Pacer Construction Holdings Corporation Plaintiff - v. -, 2016 ABQB 697

Court of Queen’s Bench of Alberta Citation: Pacer Construction Holdings Corporation v Pacer Promec Energy Corporation, 2016 ABQB 697 Date: 20161209 Docket: 1501 02652 Registry: Calgary Between: Pacer Construction Holdings Corporation Plaintiff - and - Pacer Promec Energy Corporation and Pacer Promec Energy Construction Corporation Defendants _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Robert A.

Graesser _______________________________________________________ Introduction [ 1 ] FDS Prime Energy Services Ltd. (“Prime”) filed two builder’s liens against property owned by Pacer Promec Energy Corporation (“Energy”). Prime acted as a subcontractor to Pacer Promec Energy Construction Corporation (“Construction”). [ 2 ] Both Energy and Construction are in receivership.

FTI Consulting (Canada) Inc. (“FTI”) is the court-appointed receiver. [ 3 ] For the purposes of this application, the distinction between the two Pacer corporations is not important, so I will refer to Energy and Construction collectively as PPEC. [ 4 ] Prime registered its first builder’s lien, 152 193 549 (“Lien #1”) on July 2, 2015 in the amount of $2,996,050. [ 5 ] A second lien, 162 062 951 (“Lien #2”) in the amount of $1,309,761.46 was filed on March 1, 2016. [ 6 ] By order of B Nixon J dated May 7, 2015, FTI obtained an order that established a process for determining claims against PPEC or the Receiver (the “Claims Procedure Order”).

Roland Laing was appointed Claims Officer to supervise the claims process and ultimately adjudicate claims, subject to confirmation of the adjudication by the Court. [ 7 ] With respect to Lien #1, the Claims Officer adjudicated the lien claim and determined that its value was $87,377.42. Prime applies to have the Court reject the Claims Officer’s adjudication, accept the amount of its claim and determine that its builder’s lien was filed in time.

FTI seeks Court approval of the adjudication. [ 8 ] With respect to Lien #2, FTI applies to strike Prime’s lien, alleging that it was filed out of time and is thus barred by the Claims Procedure Order. Prime opposes the application, and says that it did not deliberately delay filing a proof of claim pursuant to the Order. It seeks additional time in which to do so.

[9] It appears clear that but for remedies under the Builder’s Lien Act and funds that have been withheld from PPEC by theowner, Canadian Natural Resources Limited (“CNRL”), Prime’s claims against PPEC will yield them nothing, as there is likely asignificant shortfall between PPEC’s assets and its debt to its secured creditor. [10] Its secured creditor, Pacer Construction Holdings Corporation, is a shareholder of PPEC, along with Construction Promec Inc.It appears that the receivership of PPEC was the result of the inability of Pacer Construction Holdings Corporation and ConstructionPromec Inc. to agree on funding to complete the Prime Contract.

Process for Lien #1 [11] As required by the Claims Procedure Order, Prime filed a proof of claim in respect of its lien claim. FTI denied the claim, andthe claim was referred to the Claims Officer. Lengthy affidavits were exchanged between Prime and FTI. The deponents were cross-examined on their affidavits. Brian Fahner provided the main affidavit for Prime. James Engen provided the main affidavit for FTI. [12] The parties appeared before the Claims Officer to argue their respective positions.

At the request of the Claims Officer,former employees of PPEC (Bhaskar Bhowmick and Carl Tatarin) provided affidavits during the process. Mr. Bhowmick’s affidavit wasprovided by FTI; Mr. Tatarin’s by Prime. They too were cross-examined and the transcripts of the cross-examinations were provided tothe Claims Officer. [13] Eventually, lengthy written arguments were filed by both parties. The Claims Officer reserved his decision and issued alengthy written decision, allowing Prime’s claim but only to the extent of $87,377.42.

Standard of Review [14] One of the key issues on Prime’s application is to determine how the Court should approach the Claims Officer’sadjudication. Prime says the Court is to approach the issues afresh, to make its own determination on a review of the evidence and not torestrict itself to looking at alleged errors of the Claims Officer. Essentially, Prime characterizes the process before the Court as a hearingde novo. [15] FTI, on the other hand, characterizes the process as an appeal on the record, and argues that the standard of review isreasonableness, having regard to the expertise of the Claims Officer.

Analysis [16] Paragraph 45 of the Claims Procedure Order states: 45 The disposition and recommendations of the Claims Officer in respect of any Claim are subject to final determination by thisHonourable Court, unless agreed by the Receiver and the Claimant, in which case the disposition and recommendations of the ClaimsOfficer will be binding upon the Receiver and the Claimant [17] The role of a claims officer in court-appointed receiverships is not a statutory one, but rather appears to be a creation of thecommon law.

FTI argues that orders specifying provisions for determining claims in receiverships are designed to achieve a “fair, timely,and economical determination of the claims of creditors”. [18] It is unclear whether Prime played any role in the application that led to the Claims Procedure Order. [19] In SemCanada Crude Co., Re, 2012 ABQB 489 (leave to appeal refused at 2012 ABCA 313), Romaine J stated at paragraph53 that the objective of a claims procedure is to require legitimate creditors to come forward on a timely basis. [20] She stated at para 63: [63] The claims procedure process was developed to give creditors a level playing field with respect to their claims and to discouragetactics that would give some creditors an unjustified advantage.

Situations that give rise to concerns of improper manipulation of theprocess by a creditor must be carefully considered. [21] That is a decision under the Companies’ Creditors Arrangements Act, RSC 1985 c C-36, which distinguishes it from the caseat bar as I will discuss further on. [22] FTI argues that appeals from a claims officer arising from a claims process instituted in a court-ordered receivership is anappeal on the record, citing Bank of Montreal v Scott, 2013 SKQB 64.

There, Rothery J stated at para 11: [11] Court-appointed receivers often seek the assistance of the court in establishing a claims process where ownership of the assets inthe debtor’s possession or liability of the debtor is in dispute. When that court-ordered claims process includes a determination to bemade by a claims officer after receiving evidence, an appeal to the court of the claims officer’s decision is an appeal on the record.Morawetz J. stated the following at para. 11- 12 of General Motors Corp. v. Tiercon Industries Inc., 62 C.B.R. (5th) 90, [2009] O.J. No.5580, (QL) (Ont. Sup.

Ct.) (affirmed by the Ontario Court of Appeal at 2010 ONCA 666 , 70 C.B.R. (5th) 223): 11 The Claims Procedure Order provides that a party may appeal a final determination of the Claims Officer. 12 The appropriate standard of review for the appeal of the decision of the Claims Officer is as follows:

(

a) With respect to pure questions of law, the standard of review is correctness. (

b) With respect to questions of fact, the standard of review is that such findings are not to be reversed unless it can be established thatthe decision maker made a palpable and overriding error. (

c) With respect to questions of mixed fact and law, the standard of review, is that, in the absence of an “extricable” legal error or apalpable and overriding error, a finding of the decision maker should not be interfered with. ... [23] That is a restatement of how a court of appeal reviews a superior court decision, following Housen v Nikolaisen, 2002 SCC33. I would only add to that list the review of inferences drawn by a trial judge. If an inference drawn by the trial judge is reasonable, anappellate court should not intervene just because other inferences could also have been reasonably drawn: H.L. v.

Canada (AttorneyGeneral), 2005 SCC 25. [24] A similar approach was taken in Triton Tubular Components Corp., Re, 2005 CarswellOnt 4439 (ONSC), General MotorsCorp. v Tiercon Industries Inc., 2009 CarswellOnt 8164, and DBDC Spadina Ltd. v Walton, 2015 ONSC 5608. [25] The Saskatchewan and Ontario approaches essentially elevate a claims officer to the status of a superior court judge, which isironic in Alberta because appeals from Masters in Chambers are essentially hearings de novo and Masters are owed no deference by thereviewing Court of Queen’s Bench because of Bahcheli v Yorkton Securities Inc., 2012 ABCA 166 and cases following it. [26] Big Sky Farms Inc., Re, 2010 SKQB 255, cited by Prime, is a case involving the claims process ordered as part of a proposalunder the Companies’ Creditors Arrangement Act (Canada), RSC 1985, c C-36.

There, the parties agreed before the reviewing judgethat the standard of review from the claims officer’s decision was the same as for an appeal court reviewing a superior court decision. [27] Boutique Jacob Inc., 2011 QCCS 787, also cited by Prime, is a detailed claims procedure order under the CCAA, whichprovides for an appeal to the Quebec Superior Court from the decision of the claims officer.

