Golfside Ventures Ltd (Re), 2021 ABQB 427

Court of Queen’s Bench of Alberta Citation: Golfside Ventures Ltd (Re), 2021 ABQB 427 Date: 20210601 Docket: B203 473663 Registry: Edmonton IN THE MATTER OF THE BANKRUPTCY OF GOLFSIDE VENTURES LTD. Between: BDO Canada Limited in its Capacity as Licensed Insolvency Trustee Applicant - and - Obcorp Holdings Inc. Respondent _______________________________________________________ Reasons for Decision of the Honourable Mr. Justice Robert A. Graesser _______________________________________________________ Introduction

[ 1 ] There are two parts to this application. The first is an application by the Bankruptcy Trustee for Golfside Ventures Ltd. for advice and directions in the bankruptcy on two issues: 1. Whether Obcorp Holdings Inc. has a provable secured claim in the bankruptcy; and 2. Advice and directions on the sale of the Lands owned by Golfside Ventures Ltd. [ 2 ] The second is an appeal by Obcorp Holdings Inc. from the Trustee’s disallowance of its builders’ lien filed against the Lands. [ 3 ] I heard this application on April 8, 2021.

I invited the parties to make written submissions on whether a lien was valid only if there was an amount presently payable to the claimant. They did so over the month of April. I am now in a position to give my decision. Background [ 4 ] The facts are not complicated. Golfside Ventures Ltd. (“Golfside”) is a corporation controlled by Robert Shalhoub. Obcorp Holdings Inc. (“Obcorp”) is a corporation controlled by Donald Oberowsky. [ 5 ] In 2007, Golfside agreed to purchase a 15.8-acre parcel of land (the “Lands”) from the Town of Redwater (the “Town”), for an intended property development.

As part of that purchase Golfside was required to complete various agreements with the Town, including a services agreement and a development agreement. The Lands were to be ultimately subdivided in accordance with these agreements. [ 6 ] On July 7, 2007, Golfside entered into a Joint Venture Agreement (the “Agreement”) with Hustle Holdings Ltd. (“Hustle”), another corporation controlled by Donald Oberowsky. The Agreement provided that Hustle would provide assistance to Golfside in connection with its negotiations with the Town.

It also obliged Hustle to obtain and pay for all engineering and planning consultants. [ 7 ] At the stage the project was at, the stage the subdivision plan could be registered, Hustle had the option of continuing its participation in the development.

Hustle did so. [ 8 ] On the go-forward basis, Golfside’s costs incurred to that time (as defined in the Agreement) were set as its contribution to the Joint Venture, including its interest and carrying costs on funds borrowed to meet its obligation under the Agreement. [ 9 ] Hustle was credited with its out-of-pocket costs to date, and it was obliged on an ongoing basis to: a. Pay all offsite levies to the Town; b. Construct and install all services required by the Services Agreement with the Town, using an affiliate of Hustle (Waiward Construction Management Inc.) to do that work; c.

Pay for the costs of a jointly-retained independent engineer to supervise the work by Waiward; and d. Pay all other costs to render the Lands ready and available for sale. [ 10 ] These additional costs were to be credited to Hustle’s contribution to the Joint Venture, as well as all “reasonable interest and carrying costs in respect of funds borrowed to meet its obligations under the Agreement. [ 11 ] Revenues to the Joint Venture were to be paid to satisfy various obligations, including repayment of the contributions by Golfside and Hustle.

Paragraph 31 provides: After the repayment of all contributions revenues of the Parcel A JV will be distributed 50% to Golfside and 50% to Hustle. [ 12 ] Paragraph 32 says: The Parcel A JV will terminate when all developed lands in Parcel A have been sold and all revenues of the JV have been distributed. [ 13 ] The affidavits and materials filed on behalf of the parties trace the history of the project to the present time. The property was subdivided. There were some sales. The sales were not sufficient to pay for the ongoing obligations, let alone provide any return to the Joint Venturers of their contributions.

