Eecol Electric Corp v, 2017 ABQB 196

Court of Queen’s Bench of Alberta Citation: Eecol Electric Corp v 968392 Alberta Ltd, 2017 ABQB 196 Date: 20170322 Docket: 1203 09269 Registry: Edmonton Between: Eecol Electric Corp Plaintiff - and - 968392 Alberta Ltd., Chandos Construction Ltd., 722657 Alberta Ltd., 722657 Alberta Ltd. operating under the trade name and style of Sprague Electric, BDO Canada Limited in its capacity as receiver and manager of 722657 Alberta Ltd. and 722657 Alberta Ltd. operating under the trade name and style of Sprague Electric, and Sprague Electric Defendants _______________________________________________________ Reasons for Decision of W.S.

Schlosser , Master in Chambers _______________________________________________________ [ 1 ] In this case, Chandos kept materials that had been supplied by Eecol and, in refusing to pay, now takes shelter in the Builders’ Lien Act , RSA 2000, c B-7 and

section 81.1 of the Bankruptcy and Insolvency Act , RSC, 1985, c B-3 [1] . [ 2 ] There are three reasons why Chandos should not be permitted to do this: First, Eecol has (had) a superior right to the property (or the value of it) pursuant to

section 81.1 of the Bankruptcy and Insolvency Act and section 17(2) of the Builders’ Lien Act ; Second, a liberal and purposive reading of section 18(3) of the Builders’ Lien Act (18(3)(b) ‘due and owing but unpaid’) favours Eecol; Finally, Eecol as supplier and sub-subcontractor, enjoys a range of equitable remedies against a general contractor, notwithstanding other remedies it might enjoy under the Builders’ Lien Act . Facts [ 3 ] Chandos was the general contractor in a big project in Ft. McMurray. Sprague was the electrical subcontractor.

Eecol was Sprague’s electrical supplier. [ 4 ] Sprague went into receivership. The Receiver notified Eecol. Eecol made a demand under s 81.1 of the Bankruptcy and

Insolvency Act , which would, in effect, have given them a priority – or the equivalent of a secured interest in a bankruptcy – for the approximately $200,000 worth of materials they had supplied but which had yet to be incorporated into the project. [ 5 ] The Receiver conveyed to Eecol that they did not have the electrical supplies. They passed Eecol’s demand on to Chandos. Chandos either ‘refused or neglected’ (as the expression goes), to deliver up the materials to the Receiver.

The materials were ultimately used to complete the project by replacement subcontractors. [ 6 ] Eecol seeks the money paid into Court some time ago under s 48 of the Builders’ Lien Act to discharge the liens. The amount represents the value of the materials supplied. [ 7 ] Chandos’ relies on a term of the sub-contract permitting them to take over and complete work that is either sub-standard or abandoned.

They take the position that Sprague abandoned the project before the receivership or, at the very least, Sprague formally abandoned the project when the Court appointed Receiver gave notice that, as Receiver, they would not be completing the project. Analysis [ 8 ] The contractual term relied on by Chandos contemplates an investigation, and 24 hours notice before the general contractor takes over.

It does not permit the general contractor to keep materials belonging to subcontractors, or the subcontractor’s supplier, without paying for them. [ 9 ] Chandos had physical possession of the materials but it is difficult to justify a better claim to ownership, or title, prior to payment. When title is to pass is a matter of intent. Eecol invoiced Sprague for material and even on the face of those invoices, return of unused material is contemplated (subject to a restocking fee). It would be legally cumbersome to presume that the return of unused goods amounted to a resale at a 20% discount, for example.

And without being able to demonstrate ownership or title, Chandos might well have been a bailee. Accordingly, I reject Chandos’ claim to be able to keep the materials with impunity based on the contractual term in the sub-contract between Chandos and Sprague. [ 10 ] Chandos takes the position that Eecol’s remedy exists solely under s 81.1 of the Bankruptcy and Insolvency Act which provides: 81.1