No guidelines are given as to the standard ofreview. [28] These latter two cases are not of much assistance here as the claims procedure order in this case arose in a receivership, and itis not governed by statute. [29] In Coast Capital Savings Credit Union v Symphony, 2011 BCSC 333, the British Columbia Supreme Court considered theclaim review provisions in the Bankruptcy and Insolvency Act, RSC 1985 c B-3 and the Companies Creditors Arrangement Act, RSC1985 c C-36. Walker J noted that the matter before him arose out of a consent order.

His conclusions on the review process make sense,and allow for the admission of new evidence on a review or appeal of a claims officer’s decision. [30] At paragraph 24, he stated: [24] The integrity of the claims process followed by the receiver and the creditors to date is both maintained and promoted ifthe review process to be undertaken by the Court in respect of each of the receiver’s impugned decisions is carefully determined on acase by case basis, having regard to the following factors: (

a) the dollar amount involved; (

b) relevance of the further evidence proposed to be adduced; (

c) historical context including laches; and (

d) the sources of new evidence sought to be adduced. [31] He concluded at paragraph 27: [27] Therefore, in conclusion, it is my opinion that the review process is not in all cases an appeal that follows a strict approach fromGalaxy. Care should be taken to ensure that a principled process is taken in respect of each disputed claim in order to avoid a miscarriageof justice to the disputing creditors and to all of the parties who participated throughout in the claims process. The starting point is thatdeference must be afforded to the receiver. A review by way of de novo is not a matter of right.

The process to be engaged for the reviewof each of the disputed claims depends upon the factors I have set out in para. 24 above. [32] Ultimately, despite authority to the contrary, I am unwilling to give a claims officer appointed by the Court the same level ofdeference the judge appointing him has, absent clear directions to that effect in the Claims Procedure Order. I do not believe that anappointee or delegee should automatically be given greater deference than a Master in Chambers. I prefer the approach taken by WalkerJ in Coast Capital Savings Credit Union v Symphony which mandates a flexible approach.

In BC, appeals from masters in chambers aretreated as true appeals, other than appeals involving the exercise of a discretion. A reviewing judge may exercise his or her owndiscretion without deferring to the Master.

See Abermin Corp. v Granges Exploration Ltd., (BC SC). [33] It appears that cases under the CCAA have consistently treated reviews or appeals from a claims officer appointed by orderunder that legislation as “true appeals” and not as de novo hearings. [34] In Alberta, I am of the view that in proceedings not governed by the CCAA or the BIA, appeals or reviews of claims officers’decisions should follow the same approach as appeals from Masters in Chambers.

Here, that means that decisions of claims reviewofficers are generally to be treated as hearings de novo. [35] The exception to that would be where the claims review order specifies a different standard of review to be applied on appeal.

It seems to me that this would be easy to incorporate in a claims review order, and would have the relevant parties address their minds to appeals and reviews at the outset. Indeed, that is precisely what occurred in Montreal, Maine & Atlantic Canada Co. (Re) , 2015 QCCS 1472 . See paragraph 12 of the order there. [ 36 ] In making this finding, I do not want to be seen as critical in any way of the Claims Officer. He is a well-respected, experienced barrister.

He conducted a fair and transparent process and gave well thought-out and logical reasons for his decision. [ 37 ] If his appointment as Claims Officer in a receivership process entitled him to deference regarding any review or appeal from his decision, I would not hesitate to give such deference. [ 38 ] That being said, for the reasons that follow, it is not necessary for me to actually decide the matter on the basis as to whether deference is owed or not. For the reasons that follow, the result is the same using either approach.

Facts relating to Lien #1 [ 39 ] Prime entered into four separate subcontracts and three separate purchase orders with PPEC relating to the supply and erection of scaffolding for PPEC’s work on the Canadian Natural Resources Limited’s Horizon Oil Sands Project. The subcontracts are in the same basic format, and are numbered N5000, N6000 #1, N6000#2, and BTU S6000A.

All four subcontracts are dated March 18, 2014. [ 40 ] The purchase orders are S6000A Purchase Order #1, S6000A Purchase Order #2, and R-100 Purchase Order. [ 41 ] After payments on all of the subcontracts and purchase orders fell significantly into arrears, Prime filed Lien #1 claiming a total owed to it of $2,996,050.04. [ 42 ] Prime was represented throughout most of the dealings on the Horizon project by its senior officer, Brian Fahner. Mr. Fahner dealt with Carl Tatarin, PPEC’s construction manager, for site matters.

Bhaskar Bhowmick was PPEC’s Vice President, Finance, and operated solely out of PPEC’s head office. He was not on site. Contractual provisions and chronology [ 43 ] The subcontract contains a number of key provisions. N5000 describes the work as: Scaffold support as requested on site: Labour only.

Supply of scaffold rental as required. [ 44 ] The subcontract incorporates the terms of the Prime Contract between PPEC and CNRL for the construction of CNRL N5000 which was one of many components of the overall CNRL Horizon project. [ 45 ] The payment provisions required Prime to submit invoices by the 25th of each month “in which materials were supplied or work performed”, and required Prime to submit a statutory declaration and a WCB clearance letter with each invoice. [ 46 ] PPEC was required to pay 90 percent of the value of the work completed within the earlier of 10 days from receipt of payment for such work by PPEC from CNRL or 45 days from approval of the invoice by PPEC. [ 47 ] Final payment was to be made within 10 days after PPEC received payment from CNRL, or within a “reasonable period of time after total performance or termination of the Prime Contract, or stoppage of the Project”. [ 48 ] There are a number of relevant subcontract conditions. [ 49 ] SC 4.1.3 gives Contractor the right “at any time by written notice to the Subcontractor” to terminate the subcontract: 4.1.3 The Contractor shall have the right at any time by written notice to the Subcontractor to terminate this Agreement, in which case, provided the Subcontractor is not then in default, the Contractor shall indemnify the Subcontractor against any damage directly resulting from such termination, except that the Subcontractor shall not be entitled to anticipated profits on Work not performed or on materials or equipment not delivered. [ 50 ] SC 6.1 gives the Contractor the right “without terminating the Subcontract” to make: .1 any changes in the Subcontract Work consisting of additions, deletions, or other revisions to the Subcontract Work by Change Order or Change Directive... [ 51 ] SC 6.2.1, dealing with Change Orders, states: When a change in the Subcontract Work is proposed or required, the Contractor shall provide notice in writing to the Subcontractor describing the proposed change in the Subcontract Work. [ 52 ] Under SC 6.3, dealing with Change Directives, the Contractor may “issue a Change Directive” if the Contractor and Subcontractor have not yet come to agreement on the pricing or timing of the proposed Change Order. [ 53 ] SC 15.1.1 allows the Contractor “the right to perform work with its own forces, or subcontract work to others, including Work under this Subcontract, at the Contractor’s discretion”.

[ 54 ] SC 22.4.1 states: It is agreed that no act by either party shall be construed as a renunciation or waiver of any rights or recourses, provided the party has given the notices required under

Part 22 of the Subcontract Conditions – DISPUTES and has carried out the instructions as provided in paragraph 22.1.3. [ 55 ] The work started uneventfully, and the materials filed in the matter indicate that at no time did PPEC express any concern over the quality or timeliness of Prime’s work. [ 56 ] It does appear that from early on, PPEC had problems paying Prime on a timely basis. [ 57 ] On September 16, 2014, Mr. Bhowmick, PPEC’s Vice President Finance, emailed Prime saying: My sincere apologies for the mix up at our end. We have

schedule a weekly payment to you and you should have received more than one payment. By a copy of this email I am requesting our controller Pam to find out why we did not honour our commitment...We hope to be on track with all the invoices very soon. [ 58 ] That was in response to Mr. Fahner’s email saying: To date we have only received 1 of the cheques you had committed to us weekly. This particular one was mailed September 6th. We cannot continue to operate without payment from your firm. [ 59 ] It appears that PPEC made a decision to use their own forces to deal with scaffolding sometime in October.

An email from Mr. Bhowmick to Carl Tatarin dated October 17, 2014 states: We are good to roll with scaffolding in CNRL. We should ensure that all new scaffolding jobs go through Stephen. We should also plan to downsize/eliminate scaffolding work with Prime Energy or any other scaffolding company like Panels & Pipes. That will help us save lots of money. [ 60 ] Mr.