There has never been, and never will be, any profit to distribute. [ 14 ] In 2011, Donald Oberowsky purchased the security Golfside had given in favour of the Town to secure Golfside’s obligations under the Development Agreement. Mr. Oberowsky also acquired the mortgagee’s interest in a mortgage against the Lands previously granted by Golfside. The validity and priority of that mortgage in the bankruptcy are not in dispute. [ 15 ] In 2015, Hustle’s interests in the project, including an assignment of its interest in the Agreement, were assigned to Obcorp.

The validity of that assignment is not in dispute. [ 16 ] Ultimately, Golfside assigned itself into bankruptcy. The Trustee was appointed on February 11, 2019. Obcorp filed a builders’ lien on March 1, 2019 (the “Builders’ Lien”). In the bankruptcy proceedings, Obcorp filed proofs of claim advancing a secured claim for $2,650,000 in relation to its Builders’ Lien and an unsecured claim for $3,516,468.74.

Those amounts represent some or all of Hustle’s and Obcorp’s contributions to the Joint Venture under the Agreement. [ 17 ] Donald Oberowsky filed a proof of claim in the amount of $430,447.90 in relation to the Town security he purchased in 2011. [ 18 ] Metrocan Ventures Inc. (“Metrocan”) filed a proof of claim in the amount of $1,079,434.88. Metrocan is a corporation

controlled by Robert Shalhoub. Metrocan’s claim arises from a debt or debts Golfside incurred in favour of Metrocan in connection with the development. That amount represents some or all of Golfside’s contributions to the Joint Venture under the Agreement. Golfside had no other business endeavours other than the development of the Lands. [ 19 ] The only other secured creditor is the Town for unpaid taxes in the amount of $121,423. [ 20 ] The Obcorp Builders’ Lien was filed on March 1, 2019. Mr.

Oberowsky swears in his affidavit of March 4, 2019 that Hustle and Obcorp spent approximately $5,532,468.74 developing the lands between June 2007 and February 2019. He swears that “Obcorp continues to carry on work developing the Lands.” [ 21 ] He notes in addition that Obcorp granted the Town an irrevocable letter of credit in the amount of $634,000 under the terms of the Servicing Agreement. Mr.

Oberowsky says that letter is still outstanding. [ 22 ] The Trustee rejected the validity of Obcorp’s Builders’ Lien and treats all of Obcorp’s claims against Golfside as unsecured. [ 23 ] The bankruptcy has proceeded somewhat slowly. The Lands have been appraised. Valuation information is sealed in a confidential supplement to the Trustee’s report.

Suffice it to say that the value of the lands would appear insufficient to pay all of Metrocan’s accepted claim under its security agreement with Golfside, after paying off the higher-ranking secured creditors: the Town and Donald Oberowsky. [ 24 ] There will be nothing left over for unsecured creditors, including Obcorp, if the Trustee’s application is successful and Obcorp’s appeal from the disallowance of its Builders’ Lien fails. [ 25 ] There appears to be no “mid-ground”. If Obcorp’s Builders’ Lien is invalid, it will get nothing.

If Obcorp’s Builders’ Lien is valid, then Metrocan will get nothing as the Builders’ Lien will take priority over Metrocan’s security interest. [ 26 ] Under the Agreement, absent bankruptcy or some other crystallizing event, Obcorp and Metrocan would share proportionately to their respective contributions to the Joint Venture and surplus after paying the tax arrears. [ 27 ] I do not think there are any material facts in dispute on this application. Issues [ 28 ] This application turns on the appeal by Obcorp from the Trustee’s disallowance of its Builders’ Lien.

That requires a determination firstly of the standard of review from the Trustee’s disallowance, and then application of that standard to the Trustee’s decision.

Standard of Review [ 29 ] Obcorp submits that the standard of review when reviewing a Trustee’s decision to disallow a claim is correctness, for legal issues including extricable legal issues arising in the context of mixed fact and law, and reasonableness for questions of fact, citing Aronson v Whozagood Inc. , 2019 ABQB 656 at para 35 . [ 30 ] The Trustee refers to Aronson as well. [ 31 ] In that case, Justice Eamon noted that this Court is divided on the appropriate standard of review.

