver relies on the case of Orban Industries Ltd v Gauntlet Energy Corporation, 2004 ABCA 20, at paras 8 and 13[Orban] for the proposition that labour and materials provided to structures that are not in themselves improvements, are not properlyincluded in the lien. [68] Orban is a decision of a single Justice of the Court of Appeal on a leave to appeal application. The chambers judge belowheld that the provision and installation of sour gas line heater/separator packages, used to extract natural gas, were not improvements.

Onthe leave application, the issue was described as: …whether the chambers judge erred in determining that this equipment, its use, its method of installation and the method of affixationsatisfied the definition of improvement under the BLA. In arriving at her conclusion that it did not, she considered the evidence beforeher, the purpose and use of the equipment and the specific method of affixation. She concluded, on the evidence before her, that theseparator packages in this case were not intended to be or to become part of the land in question.

She rejected what she called “the baldproposition” advanced by Orban that anything done to recover minerals is an improvement to the mineral interest under the BLA. [69] The Appeal Justice held that the issue of whether Orban had a valid lien under the BLA was a question of mixed fact and law,and the standard of review was high. No sufficient error on the “fact specific” issue of whether there was an improvement was shown.The chambers justice had also not erred in law.

The Appeal Justice held that the “proposition that a drilling well is an improvement andthus materials supplied or services render in connection with a well are, without more, entitled to a builder’s lien” was not supported bythe case law. [70] There are important distinctions between Orban and this case. In this case it is clear that the Work constituted animprovement to the Syncrude lands. The existence of an improvement was conceded when the Receiver approved payment of liensregistered within 45 days. The Receiver did not revoke this concession at the hearing.

From the facts provided regarding the nature of theWork, there is no reason to question that it constituted an improvement, which includes “anything constructed, erected, built, placed, dugor drilled or intended to be constructed, erected, built, placed, dug or drilled, on or in land except a thing that is neither affixed to the landnor intended to be or become part of the land”: BLA s 1(d). [71] The connection, if any, between the separators and any improvement to the land is not clear from the decision in Orban.

Incontrast, the connection between the equipment and rigs maintained by Roughrider, and the improvement constituted by the Work, isclear. “Roughrider supplied and rendered on-demand (continual) mechanical maintenance services for Davidson’s oil and gas drillingand exploration rigs, loader and support equipment essential to exploration drilling (the “Services”).

The Services supplied byRoughrider were absolutely essential to the exploration and drilling operations and improvements to the lands” (Affidavit of LauraSecord). [72] The issue is whether this connection is sufficient to show that the Roughrider services were performed “on the improvement”:BLA s 1(p). [73] Roughrider relies on the Saskatchewan Court of Appeal decision in Grey Owl Engineering Ltd v Propak Systems Ltd, 2015SKCA 108, at paras 22-26: [22] …Cameron J.A. stated he [preferred] instead to consider whether the reconstruction of the rail line constituted an improvement tothe land and then [ask] the question whether Brewster did any work upon that improvement or render any services for it…[citingClarkson Company v Hansen (1983), (SK CA), 22 Sask R 126 (CA) (Hansen)] [23] This approach, which focuses on the main contract or contracts rather than its individual subcontracts and the work being doneunder them, has been consistently followed and applied in this jurisdiction.

In Pritchard Engineering Company v Coronach, (SK KB), [1983] 30 Sask R 137 (QB), the main contract was between the owner, the town of Coronach, and Wes-CanUnderground Ltd. and involved the construction of a water supply line and associated tasks within the water treatment plant. Wes-Canhired Ray’s Transport Ltd. to transport equipment to the job site at Coronach and upon termination of the work to return the equipment toSaskatoon.

Applying Hansen, Sirois J. found first that the construction work under the main contract was an “improvement” (para. 5) andsecond that Ray’s Transport had provided services “in respect of” that improvement (para. 16).

He concluded by saying, “The hauling ofthe equipment by Ray’s Transport to a point on the improvement site was solely to enable Wes-Can Underground Ltd. to carry out itscontract with the Town of Coronach.” [24] Similarly, in BWV Investments Ltd. v Saskferco Products Inc. (1993), (SK KB), 114 Sask R 306 (QB),MacPherson C.J.Q.B. applied Hansen to uphold a claim of lien for the rental of 29 trailers located on the building site and used in theconstruction of the Saskferco fertilizer plant.

As part of his reasoning, MacPherson C.J.Q.B. noted that neither the trailers, nor any part ofthem, were consumed by or integrated into the actual construction of the fertilizer plant, but that such a finding did not determine thevalidity of the lien (para. 14).