Tatarin replied: Before we make any dramatic steps, 4 things need to happen: 1) a complete inventory of Prime’s material. (Jacques can request this from Dave or Keith); 2) Prime to install wall insulation; 3) Prime’s acc’t would need to be brought up to date. Forecasted 500K to Christmas. (Bhaskar); 4) rental agreement for scaffold inventory as it would be out of the question to remove and replace what we have erected. (Lambert or Carl P); 5) I believe we need to adjust Prime’s contract as the original amount has been exceeded. (Lambert or Carl P).

For N5000b, I suggest the transition be made between 2 nd and 3 rd week December. [ 61 ] Mr. Bhowmick responded: Thanks for the update Carl. I would leave the transition decision between you and Bruce but from my point of view, quicker we can move to our own, that much financially better off we are. Yes, Prime has to complete the insulation till we get our insulation crew and are ready. Scaffolding at site is being rented from Steeplejack, so it will be a question of switching the rental agreement from Prime to PPEC. Ron is the contact at Steeplejack.

Once we decide about the effective date for moving from Prime to PPEC, we can issue a fresh PO for the extra work. We have a payment arrangement with Brian of Prime and that is going well. [ 62 ] Word of this change reached Mr. Fahner, and he wrote Mr. Bhowmick on October 24, 2014: Good Afternoon; I understand your firm is struggling with the CNRL site and we have tried to work with you regarding this. We have still not received the last two payments owed to Prime Energy as promised in our last conference call. I would request we pick up these two checks plus next weeks on Tuesday October 28 at your office.

In addition a substantial amount of money is owed on the Flotation cells project which we completed lump sum and has no connection to the N5000 project. This work must be paid for this month. We have been patient as long as we can be. Also it has come to our intention your group is in the process of replacing us at CNRL. This is a decision you are entitled to and in light of costs could save at least the markup we add to our labor. However we need to be paid as promised in November for what we have

completed on N5000. We will also need to agree to a scaffold equipment strategy. We absorbed $35,000.00 in transportation costs to this project on the bases we would be working to completion on the N5000 project. Please confirm we can up the checks next week. Thank you. Best Regards. [ 63 ] On October 31, 2014, Dave Martin, Prime’s General Superintendent for the project, wrote to Mr. Tatarin: Good morning Gentleman, I will be sending the scaffold material list to you today, there will be 2 list which will be 1. The total materials we have on site and in laydown 2.

The total list of scaffold materials we have that is erected on site. Once you have received the list I would like to know if you are requiring the use of our scaffold materials we have in the laydown, if not I want to start getting it ready to ship off site, for the materials in the unit that is erected, I would think that you will keep it and pay the rental on that only. Last but not least, with PPEC having their own Scaffold division when are you planning on taking over the 5000 site, I would like to know so I can start placing people to other jobs as the word is out and I am going to start losing them.

If you are planning on taking over in November that is fine I just need to get a few small details ready so I can do a proper turn over with PPEC before we leave site. Please advise. [ 64 ] Mr. Tatarin responded that day: Hello Dave; Currently we have 27 scaffolders (a match to your crew) that we would like to blend into the work areas. We would like to start integrating PPEC scaffolder’s into the work areas incrementally on the 3 rd November. For the last 4 – 5 weeks we have been running par or light with our numbers.

Now that we have the 5D bends and more spools, plus the mono rail, there is room to increase these numbers. Therefore as your A, B and C rotations end, we need to work to replace your workers with ours. I suggest and can foresee that this could take us into the 3 rd week of November as we would need to bring your A crew back for a 2 nd rotation. Drop by this afternoon or tomorrow and we can sort this out on the white board arid lock it in. [ 65 ] On November 1, 2014, Mr.

Tatarin emailed Dave Martin and Stephen Crocker (PPEC’s new manager for scaffolding matters): Hello Stephen and David; Please arrange a meeting between yourselves as I believe there is some logic in transferring some of Prime’s craft to PPEC as a good portion are from Alberta or BC vs. costly eastern airfare. As well we would not need to invest in retraining and indoctrination. [ 66 ] It appears from an internal email between PPEC employees dated November 14, 2014 that Prime workers were intended to be off site by November 27, 2014. Mr.

Tatarin placed the date as between November 16 and 18, 2014 during his cross-examination on April 29, 2016. [ 67 ] Substantial amounts of Prime’s scaffolding remained on site, and it is common ground that the removal at that time of Prime’s scaffolding would have had a major impact on PPEC’s ability to continue with work under the Prime Contract in a timely way. [ 68 ] At the April 29, 2016 cross-examination on his affidavit of March 23, 2016, Mr. Tatarin stated at page 14, lines 9 – 17: A And that’s exactly what we have here. We have multiple tons of equipment that remained after FDS demobilized.

And we as PPEC utilized it November, December, January, February, March, April, May, June, July until such time as PPEC actually finished their contract under receivership, until they closed the doors. So we’re looking at probably nine months of rental that I would think hasn’t been paid. [ 69 ] Mr. Tatarin responded at page 16, lines 7 to 17:

Q Some of the scaffolding was built in place. Is that a good layman’s

interpretation? A Yes. Q So it would be very difficult to remove, so it was going to stay on site? A Yeah. It was tied into the equipment and the pipe racks. There was no way you -- well, you could have, but it would have been a great deal of difficulty. Q Okay. Thank you. A And it would have stopped all work. [ 70 ] Mr. Bhowmick wrote Mr. Fahner on November 26, 2014 as follows: Hi Brian, I hereby confirm that all the Prime Energy Invoices are in order and booked in our payables.

I have lined up $ 200k EFT but I am waiting for the final go ahead from MasTec Florida, who are in the process of taking over 100% ownership of PPEC. It is my understanding that the final negotiation between MasTec and Promec is very close and we will have a deal and path forward very soon. Once again, I want to assure you that we will fully honour our commitments and be able to clear of your outstanding very soon. [ 71 ] On December 5, 2014 Mr. Bhowmick wrote Mr. Fahner: Good Morning Brian, Although the negotiations are still going on, I got a special permission to remit $ 200 K to you.

I am hoping to get the funds in place today and will make an EFT as soon as I have the funds released. [ 72 ] Mr. Fahner had been inquiring about the status of overdue payments, and had been made aware of negotiations between the owners of PPEC (including Pacer Construction Holdings Corporation). [ 73 ] On December 19, Mr. Bhowmick wrote to Mr. Fahner: Hi Brian, I have another $200 k EFT ready to go but I am waiting for funds from CNRL. As soon as I see it, your EFT will be on the way. [ 74 ] On December 25, 2014, Mr.

Fahner sent a package to Jeff Johnson at PPEC, referencing Contract N5000 (consistent with the other invoicing on this subcontract). Mr. Fahner stated: Please find our invoices for scaffold services provided for the CNRL N5000 Project, which include previous hold back invoices. [ 75 ] He included four invoices, PP-2014-195, 196, 192 and 162, an invoice

summary, signed copies of the daily labour, equipment and material summaries, a WCB clearance letter and a statutory declaration. [ 76 ] Invoice 195 was the December 25, 2014 invoice for scaffold and trailer rental in the amount of $21,099.76. Invoice 196 was for the 10 percent holdback on Invoice 195. Invoice 192 in the amount of $48,000.27 was for the holdback from a November 15, 2014 invoice, and Invoice 162 in the amount of $49,823.46 was for the holdback from the October 25, 2014 invoice.

[ 77 ] Two statutory declarations were provided. They both refer to the Agreement date of March 18, 2014.

The first says “For: provision of holdback scaffold labour N500 Project CNRL Horizon”. [ 78 ] The tick box selected states: FINAL ACCEPTANCE: As of the date hereof, Subcontractor: has completed the Work so as to achieve Final Completion; has complied with all its lawful obligations to its Personnel, its Subcontractors and Vendors in respect of the Work and discharged and satisfied all lawful claims against it that arose out of the performance of the Work except for the amounts owing which total $ (if nil, state nil).

A detailed explanatory statement of the amount owing, including any amounts in dispute must be attached as part of this Statutory Declaration; and confirms that no liens have been filed in connection with the Work. [ 79 ] The Statutory Declaration is signed by Mr. Fahner. The jurat is not completed, such that the commissioner’s signature is not where it is indicated to be, and the Statutory Declaration is undated.

The signature of Madison MacGregor (whom I assume to be a commissioner for oaths) is below a stamp giving the commissioner’s expiry date. [ 80 ] The second Statutory Declaration references “provision of substantial completion scaffold labour N5000 Project CNRL, Horizon.

In that Statutory declaration (undated and with the jurat not completed) the tick box checked states: CERTIFICATE OF SUBSTNATIAL PERFORMANCE: As of the date hereof, Subcontractor: has reached substantial performance (as described in the Alberta Builders’ Lien Act); has complied with all its lawful obligations to its Personnel, its Subcontractors and Vendors in respect of the Work and discharged and satisfied all lawful claims against it that arose out of the performance of the Work except for the amounts owing which total $ (if nil, state nil).