(1) Subject to this section, if a person (in this

section referred to as the “supplier”) has sold to another person (in this

section referred to as the “purchaser”) goods for use in relation to the purchaser’s business and delivered the goods to the purchaser or to the purchaser’s agent or mandatary, and the purchaser has not fully paid for the goods, the supplier may have access to and repossess the goods at the supplier’s own expense, and the purchaser, trustee or receiver, or the purchaser’s agent or mandatary, as the case may be, shall release the goods, if (

a) the supplier presents a written demand for repossession to the purchaser, trustee or receiver, in the prescribed form and containing the details of the transaction, within a period of 15 days after the day on which the purchaser became bankrupt or became a person who is subject to a receivership; (

b) the goods were delivered within 30 days before the day on which the purchaser became bankrupt or became a person who is subject to a receivership; (

c) at the time when the demand referred to in paragraph (

a) is presented, the goods (

i) are in the possession of the purchaser, trustee or receiver, (ii) are identifiable as the goods delivered by the supplier and not fully paid for, (iii) are in the same state as they were on delivery, (iv) have not been resold at arms’ length, and (

v) are not subject to any agreement for sale at arms’ length; and (

d) the purchaser, trustee or receiver does not, forthwith after the demand referred to in paragraph (

a) is presented, pay to the supplier the entire balance owing. [ 11 ] The difficulty with this position is that Sprague (or Sprague’s Receiver) did not have actual possession of the goods and Chandos refused to deliver them up, relying on the

section of the sub-contract noted above. Chandos thereby frustrated the Receiver’s call for possession and, indirectly, the Court Order appointing the Receiver. [ 12 ] As noted above, the effect of s 81.1 would have been to give Eecol the equivalent of a secured interest and thereby put it in a superior position to other creditors as Sprague. I note that s 81.1(11) of the Bankruptcy and Insolvency Act has preserves other remedies available to unpaid suppliers. It isn’t an exclusive remedy and it does support Eecol’s claim to have had a better right to the goods when the receivership intervened.

Mere delivery does not give ownership in these circumstances, much less an unassailable right to something for nothing . (eg Re Bankruptcy of Barrington and Vokey Ltd , 1995 Carswell NS 49 esp. at para 33, per Smith, R. [ 13 ] Chandos also takes refuge in the Builders’ Lien Act . They argue that the lien fund should be set at $50,000 (under s 18(3)) and that Eecol’s other claims based in conversion, detinue and unjust enrichment should be dismissed. [ 14 ] I am not willing to read s 18(3), especially 18(3)(b), as narrowly as Chandos requests.

Eecol’s claim is plainly for amounts due and owing them, but which remain unpaid in large part because Chandos frustrated the priority Eecol would have enjoyed in the

receivership. In other words, Chandos is now trying to do directly what it has already attempted to do indirectly and, I might add, improperly. [ 15 ] The purpose of the Builders’ Lien Act is to give a remedy to unpaid subcontractors or suppliers who have no contractual recourse against an owner or a contractor. It is not to be used as a means to frustrate the legitimate expectations of an unpaid supplier.

In a manner of speaking the Act is a sword in the hands of subcontractors and not a shield for contractors to frustrate legitimate claims. [ 16 ] Finally, the Act does not solely and exclusively occupy the field to the extent that remedies in tort that a subcontractor (or a sub-subcontractor) might have are extinguished.

I have in mind here: Litemor Distributors (Edmonton) Ltd v Midwest Furnishings & Supplies Ltd , 2007 ABQB 23 , per Read, J., Man-Shield (Alta) Construction Inc v 1117398 Alberta Ltd , 2007 ABQB 603 , per Hanebury, M., Bova Steel Inc v Constructions Beauce-Atlas Inc (Les) , 2016 ABQB 589 at paras 20 – 26 per Robertson, M.

This is not a suppliers claim against an owner and, as the learned Master noted in the last case, a tort claim, or a claim in equity is not made “under the Act .” Disposition [ 17 ] The funds presently held in Court representing the value of the unpaid supplies are to be paid out to Eecol in satisfaction of this portion of its claim. [ 18 ] Eecol Electric also claims interest and there may well be justification for interest at the invoice rate or something approaching it. However, the events leading to this application arose in 2012.

Someone in the position of Eecol should not let her sword ‘sleep in her hands’ (to borrow from Blake). The Builders’ Lien Act contemplates two years from lis pendens to trial. This procedure has taken more than twice that. I acknowledge that the intervention of the receivership added some complexity and slowed things down somewhat. In my view, interest should be kept at 30 months and payable under the Judgment Interest Act , RSA 2000, c J-1. [ 19 ] Costs follow the event. Heard on the 6 th day of March, 2017. Dated at the City of Edmonton, Alberta this 22 nd day of March, 2017. W.S. Schlosser M.C.Q.B.A.

Appearances: Patrick Kirwin Kirwin LLP for the Plaintiff Trent Kulchar Duncan Craig LLP for Chandos Construction Ltd.