Westpoint Capital Corporation v Solomon Spruce Ridge Inc, 2017 ABQB 254

Court of Queen’s Bench of Alberta Citation: Westpoint Capital Corporation v Solomon Spruce Ridge Inc, 2017 ABQB 254 Date: 20170406 Docket: 1503 04033 Registry: Edmonton Between: Westpoint Capital Corporation Appellant - and - Solomon Spruce Ridge Inc. and Martin Gunderson Respondents _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Robert A.

Graesser _______________________________________________________ Introduction [ 1 ] This is essentially a priority dispute over monies held in court as a resulting from the foreclosure sale of the lands in question. [ 2 ] Westpoint Capital Corporation (“Westpoint”) appeals the decision of Master Breitkreuz pronounced March 21, 2016. Master Breitkreuz allowed the application of Berry Homes Ltd. (“Berry”) for an adjournment of Westpoint’s application for an order to pay monies held in court out to it.

Master Breitkreuz also allowed Berry and Performance Paving Services Inc. (“Performance”) leave to be added as parties to this action for the purposes of allowing them to question Munir Virani, the principal of Westpoint, on the issue of whether Westpoint should be found to be an “owner” under the Builder’s Lien Act , RSA 2000 c B-7 . [ 3 ] The issues before me are whether Westpoint should succeed on this application in having the monies in court paid out to it, or whether it should be declared to be an owner under the Builder’s Lien Act and a subsequent determination as to priorities, or if these issues should go to trial or

summary trial. [ 4 ] Procedurally, Performance had applied on April 17, 2015 for a declaration that its builder’s lien was valid, and for judgment

against the defendants, including Westpoint. It sought orders that “Westpoint be identified as an owner under the terms of the Builder’s Lien Act ”, or that it be paid in priority to Westpoint and Berry out of any equity arising from the sale of the lands. [ 5 ] Berry sought an adjournment of the determination of the priority claims, and in the alternative, an order that Westpoint was an owner under the Builder’s Lien Act “and this is subsequent in priority to Performance along with an order confirming that Berry stands in priority to Performance”. Background [ 6 ] The basic facts are not in dispute.

Solomon Spruce Ridge Inc. (“Solomon”) is a land developer. Martin Gunderson is the principal of Solomon. [ 7 ] Solomon owned land in Spruce Grove, Alberta for the purposes of building homes on it. Westpoint loaned Solomon monies to develop the land and build the homes. Solomon granted Westpoint a mortgage on the lands, dated October 24, 2013 and registered on November 12, 2013. Mr. Gunderson guaranteed the mortgage indebtedness. [ 8 ] The lands were previously owned by 1258276 Alberta Ltd., of which Mr.

Varani was the principal. 1258276 Alberta Ltd. sold the lands to Solomon, and Westpoint advanced its mortgage to facilitate the purchase of the lands by Solomon. [ 9 ] Performance argues in this application that the mortgage advance was for an amount significantly in excess of the then value of the lands. [ 10 ] Westpoint claims that the mortgage was fully advanced on November 22, 2013, before Berry filed its caveat as purchaser of the lands from Solomon, and before Performance filed its builder’s lien against the lands.

Through record production and questioning, it appears that the full amount of the mortgage was advanced shortly after the mortgage was granted, notwithstanding that construction activities were proceeding and the work was not complete. [ 11 ] Some of the funds advanced went directly to Solomon, however, $1,000,000 was advanced into a guaranteed investment certificate (GIC) in Westpoint’s name. [ 12 ] In addition to the purchase of the GIC, approximately $290,000 of the monies advanced on November 22, 2013 went to three subcontractors who had been working on the lands. Mr.

Virani’s evidence on his questioning was that approximately $200,000 went to Good Brothers Construction, $3,192 went to DeAngelis Development, and approximately $80,000 went to Clearwater Rock. Mr. Virani was unsure as to whether Westpoint paid these contractors directly, or whether Westpoint “reimbursed Solomon for having paid for the work being done” (at p 49 line 5 to p 50 line 11).

Westpoint refused to undertake to advise what actually happened, although later advised that “Westpoint paid these funds to Solomon in order for Solomon to pay these invoices”. [ 13 ] One of the encumbrances against the land ahead of Westpoint’s mortgage was the development agreement between Solomon and the City of Spruce Grove.

Spruce Grove required a bond to secure performance of Solomon’s obligations under the development agreement. [ 14 ] From questioning and responses to undertakings, it appears that some of the funds were used to purchase a GIC with the Alberta Treasury Branches “standing” for a letter of credit issued to the City of Spruce Grove. According to Dan Champagne (president of Performance) in his affidavit of June 3, 2015, as at that time the GIC with the Alberta Treasury Branches was in the name of Westpoint and was in the amount of $596,757.

It is not in evidence before me as to what happened to that GIC. [ 15 ] Undertaking responses provided by Mr. Virani show that as of May 7, 2015, the ATB Financial GIC was in the name of Westpoint and stood at $604,585.20. [ 16 ] It does appear from the questioning of Mr.

Virani that there were still unresolved issues with the Alberta Treasury Branches at that time. [ 17 ] Part of the arrangements between Solomon and Westpoint authorized and directed Westpoint to “irrevocably advance and disburse to the Royal Bank of Canada $1,000,000 for a guaranteed investment certificate, issued by the Royal Bank of Canada in favour of Westpoint as collateral security for the TXN 890 Loan (the mortgage loan)”. [ 18 ] The loan agreement directed Westpoint to “deduct the foregoing fees, legal fees and reserves from the advance of the TXN 890 Loan and to disburse the TXN 890 Loan in accordance with the following...” [ 19 ] From questioning, it appears that the Royal Bank GIC was held by Westpoint as security for completion of the deep services to be constructed on the lands by Solomon.

The $1,000,000 was apparently released to Solomon on or about August 15, 2014. Mr. Virani testified for Westpoint that it was then satisfied that the deep services were complete. [ 20 ] According to Mr.

Champagne, the certificate of completion for the deep services was not issued until October 27, 2014, which is a date after Performance filed its builder’s lien. [ 21 ] Construction began, and Performance contracted with Solomon to perform paving work on the lands. [ 22 ] Again from questioning, it appears that Solomon was in default of its obligations to Westpoint under the mortgage almost immediately after the mortgage was advanced on November 22, 2013. [ 23 ] Berry agreed to purchase the lands from Solomon under an agreement dated April 26, 2013. Berry gave Solomon $168,000 as a deposit under the agreement.

No fixed closing date was specified; rather, possession was to be given 14 days after subdivision

approval. [24] The deposit cheque is dated May 2, 2013. On May 7, 2013 an addendum was signed by Berry and Solomon. That requiredSolomon to service the lands on or before July 31, 2013. If subdivision was not obtained by then, either party had the right to terminatethe agreement. It also obliged Berry to pay $932,000 for unconditional release to Solomon on the completion date. [25] There was a further amendment dated July 26, 2013 amending the July 31 date to September 30, 2013, and anotheramendment dated September 29, 2013 amending the date to October 31.

Then on November 13, 2013, the parties agreed to waive the“mutual subdivision condition” and Solomon agreed to carry back $2,260,000 of the purchase price interest free for a year. [26] Pursuant to that agreement, Berry paid Solomon a further $932,000. [27] Berry filed a caveat against the lands to protect its interest as purchaser on December 5, 2013.

The caveat is dated November29, 2013. [28] Performance filed a builder’s lien against the lands on October 7, 2014 claiming unpaid amounts for its services to Solomon.Performance issued a statement of claim on December 1, 2014 and filed a lis pendens on December 2, 2014.

It obtained a consentjudgment against Solomon in the amount of $242,673.76 plus interest and costs on July 10, 2015. [29] Paragraph 6 of the Statement of Claim says: The Defendants, Westpoint Capital Corporation and Berry Homes Ltd., are joined to this Action as nominal Defendants pursuant to theprovisions of the Builder’s Lien Act as prior encumbrance holders on the above Titles under registration numbers 132 365 077 and 132397 634. [30] On March 17, 2015, Westpoint commenced foreclosure proceedings. Performance had commenced action on its builder’s lienon December 2, 2014.