A detailed explanatory statement of the amount owing, including any amounts in dispute must be attached as part of this Statutory Declaration; and confirms that no liens have been filed in connection with the Work. [ 81 ] Invoices for scaffold rental were sent on each of January 25, 2015, February 25, 2015, March 25, 2015, April 25, 2015 and May 25, 2015. Statutory Declarations were provided regarding each invoice, with the “progress claim” tick box checked. [ 82 ] On January 14, 2015, Mr. Fahner wrote to Mr. Bhowmick: I am following up on your email of last Friday. Has your group come up with a payment plan?

As of this week my margining has been reduced due to the state of this account. Therefore it is critical for our survival the money owed by paid in a timely manner. Please let me know where this stands. [ 83 ] Mr. Bhowmick replied on January 15, 2015: Sorry I could not respond yesterday. I have scheduled $500 k for you in the next cheque run. CNRL is holding over $17 mil and our guys in Mastec are going to meet them. [ 84 ] Then on February 2, 2015 Mr Bhowmick wrote: I have already set up EFT and waiting for release. I will be in Florida for next few days meeting Mastec people.

Back next week. [ 85 ] Pacer Construction Holdings Corporation put PPEC into receivership on March 10, 2015. [ 86 ] In fairness to PPEC, it appears to have carried through with some of Mr. Bhowmick’s promises to Mr.

Fahner, in that Prime received the following payments: October 30 $100,000; October 30 $100,000; November 3 $100,000; December 8 $200,000; December 29 $200,000. [ 87 ] After the end of December, 2014, however, any promises or assurances made by PPEC to Prime were at best hollow. [ 88 ] On March 25, 2015 Prime invoiced PPEC for scaffold rental, including a WCB clearance letter and statutory declaration.

Further invoices were provided to PPEC dated April 25, 2015 and May 25, 2015. [ 89 ] On the issue of termination of Subcontract N5000 and its replacement by a new subcontract or purchase order for the supply of scaffolding only, Carl Tatarin stated at paragraph 4 of his affidavit sworn March 23, 2016: 4. I was aware that FDS had a number of contracts with PPEC. The quality of the services provided by FDS was never in question, nor was the amount invoiced for the work performed. Mr.

Bhaskar Bhowmick, who was holding the position of Vice-President — Finance for PPEC, was the person overlooking the financial aspect of the project. He received all of the invoices prepared by FDS for the services provided and confirmed to me that the amounts would reflect the exact amount of work performed by FDS on the projects.

[ 90 ] At paragraph 5, he discussed Mr. Fahner’s threat of liening the project in September, 2014: 5. ... Both Mr. Bhowmick and I tried to convince FDS not to register a lien on the work site and provided assurances that the arrears would be paid by the end of the year. Mr. Fahner was also somewhat reluctant to place a lien on CNRL’s site, as this would have jeopardized FDS’s chances of entering into new contracts with CNRL. [ 91 ] He went on to say in paragraph 6: 6.

However, by mid October, 2014 when it became apparent that PPEC would not be in a position to bring the arrears up to date, FDS decided to pull its employees off site, as FDS could no longer afford to pay them for the services provided. I was able to work out an arrangement with FDS for a transition plan by which FDS’s employees would be gradually replaced by PPEC’s employees, so that the projects would not be disturbed. The understanding was that FDS would stop providing services, but would continue to provide the rental of scaffolding equipment to PPEC.

Since FDS employees would no longer be on site, I have also worked an agreement with FDS so that the scaffolding equipment could be tagged and transferred into the care of PPEC employees. To my knowledge, there was never any separate rental contract entered into by FDS and PPEC, as all the contracts between FDS and PPEC contained the provision of services and rental of scaffolding equipment. The LEMS executed by both parties after each day of work included the rental portion of the services provided by FDS to PPEC. [ 92 ] He stated at paragraph 8: 8.

There was never a discussion with respect to a possible termination of contracts between PPEC and FDS. That is simply because PPEC was satisfied with the quality of work FDS provided. Unfortunately, PPEC was not able to provide payment for the services provided by FDS. Once FDS decided to stop providing services and continue with the rental portion of the contracts, PPEC accepted this change, especially when considering that FDS agreed to provide a transition period for PPEC’s employees to take over the responsibilities of FDS’s employees. [ 93 ] Mr.

Bhowmick’s evidence was provided in his affidavit affirmed March 31, 2016. In it, he spoke of the importance of the CNRL work to PPEC and its overall contract values being “tens of millions of dollars”. [ 94 ] In paragraphs 9, 10 and 11, Mr. Bhowmick described two commercial considerations “which were very important to PPEC” in late 2014: 9. First, in late 2014 PPEC determined that it would be more economically favourable for PPEC to bring the provision of scaffolding services in-house as PPEC would then no longer be required to pay the rates of FDS, which included a mark-up over cost.

PPEC determined that it could achieve considerable savings by terminating the relationship with FDS and conducting the scaffolding operations and services itself. 10. Second, avoiding the registration of builders’ liens was always a primary consideration of PPEC at the Horizon Project, as CNRL refused to make any payments to PPEC if builders’ liens were registered by any of PPEC’s sub-trades. The work which PPEC was doing for CNRL was significant and generated significant and important cash flow for PPEC.

Throughout the Horizon Project PPEC took active steps to ensure that builders’ liens were not registered by its sub-trades, including FDS, as the registration of builders’ liens would negatively impact PPEC’s cash flow. 11. It is within this context that the relationship between PPEC and FDS was terminated, and it is within this context that I wrote the email communications which are discussed below. [ 95 ] He stated at paragraph 15: 15.

I understood and intended that the relationship between FDS and PPEC was terminated completely, as PPEC’s anticipated cost savings depended upon completely terminating this relationship and having PPEC take sole responsibility for scaffolding. [ 96 ] He went on at paragraph 21 to state: 21. After November, 2014, my emails were solely in reference to paying FDS amounts owed for scaffolding services previously provided, as opposed to dissuading FDS from removing scaffolding from the Horizon Project, as it was my understanding FDS no longer had any ongoing role or scaffolding at the Horizon Project. [ 97 ] What Mr.

Bhowmick says of Mr. Tatarin’s evidence is that if Mr. Tatarin worked out the arrangement described in his affidavit, he did not have the authority to do so and he failed to do what Mr. Bhowmick instructed him to do: 26. Where this evidence states that FDS would continue providing the rental of scaffold equipment, it is contrary to PPEC’s decision to completely terminate the relationship and contracts with FDS. Moreover, this evidence is contrary to my direction to Mr. Tatarin to do so.

As communicated in the email attached as Tab 7 to the Claims Officer Package, in October 2014 I made the decision on behalf of PPEC to terminate entirely the relationship between FDS and PPEC. I had authority to make this decision on behalf of PPEC and, communicated this decision to him both orally and in the email attached as Tab 7 to the Claims Officer Package. 27. Moreover, PPEC did not agree to continue the rental of scaffolding under the existing contracts. 28. Mr.

Tatarin did not have the authority to “make an arrangement” on behalf of PPEC, but he was instructed to implement the logistics of the transfer from FDS to PPEC. 29. Any suggestion that PPEC was to continue renting scaffolding from FDS is contrary to PPEC’s decision to entirely terminate the relationship between FDS and PPEC, and is contrary to my direction to Mr. Tatarin in that regard.

[ 98 ] It is obvious that Mr. Bhowmick was unaware of the continued need on site for some of Prime’s scaffolding. [ 99 ] Mr. Fahner’s affidavit of June 24, 2016, states at para 10: 10. Attached herewith as Exhibit “J” are email exchanges between FDS and PPEC between July 23, 2014 and February 2, 2015. It should be noted that at no point in time is there any indication on the part of PPEC that the contract with FDS was formally terminated.

The communication between PPEC and FDS during the months of November-December 2014 and January-February 2015 shows PPEC’s intentions to honour their commitments towards FDS and pay the outstanding invoices as soon as possible. [ 100 ] He concludes his affidavit at paragraph 25, stating: 25. I am advised by my counsel and do verily believe that the Claims Officer misinterpreted evidence and made palpable and overriding errors in arriving at his decision.

