Encore Electric Inc. v Haves Holdings, 2017 ABQB 803

Court of Queen’s Bench of Alberta Citation: Encore Electric Inc. v Haves Holdings, 2017 ABQB 803 Date: 20171222 Docket: 1701 01620 Registry: Calgary Between: Encore Electric Inc. Plaintiff - and - Haves Holdings Country Hills Gym Ltd. and Albari Holdings Ltd. Defendant _______________________________________________________ Reasons for Decision of J.T.

Prowse , Q.C., Master in Chambers _______________________________________________________ [ 1 ] On September 1, 2017, I heard an application by the defendant Haves Holdings Country Hills Gym Ltd. (referred to as “Gold’s Gym”) to strike out two liens filed by the plaintiff Encore Electric Inc. (“Encore”). Former counsel for Encore failed to attend and the liens were struck. [ 2 ] Encore retained new counsel and obtained an order, consented to by Gold’s Gym, allowing the application to be re-heard.

These are my reasons on the re-hearing. [ 3 ] The ground for striking the liens is that they were incorrectly filed against the fee simple title of the building owner instead

of being filed against the leasehold interest of Gold’s Gym. [4] For the reasons given below I confirm my earlier decision to strike out the liens. The facts [5] Encore contracted with Gold’s Gym to provide electrical work for a new gym in northeast Calgary. Albari Holdings Ltd.(“Albari”) is the landlord and owner of the site. [6] Gold’s Gym paid Encore for work done, but ultimately payments to Encore ceased due to alleged deficiencies with Encore’swork. The unpaid amount is approximately $686,000.00. [7] Encore responded by registering two builders’ liens.

Both forms of lien left blank the portion where an interest other than afee simple is specified, and accordingly the liens were registered against the fee simple. [8] Albari and Gold’s Gym say that Encore registered the builders’ liens erroneously against the fee simple, rather than theleasehold interest of Gold’s Gym. [9] Encore attempts to uphold its liens in two ways: • By arguing that the fee simple owner, Albari, is an ‘owner’ within the meaning of

section 1(

j) of the Builders’ Lien Act (the“BLA”) and accordingly Albari’s interest is lienable • By arguing, in the alternative, that even if only the leasehold interest of Gold’s Gym is lienable, the liens filed by Encore, thoughflawed, are still sufficient to attach that leasehold interest. Is Albari an ‘owner’ within the meaning of the BLA, so thatAlbari’s interest is lienable? [10] Encore says that Albari is an ‘owner’ as defined in

section 1(

j) of the Builders’ Lien Act (the “BLA”), so that Albari’s interestwas lienable. [11]

Section 1(

j) of the BLA defines ‘owner’ as follows: “owner” means a person having an estate or interest in land at whose request, express or implied, and (

i) on whose credit, (ii) on whose behalf, (iii) with whose privity and consent, or (iv) for whose direct benefit, work is done on or material is furnished for an improvement to the land and includes all persons claiming under the owner whose rightsare acquired after the commencement of the work or the furnishing of the material; [12] A number of previous decisions in Alberta have considered whether, using this definition, a commercial landlord has becomean ‘owner’ so as to make the fee simple lienable by a contractor hired by a tenant to construct leasehold improvements. [13] In my decision in Labbe-Leech Interiors Ltd. v TRL Real Estate Syndicate

(07) Ltd., 2009 ABQB 653, 2009 CarswellAlta1898, I listed chronologically and summarized eight of those earlier decisions issued between 1977 and 2001. [14] These cases all deal with the situation where, as here, the contractor has not given the owner, a notice pursuant to section15(1) of the BLA, which provides: When the estate on which a lien attaches is a freehold estate for a life or lives or a leasehold estate then, if the person doing the work orfurnishing the material gives to the person holding the fee simple, or that person’s agent, notice in writing of the work to be done ormaterials to be furnished, the lien also attaches to the estate in fee simple unless the person holding that estate, or that person’s agent,within 5 days after the receipt of the notice, gives notice that the person holding that estate will not be responsible for the doing of thework or the furnishing of the materials. [15] A review of those cases indicates that, absent a section 15(1) notice, a commercial landlord typically is only held to havemade an implied request for work done for a tenant where the landlord has become significantly involved in the design and/orconstruction of the leasehold improvements. [16] In preparing these reasons, a further case dealing with a commercial landlord came to my attention, which is the 1975 decisionof Suss Woodcraft Ltd. v Abbey Glen Property Corp., (AB KB), 1975 CarswellAlta 48, [1975] 5 W.W.R. 57. [17] That case focussed on whether the commercial landlord had received a ‘direct benefit’ within the meaning of