Berry filed an application on July 8, 2015 seeking a declaration that Westpoint is owner of the lands, such that itscaveat would attach to Westpoint’s interest in the lands. [31] The initial court applications and affidavits filed in this action related to Westpoint’s foreclosure and its attempt to obtain avesting order of the lands under its mortgage. Westpoint’s attempts to do so were opposed by Berry and Solomon and other lienclaimants. [32] Solomon and Mr. Gunderson have not been active in the foreclosure proceedings commenced by Westpoint and did notoppose the foreclosure. It has taken no

part in these proceedings relating to priorities to the funds in court. [33] Ultimately, Westpoint was unsuccessful in the tender process and its attempt to acquire the lands through foreclosure. MasterSchulz granted an order confirming sale and vesting title to the lands to Berry on July 9, 2015.

Berry was the successful tenderer whosebid was approved following a sealed tender process. [34] The sale process resulted in $3,605,489.43 being paid into court. [35] This application was brought by Westpoint on October 30, 2015, seeking payment of the monies in court. [36] Master Wacowich ordered that $600,000 of the monies in court be paid out to Westpoint on November 2, 2015, such that$3,005,489.43 remains. Standard of Review [37] All parties agree that the standard of review for now is correctness, such that no deference is accorded to the Master’sdecision below.

This follows Bacheli v Yorkton Securities Inc., 2012 ABCA 166, and cases following it. Arguments Westpoint [38] Westpoint argues that Master Breitkreuz erred by granting the adjournment to allow Performance and Berry to pursue theirtheory that Westpoint was not simply a mortgagee but was also an owner for the purposes of the Builder’s Lien Act.

Being an “owner”under the Builder’s Lien Act would make Westpoint’s interest in the lands subject to Performance’s lien, presumably ahead of theirmortgage. [39] Westpoint submits that the issue of whether Westpoint became an owner within the meaning of the Builder’s Lien Act isirrelevant and a red herring issue, as Performance never claimed a lien against Westpoint’s interest in the land.

Because Performance didnot advance the “ownership” claim against Westpoint until Westpoint brought its application to have the monies in court paid out to it,Westpoint argues that the time for filing a builder’s lien had long since expired. [40] Westpoint relies on Arres Capital Inc. v Greywood Mews Development Corp., 2011 ABQB 411. [41] Westpoint also argues that the advance of mortgage funds to the Royal Bank to purchase a GIC in Westpoint’s name was anadvance under the mortgage and should be treated as such in determining the priorities on the sale of the land.

It cites BerkeleySecurities Ltd. v Grouse Nest Resorts Ltd. et al, (BC SC), [1978] 3 WWR 9, and CIBC Mortgage Corp. v Duguay,

[1991] BCWLD 855, in support of that position. Performance [42] Performance argues that Westpoint is an owner within the meaning of

section 1(

f) of the Builder’s Lien Act. They argue thatfollowing the line of cases starting with Northern Electric Company Limited v Manufacturers Life Insurance Company, (SCC), [1977] 2 S.C.R. 762 at pp 765 and 774.

That case was followed by City of Hamilton v Cipriani, (SCC),[1977] 1 S.C.R. 169 at p 173 and then by Phoenix Assurance Company of Canada v Bird Construction Company Limited, (SCC), [1984] 2 SCR 199; and Yarwood v Ownix Developments Limited, (SCC), [1984] 2 S.C.R. 199, at p.213. [43] There is no doubt under Alberta law that a mortgagee can conduct itself in such a way as to be considered to be an owner forthe purpose of builder’s liens.

The same principle applies to landlords, whose interest in the lands may become subject to builder’s lienclaims arising out of tenant improvements, if the landlord has acted more like an owner in the construction process than a landlord withno direct interest in the improvements. See Suss Woodcraft Ltd. v Abbey Glen Property Corp., (AB QB), [1975] 5W.W.R. 57 (Alta. T.D.) and cases following it. [44] Performance argues that the facts here bring Westpoint into the realm of owner, rather than simply as mortgagee.

As such,Performance says its builder’s lien for $242,673.76 plus interest and costs should take priority over Westpoint’s mortgage. It argues thatMaster Breitkreuz was right to permit Performance and Berry to question Mr. Virani to attempt to determine if Westpoint could beshown to be an owner within the meaning of the Builder’s Lien Act. For the purposes of this appeal, they argue that this is a matter thatshould go to trial so that credibility issues can be properly explored and resolved.

Berry [45] Berry argues that if Westpoint is an owner under the Builder’s Lien Act, their caveat protecting their interest in the lands aspurchaser would follow Performance’s lien in priority and would move ahead of Westpoint’s mortgage.

Berry argues that as a purchaserof the lands from Solomon, any payments it makes towards that purchase create an equitable lien on the lands, citing Di Castri, Victor,The Law of Vendor and Purchaser, 3d ed., loose-leaf, (Toronto:” Thomson Reuters, 2014 paras 913 and 914) as well as SparrowDevelopments Ltd. v Gail, (1985), 61 AR 2010 (Master) and Pan Canada Mortgage Group Inc. v 679972 BC Ltd., 2014 BCCA 113. Inthe alternative, Berry argues that Westpoint had a beneficial ownership in the lands and, as a result, its mortgage merged into itsbeneficial ownership.

As a result, Berry’s purchaser’s caveat would rank ahead of Westpoint’s registered mortgage in the priorities to thefunds. [46] Berry’s interest was protected by the caveat it filed on December 5, 2013, shortly after Westpoint’s mortgage was filed andfully advanced. Berry argues that if the mortgage interest and beneficial ownership of the land become united in the same person, theymerge such that the mortgage becomes extinguished.

Berry submits that if Westpoint became an owner of the land under the Builder’sLien Act, as argued by Performance, its interests merged and the mortgage merged into its ownership interest.

Thus, Berry’s caveatwould take priority. [47] Indeed, since a purchaser’s interest takes priority to a builder’s lien, citing Coyes v Gypsum Drywall (Northern) Ltd., [1988]AJ no 277 (ABCA), Berry’s interest would take priority over Performance’s builder’s lien. [48] Since Berry paid Solomon $1,100,000 under its purchase agreement with Solomon, Berry is entitled to recover that amountplus interest plus costs from the monies in court as a first priority against those funds. [49] Berry argues in the alternative that Westpoint wilfully concealed its “de-facto ownership interest in the subject lands”.

Berryrelies on s 11(4) of the Builder’s Lien Act:

(4) A registered mortgage or a mortgage registered by way of a caveat has priority over a lien to the extent of the mortgage money ingood faith secured or advanced in money prior to the registration of the statement of lien. [50] They argue that because of this concealment, the advance of mortgage monies was not in good faith.

Berry relies on RBC vDonsdale Development Ltd., (1986), (AB KB), 74 AR 161 (ABQB). [51] As a further argument, Berry argues that if Berry is not able to maintain priority over Performance and Westpoint is not ableto maintain its priority over Performance (as mortgagee), the “equitable solution” is to allow each party to have priority over itsrespective counterpart, following the analysis in Dunlop and Blackwold, Debt Recovery in Alberta (Toronto: Reuters Canada Ltd., 2012)pages 399-401. [52] Following that logic, Berry argues: If Performance takes priority to Westpoint in the amount of $250,000 the proper priority has been applied and Westpoint cannot argue ithas been dealt with unjustly.

However, in order to satisfy s. 14 of the Land Titles Act, one must then determine priority to the $250,000by date of registration – and that priority should be of Berry over Performance.

In such circumstances, Westpoint has only given up itspriority to the extent of the amounts claimed under Performance’s builder’s lien; Performance maintains its position subsequent to Berry,and Berry is granted only a portion of the amount claimed pursuant to its purchaser’s lien but it is done while avoiding any additionalprejudice to Westpoint. [53] During argument, I questioned the purchase of the Royal Bank GIC in Westpoint’s name on November 22, 2013, and askedfor further submissions as to whether that transaction constituted an advance so as to give that $1,000,000 priority over Berry’spurchaser’s caveat filed December 2, 2013 and Performance’s builder’s lien filed October 7, 2014.

I received further submissions from

the parties over the course of February, 2017. Analysis [54] It is clear that if I do not accept Westpoint’s argument that the entire matter is answered by Arres Capital Inc. v GreywoodMews Development Corp., the issue as to whether Westpoint acted in the role as owner for the purposes of the Builder’s Lien Act shouldgo to trial or to

summary trial. [55] Berry argues that Arres is distinguishable because it did not deal with a situation where there was concealment of Westpoint’s“true role”. Performance excuses its failure to lien Westpoint’s interest in the land on the basis of discoverability: It wasn’t untilWestpoint’s application to pay the monies out of court did Performance learn that Westpoint may have acted in the capacity as owner. [56] Arres is remarkably similar to the basic facts in this case.