I am making this Affidavit in support of an application seeking an Order directing that the Receiver pay, forthwith and in full, the outstanding account balances owed to FDS. [ 101 ] During questioning on January 8, 2016 on his initial affidavit, Mr. Fahner was asked about his position that Prime had stopped working “on some of the N-5000 contract”: Q But according to paragraph 15 FDS stopped working on some of the N-500O contract and it was al1owed to do that pursuant to

section 16.1.3 of the N-5000 subcontract, correct? A Correct. Q Did FDS give PPEC a written notice pursuant to

section 16.1.3 of that subcontract? A Yes, in the e-mails there was an e-mail that we sent to clients notifying that we will stop the labour part of the contract without payment. We would continue providing them the materials, the equipment side but we would no longer be able to continue with the labour side because we quite bluntly couldn’t afford to. [ 102 ] The questioning continued at page 15, line 18: Q So, in fact, it was PPEC who decided to terminate the relationship with FDS? A No, I terminated it because they weren’t paying us for the labour. They owed us a substantial amount of money.

So I could no longer quite, like I say, bluntly pay to keep the people on the site. So we notified them that we’re going to have to stop working there but we’ll keep the equipment going because we understand they need to carry on. I made it very clear to them that, you know, that you pay and we’ll continue. Several phone calls with them about that. Q And at the same time, as far as you know, PPEC was intending on taking over the scaffolding itself or getting another contractor involved?

A I don’t know. Like I say, this is hearsay that I was trying to address in this e-mail and never got a proper response from it. Q But, in fact, that’s what turned out to happen, PPEC did take control over the scaffolding process? A Yeah, they had no choice because, like I say, I pulled the people off site. We took them and sent them home. Q And this is the written notice that you were referring to earlier when I asked that question about 16.1.3? A Right. So basically he’s saying, as it says here, we need to be paid to carry on or, you know, we can’t continue.

Q And at the end of the day following these exchanges, I should say, the new deal was that the scope of the work would be reduced to just the rental component? A I don’t know if it’s a new deal. It’s just we have a contract to provide equipment and labour. We quit providing the labour component. We continued and still today as we speak continue to provide the equipment side of the contract. Like I don’t understand where the confusion is. We very clearly kept on the best that we could. We just could not afford to carry on with the labour part of it. [ 103 ] Mr.

Engen, on behalf of the Receiver, has no personal knowledge of any of the relevant circumstances and relies entirely on information and belief. His evidence is of little or no assistance in determining this key issue. Claims Officer’s decision [ 104 ] The Claims Officer described the issues as follows: 32. The questions then become:

a) Did the dealings between the parties in late 2014 amount to a variation of the N5000 contract which then carried forward in time the scaffold rental provisions of the N5000 contract even while the scaffold labour component was abandoned or, did those dealings amount to a rescission of the N5000 contract in its entirety which was replaced by a new agreement between the parties dealing solely with ongoing scaffold rental?

FDS argues the former and claims that its lien was filed in time as the supply of scaffolding under the N5000 contract was ongoing at the date its lien was filed and that FDS is therefore “secured” for all amounts owing under that contract, both for labour and rental. The Receiver argues the latter, claining that all FDS lien rights under the N5000 contract expired in January, 2015, 45 days after the last materials or services under that contract were furnished in late November 2014 and that any later entitlement to payment (see paragraph 11 above) comes by way of a new “rental only” agreement.

b) If all of the contracts and purchase orders are inter-related and if the ongoing rental of scaffold resulted from a variation of the N5000 contract, did FDS’s lien rights in respect of work and materials furnished under all contracts and purchase orders continue by reason of the ongoing scaffold rental under contract N5000 so as to entitle FDS to payment of all outstanding amounts in relation to all contracts and purchase orders as a “secured” lienholder under the Act? [ 105 ] The Claims Officer disallowed all claims other than for $87,377.42 owed pursuant to subcontract N5000. He based his decision on several conclusions:

1. Prime had not established the existence of a prevenient arrangement so as to treat all amounts owed under all of the various subcontracts and purchase orders together for the purposes of its builder’s lien claim; 2. Subcontract N5000 had come to an end by December, 2014 and was replaced by a “new” arrangement; 3.

By the time Prime filed its builder’s lien the “old” arrangement had expired such that it was filed out of time for all work performed under the old arrangement; and 4. $87,377.42 remained owing under the “new” arrangement and was properly caught by the builder’s lien filed on July 2, 2105. [ 106 ] The Claims Officer characterizes the competing scenarios between the parties: that subcontract N5000 came to an end and was replaced by a new relationship, or that subcontract N5000 was varied and there was no “new” arrangement. [ 107 ] It is fair to say that the Claims Officer’s decision in this regard was based almost entirely on his

interpretation of the three holdback invoices dated December 25, 2014, and the accompanying statutory declaration signed by Mr. Fahner. [ 108 ] The essence of the Claims Officer’s decision is found at paragraphs 53 and 54: 53. Notwithstanding the strength of the points identified in paragraph 40 above, with which I have some sympathy, I find the argument of the Receiver regarding the evidentiary weight to be given the Statutory Declarations, when taken together, to be compelling, particularly in light of the commercial realities that the Act appears designed to facilitate.

To find otherwise would, in my view, require me to ignore the clear purposes of the Act and to ignore the meaning of “Work” in the Statutory Declaration itself as well as the commercial purposes these devices were intended to facilitate. To be able to take things at face value seems to me to be what the Act intended.

To replace the relative certainty that comes with adopting the position urged by the Receiver with the position urged by FDS would be to require the recipient of a Statutory Declaration to look behind the face of the document with its express declarations regarding completion of the Work and pursue a comprehensive back story investigation much like we have found necessary in these proceedings, resolve the difficult legal issues that such an investigation raises (“rescission or variation”?; “termination” or “stop work”?) and only then decide whether it is safe to release funds.

That, surely, cannot be what the Act requires. 54.

Whether one accepts the Receiver’s argument that these Statutory Declarations (in particular the first one), alone, amount to “conclusive evidence” of the end of the “old” relationship and the beginning of the “new” or whether one simply looks at the weight of all of the evidence (including the evidence relating to the Statutory Declarations) to see whether we have here a “variation” or an “abandonment” of contract N5000, we reach the same conclusion; there was a material change of relationship between the parties in late 2014 resulting in a new relationship going forward and this material change was known to all.

Although there was no written agreement regarding this new relationship, the rendering of invoices by FDS to PPEC into 2015 bears witness to the fact that an agreement existed. Accordingly, I find that all Work under contract N5000 was “completed” in late December 2014 with the result that the FDS lien is out of time.

FDS’s Claim herein is therefore disallowed in relation to all amounts claimed other than the $87,377.42 acknowledged by the Receiver to be secured and referred to in paragraph 11 above. [ 109 ] The Claims Officer referred to Canadian Fluid Systems Ltd. v Michels Directional Crossing Corp. , 2004 ABQB 292 , relating to the evidentiary value of a statutory declaration. [ 110 ] There, Horner J held at paragraph 16: [16] Mr. Keenan of Michels swore a Statutory Declaration dated October 5, 1999 for delivery to Alliance, wherein Mr.

Keenan stated under oath that its contract with Alliance was “substantially complete/wholly terminated on the 13th day of August, 1999, and the last work performed by the said contractor (Michels) was done on the 13th day of August, 1999.” Further Mr. Keenan swore an Affidavit in these proceedings in April 2000 wherein again under oath Mr. Keenan stated that a placement system ran on site until August 13, 1999. Clearly a substantial completion date of August 13, 1999 means the CFS and Terracon liens were filed in time. At trial Mr.

Keenan explained the new substantial completion date of August 5th, 1999 was the date that subsequent testing, invoiced August 10, 1999, showed the crossing was ready. In fact Michels own invoice to Alliance of August 6, 1999 illustrates that an Alliance inspector approved the crossing on August 5, 1999. No explanation for the date in the statutory declaration or affidavit however was offered.

Without all the additional factual background I rely on the first Michels evidence, given under oath, as to the substantial completion date of August 13, 1999 and therefore find that the CFS and Terracon liens were filed within the 45 day time frame required by section 20(2) of the Act. [ 111 ] The Claims Officer dealt with two central issues: whether contract N5000 was rescinded and replaced by a new agreement for scaffold supply only, and whether all of the contracts and purchase orders were interrelated so as to be the subject of only one lien.

Termination of contract N5000 [ 112 ] In determining that contract N5000 had been terminated and replaced by a new supply-only contract, the Claims Officer relied almost exclusively on the December 25, 2014 statutory declaration. His

interpretation of it, along with his

interpretation of Canadian Fluid Systems Ltd. v Michels Directional Crossing Corp. , led him to conclude that N5000 had been abandoned. Analysis [ 113 ] In my view, the Claims Officer erred in this conclusion. There are a number of reasons for that. [ 114 ] First, the statutory declaration in Canadian Fluid Systems Ltd. v Michels is very different from the one here. In that case, Mr. Keenan swore that Michels’ contract with Alliance was “substantially complete/wholly terminated on the 13th day of August, 1999, and the last work performed by the said contractor (Michels) was done on the 13th day of August, 1999.”