He held that the supply of the trailers constituted a “service performed on or in respect of” the constructionof the fertilizer plant (para. 24). [25] Finally, in Royal Bank of Canada v Saskatchewan Power Corporation (1990), (SK QB), 84 Sask R 277 (QB),counsel for the Bank argued that steel poles modified and delivered by subcontractors, for use in Saskatchewan Power’s transmissionlines, could not be considered improvements because the poles were movable. MacLean J. rejected this argument, finding that theimprovement in question was not the poles but the transmission line itself.

This Court affirmed the decision in brief oral reasons (see(1990), (SK CA), 84 Sask R 275 (CA)). Neither the Court of Queen’s Bench nor this Court referred to Hansen, but

both Courts appear to have taken it as self-evident that the improvement was the work the owner was performing on the land and not the work performed by the various subcontractors and others contracting with them. [26] In [] Hansen , Cameron J.A. stated, “the principal object of this Act is to better ensure that those who contribute work and material to the improvement of real estate are paid for doing so” (para. 30).

This approach to builders’ lien legislation has a long provenance in this jurisdiction. [ 74 ] The Receiver submits that Grey Owl should be distinguished, as the Saskatchewan legislation defines “improvement” more broadly than the BLA . [ 75 ] The Builders’ Lien Act , SS 1984-85-86, c B-7.1, s 2(1)(

h) provides: (h) “improvement” means a thing constructed, erected, built, placed, altered, repaired, improved, added to, dug or drilled or intended to be constructed, erected, built, placed, altered, repaired, improved, added to, dug or drilled on or into, land, except a thing that is not affixed to the land or intended to become part of the land and includes: (

i) landscaping, clearing, breaking, excavating, digging, drilling, tunnelling, filling, grading or ditching of, in, on or under land; (ii) the demolition or removal of any building, structure or works or part thereof; (iii) services provided by an architect, engineer or land surveyor ... [ 76 ] I reject this proposed distinction. The BLA definition of “improvement” is virtually identical. The additional express inclusions under s 2(1)(h)(

i) of the Saskatchewan Act do not detract from the breadth of the basic definition under both Acts. In any event, the issue is not whether the Work constituted an improvement, but whether Roughrider’s services were “on the improvement” (s 1(p)).

This language in the BLA is similar to s 22 of the Saskatchewan Act considered in Grey Owl , which gave lien rights to those providing services “on or in respect of an improvement”. [ 77 ] Further, the approach in Grey Owl is fully in accord with the approach in a number of Alberta Court of Appeal cases, including Schlumberger , discussed above, and PTI Group Inc v ANG Gathering & Processing Ltd , 2002 ABCA 89 at para 11 [ PTI Group ], citing Alberta Gas Ethylene Co Ltd v Noyle , 1979 ABCA 334 , 20 AR 459 [ Alberta Gas ]. [ 78 ] In paragraphs 8-10 of Alberta Gas , the Court of Appeal held: [8] It is apparent that the work done by Burmac was done directly upon the portable buildings and the propane supplied by Cigas was used in those buildings.

This in itself does not create the basis for a lien against the land, as there is no evidence that the portable buildings were improvements. Their description as “mobile” makes it apparent that they were “neither affixed to the land nor intended to be or become part of the land”. Further, the respondents do not contend that the portables were improvements. [9] The improvement involved in this case was the construction of a gas extraction plant. The issue is whether Burmac’s work and Cigas’ materials were work and materials done or used “upon or in respect of” that improvement.

In essence this amounts to a determination of whether work done and materials used to provide sleeping accommodation and food services for persons who labour upon an improvement are work done and materials used “in respect of” an improvement. [10] As I see the problem, the respondents’ work and materials must be examined in relation to the overall project , rather than in relation to the rented chattels on which they were directly expended. This approach is in line with that taken by Darling, Co. Ct. J. in Cigas Products Ltd. v. Tamarisk Developments Ltd. and Young [1976] 6 W.W.R. 733 .

In that case the lien claimant had rented propane tanks and heaters to a general contractor for use in drying out concrete and for heating the building during construction. It also installed the equipment and supplied fuel for it. The plaintiff was not allowed a lien for the rental amount of the units, as the British Columbia Mechanics’ Lien Act contains no equivalent to our s.4 (4). However, the liens in respect of the cost of the fuel and for the installation of the heating equipment were allowed.

The learned County Court judge said at page 735: The evidence satisfies me that Cigas qualifies as a materialman suppling materials to or for the improvement, that is, the propane gas for the making of this improvement. Drying out cement and walls is a necessary part of the building procedure. Without getting technical, the chemical process, I understand on the evidence, is equivalent to its being consumed and incorporated in the course of construction. The same reasoning applies to the item of labour and materials to install the tanks, pipes and heaters.