In that case, the lien claimants filed their builder’s liens claimingagainst the fee simple estate of the registered owner, who happened to be the contracting party with the builder’s lien claimants. Themortgage had been fully advanced before any of the liens was filed. The lien claimants argued that Arres had acted as owner within themeaning of s 2(

f) of the Builder’s Lien Act. [57] Master Smart referred to section 34(2) of the Builder’s Lien Act regarding the formalities of a builder’s lien:

(2) The statement of lien shall set out (

a) the name and residence of (

i) the lienholder, (ii) the owner or alleged owner, and (iii) the person for whom the work was or is being done or the materials were or are being furnished, (

b) the date when the work was completed or the last materials were furnished, or if the statement of lien is filed before thecompletion of the contract or subcontract, as the case may be, a statement that the work is not yet completed or the materials have not yetall been furnished, (

c) a short description of the work done or to be done or of the materials furnished or to be furnished, (

d) the sum claimed as due or to become due, (

e) a description, sufficient for registration, of the land and estate or interest in the land to be charged, and (

f) an address for service of the lienholder in Alberta. [58] In dealing with these mandatory requirements, Master Smart referred to LT Interior & Drywall Ltd. v Sofa Centre Inc., 2003ABQB 552 , 2003 CarswellAlta 918 (ABQB). [59] In that case, Greckol J (as she then was) dealt with a situation where the builder’s lien claimant filed a claim against theinterest of the fee simple owner of the lands, and not the tenant of the owner for whom the claimant had done the work. [60] Greckol J recited the facts, which included that the contract for the work was between LT Interior and the tenant, Sofa Centre. [61] The lien did not state that the work was done “on the credit, on the behalf, on the privity and consent, or on the direct benefit”of the registered owner (the wording in s 1(

f) of the Builder’s Lien Act. [62] Greckol J held at para 25: [25] The Statement of Lien must identify the “owner” since, according to s. 6 of the Builders’ Lien Act, the lien is “on the estate orinterest of the owner in the land in respect of which the improvement is being made.” The word “owner” has a singular meaning underthe Act. The term is defined under s. 1(

j) as “a person having an estate or interest in land at whose request, express or implied, and (

i) onwhose credit, (ii) on whose behalf, (iii) with whose privity and consent, or (iv) for whose direct benefit, work is done on or material isfurnished for an improvement to the land and includes all persons claiming under the owner whose rights are acquired after thecommencement of the work or the furnishing of the material.” [Emphasis added] [63] While that case involved work done for a tenant and the builder’s lien claimant’s attempt to have the fee simple owner maderesponsible for the lien, the principles involved are the same where a builder’s lien claimant is attempting to make a mortgageeresponsible for the lien. [64] In LT Interior Drywall the problem for the builder’s lien claimant was that it had claimed against the fee simple owner, buthad not in its lien claim asserted that the word was done “on the credit, on the behalf, on the privity and consent, or for the direct benefit”of the registered owner. [65] The decision may be considered as a technical one, but it recognizes that builder’s lien claims are an extraordinary remedyallowing claimants in circumstances to advance claims and collect payment from parties they had no contractual relationship with.

Because of the extraordinary nature of the lien remedy, the courts have consistently held that lien claims and the rights of lien claimantsare to be construed narrowly: see Kettle Valley Contractors Ltd. v Cariboo Paving Ltd., 1986 CanII 1009 (BCCA). [66] The genesis of builder’s lien claims against mortgagees on the basis that they are owners within the meaning of builder’s lienlegislation is Northern Electric Co. v Manufacturer’s Life Insurance Co., (SCC), [1977] 2 SCR 762.

In that case, thecourt decided that the mortgagee was an owner as the mortgagee had requested that the work be done, that the work had been done onthe mortgagee’s behalf and for the mortgagee’s direct benefit and with the mortgagee’s privity and consent. [67] Manufacturer’s Life Insurance had initially bought the lands from a developer and then leased the lands back to the developerunder an 80-year lease. Under the lease, the developer was to build on the lands and mortgage monies would be advanced under amortgage charging the developer’s leasehold interest to enable construction.

Ultimately, the lands would revert to Manufacturer’s LifeInsurance when the lease expired. [68] The majority of the Supreme Court concluded: I cannot agree with the submission that Metropolitan was merely borrowing money to enable it to put up a building of its own, and thatthe respondent was not advancing money for the construction of a building for it by Metropolitan. The title position and the rent paymentprovisions are against any such submission.

Whose building was it if not the respondent’s, subject to possession and use by Metropolitanfor a limited period, by way of being able to realize some pecuniary advantage from its original ownership of the land and from itsexertions as contractor? The letters of commitment are clear enough on this point since they associate the obligation to construct thebuilding with the transfer to the respondent of the land upon which the building is to be constructed, and they provide that theconstruction will be paid for by the respondent.

This is the substance of the overall arrangement, and the security aspect of thetransaction, involving a mortgage of the leasehold, cannot be allowed to mask that substance. I am not at all persuaded that the truecharacter of the transaction between the parties can be founded upon a consideration of only the mortgage of the leasehold, with itscommonplace provision that any advances thereon are in the discretion of the mortgagee.

This provision has no more reality against theentire arrangement than has that provision of the mortgage by which the mortgagor acknowledges receipt of the entire sum of theproposed loan as consideration for the mortgage. [69] The developer was considered to be the contractor within the meaning of the Nova Scotia Builder’s Lien Act, the majoritystating: It is a person who contracted with the owner, that is with the respondent, for the construction of the apartment building. I do not thinkthat the definite

article “the” in the definition can be taken here to exclude the respondent since, so far as any contract for the buildingwas concerned, the respondent, as owner of the land on which the building was to be constructed, qualified as “owner” in respect of thecontract. There was a direct dealing between Metropolitan, which acted as its own contractor, and the respondent, the former undertakingwith the latter to build an apartment building according to plans to be approved by the respondent.

I think it would be too narrow areading of the provisions of the Mechanics’ Lien Act (having regard to its object to offer protection to persons doing work or providingservices or furnishing materials in respect of any building or improvement) to draw a distinction between a contract for an entire buildingand a contract for work, services or materials going to make up that building, so as to exclude the former from the scope of the Act inrespect of the definition of “contractor”. [70] Many years earlier, a similar argument had been raised in Marshall Brick Co v Irving, (1916) (ON CA), 35OLR 542, aff’d (SCC), 54 SCR 569.

In that case, the appellants sold Irving some land. It was a condition of sale thatIrving build on it, according to plans and specifications prepared by Irving. [71] Monies were advanced by the appellants to Irving so he could build. Irving defaulted, and the appellants took the lands backin a foreclosure process under their agreement for sale. Liens were filed by Irving’s subcontractors.

One of them, Marshall Brick,claimed that the appellants were owners within the meaning of the lien legislation in Ontario. [72] Meredith CJCP speaking for the majority in the Ontario Court of Appeal stated at paras 11- 13: 11 That, however, does not prevent mortgagees from being more than mortgagees, they are “owners” if they come within the definitionof that word contained in the

interpretation clause of the Act before mentioned. The definition is: one having an estate or interest in landupon which work is done or materials placed or furnished, at whose request and upon whose credit, or on whose behalf, or with whoseprivity and consent, or for whose direct benefit, the work is done or materials supplied. 12 The work was done and materials supplied by Irving’s contractor, Campbell, and his sub-contractors, and by workmen andtradesmen who sold materials to them.

The appellants had nothing to do with these contracts nor any control over the contractor, sub-contractors, or workmen or tradesmen.

Their dealings were with Irving only: they could keep him up to his obligations to them: but, apartfrom that, Irving was substantially owner of the lands and could do as he pleased. 13 That being so, how can the “mortgagees” be deemed “owners?” Nothing was done or supplied by contractor, subcontractor, orworkman, at their request or on their credit: Irving was in no sense their agent in making his contracts, the work was done at his requestand upon his credit solely: so too on his behalf: the appellants were strangers to the building contracts of Irving with the builders: therewas no privity and consent: and plainly it was not for their direct benefit, it was for Irving’s direct benefit: all that the appellants couldget would be an indirect benefit in the additional security they would have if the value of the lands were increased by the buildings morein amount than the sums they paid to Irving, under their agreement with him, towards the erection of the buildings: and so they arewithout sec. 8 of the Act, and within secs. 14 and 8(3). [73] Riddell J concurred in the result and concluded that the appellants had done nothing to request the work.