[ 115 ] Here, the statutory declaration references “scaffold labour” and that is defined as the “work”. The body of the declaration references “work” and not the agreement. It does not deal with the portion of the subcontract dealing with the supply of scaffolding and other equipment. It does not reference the entire contract. [ 116 ] Prime refers to Edmonton Gold’s Gym Corp. v Eagle One Contracting Inc. , 2010 ABQB 20 .

While a brief case, it emphasizes the importance of looking at the precise wording of the statutory declaration to see exactly what is being referenced. [ 117 ] Raymond Massey Builders Ltd. v Sachdeva , 1982 CarswellMan 334 (Man Co Ct) involved consideration of a notice of substantial completion under the Manitoba Builders’ Liens Act .

Jewers J (as he then was) stated: 7 In my view, the fact that the contract may not have been substantially completed, did not, and does not, affect the validity of the notice or negate its effect under s. 24(1) as the key document, which, on proper delivery under s. 46, triggered the commencement of the forty day holdback period. I can see nothing in the Act which makes the validity and effect of the notice dependant upon the contract actually having been substantially performed.

Section 46(2) provides that the contractor shall give the notice when, in his opinion, the contract has been substantially performed; it is that opinion - not the actual substantial completion - which is the precondition for the notice to be given. No doubt it is assumed that the contractor will hold that opinion in good faith, and s. 46 (6) provides heavy penalties for giving a fraudulent notice. In the instant case there is no question of bad faith or fraud.

In any event, when the notice was accepted in good faith by the respondents, as it was, they were entitled to rely upon its delivery to them as validly marking the commencement of the forty day holdback period. It is clear that one of the purposes of the new legislation was to attempt to speed up the disbursement of holdback monies. See the recommendations of the Manitoba Law Reform Commission contained in their report on mechanics' liens legislation in Manitoba (1979) at p. 59 where the subject of “substantial performance” is treated.

In my opinion, that aim would be frustrated if the person receiving an apparently valid notice under s. 46 could not rely upon it. 8 It is not necessary for me to decide or comment upon the validity and effect of a notice given or accepted in bad faith or fraudulently; nor is it necessary for me to decide whether the contract was in fact substantially completed because, in my view, the parties can now safely proceed pursuant to s. 24(1) of the Act on the basis of a valid and effective notice of substantial performance under s. 46. [ 118 ] Raymond Massey Builders is about the honestly held belief of the deponent and the other side’s ability to rely on the representation. [ 119 ] Here, no issue arises out of Mr.

Fahner’s good faith in providing the statutory declaration. Since the issue arose after the materials were filed for the claims review, his subjective belief was not put forward in affidavit form, and was not questioned on cross- examination. [ 120 ] A careful review of the circumstances and the actual wording of the statutory declaration are entirely consistent with Prime’s argument that subcontract N5000 was not terminated or abandoned, and that the work under it continued to include the supply of scaffolding. Scaffolding was supplied until at least the end of May, 2015. [ 121 ] In Haebler Construction

(2003) Inc. v Condura Forming Ltd. , 2014 BCSC 163 , the deponent of a statutory declaration was questioned on the accuracy of the declaration.

The decision relates to credibility issues and not to the effect of a statutory declaration in construction lien matters, so it is of no assistance here. [ 122 ] Prime also refers to 88766 Canada Inc. v 167407 Canada Inc. , 2010 TMOB 167 , where the Trade-Marks Opposition Board refused to allow an improperly completed statutory declaration into evidence. [ 123 ] I agree that procedural irregularities are a relevant consideration to the weight to be given to a statutory declaration, but I would not go so far as to say that irregularities eliminate any weight at all.

Here, I am satisfied that the Claims Officer misinterpreted the statutory declaration by failing to give effect to the definition of “work” contained in it. [ 124 ] By equating “work” to the entire subcontract, or all of the work required by the subcontract, the Claims Officer erred and misconstrued the meaning and effect of the statutory declaration. [ 125 ] The Supreme Court of Canada considered the characterization of contractual

interpretation in Sattva Capital Corp. v. Creston Moly Corp. , 2014 SCC 53 , and concluded that the issue was one of mixed fact and law. That means that the standard of review on appeal would normally be palpable and overriding error. [ 126 ] That is now the starting point from which to approach the

interpretation of a document having regard to the importance placed on context by the Supreme Court in Sattva . [ 127 ] However, the Supreme Court recently considered Sattva in Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co. , 2016 SCC 37 . There, Wagner J stated (for 8 of the 9 judges on the appeal): [24] I would recognize an exception to this Court’s holding in Sattva that contractual

interpretation is a question of mixed fact and law subject to deferential review on appeal. In my view, where an appeal involves the

interpretation of a standard form contract, the

interpretation at issue is of precedential value, and there is no meaningful factual matrix that is specific to the parties to assist the

interpretation process, this

interpretation is better characterized as a question of law subject to correctness review. [ 128 ] There is no information before me as to the factual matrix that led to the formation of the subcontract. On its face, it would appear to be a standard form, in so much as the same form was used for the four subcontracts between Prime and PPEC. [ 129 ] The Statutory Declaration form is a standard form in the construction industry. [ 130 ] The

interpretation of standard form subcontracts and documents required by standard form contracts (such as the statutory

declaration) is of precedential value and, in my view, the issues here concerning the subcontract and the statutory declaration should betreated in similar fashion to the insurance policy in Ledcor v Northbridge. I therefore intend to apply the correctness standard. [131] The Claims Officer’s

interpretation of the statutory declaration was incorrect. It did not have the effect of terminating thesubcontract, nor was it evidence of any abandonment of the subcontract by either party. [132] Secondly, the Claims Officer placed far too much weight on his

interpretation of the statutory declaration. Mr. Fahner did notintend to terminate the entire agreement, and believed that subcontract N5000 continued on, minus the labour component. Primecontinued to invoice PPEC under that subcontract number for the duration of its relationship with PPEC and the Receiver, withoutobjection from either PPEC or the Receiver.

The statutory declaration by itself should not be elevated to conclusive proof of the event,especially where PPEC’s own senior employee on site and dealing with Prime was of the view that the contract had not been terminated,but that it carried on. [133] In my view, the evidence of Mr. Tatarin should be preferred to that of Mr. Bhowmick. There is no reason not to accept it. Hewas PPEC’s site supervisor and was a vice president of PPEC. He dealt with Prime on site. He was charged by Mr. Bhowmick withcarrying out Mr. Bhowmick’s intentions: replace Prime. The fact that Mr. Tatarin may not have done exactly what Mr.

Bhowmickintended is an internal matter within PPEC, and has no impact on Prime. [134] Mr. Bhowmick’s evidence, on the other hand, has no substance to it. It was Mr. Tatarin who actually dealt with Mr. Fahner andMr. Martin, and Mr. Bhowmick’s beliefs are of no assistance in determining the issues. [135] FTI’s argument that Mr. Tatarin acted without authority and that Mr. Bhowmick’s evidence should be preferred is without anymerit. Mr. Bhowmick was unaware of the real circumstances on the site. He was unaware that Prime continued to supply scaffoldinglong after it stopped providing labour.

He left it entirely to Mr. Tatarin to arrange the “transition” with Prime, without any knowledge asto what that might entail, other than what Mr. Tatarin had said to him in his email of October 17, 2014. [136] None of what Mr. Tatarin described happened. The evidence is that Mr. Tatarin was not the contract administrator for PPEC. Ifsomeone within PPEC dropped the ball, that is entirely within PPEC’s responsibility, and that failure is not visited on Prime. [137] Third, Mr.

Bhowmick’s understanding of the contractual situation was imperfect and, in my view, his evidence should beignored on the subject. [138] PPEC was the contractor. It was in charge of administering the subcontract. Mr. Tatarin had told Mr. Bhowmick what needed tobe done to properly administer the subcontract with Prime and to accomplish what Mr. Bhowmick wanted: to have PPEC take over theexpensive labour component of the Prime subcontract. [139] Mr. Tatarin was clear in his correspondence to Mr. Bhowmick that Prime had scaffolding on site. If Mr.