Cigas, as I find, is in the position of a subcontractor to do such work and, in a limited sense, to do such work upon and to furnish such materials as the pipes, the fittings and the blocks for the installation of the equipment. Cigas supplied its own workmen under its supervision and paid them for the installation labour. Next, the blocks, pipes and fittings are not recoverable or re-usable, but remain on the lands of the defendant Tamarisk.” [ 79 ] I conclude that both the Alberta Court of Appeal and the Saskatchewan Court of Appeal consider “improvement” from the perspective of the “overall project” involved.

In other words: (

i) the “overall project” is the “improvement”; (ii) the “overall project” constitutes the “thing constructed, erected, built, placed, altered, repaired, improved, added to, dug or drilled or intended to be constructed, erected, built, placed, altered, repaired, improved, added to, dug or drilled on or into, land”; and (iii) the “overall project” would also be the thing that is “affixed to the land or intended to become part of the land.” [ 80 ] To the extent that Orban is inconsistent with this approach, and I am not sure that it is inconsistent, it has less weight as the decision of a single Justice, while the other decisions cited were by full panels of the Court of Appeal. [ 81 ] The focus is thus not whether the equipment serviced by Roughrider was an improvement affixed to the land, but whether the

services provided by Roughrider were on the improvement constituted by the Work. [ 82 ] PTI Group makes it clear that “services need not be physically performed upon the improvement to fall within the meaning of the Act. They must, however, be ‘directly related to the process of construction’”: para 16. “[I]t is the degree of proximate connection to the process of construction that must be evaluated”: para 17. Relevant inquiries include (para 18):

a) whether the contractors, sub-contractors and owners contemplated that the services provided were necessary to expedite the construction of the improvement;

b) whether the off-site services could have been provided on the site;

c) whether the improvement could have been carried out absent such off-site services; and

d) whether in all of the circumstances, the off-site services were so essential to the construction of the improvement and so directly connected with it, that it can be said that the services in question were “primary” in nature. [ 83 ] I am satisfied that the connection of Roughrider’s services to the Work established by the evidence – essential on-demand maintenance services for equipment that was in turn essential to the drilling operations – demonstrates the required connection to the improvement.

Some of the services were provided “out in the field where drilling and exploration operations were being performed”. The services were requested by Davidson’s field managers and site supervisors when a piece of equipment broke down. “Were it not for Roughrider’s essential and timely services, Davidson’s drilling and exploration work on the Sites simply would have stopped entirely” (Affidavit of Laura Secord). [ 84 ] Roughrider’s lien is declared valid in the claimed amount. Bruno’s [ 85 ] Bruno’s rented a gen set and a transformer to Davidson. Bruno’s removed most of its equipment on March 8, 2013.

Bruno’s lien in the amount of $92,817.35 was registered on May 14, 2013. As the lien period is 90 days, Bruno’s lien was filed in time. [ 86 ] Again, the Receiver is not pursuing the argument that the lien was registered against the wrong Syncrude lease. [ 87 ] Bruno’s lien claim included an amount to replace a missing transformer. The transformer was eventually located and returned to Bruno’s.

As a result, Bruno’s has reduced its lien claim to $68,856.85, the amount which it claims is due and owing pursuant to the rental agreement. [ 88 ] The sole remaining issue is whether Bruno’s lien should be reduced in respect of charges for demobilization costs and repairs and replacement of missing parts after the rental period. The Receiver’s position is that it should, and that the valid amount of the lien is $56,856.50. [ 89 ] The Receiver’s argument is based, in part, on Orban and Husky Oil .

I have declined to follow these decisions, for reasons already stated. [ 90 ] The Receiver also claims that these costs are not included under BLA s 6(4), which provides that a renter of equipment has a lien “for reasonable and just rental of the equipment while it is used or is reasonably required to be available for the purpose of the work”. [ 91 ] As to demobilization costs, this cost was contemplated by the parties and included in the rental contract. The BLA s 6(1) provides that a person who works on or in respect of an improvement has a lien “for so much of the price of the work ...as remains due”.

A renter of equipment is deemed to have provided a service (s 6(4)), and services on an improvement are included in the definition of work (s 1(p)). In my view, the rental amount remaining due to Bruno’s, including the agreed demobilization cost, is part of the “reasonable and just rental” that applies to the rental period (i.e., the period that the equipment was used or required to be available). [ 92 ] Repair costs are potentially more problematic. If repair costs amount to a claim in damages, they would not be part of the lien claim.

However, where repair costs are contemplated by the parties and included in the rental contract, they are, in my view, part of the reasonable and just rental. In Krupp Canada Inc. v JV Driver Projects Inc. , [2014] A.J.