Of the three possibilities: a hearing de novo , an appeal on the record, or an appeal on the record, or “hybrid” approach where fresh evidence might be permitted to be introduced in appropriate circumstances.

He observed that the Court of Appeal has not yet decided the issue. [ 32 ] Eamon J supported the hybrid approach described in Re San Juan Resources , 2009 ABQB 55 He cites Pacer Construction Holdings Corporation v Pacer Promec Energy , 2016 ABQB 697, 2018 ABCA 113 as support for an approach that gives appropriate deference to the role assigned to Trustees and the role assigned to them in the bankruptcy process. [ 33 ] I do not see that it is necessary or appropriate for me to weigh in on the issue here, as neither party was arguing for a hearing de novo .

I mention it only to highlight the presence of an unresolved issue that may be relevant in another case. [ 34 ] I am satisfied that for the purposes of this case, the appropriate standard of review is as described by Obcorp: correctness for questions of law, and reasonableness for questions of mixed fact and law. Validity of Builders’ Lien [ 35 ] The Trustee disallowed the Builders’ Lien and sent a Notice of Disallowance of Claim to Obcorp’s solicitors dated April 21, 2020. Obcorp immediately appealed the disallowance.

No issue is taken with the timeliness of this appeal. [ 36 ] The reasons given by the Trustee are as follows: The Creditor, Obcorp Holdings Inc. entered into a joint venture agreement with the Bankrupt (the “JVA”) in relation to the development of lands registered to the Bankrupt located in Redwater, Alberta (the “Parcel A Lands”). The basis for the secured claim of the Creditor relates to work completed upon the Parcel A Lands pursuant to the JVA, for which the Creditor has registered a lien (the “Lien”) pursuant to the Builders’ Lien Act (Alberta) (the “ BLA ”).

The JVA PROVIDES THAT THE Creditor is entitled to payment for work completed in relation to the Parcel A Lands less costs of sale and direct operating costs under the JVA. The Parcel A Lands have not sold. The Lien is not valid as no amounts are currently due and payable to the Creditor under the JVA. The work completed by the Creditor in relation to the parcel A Lands was not for an owner, contractor or subcontractor within

section 6 of the BLA , rather it was the contribution of the Creditor to an investment under the terms of the JVA. On this basis the Lien is not valid.

Work claimed under the Lien relates to preliminary work not sufficiently connected to construction of an improvement upon the Parcel A Lands, and therefore does not support the validity of the Lien to the extent of that preliminary work completed. [ 37 ] There are three bases for the Trustee’s decision: 1. A builders’ lien cannot be valid if there is no amount “currently due and payable” to the builders’ lien claimant ; 2.

Work performed by a joint venturer does not entitle the worker/contractor to claim a builders’ lien for that work if the work is the worker’s or contractor’s contribution to the joint venture; and 3. The work done by Hustle/Obcorp was not sufficiently connected to an improvement to land so as to support a valid builders’ lien. [ 38 ] The first two bases are matters of law, and should therefore be reviewed on the basis of correctness. The third basis is a question of mixed fact and law as it involves the application of a legal standard or test to the facts, and thus attracts a standard of reasonableness. 1.

Can a builders’ lien be valid if there is no amount currently due and payable to the builders’ lien claimant? and 2. Can work performed by a joint venturer for the joint venture entitle the contractor/subcontractor/materialman/worker to claim a builders’ lien for that work if the work is the worker’s or contractor’s contribution to the joint venture? [ 39 ] I will deal with the Trustee’s first two arguments together, as they are interrelated. [ 40 ] Section 6(1) of the Builders’ Lien Act , RSA 2000, c B-7 (the “ BLA ”) provides: 6

(1) Subject to subsection (2), a person who (

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

b) furnishes any material to be used in or in respect of an improvement, for an owner, contractor or subcontractor has, for so much of the price of the work or material as remains due to the person, a lien on the estate or interest of the owner in the land in respect of which the improvement is being made. [ 41 ] The Trustee argues that a lien claim cannot exist independently of an enforceable obligation to pay for work performed or materials furnished.