At paragraph 37, hestated: 37 With the law that mere knowledge and non-interference will not render a mortgagee liable as an owner, and that each case is to bedetermined upon its own facts, I can find nothing in the present case to show that the work in question was done at the request of the

company: the decision of the Referee should he reversed with costs here and below. [74] Since Northern Electric, there have been a number of decisions finding a mortgagee to be the owner for builder’s lienpurposes. [75] Phoenix Assurance Co. of Canada v Bird Construction Co., (SCC), [1984] 2 SCR 199, dealt with a complexarrangement between Phoenix and a developer to build Phoenix’s Canadian head office by way of a sale of lands by the developer toPhoenix. The developer then leased back the lands and mortgaged its leasehold interest to Canada Trust to obtain financing for theconstruction.

The developer subleased the building to be completed to Phoenix along with other “subtenants”. [76] When the developer became insolvent, its contractor, Bird, liened the interests of the developer as well as that of Phoenix. TheSupreme Court concluded that in these circumstances, Phoenix was an owner for builder’s lien purposes. It stated at p 217: The next step is to determine whether the “work”, which I have concluded was done at the request of Phoenix, was done pursuant to anyone of the four subparagraphs of subs. 1(d). It would be difficult to conclude that all four did not apply in the circumstances.

Theappellant argued for a distinction in these statutory tests between a “contracting owner” and a “non-contracting owner” in the event thatPhoenix was found to be an owner. The statute admits of no such

interpretation and in neither Northern Electric nor Cipriani, supra, wasany such

interpretation placed on the Act. It is clear that Ownix could not, on its own resources, finance this project. It is beyondargument that the credit lease was an arrangement whereby the creditworthiness of Phoenix was utilized for the purpose of obtaining theCanada Trust mortgage. The mortgage proceeds financed the construction carried out on these lands. Whether the transaction took thisroute as against a simple mortgage by PCDA as owner or by means of a simple guaranty by Phoenix of Ownix’s covenants in amortgage, is of no importance.

The form may have been dictated by tax, insurance regulations or other considerations. The substanceremained the same. It was the credit of Phoenix that was employed to bring this project into being and to establish the head office forPhoenix Canada. Phoenix, being the registered owner of the land, had an “interest in the land” within the meaning of s. 1. It was at the “request” ofPhoenix that the work was done on the land by Bird.

Divided up into each single step or function performed by the parties under thedevelopment agreement, it might be argued that Ownix, not Phoenix, “requested” Bird to construct the building. Ownix, through theperformance of the development contract, caused the building to be built, which building, by the contract, became, in the fullness of time,the sole property of Phoenix. Additionally, Phoenix participated in the profits from the operation of the building until it vestedcompletely in Phoenix in 35 years.

In short, Ownix and Phoenix instituted this development project wherein a head office for PCDA wasbrought into being, all pursuant to the development contract between Ownix and Phoenix. As was the case in Northern Electric, supra,Phoenix was the entrepreneur, owner and financier. Ownix was the contractor for Phoenix; and Bird was engaged by Ownix on behalf ofand as the agent for Phoenix. This was the substance which the form merely served. The other subparagraphs of para (d), that is subparas (ii), (iii) and (iv), are alternative, not successive features of the definition of“owner”.

But even if each of them applied cumulatively, all are met on these facts. For the reasons already stated, the “work” in questionwas done on these lands “on behalf of”, “with privity or consent” of, and for “the benefit of”, Phoenix, the residual owner andintermediate beneficiary from the operations of the building. [77] In Royal Trust Corporation of Canada v Bengert Construction Ltd., (ABQB), the appellants purchased a“lot and home” from Bengert Construction Ltd.

Bengert was to construct the house on the lands according to a specified house plan. [78] The appellants gave a down payment and later filed a caveat to purchase its interest as purchaser. Before the appellants’caveat was filed, work was done on the lands by builders subcontracting with Bengert. Those builders filed builder’s liens after theappellants had filed their caveat. [79] Virtue J considered a number of cases and contrasted the case before him with cases where a purchaser had been held to be anowner.

He noted that in the case before him, there had been no progress draws and the purchasers had little or no involvement in theproject. The purchasers were entitled to priority for their deposit because their caveat was filed “first in time”. [80] In a related case, Coyes v Gypsum Drywall (Northern) Ltd., 1988 AJ No 277 (ABCA), the Court of Appeal stated at paras 23to 25: [23] The Supreme Court of Canada has considered the definition of “owner” in similar words in other statutes in three cases since 1976:City of Hamilton v. Cipriani (1976) (SCC), 67 D.L.R. (3d) 1; Northern Electric Co. v.

Manufacturers Insurance Co.(1978) (SCC), 79 D.L.R. (3d) 336; and Phoenix Assurance Company Limited v. Bird Construction Company Limited (SCC), [1984] 2 S.C.R. 199. None of these cases, in my opinion, stands for the proposition that contracting with abuilder, of itself, brings one within the definition of “owner”. In all of those cases, there was an active participation by the entityeventually held to have made a “request” and so to be within the definition of “owner”. [24] The position of many new home buyers is aptly stated by Mr. E.

Mirth, of the Alberta bar in a paper delivered to the AlbertaBranch of the Canadian Bar Association and reproduced in the Association’s papers for 1986 at page 488: “one must … quere the application of the Act to an ‘interim’ purchaser: - one who acquires an interest under an ‘interim’ agreement forsale and who expects to have little or no involvement in the project until it is completed. It is not uncommon for a new-home buyer to tiea property up with an ‘interim’ purchase with no further significant involvement until closing after house completion.

The buyer, in hisown mind at least, is buying a completed house; not a lot with construction to be done thereon. Often his ‘interim’ says little more aboutwhat construction is to be done (and how) than to say that a house of a certain type is to be built. There are no progress payments, andoften the buyer simply assumes the builder’s mortgage (which finances construction) on closing and possession. From the buyer’sperspective he is on closing buying a completed house and lot by cash (or cash and mortgage assumption).

Especially where the builderhas or places permanent financing to be assumed on closing, the ‘interim agreement’ seems closer in character to an option than to anagreement for sale. The deal has a distinct and separate level of closing once the house is built. The buyer swaps his full price paymentfor title to a completed house.”

[25] In this case, the Coyes’ participation in the construction activities was little more than to choose a house plan. They had such aminimal

part in design that their contract does not even specify any extras to be added to it. The contract does not empower them toinspect during construction or to have any involvement with sub-trades. The builder had obtained the mortgage and financed constructionfrom it so that Mr. and Mrs. Coyes were unable to control the cash flow into the project to ensure that no builders’ liens would beoutstanding.

Moreover the form of contract describes the Coyes as interim purchasers, which was borne out by the provision for a closingwhen the house was completed at which time most of the purchase price would be paid by cash and the assumption of the builder’smortgage.

Only then would title be transferred. [81] In Luscar Ltd. v Smoky River Coal Limited, 1999 ABQB 204, Lovecchio noted at paragraph 22: [22] It is true that there have been cases where the interest of a requesting mortgagee has been sufficient to allow them to constitute an“owner” under the Builder’s Lien Act but these decisions are all predicated on a finding of a request by the mortgagee to do the work ora direct dealing between the mortgagee and the lien claimant concerning the work. [82] Lovecchio J dealt with priorities at para 46: [46] There is another reason for not linking security interests and ownership interests under the umbrella of all interests.

The taking ofa mortgage as security for a debt is not of the same nature as becoming the owner of a property. In a mortgage, the creditor has providedfunds to the owner and now simply wants to be repaid. The creditor has taken a security interest to secure that repayment. The nature oftheir security interest in the property and their relationship to the owners is similar to that of the lienholders. The lienholders are alsocreditors who have done something for the owners and want to be paid by the owners.

As they are both creditors, the issue, as betweenthe Petitioners and the lienholders, should be one exclusively of priorities except for the situations in which the mortgagee has, by directdealing, involvement or by the nature of the financing arrangement, incurred a direct liability to the lienholder.

In those latter situations,the “priority” goes to the lienholder, not because the words are expanded in section 4(2), but more logically because the conduct of oneof two parties who have a similar interest in relation to the owner has dictated that, as between the two, the lienholder should have theadvantage. [83] The principles relating to mortgagees becoming owners for the purposes of builder’s lien claims has been applied to landlords.In Suss Woodcraft v Abbey Glen Property Corporation, (ABQB), McDonald J (as he then was) found that the landlordhad become an owner for the purposes of builder’s liens filed relating to work done for tenants constructing tenant improvements.