No. 456 Master Robertson reviewed case law and concluded that, while damages claims in tort or for breach of contracts unrelated to an improvement are not properly part of a lien, all contract charges for work on or in respect of an improvement, including amounts assessed on a quantum meruit basis, are included in lien rights. [ 93 ] In this case the charges for repair or replacement of missing items are due under the rental contract and therefore are included in the lien. [ 94 ] Bruno’s lien is declared valid in the amount of $68,856.85. Acme [ 95 ] Acme supplied light towers to Davidson.

It was last on site on March 7, 2013, and filed a lien in the amount of $114,758.44 on April 12, 2013. The Receiver concedes that the Acme lien was filed in time. [ 96 ] The Receiver claimed that Acme had not established a prevenient arrangement with Davidson, and that its lien should be valid only for the costs of reasonable rent within the lien period. The existence of a prevenient arrangement is an issue where there is a series of contracts. A lien claimant who files within the lien period running from when the last item was supplied or last service rendered, and

who seeks to recover amounts due under several contracts; must establish that the parties contemplated a continuing contract: Re BlueRange Resource Corp, at paras 3-7 (ABQB). [97] In this case, however, there was one contract between Acme and Davidson, regarding the rental of four 20KW light towersand three 6KW light towers, at agreed monthly and daily rates [the Rental Agreement]. The President of Acme deposed that all of theinvoices rendered from Acme to Davidson were pursuant to the Rental Agreement (Affidavit of Howard Evans).

The Rental Agreementdid not specify which Syncrude leases the towers would be located on; but the Receiver has withdrawn its objection on this ground,acknowledging that work performed anywhere on the large tract covered by the Syncrude leases gave rise to lien rights. This is not asituation, as in Re Gauntlet Energy Corporation (Companies’ Creditors Arrangement Act), 2003 ABQB 1014 where an oil and gasservices contract was “very general in its terms”, provided “no estimate” of the number of wells, and applied to lands that lackedcommon ownership. [98] I conclude that the lien arises from one contract.

The question of a prevenient arrangement does not arise. [99] The Acme lien claim includes amounts due under the Rental Agreement for delivery and removal costs and for maintenanceto the light towers. These amounts are properly included in the lien, for the reasons discussed in relation to the Bruno’s lien. [100] The Acme lien claim includes an invoice for $10,101 for a light tower that was not returned to Acme. The Rental Agreementprovided that Davidson was responsible for return of units.

However, the evidence is that Acme picked up most of the units on March 7,2013, and arranged for Bruno’s to pick up remaining units. They were unable to locate one light tower. [101] Acme has not established, based on the terms of the Rental Agreement and the circumstances relating to the missing tower, thatthe charge for the missing tower is part of the reasonable and just rental under the Rental Agreement.

That charge ($10,101) is deductedfrom Acme’s lien. [102] An issue was also raised by the Receiver relating to invoice AE78, in which Acme charged the daily rate rather than themonthly rate, resulting in a charge that was $7836.15 higher than the monthly rental, for a rental period of less than a month. The RentalAgreement does not specify when monthly or daily rates apply. In my view, it is not reasonable and just to charge the daily rate when theresulting charge is higher than the monthly rental, for a rental period of less than a month.

The overcharge of $7836.15 is deducted fromAcme’s lien. [103] [104] Acme’s lien is declared valid in the amount of $96,821.29. Costs [105] The parties may speak to me regarding costs if they are unable to agree. Heard on the 14th day of April, 2016. Dated at the City of Edmonton, Alberta this 25th day of July, 2016. J.M. Ross J.C.Q.B.A. Appearances: Darren Bieganek, QC and Tara Matheson Duncan Craign LLP for the Applicant Renn Moodley and Riley Snider

Witten LLP for the Respondent Martine H. Pettem Walsh LLP for Lienholder, 72619 Alberta Limited (o/a Roughrider International) Casey A. Smith Walsh LLP for Lienholders, Gregory Oilfield Services Ltd. and Cordy Manufacturing Inc. Benjamin J. Kormos Walsh LLP for Lienholders, Clean Harbors Energy and Industrial Services Corp. G. Stephen Panunto MJM Barristers for Lienholder, Century Wireline Services Philip R. Biggar The Law firm of W.

Donald Goodfellow, QC for Lienholders, Acme Energy Services Inc. and Bruno’s Trucking Ltd. _______________________________________________________ Corrigendum of the Reasons for Judgment of The Honourable Madam Justice J.M. Ross _______________________________________________________ The Judgment has been amended by replacing the word Harbours with Harbors on pages 11 and 12 in the heading and paragraphs 62, 63 and 64.