Bhowmick wasunaware of that, as he claims in his affidavit, he must have missed that part of Mr. Tatarin’s correspondence to him, or ignored it. Mr.Bhowmick’s ignorance has no role to play in contract

interpretation. He was simply wrong in his understanding that Mr. Tatarin hadtaken care of everything, and that Prime no longer had equipment on site. [140] Mr. Bhowmick’s misunderstanding is irrelevant, and his misunderstanding was in any event never brought home to Prime. [141] The reality is that the subcontract continued on. It needed no amendment. There is no suggestion that there was anyrenegotiation over price and terms.

The notion that the subcontract came to an end and was replaced by a new arrangement is untenable. [142] The first question to be asked in that circumstance would be “so what were the terms of the new contract?”. No answer isprovided in any of the correspondence or documentation presented by either party, and the real answer is provided by Mr. Tatarin: therewas no new contract. [143] As a result of his erroneous findings, the Claims Officer held that Prime had failed to prove that its builder’s lien was filed intime.

He appears to have found that the cessation of the provision of labour was enough, stating that “once it would have been obvious toa reasonable contractor that the cessation of work was not merely temporary, but represented a termination of the contract, the contractwas effectively “abandoned” (at page 13 of the decision). [144] The Claims Officer relied on Clearview Rental Project Edmonton Ltd. v Walker, (AB KB), [1993] 4 WWR284, in holding: As it relates to whether a contract was varied or terminated, the Alberta Court of Queen’s Bench provides the following comments:“Whether a subsequent agreement is a rescission or a variation depends on the extent to which it departs from the original agreement.

Itis a rescission if it alters the original agreement in some essential way; but if it does not go “to the very root of the original contract” itis only a variation. The distinction is one of degree.” Clearview Rental Project (Edmonton) Ltd. v Walker, (AB KB),[1993] 4 WWR 284 at paras 22-24 (ABQB) [145] It is not clear from the Claims Officer’s decision which party he found to have abandoned the entire contract. Prime did notintend to do any more than abandon the labour component.

PPEC wanted them to do so, and was content to have that occur. [146] PPEC did not want to abandon the entire contract either, as it needed Prime’s scaffolding for an undetermined period of time. [147] There was no need for any modification to the existing contract, as it allowed PPEC to take away the labour component and toperform that work itself or by hiring another subcontractor to do so. [148] The decision was vague as to when the “reasonable contractor” ought to have known that the cessation of work was nottemporary.

The Claims Officer made the fact finding at paragraph 54 that “all Work under contract N5000 was completed in late

December 2014”. [ 149 ] That conclusion is unreasonable on the facts, namely because the scaffolding continued to be supplied under contract N5000 for many months after December 2014. To the extent that the Claims Officer relied on the December statutory declaration to support that conclusion, he has failed to consider the definition of “work” in the statutory declaration that makes it clear that the declaration applies only to the provision of labour. [ 150 ] Finally, I conclude that the statutory declaration is a red herring to the issues here.

Its importance is diminished entirely by the definition of “work” contained in it. [ 151 ] Prime was not entitled to be paid any holdback until PPEC received holdback from CNRL, or completion of the work under the Prime Contract. It is unclear if PPEC has ever received final payment from CNRL, as work under the Prime Contract was not complete until August 2015 at the earliest. [ 152 ] Statutory declarations are not part of the builder’s lien regime set up under the Builder’s Lien Act . They have been created contractually to facilitate payment of progress claims and for release of holdback. [ 153 ]

Section 21 of the Act provides: 21(1) Notwithstanding section 18(1), if (

a) a certificate of substantial performance is issued for a contract, (

b) a period of 45 days has expired from the date of issue of the certificate of substantial performance, and (

c) no lien has been registered, the amount that the owner is required to retain under

section 18 is reduced by 10% of the value of the work actually done and materials actually furnished under the contract at the date of issue of the certificate of substantial performance.

(2) Notwithstanding section 18(1), if (

a) a certificate of substantial performance is issued for a subcontract, (

b) a period of 45 days has expired from the date of issue of the certificate of substantial performance, and (

c) no lien has been registered, the amount that the owner is required to retain under

section 18 is reduced by 10% of the value of the work actually done and materials actually furnished under the subcontract at the date of issue of the certificate of substantial performance. [ 154 ] Here, if the statutory declaration could be seen to be a “certificate of substantial completion”, it would only be a certificate of substantial completion of a portion of the subcontract. That essentially makes it meaningless, as it would not entitle the owner to release anything to the contractor.

The Act does not trump the contract as far as what the owner is required to retain from the contractor, or the contractor from a subcontractor. [ 155 ] There is no evidence to suggest that either PPEC or CNRL relied on the statutory declaration in any way. [ 156 ] My conclusion is that subcontract N5000 was not terminated in November or December 2014. It continued in full force and effect until at least May 5, 2015.

The Receiver took no steps to terminate the contract before then, and was apparently content to continue to use Prime’s scaffolding to assist in the completion of PPEC’s work under the Prime Contract. [ 157 ] Forty-five days from May 31, 2015 would have the lien period for claims under Contract N5000 expire on July 15. Prime’s lien was filed on July 2, 2015 and is thus valid. [ 158 ] I make no comment on the value of the lien. Alternate approach [ 159 ] If I am incorrect in my view of the correctness standard applying to the

interpretation of the subcontract and the statutory declaration and am otherwise required to consider whether the Claims Officer’s conclusions were reasonable and not tainted by palpable and overriding errors, I would simply repeat my analysis above and conclude that the Claims Officer’s

interpretation of the subcontract was flawed and demonstrates palpable and overriding error in relation to his failure to interpret the provisions of the subcontract in a manner consistent with the intent of the contract. [ 160 ] His

interpretation of the statutory declaration was flawed and demonstrates palpable and overriding error in relation to his failure to consider the definition of “work” in the statutory declaration and what work was referenced as being complete. [ 161 ] Further, the Claims Officer over-weighed the effect of the statutory declaration and failed to consider the absence of any reliance on it. That amounted to palpable and overriding error. Similarly, his treatment of the evidence of Carl Tatarin and apparent acceptance of the evidence of Mr.

Bhowmick is flawed and tainted by palpable and overriding error. [ 162 ] As I stated above, in my view both of these approaches yield the same result in this case: there was no termination or

abandonment of the subcontract. The July 2, 2015 builder’s lien was filed in time. Review of cases cited [163] In coming to these conclusions, I have reviewed the briefs on the merits of Prime’s lien claim submitted to the Claims Officerby the parties, and the cases cited by each to support their arguments. [164] In particular, Revita Corp v ConCreate USL (GP) Inc., 2015 ABCA 80, deals with abandonment. There, Slatter JA stated: [11] The second interpretive approach relates to the term “abandonment”.

The term “abandonment” can have a narrow meaning,denoting conduct of the contractor that signifies a subjective intention to cease performing its obligations. This would include thecontractor “walking off the job” or “no longer showing up”. Abandonment may often be assumed upon the insolvency of the contractor,although in this case Tervita was never insolvent. Under the Act, however, a purely subjective test for abandonment as adopted in caseslike W.M.

Fares & Associates Inc. v 3035605 Nova Scotia Ltd., 2006 NSCA 120 at para. 23, 249 NSR (2d) 156 isinappropriate. [12] In some cases a contract may be “abandoned” on an objective basis. The statute just requires abandonment, not necessarilyabandonment by the lien claimant. Certainly a subjective abandonment by the lien claimant will be sufficient. However, when itbecomes clear that the contract has been rendered un-performable by the conduct of either or both parties, by the actions of third parties,or as a result of external factors, the contract is essentially “abandoned”.

Once it becomes impractical or impossible to perform thecontract, no reasonable party would persist in saying they are “ready, willing and able” to continue performing: Lake of the WoodsElectric (Kenora) Ltd. v Kenora Prospectors & Miners Ltd., (1996), 27 CLR (2d) 184 at para. 49 (OCJ Gen Div). There comes a point intime when it is clear that the contract is at an end. [165] On an objective basis, neither party “abandoned” the subcontract. Prime remained ready, willing and able to continue to supplyscaffolding. It did so even after PPEC was put into receivership.

Prime was not willing to continue to supply labour without being paid.PPEC needed scaffolding, and whether Mr. Bhowmick knew it or not, PPEC needed Prime’s scaffolding. Mr. Tatarin was well aware ofthat. Mr. Tatarin was the on-site manager. PPEC continued to use Prime’s scaffolding until it went into receivership, and the Receivercontinued to use it thereafter. [166] Mr. Tatarin contemplated a new arrangement, as did Mr. Fahner, but no steps were taken to negotiate a new agreement. As Idiscussed above, no new agreement was necessary, as the existing subcontract covered the situation.