Thatcase was followed in Hillcrest Contractors Ltd. v McDonald, (ABQB). [84] Performance referenced several other Alberta cases that deal with the mortgage advance issues. George N Jackson Ltd. vBatoni-Bowlen Enterprises Ltd., (ABQB), questioned (without deciding the point) whether a mortgage advancedbeyond the value of the building would take full priority over builder’s liens. [85] In Royal Bank v Hallmark Golf Developments Inc., (ABQB), [1992] A.J. No. 226, the Court consideredthe priority of secured advances by the Royal Bank.

All credit facilities were fully advanced before any builder’s liens were filed, butpayments were made on the operating line of credit and further advances on it after liens had been filed. Dixon J held that advances onthe operating line after the liens were filed ranked behind the liens. He stated at paras 17 and 19: 17 Having regard to the first issue, I am of the opinion that withdrawals pursuant to an authorized line of credit secured against realproperty should be treated as equivalent to draws made under a registered mortgage for the purposes of establishing priority under theBuilders’ Lien Act.

The two are functionally identical. A bank cannot circumvent the priority sections of the Builders’ Lien Act bymerely using different terminology than that used in s. 9(2) of the Act. An

interpretation of the Act must reflect its purpose, that ofsecuring a priority of interests through the process of registration. 19 Again, the purpose and intent of the Builders’ Lien Act would be circumvented if banks were allowed to characterize their loans asfully secured at the time of registration. Such a characterization is not borne out by a literal reading of s. 9(2). The

section speaks of“mortgage money ... advanced in money prior to the registration of the statement of the lien”. Section 9(3) addresses the situation whereadvances are made under a mortgage after a lien has been registered. These clear indications of the importance of timing would besuperfluous if the

section assumed that all mortgage monies were advanced at the time of registration of the mortgage. Moreover, theproviso “in money” appears to point to a concrete advancement of funds. [86] The Court of Appeal upheld the decision, at 1993 ABCA 255. The Court of Appeal noted at para 7(

c) and (d): (

c) There is no evidence here that the mortgagee was obliged to permit further draws, i.e. honor cheques beyond the balance in thechequing account. There is admittedly no express covenant to that effect in the appeal book. Indeed, clause 15 of the mortgage expresslysays that the mortgagee is not obliged to advance the moneys, or the rest of them. Whether any other contract might modify that is notrevealed by the evidence. The mortgagee cites

definitions of revolving credits from dictionaries and like works, but we are unwilling toassume that every arrangement with that name contains a covenant to advance, especially as we lack knowledge of some of the otherterms of this loan. (

d) The agreements in the appeal book clearly provide that the mortgagee may call the loans if the borrower has failed to make anypayment or breached any of his covenants, or if the mortgagee feels there have been adverse financial changes. And some of the loanswere demand loans anyway. It is agreed that the borrower was behind in its interest payments before the liens were registered, and suchliens surely would constitute adverse financial changes. The mortgagee argues that it would take a formal declaration of default andadvance notice before it could refuse to permit draws under the revolving line of credit.

We see no clause or condition to that effect. Thatthe mortgagee would be obliged to advance more money to a borrower in default and shaky, and whose loan could be called at once,offends common sense. When counsel for the mortgagee was asked whether he really wanted this Court to put such a proposition of lawinto a judgment, he backpedalled, but we cannot disentangle the two questions. There was no obligation, on the facts of this case, topermit the further draws after the liens. [87] J. Murphy Holdings Ltd. (Murphy’s Eavestroughing) v Qualico Developments (Edmonton) Ltd.,

(ABQB), deals with priorities under s 9(1) of the Builder’s Lien Act and references Aetna Roofing Ltd. v Aedes Construction Ltd.,(1985), 1984 ABCA 258 , 35 Alta L R (2d) 33 (ABCA), and the principle that a builder’s lien arises from the commencement ofthe work. [88] Section 9(1) is now s 11(1), which states: 11(1) A lien has priority over all judgments, executions, assignments, attachments, garnishments and receiving orders recovered, issuedor made after the lien arises.

(2) Notwithstanding subsection (1), a payment made pursuant to an assignment, attachment, garnishment or receiving order that ispaid, before a lien is registered, to a person for whose benefit the assignment, attachment, garnishment or receiving order is made orissued, takes priority over the lien.

(3) Notwithstanding subsection (2), no judgment, execution, assignment, attachment, garnishment or receiving order shall affect theamount required to be retained under sections 18(1) or (1.1) and 23(1) or (1.1).

(4) A registered mortgage or a mortgage registered by way of a caveat has priority over a lien to the extent of the mortgage money ingood faith secured or advanced in money prior to the registration of the statement of lien.

(5) Advances or payments made under a mortgage after a statement of lien has been registered rank after the lien, but a mortgagee whohas applied mortgage money in payment of a statement of lien that has been registered is subrogated to the rights and priority of thelienholder who has been so paid to the extent of the money so applied.

(6) An agreement for sale of land in respect of which a caveat has been filed and any money in good faith secured or payable under theagreement has the same priority over a lien as is provided for a mortgage and mortgage money in subsections (1) and (2), and for thepurposes of this Act, (

a) the seller is deemed to be a mortgagee, and (

b) any money in good faith secured and payable under such an agreement is deemed to be mortgage money in good faith secured oradvanced. Issues [89] From reviewing the cases submitted and the arguments made, there are really nine issues to determine: 1. Has Performance’s lien claim merged in its judgment against Solomon such that no further proceedings on the lien are possible? 2. Has Performance shown that Westpoint was an owner for the purposes of its builder’s lien filed on October 7, 2014? 3. Even if it has, is its failure to lien the estate of Westpoint fatal to its lien claim? 4.

If Performance gets past these first three steps, can Berry piggy-back on Performance’s priority position and gain priority overWestpoint’s mortgage? 5. Was Westpoint a beneficial owner of the lands such that its mortgage merged into its beneficial ownership? 6. What is the extent to which payments made by Berry to Solomon are protected by its purchaser’s caveat? 7. What is the priority position between Performance and Berry? 8. Are advances under a mortgage that exceed the value of the lands and buildings on it nonetheless given the same priority as advancesup to the value of the lands and buildings? 9.

Are the purchases of Guaranteed Investment Certificates in Westpoint’s name by Westpoint at the time the mortgage to Solomon was“advanced” advances for the purposes of s 11(1) of the Builder’s Lien Act such that they take priority over Berry’s purchaser’s caveatand Performance’s builder’s lien to the extent of monies released from the GICs after registration of Berry’s caveat or Performance’slien? 1.

Has Performance’s lien claim merged in its judgment against Solomon such that nofurther proceedings on the lien are possible? [90] In my view, Westpoint’s argument that Solomon’s claims (including its claims against the land and against Westpoint)merged into the consent judgment taken against Solomon on July 13, 2015 is fully answered by s 31 of the Builder’s Lien Act: Merging of lien 31(1) A lien is not merged, paid, satisfied, prejudiced or destroyed by (

a) the taking of any security, (

b) the acceptance of a promissory note or bill of exchange, (

c) the taking of any acknowledgment of the claim,

(

d) the giving of time for payment, or (

e) the taking of proceedings for the recovery of a personal judgment, unless the lienholder agrees in writing that such an action is to have that effect. [ 91 ] There is no evidence that Performance agreed that taking judgment against Solomon would have any effect on it in rem claims on its builder’s lien. All of its actions to and following the taking of judgment show the opposite intent: that Performance was determined to pursue all available remedies to it against the lands and against Westpoint. [ 92 ] This argument by Westpoint fails. 2.

Has Performance shown that Westpoint was an owner for the purposes of its builder’s lien filed on October 7, 2014? [ 93 ] Priority disputes are intended to be resolved summarily, to the extent reasonably and fairly possible. Builder’s lien claims are also intended to be resolved expeditiously. Section 46(2) of the Builder’s Lien Act emphasizes this:

(2) Notwithstanding subsection (1), if no trial has been held within 2 years from the date of the registration of the certificate of lis pendens, any interested party may apply to the court to have the certificate of lis pendens vacated and the lien to which it relates discharged. [ 94 ] The parties have filed affidavits; questioning has taken place on those affidavits; undertakings have been complied with. The events involved in this dispute occurred more than two years ago.

It seems to me that if there was relevant information as to Westpoint’s role in construction activities on the lands in question, that information has been discovered and explored to the extent necessary to answer this question. [ 95 ] Remedies against a mortgagee or landlord such as declaring them to be an owner under the Builder’s Lien Act are unusual and rare. Clear circumstances must exist for this extraordinary remedy to be imposed. In my view, those circumstances are absent here. [ 96 ] There is no information that Westpoint and Mr. Virani were not arms-length to Solomon and Mr. Gunderson.