section 1(

j) ofthe BLA. D. C. McDonald J. noted that the lease provided for participation rent, whereby the rent increased as the tenant’s receipts fromits business on the premises increased. Accordingly he found that the work done on leasehold improvements was for the direct benefit of

the landlord as, without leasehold improvements “the store will not attract customers and there will be lower or no sales” [18] There was no participation rent in the lease between Albari and Gold’s Gym, and the involvement of Albari with Encoreduring construction was relatively minor. The payment of a leasehold improvement allowance by Albari is not sufficient to put it over theline into the category of ‘owner’ under the BLA. [19] Accordingly, Encore does not have a lien against the fee simple interest of Albari. If Encore has any builder’s lien, it is only alien against the leasehold interest of Gold’s Gym.

The question is whether the form of lien filed by Encore is sufficient in that regard. Is the form of lien filed by Encore sufficient to lien the leaseholdinterest of Gold’s Gym? [20] For the reasons described below I sympathize with the argument of Encore that the form of lien it filed should be sufficient toattach the leasehold interest of Gold’s Gym.

However, there are previously decided cases, binding on me, which indicate to the contrary.If Encore wishes to pursue this argument it will need to do so before a Queen’s Bench judge. [21] Encore’s argument is based upon the premise that, while the creation of a lien under the BLA should be strictly construed, anerroneous form of registration can be cured, provided that no prejudice has accrued from the erroneous form of registration to the partyagainst whom the lien is sought. [22] In this case, when the non-lawyer representative of Encore attended at the land titles office to register Encore’s liens, he wasfaced with the second box of the lien form as follows: ... claims a lien under the Builders’ Lien Act in the fee simple estate OR (specify if some other type of estate or interest applies)____________ [23] Encore’s representative should have written in the space provided “the leasehold interest of Gold’s Gym” but he did not. [24] I am unaware of any prejudice which flowed to Gold’s Gym from this error.

The lien came to its attention. It was in a directcontractual relationship with Encore.

It did not do anything different than it would have done if its leasehold interest had been inserted inbox 2 of the form. [25] I previously ruled in favour of a lienholder who registered an erroneous form of lien in Norson Construction Ltd. v ClearSkies Heating & Air Conditioning Ltd., 2017 ABQB 188, 2017 CarswellAlta 504, upheld at 2017 ABQB 544, 2017 CarswellAlta 1607. [26] However, the Norson case was one where the lienholder inserted the name of the general contractor instead of the name ofthe owner of the land. [27] In this case, the error was as to the interest being liened, as opposed to the identity of the owner of the land.

A number ofprevious decisions have indicated that

section 37 of the BLA, which allows a lien to be upheld where there is substantial compliancewith the form of lien filed, does not allow a lien to be validated where the interest being liened was not filled in correctly.

Among thoseauthorities (in chronological order) are: LT Interior & Drywall Ltd. v Sota Centre Inc.,2003 ABQB 552, 2003 CarswellAlta 918;Canadian Helicopters Ltd. v Udo Stephen Building Materials Ltd., 2003 ABQB 322 , 2003 CarswellAlta 500; and WestpointCapital Corp. v Solomon Spruce Ridge Inc., 2017 ABQB 254, 2017 CarswellAlta 580 at para. 95. [28] Accordingly, pursuant to these decisions, I decline to uphold Encore’s liens against the leasehold interest of Gold’s Gym. Costs [29] If the parties cannot agree on costs, they may seek a ruling from me in that regard. Heard on the 06th day of December, 2017.

Dated at the City of Calgary, Alberta this 21st day of December, 2017. J.T. Prowse, Q.C. M.C.C.Q.B.A. Appearances:

Michael C. Kwiatkowski McLeod Law LLP for the Plaintiff Shaun B. Cody New Horizon Law for the Defendant