Neither party terminated thesubcontract. [167] Agreements require consensus ad idem: see Quinlan Brothers Ltd. v Coady, 2013 NLCA 31. While there may have beenconsensus to enter into a new agreement at some stage, events moved past that and no new agreement was made.

In a constructioncontract setting, where the rights and responsibilities of the parties are clearly defined, and the wording of the contract includes an “entireagreement” clause and provides detailed mechanisms for changes in writing, the Court should be extremely slow to imply amendmentsor variations or termination where no such thing has been documented. [168] PPEC’s “subjective belief” that there was a new contract was only in the mind of Mr.

Bhowmick, and his subjective belief andintention cannot form the basis of a new contract: Baranabe Estate v Canada, [1999] FCJ No 1019 (FCA). [169] As Prime notes, “people should not have obligations thrust upon them without their consent”, Angela Swan & Jakub Adamski,Canadian Contract Law, 3rd ed. (Markham: LexisNexis, 2012) at 4.48. [170] As also argued by Prime, the onus is on the Receiver to demonstrate that the existing subcontract was terminated and replacedby a new one.

See Loughlin v Nichol, 2003 BCCA 599 and Lethal Energy Inc. v Kingsland Energy Corp., 2014 SKQB 10. [171] Here, the Receiver has failed to do so. The only evidence that in my view is capable of supporting that position is the December25 statutory declaration. I have already dealt with it above, and have concluded that the proper

interpretation of the statutory declarationdoes not support the notion of a new contract, but rather supports the continued existence of Subcontract N5000 by the definition of“work”. Even absent the definition of work, the statutory declaration is not conclusive of the issue and is contradicted by the evidence ofMr. Tatarin and Mr. Fahner. Mr. Bhowmick’s evidence is of no assistance whatsoever on the issue. [172] The Receiver argued that Prime had abandoned the contract by failing or ceasing to supply labour under the subcontract.

Theyrelied on Tervita Corp. v ConCrete USL (GP) Inc., 2015 ABCA 80. [173] Dealing with abandonment, the Court of Appeal stated at paragraph 12: [12] In some cases a contract may be “abandoned” on an objective basis. The statute just requires abandonment, not necessarilyabandonment by the lien claimant. Certainly a subjective abandonment by the lien claimant will be sufficient. However, when itbecomes clear that the contract has been rendered un-performable by the conduct of either or both parties, by the actions of third parties,or as a result of external factors, the contract is essentially “abandoned”.

Once it becomes impractical or impossible to perform thecontract, no reasonable party would persist in saying they are “ready, willing and able” to continue performing: Lake of the WoodsElectric (Kenora) Ltd. v Kenora Prospectors & Miners Ltd., (1996), 27 CLR (2d) 184 at para. 49 (OCJ Gen Div). There comes a point intime when it is clear that the contract is at an end. That will also start the 45 days running.

At some time between the date whenConCreate’s receiver posted guards and blocked access to the site, and the email of July 23, this contract was essentially abandoned. [174] The Court concluded at paragraph 15: [15] A review on appeal discloses that the trial judge applied too narrow a legal test. The test is when the lien claimant knew orshould have known that the other party would not complete the contract. Once it would have been obvious to a reasonable contractor that

the cessation of work caused by the receivership was not merely temporary, but represented a termination of the contract, the contractwas effectively “abandoned”. An abandonment can occur without a formal communication from the other parties that the contract isterminated. Here the insolvency of ConCreate, the actions of its receiver in blocking access to the site, the discussion with the City aboutthe possibility of doing the remaining work directly for the City, combined with the other surrounding factors, would cause a reasonableperson to conclude that the contract was terminated.

Tervita acknowledged that in its email of July 23.

The fact that the City of Calgarymight enter into a new contract for the same work was irrelevant to the ability to file a lien for the work done under the first contract. [175] Shorb v Alberta (Public Trustee), (AB CA), 1954 CarswellAlta 8 (SCC), is cited by the Receiver for theproposition that rescission “is a question of the intention of the parties, a question of fact, in every such case” (at paragraph 5). [176] In CIBC World Markets Inc. v Blue Range Resources Corp., 2001 ABCA 86, the Court of Appeal stated at paragraph 3 that“the parties will be presumed to have intended to rescind the old contract and to have substituted a new one whenever the agreement isinconsistent with the original contract to an extent which goes to the very root of it”. [177] Clareview Rental Project (Edmonton) Ltd. v Walker, 1983 CarswellAlta 285 (ABQB), discusses the effect of a change to acontract made by a subsequent agreement, and whether there is a new contract or merely an amendment to the existing agreement.

FraserJ stated at paragraph 23: [23] It (an amendment) would be a change that does not affect the nature of the basic rights and obligations created by the agreement.If it (the subsequent agreement) created new rights or obligations, it would arguably not be an amendment but a new agreement becausethe basic rights and obligations existing under the agreement, or some of them, are different. [178] In Triple R Contracting Ltd. v 384848 Alberta Ltd., 2001 ABQB 52, Phillips J stated at paragraphs 21 and 22: [21] I consider that the Morris and Chapman cases cited in the above quote are equally applicable here.

I appreciate that writtencontracts must be treated with respect. However, when, as here, the subsequent conduct of the contracting parties points to theconclusion that they do not consider themselves to be governed by the Contract’s terms and instead developed an alternative arrangementestablished on clear evidence, it is unreasonable to impose the written Contract on the relationship. The progression of the evidence andargument at trial demonstrated the artificiality in attempting to apply the Contract to the obligations of the parties. Master Quinnrecognized this in his reasons given for dismissing Triple R’s

summary judgment application in Triple R Contracting Ltd. v. 384848Alberta Ltd., 2000 ABQB 15 , 2000 ABQB. 15, where he concluded: In my opinion the evidence indicates that neither of them ever considered himself to be strictly bound to the written contract. Theycontinued to deal with each other as they had in the past. What they really had was a quasi cost plus arrangement pursuant to which anydifferences of opinion were resolved by negotiation.

In my view the parties mutually agreed to more or less ignore the written contract.In these circumstances it is my view that it would not be feasible to apply the Parol Evidence Rule in determining the legal rights of theseparties. [22] Further, while clear evidence of the new agreement is required, there is no requirement either in the Contract itself or at law thatsuch a wholesale replacement of the Contract, as distinct from mere modifications and amendments, must be in writing: see for example,Pyramid Construction (Calgary) Ltd. v. Feil and Feil (1958), (AB KB), 11 D.L.R. (2d) 140 (Alta. S.C.), citing Masonv.

Scott et al, (SCC), [1935] 2 D.L.R.641 at 647 (S.C.C.). For the reasons already given, I am satisfied that there isclear evidence demonstrating that the parties did not intend the Contract to govern their relationship in regard to the Dairy Queen and thatthey entered into an alternative arrangement for its construction. [179] In my view subcontract N5000 was not abandoned by either party, subjectively or objectively. The subcontract provided for twoseparate types of work: supply of labour and supply of materials. The supply of one was not co-dependant on the other.

PPEC no longerwanted Prime to supply labour because PPEC could not afford to pay for it and had the right under the contract to do the work itself, orsubcontract it to another party. Prime was unwilling to supply further labour without being paid for it. PPEC needed Prime’s scaffolding,and Prime was willing to continue to supply it. [180] While a new arrangement was contemplated by the parties in their correspondence, a new arrangement was unnecessarybecause the existing arrangement covered the situation.

No new arrangement was ever agreed to. [181] Prime was in a situation where it could have terminated the agreement for non-payment, but it took no steps to do so. PPECcould not have terminated the agreement because of Prime’s unwillingness to provide further labour because of PPEC’s default inpayment pursuant to the terms of the subcontract. [182] Prime had no intention of abandoning the subcontract; Mr. Bhowmick may have had the intention to terminate it, but hisintention was not communicated to Prime and is essentially irrelevant. His instructions to Mr.

Tatarin were not carried through with, butthat is something that cannot be visited on Prime. [183] The supply of scaffolding only by Prime was not inconsistent with its obligations under the subcontract; the supply of labour didnot go to the root of the subcontract because it could unilaterally be removed by PPEC. [184] Even if the removal of the labour component was viewed as an amendment to the existing subcontract, it did not change theremaining rights and responsibilities of the parties.

Nothing changed, other than the labour component. [185] The parties’ subsequent conduct did not show any unwillingness or inability to be governed by the terms of the existingsubcontract and no new obligations arose. [186] There is no evidence of any oral or written new agreement or meetin

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