While the transactions here are somewhat complicated, there is nothing particularly sinister or suspicious about them. An entity owned or controlled by Mr. Virani ended up as owner of the lands. The lands were in the process of being developed for residential subdivision purposes. The fact that another corporation controlled by Mr. Virani, Westpoint, lent money to Mr. Solomon to help him buy the land from Mr.

Virani’s numbered company and to develop the lands is not in any way something that might raise eyebrows. [ 97 ] While it is certainly arguable that Westpoint advanced more money to Solomon than the land was worth at the time the mortgage was “advanced” on November 22, 2013, it should be noted that over $1.5 million was “advanced” to GICs in Westpoint’s name, presumably as security for Solomon’s obligations under the mortgage loan. [ 98 ] It is also somewhat significant that when Solomon defaulted and apparently walked away from the project, only several lien claims were filed; Performance’s for $243,000, a lien for One 9 Construction Ltd. for $84,966 and a lien for Burnco Rock Products Ltd. for $44,127.

There is no evidence on this appeal that Solomon left a wake of creditors behind, in the context of a property that sold for more than $5,000,000 in the foreclosure proceedings that followed its default. [ 99 ] The suggestion that Westpoint and Solomon colluded in some fashion to harm contractors and subcontractors working on the lands is simply not made out. [ 100 ] There is no evidence of any direct dealings between Westpoint and any of the contractors or subcontractors.

Most importantly, there is no evidence from Performance that it had any dealings at all with Westpoint until after it filed its lien in October, 2014. [ 101 ] Westpoint did not pay any of the contractors or subcontractors directly according to Mr. Virani’s responses to undertakings following his questioning. Westpoint had no involvement with the construction on the lands, other than to release monies from one of the GICs to Solomon after it was satisfied that certain work had been completed.

This distinguishes this case from Royal Trust v Bengert and similar cases. [ 102 ] There is no evidence that at any time before Solomon defaulted in the fall of 2014 Westpoint had any intention of having an interest in the lands other than as mortgagee. This distinguishes this case from Northern Electric v Manufacturers Life and Phoenix Assurance v Bird . [ 103 ] There is no evidence of any request by Westpoint, express or implied, that any contractor do any work on the property. Privity and consent are not made out, and “direct benefit” is at best doubtful. [ 104 ] The fact that Mr.

Gunderson may have worked for or with Westpoint after the default in the fall of 2014 is not relevant. Mr. Gunderson undoubtedly had an interest in working with a major creditor to minimize his risks from them. Westpoint as mortgagee on a failed or failing project had an interest in minimizing its losses and maximizing the value of its security. If having some interaction with its debtor assisted in that process, there is nothing inappropriate in that.

And in any event, any such cooperation appears to have been after the fact and has no bearing on the “owner” issue which must be determined from the circumstances during the work. [ 105 ] Accordingly, I conclude that there is no merit to Performance’s claim that Westpoint should be considered to be an owner and that Performance’s builder’s lien would thus take priority over Westpoint’s mortgage. [ 106 ] I recognize that Mr. Virani objected to many of the questions asked of him during questioning. The effect of Master

Breitkreuz’s decision was to add Performance and Berry as parties to the action for the purposes of allowing questioning. It does not appear that either Performance or Berry has brought an application to compel answers to the questions objected to. I do not see, however, that the answers to any of the objected to questions would assist Performance in attempting to establish that Westpoint acted as an owner within the meaning of the Builder’s Lien Act . 3.

Is Performance’s failure to lien the estate of Westpoint fatal to its lien claim? [ 107 ] Arguably, this argument is moot because of my findings on the “owner” issue above. Nevertheless, in the event I have erred in my analysis of that issue, or that is an issue that should go to trial, and not be disposed of summarily, I should analyze this defence as well. [ 108 ] It is clear that Performance’s builder’s lien named Solomon as the entity for whom work was performed on the lands.

It also named Solomon as the owner of the lands, such that the only interest expressly attached by the builder’s lien is the owner’s fee simple title. [ 109 ] There is nothing in the builder’s lien itself, or even in Performance’s statement of claim to enforce its lien rights that it was claiming that Westpoint should be treated as an owner for the purposes of its builder’s lien. Indeed, Westpoint is named in the statement of claim as a prior encumbrancer. [ 110 ] Essentially, a builder’s lien has no value until it is registered.

While registration may have some retroactive effects, as under s 11(1) referenced above, it does not attach any interest in the lands until it is registered. A builder’s lien claim against an owner who has not contracted directly with the claimant provides in rem remedies only, and does not make an owner personally liable to the claimant. It is the owner’s interest in the lands that is at stake, not the owner’s other assets. [ 111 ] Here, any builder’s lien claim against Westpoint is well past the filing deadline. Not by a few days or weeks, but rather years.

Despite not claiming a lien against Westpoint’s interest in the lands, Performance has made no attempt to amend the lien it did file to include a claim against Westpoint. [ 112 ] I find the logic and reasoning in LT Interior & Drywall Ltd. v Sota Center Inc. , 2003 ABQB 552 , and Arres Capital Inc. v Greywood Mews Development Corp. , 2011 ABQB 411 , compelling.

The failure to specifically name Westpoint in its lien and to specifically register a builder’s lien claim against Westpoint’s interest in the lands is fatal to Solomon’s claim against Westpoint or its interest in the lands. [ 113 ] I am also satisfied that the problem here is not one that can be remedied under s 37 of the Builder’s Lien Act . That

section enables some defects to be cured: 37(1) A substantial compliance with

section 34 is sufficient and a lien shall not be invalidated by failure to comply with any requirements of

section 34 unless, in the opinion of the court, the owner, contractor, subcontractor, mortgagee or some other person is prejudiced by the failure.

(2) When, in the opinion of the court, a person is prejudiced by a failure to comply with

section 34, the lien shall be invalidated only to the extent that the person is prejudiced by the default.

(3) Nothing in this

section dispenses with the requirement of registration of a lien. [ 114 ] Nita Lake Lodge Corp. v Conpact Systems

(2004) Ltd. , 2006 BCSC 885 makes the point that a builder’s lien is a creature of statute, and that the court has no discretion to depart from statutory requirements (at para 9). [ 115 ] As a result, I conclude that Performance is not able to maintain its claim against Westpoint under the Builder’s Lien Act , other than with respect to priorities to any funds that would otherwise go to Solomon. 4.

If Performance gets past these first two steps, can Berry piggy-back on Performance’s priority position and gain priority over Westpoint’s mortgage? [ 116 ] This is a curious claim, which would have a purchaser’s lien caveator improve its position because of the filing of an unrelated builder’s lien by a claimant who is able to prove that the mortgagee acted as “owner” within the meaning of the Builder’s Lien Act . [ 117 ] I find Berry’s arguments in this regard to be without merit. No authority has been cited, and it is contrary to principles of fairness.

Why would a mortgagee lose priority to bona fide advanced mortgage funds to a subsequent encumbrancer with whom it had no dealings? In my view, there is no good reason why this should occur. [ 118 ] Berry references priority arguments regarding competing claims under the Personal Property Security Act , RSA 2000 c P-7. I do not see that principle as having any connection with priorities under

section 14 of the Land Titles Act , RSA 2000 c L-4. [ 119 ] I do not see how s 14 of the Land Titles Act assists Berry, other than with respect to any advances that were either made after registration of Berry’s caveat or not made in good faith. [ 120 ] There is no legal or equitable theory that supports the notion of a subsequent encumbrancer improving its priority position against a mortgagee simply because a builder’s lien claimant is able to show that the mortgagee acted in the position of owner with respect to its builder’s lien claim. [ 121 ] Berry references section 11(4) of the Builder’s Lien Act and argues that the advances by Westpoint were either made after

registration of Berry’s purchaser’s caveat or were not made in good faith. Section 11(4) states: 11(4) A registered mortgage or a mortgage registered by way of a caveat has priority over a lien to the extent of the mortgage money in good faith secured or advanced in money prior to the registration of the statement of lien. [ 122 ] I see no merit to Berry’s submissions that it can piggy-back on Performance’s position to preserve its priority position over Westpoint. [ 123 ] I will deal with arguments concerning the advances made by Westpoint later in this decision. 5.

Was Westpoint a beneficial owner of the lands such that its mortgage merged into its beneficial ownership? [ 124 ] Berry states that there is evidence that Westpoint was a beneficial owner of the lands. There was insufficient evidence to establish that Westpoint was an owner for the purposes of the Builder’s Lien Act . [ 125 ] Even if I had accepted that argument, that would not have helped Berry. If Westpoint had acted as owner, that might assist builder’s lien claimants who could point to some direct dealings between the lien claimant and Westpoint.

It would not benefit claimants who could not bring Westpoint within the meaning of owner under the Builder’s Lien Act . The Builder’s Lien Act and the cases in this area do not support an argument that if a mortgagee or landlord has become an “owner” for the purposes of a specific claimant’s builder’s lien, that mortgagee or landlord becomes and owner for the purposes of every other claimant’s lien claim. [ 126 ] There is no authority to the effect that a lien claimant can piggy-back on another claimant’s lien in this regard.

In my view, the absence of authority illustrates the point that lien claims are individual claims. Each must be perfected by proper registration and the filing of a certificate of lis pendens .

Lien claimants may shelter in another claimant’s lawsuit, but that is only to avoid a multiplicity of actions and reduce cost and complexity in managing builder’s lien actions, especially when a project fails and there are multiple lien claims at various levels. [ 127 ] Were I to have found that Westpoint had become an owner by virtue of the payments that found their way into the hands of several subcontractors working on the site for Solomon, that would have been because of direct dealings between Westpoint and those subcontractors.

That would not have made Westpoint an owner for the purposes of all other builder’s liens on the site. [ 128 ] There is no evidence that Westpoint ever had any beneficial ownership in the lands. They were always a mortgagee. The fact that the principal of Westpoint was also principal in the former owner of the lands does not make Westpoint a beneficial owner, any more than Mr. Virani personally would be treated as a beneficial owner because of his control over the corporation that legally owned the lands. [ 129 ] There is no evidence before me that Westpoint had any interest beyond that of mortgagee.

While it attempted to acquire the lands through foreclosure, it was unsuccessful in doing so. [ 130 ] As a result, on the evidence before me I conclude that Westpoint was never an equitable or beneficial owner of the lands, such that the doctrine of merger has no application. [ 131 ] However, some of the questions objected to by Mr. Virani on questioning do go to this issue.

Since Master Breitkreuz granted the adjournment and allowed Performance and Berry to be added as parties, Berry should be allowed to pursue this argument further through questioning in the action and having this ownership issue determined by a trial process. [ 132 ] This is not an issue that assists Performance, as Performance made no builder’s lien claim against Westpoint’s interest in the lands, and it is long past time for them to file a lien claiming against that interest. 6.

What is the extent to which payments made by Berry to Solomon are protected by its purchaser’s caveat? [ 133 ] Berry submitted a number of authorities to the effect that payments towards the purchase price of lands creates a lien on the lands, including Victor Di Castri, The Law of Vendor and Purchaser , loose-leaf, (Toronto: Thomson Reuters Canada Limited, 2014) at para 915, and Amnor Ltd. v 923862 Alberta Ltd , 2010 ABQB 236 at para 63 . [ 134 ] Berry notes that a caveated purchaser’s lien takes precedence over builder’s liens filed following the filing of the purchaser’s caveat, following Coyes v Gypsum Drywall (Northern) Ltd. , [1988] AJ No 277 (ABCA) . [ 135 ] Royal Trust Corporation of Canada v Bengert Construction Ltd , 1988 ABCA 58 , and Royal Bank v Donsdale Developments Ltd , [1988] AJ No 1027 (ABQB) , are to the same effect as the Coyes decision referenced above. [ 136 ] The cases submitted relate to deposits paid by purchasers and their right to file a caveat to protect their deposits as an interest in land.

Di Castri goes further and references “payments towards the purchase price of the lands”.

It would make little sense if a $100,000 deposit on a $1,000,000 purchase was protected and a $100,000 payment on a $100,000 purchase price was not. [ 137 ] Here, without deciding the point, it is logical and not contrary to any authorities for a purchaser who fully pays for the lands, or nearly fully pays for the lands, should not be protected for the full amount of payments actually made. [ 138 ] Why a purchaser such as Berry would make such substantial payments in the face of a mortgage in a large amount is not the subject of these proceedings.

No priority is provided over the interest of a mortgagee to the extent of monies advanced in good faith on

the mortgage prior to the registration of the purchaser’s caveat. [139] My conclusion is that Berry is likely protected against subsequent encumbrancers to the full extent of monies paid to Solomonbefore other registrations against title. Whether this does Berry any good will be dealt with below when I discuss mortgage advances. [140] I also agree with Berry that for the purpose of determining Land Titles Act priorities, its purchaser’s caveat ranks ahead ofbuilder’s lien claims filed after Berry’s caveat was filed. 7.

What is the priority position between Performance and Berry? [141] As discussed above, Berry’s position is ahead of any of the builder’s liens when looking at Land Titles Act priorities under s 14of that Act. Berry seeks a determination that it would still rank ahead of Performance if Performance succeeded in its claim thatWestpoint acted as owner under the Builder’s Lien Act. [142] No case authority is cited for this, but Berry suggests that the answer is found in equity as it would be unfair for Berry to everrank behind Performance because of its registration position.

Berry references Dunlop, Debt Recovery in Alberta, Toronto: Carswell,2012 at

section 42. I see no assistance for Berry in this area. Dunlop is dealing with priorities under the Civil Enforcement Act, SA 2000 cC-15, between security interests and writs.

Section 96 of that Act is clear that the CEA applies only to proceeds arising from a sale undera writ, or where proceeds of sale are paid to an agency. [143] The argument raised is a clever one but, in my view, has no application here. Berry cannot enhance its security position bypiggy-backing on a builder’s lien claimant who is able to prove that the mortgagee or landlord has acted as an owner for the purposes ofthe Builder’s Lien Act. 8.

Are advances under a mortgage that exceed the value of the lands and buildings onit nonetheless given the same priority as advances up to the value of the lands andbuildings? [144] No authority is cited for the proposition that advances beyond the value of the mortgaged lands are not entitled to the samepriority as advances up to the value of the lands and buildings. That may be the case in jurisdictions where lien claimants have priorityover mortgagees to the extent that the lien claimants have increased the value of the property since the last mortgage advance.

That is notthe law in Alberta. [145] Mortgage advances are not always tied to the value of the property secured by the mortgage. There may be other transactionsinvolved in the relationship between the borrower and the lender. A borrower may place some store on the covenant in a mortgage oncommercial lands and in the ability of the borrower to repay the loan out of other assets. [146] Mortgagees may make mistakes as to the value of the lands.

Subject to what I say later about priorities, I see nothing untowardin Westpoint releasing the $1,000,000 GIC to Solomon when Westpoint was satisfied that the deep services had been complete.Westpoint was entitled to rely on its own judgment and did not have to wait until a certificate of completion was issued by the consultant. [147] Performance and Berry suggest that the relationship Solomon and its principal Mr. Gunderson had with Westpoint wassuspicious and suggests that payments made to Solomon were not done in good faith.

They suggest that there was some sort ofconspiracy between Solomon and Westpoint to avoid paying for some of the improvements by “stiffing” creditors like Performance. [148] I see no evidence whatsoever of any bad faith on the part of Westpoint, or any suspicious relationship that would taint the goodfaith nature of payments made. Here, there is no smoke, let alone any fire. [149] There is no merit to this argument concerning the mortgage advances. 9.

Are the purchases of Guaranteed Investment Certificates in Westpoint’s name byWestpoint at the time the mortgage to Solomon was “advanced” advances for thepurposes of s 11.4 of the Builder’s Lien Act such that they take priority over Berry’spurchaser’s caveat and Performance’s builder’s lien to the extent of monies releasedfrom the GICs after registration of Berry’s caveat or Performance’s lien? [150] This is an issue raised in argument by me.

I am doubtful that the $1,000,000.00 “advanced” to Solomon on November 22, 2013by way of purchasing a Royal Bank of Canada GIC solely in Westpoint’s name was an “advance” so as to gain priority over subsequentencumbrancers. I do not question the good faith of Westpoint in making these arrangements.

The documentation between Westpoint andSolomon clearly contemplates this transaction. [151] However, from the documentation in evidence, it the $1,000,000 Royal Bank GIC was never out of Westpoint’s sole control.Release of the funds to Solomon appears to have always been in the sole discretion of Westpoint. [152] Westpoint cited two British Columbia Supreme Court Masters decisions in support of their argument that the purchase of a GICin its name was an advance for the purposes of priority claims.

Berkeley Securities Ltd. v Grouse Nest Resorts Ltd. et al, (BC SC), [1978] 3 WWR 9, is a case where a portion of the mortgage proceeds was retained by the lender as prepaid interest.

[153] In this case, while the GIC may have been drawn by Westpoint in the event of default by Solomon, the objective was for thefunds to be released to Solomon and not retained by Westpoint to cover Solomon’s obligations. The case is readily distinguishable. [154] In CIBC Mortgage Corp v Duguay, [1991] BCWLD 855 (BCSC), subsequent encumbrancers challenged payment of appraisalfees, property inspection fees, discharge fees, property taxes and penalties by the mortgagee should not be given priority to thesubsequent encumbrancer’s claim. [155] Master Kirkpatrick referred to Aldom Drain & Concrete Limited v. G.L.

Hill Construction Co. Ltd., 247377 DevelopmentLimited and Metropolitan Trust Company, (1979) 31 C.B.R. 257, where Griffiths J concluded at p 260: To ascertain whether the moneys constituted an advance to the owner under the mortgage, it is necessary to determine the extent towhich the owner acquired control over the moneys held in trust.

If the owner had complete control in the sense that it could direct thetrustee as to the manner in which the trust funds were to be disbursed, then, in my opinion, the payment of these moneys into trustconstitutes an “advance" on the mortgage within the meaning of 5.14(1) (of the Mechanics’ Lien Act].”, at p. 260. [156] Master Kirkpatrick stated: The test would appear to be one of control.

If the mortgagor never required any control over the moneys in question then an “advance”was never made in respect of those moneys. [157] In this case, the mortgagor, Solomon, obtained no control over the $1,000,000 GIC but required the exercise of the mortgagee,Westpoint’s, discretion to release the funds to it. [158] Westpoint argues that Solomon acquired control over the GIC in that “it contractually directed under the loan Agreement andGIC Pledge and Security Agreement that the GICs be advanced to it by way of WCC obtaining GICs in its own name as security for theloan”. [159] That argument begs the question as to who had control over the GIC when it was actually advanced to Solomon.

The answerfrom the evidence before me is that Westpoint retained full control. [160] The $1,000,000 GIC, or $1,000,000 resulting from it being cashed in, was advanced to Solomon in August, 2014.

That was wellafter Berry had filed its purchaser’s caveat. [161] There is a very compelling argument that Westpoint has no priority to that $1,000,000 of the mortgage debt owed by Solomonover Berry’s interest in the lands, because Berry’s purchaser’s caveat was filed long before Westpoint authorized release of the GICfunds to Solomon. [162] That does not assist Performance, as its builder’s lien was not registered until October, 2014.

The $1,000,000 GIC was inSolomon’s control some two months before Performance filed its builder’s lien. [163] I have limited information about the GIC with the Alberta Treasury Branches. Over $600,000 remained in the Treasury BranchGIC standing in Westpoint’s name in 2015, long after Performance’s builder’s lien was filed. It is not clear if that GIC was ever cashedin, and if so, where the funds went. [164] That GIC appears to be similar to the Royal Bank GIC, in that it was purchased in Westpoint’s name and appears to have beenunder Westpoint’s control.

For there to be any determination as to entitlement to those funds, there must be further evidence. Both Berryand Performance have an interest in pursuing this GIC, as Westpoint may have no priority to these funds.

If any portion of that GIC waspaid out after Performance’s lien was filed, Performance may have priority over it ahead of Westpoint but behind Berry. [165] Performance cited Royal Bank v Donsdale Development Ltd, [1988] AJ No 1027 (ABQB), with respect to “bona fides”mortgage advances: [64] It follows then that R.B.C.’s Agreement re Lodgement of Title to Real Estate registered by way of caveat would, by virtue of s.9(2), have priority over a lien to the extent of the mortgage money in good faith secured or advanced in money prior to the registration ofthe lien.

The British Columbia Court of Appeal in the case of Casson v. Dunsmuir Const. Ltd. [(1961), (BC CA), 35W.W.R. 521] defined “mortgage moneys” in the Mechanics’ Lien Act (British Columbia) as meaning moneys owing under themortgage; however those moneys may have been owing originally, once they became secured by a mortgage, they assumed the characterof and became “mortgage moneys”.

The British Columbia Act used the words “bona fide secured” and the court held that that meant “ingood faith, not as a sham or a mere paper transaction, not collusively or as a part of a scheme to defraud anybody, but being in fact whatis in form, a genuine transaction.” I believe that “bona fide secured” and “good faith secured” have the same meaning. [166] That case answers only one of the issues concerning advances.

The other issue is whether the funds were put in the control ofthe borrower, and on that issue, Performance and Berry appear to have strong arguments on the evidence put forward so far. [167] With both of the GICs, Berry and Performance may wish to question Mr. Virani further and obtain production of anydocumentation relevant to the purchase of the GICs and more importantly what happened to the GICs and when. [168] These are issues that need to be resolved either by way of a special chambers application,

summary trial or trial itself if there isany need for viva voce evidence.

Summary [169] Performance has failed to establish that Westpoint acted as owner pursuant to the provisions of the Builder’s Lien Act.

Westpoint acted as mortgagee throughout and did not cross over the line to “owner” status.

And in any event, even if Westpoint could be treated as an owner, Performance did not file a builder’s lien against Westpoint’s interest in the land such that its lien rights have lapsed or expired. [ 170 ] Berry’s claim as purchaser has priority to Performance’s builder’s lien claim as it was the first in time registration, and filing a builder’s lien does not give retroactive effect to the builder’s lien claim over the interest of a purchaser who has protected its interests by way of filing a caveat. [ 171 ] Even if Performance had been successful in proving that Westpoint had acted as owner for the purposes of the Builder’s Lien Act that would not have assisted Berry.

While such a finding would have put Performance’s builder’s lien ahead of Westpoint’s mortgage, Berry could not piggy-back on that. [ 172 ] It is doubtful that the purchase by Westpoint of the GICs with the Royal Bank in the amount of $1,000,000 and the Alberta Treasury Branches in the amount of approximately $600,000 were mortgage advances at the time the GICs were purchased.

It is more likely that those monies, at least for determining priorities under the Land Titles Act and the Builder’s Lien Act , were advanced when they were released to or for Solomon. [ 173 ] That determination makes those amounts vulnerable to claims by both Berry and Performance. In Performance’s case, that would be limited to any amounts released out of the ATB GIC, and then only after Berry’s valid claims have been satisfied. [ 174 ] The latter issues require further evidence as there is not enough information on the ATB GIC to make any valid determination.

As well, since this was an issue raised by the Court, it is only fair to let all parties address the best way of resolving the potential claims to these GIC funds. [ 175 ] I do not seize myself with resolution of the “advance” issue but am prepared to assist the parties through resolution should they choose to do so. Comments [ 176 ] Hindsight is always the most effective way of analyzing a problem. It appears that both Berry and Performance have suffered significant losses.

They seek to demonize Westpoint and Solomon, yet they have put forward no evidence that supports these claims. [ 177 ] There are undoubtedly a lot of facts missing from this application. It seems somewhat incomprehensible that Berry would pay Solomon over a million dollars to purchase property that was encumbered by a mortgage it now says greatly exceeded the value of the property.

How did Berry think that Solomon would pay off the mortgage to be able to complete a transaction with Berry at less than the amount of the mortgage? [ 178 ] Berry’s failure to perform timely land titles searches may nonetheless be rewarded fortuitously to the extent that monies advanced by Westpoint under the mortgage after Berry’s caveat may not be protected for Westpoint. [ 179 ] To a large extent, Performance may be a victim of its own failure to ascertain before it began work how much was owed by Solomon to Westpoint.

Alberta’s Builder’s Lien Act is far less effective at protecting subcontractors and suppliers than in some other provinces that have more protective builder’s lien legislation, such as comprehensive trust provisions. Subcontractors hoping to rely on their remedies under the Builder’s Lien Act should be careful to learn where their lien might fit in the priority scheme before they begin work, rather than wait until after they have not been paid. [ 180 ] Justice Dixon expressed concern for contractors at paragraph 8 in George N.

Jackson Ltd. v Batoni-Bowlen Enterprises Ltd : [8] ...I must, nevertheless, state that I have concerns about the application of the principle of priority in every situation and particularly in one such as in this case where contractors were invited to expend their time and materials on a building known by the owner, and by the mortgagee, to be worth far less than the mortgage debt.

The effect of this would be to require contractors and suppliers to not only search the titles of the lands where their improvements are to be effected but also to seek out information as regards mortgage balances and engage an appraiser so that the equity in the property can be established prior to the doing of any work or the furnishing of any materials... [ 181 ] However, that is exactly what prudent subcontractors should be doing: taking steps to ensure payment from the party hiring them, rather

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