Further, the Trustee argues that a lien is not valid if no amounts are due to the lien claimant. [ 42 ] For the first proposition, the Trustee cites Caburn Contracting Ltd. v Creekside Estates (Camrose) Inc , 2016 ABQB 29 . For the second proposition, the Trustee relies on Acera Developments Inc v Sterling Homes Ltd , 2010 ABCA 198 . [ 43 ] At the outset of oral argument, the Trustee argued that because of the Agreement and the joint venture arrangement between Golfside and Hustle/Obcorp, any work done by Hustle/Obcorp was done for itself. No authority was cited for that argument.

I certainly accept that the registered owner of land cannot file a builders’ lien against their interest as registered owner of the land, in the same vein that an owner of land cannot mortgage the land in their favour. But there is no authority suggesting that one owner cannot file a builders’ lien against the interests of another owner, as Hustle had no legal interest in the Lands, which were at all times registered in the name of Golfside, and the Agreement does not purport to give Hustle/Obcorp any interest in the Lands. In those circumstances, Hustle could not be an owner within the meaning of the BLA .

This argument has no merit. [ 44 ] The thrust of the Trustee’s argument is that Hustle/Obcorp has never become a creditor of Golfside with respect to the work done, because nothing has ever been owed to Hustle/Obcorp since there has been no revenue generated from the sale of any of the Lands. [ 45 ] The Trustee submits that while Hustle/Obcorp were obliged under the JVA to do certain things at its cost, they were not entitled to be repaid until the Parcel A Joint Venture had generated revenue.

Out of those revenues, Obcorp was only entitled to be paid anything until after the costs of sale, the direct operating costs of the Parcel A JV, and the balance of the mortgage (now owed to Mr. Oberowsky) had all been paid.

Since those events have not occurred, Obcorp is “not entitled to demand repayment for its contributions to the Parcel A Joint Venture as no amounts are presently “due to” Obcorp. [ 46 ] The Trustee also argues that any work done by Hustle/Obcorp was not done for an “owner” within the meaning of the BLA . [ 47 ] Since Hustle/Obcorp is a joint venturer, the work and supply of materials funded by or performed by Obcorp was not “for” an owner, contractor, or subcontractor” but was a contribution by Hustle/Obcorp to the Joint Venture. [ 48 ] The Trustee says that the BLA “is intended to protect the interests of unpaid subcontractors, not investors in failed joint ventures.” [ 49 ] Obcorp argues that it has complied with the requirements of the BLA with respect to the Builders’ Lien.

It states the issue is whether it has “done or caused work to be done” to improve the Lands that Golfside Venture’s required and on its behalf, with its consent and privity, and/or to its direct benefit. [ 50 ] Obcorp relies on the Court of Appeal decision in Acera , also cited by the Trustee. It also references Royal Bank of Canada v 1679775 Alberta Ltd , 2019 ABQB 139 , a case in which I distinguished Acera .

Obcorp argues here that the facts in this case are closer to the facts in Acera and urges me to follow Acera . [ 51 ] I am of course bound by Acera and apart from the discussion of Northern Electric and other cases on the subject of “owner”, I do not find Royal Bank of Canada to be particularly relevant to the issues in this case.

[52] Obcorp submits here that the Agreement “plainly conveys a request for (and arguably requires) Hustle/Obcorp to carry outwork on the Lands.

Further, it can be said that Golfside actively participated in and even controlled the work Hustle/Obcorp carried outon the lands.” Thus, “the work Hustle/Obcorp carried out on the Lands was plainly carried out on Golfside’s behalf, with its consent andprivity, and accrued to Golfside’s direct benefit.” [53] As for the Trustee’s argument that the Builders’ Lien is not valid because no amounts are due from Golfside to Obcorp,Obcorp references the Court of Appeal majority decision at paras 29-30 and its consideration of Muzzo Brothers Ltd v CadillacFairview Corp, (ON SC), 1981 CarswellOnt 529 (HCJ): [29] The chambers judge was of the view that Sterling only has a lien for “so much of the price of the work that remains due”.

InMuzzo Brothers, West L.J.S.C. cited Cory J.’s trial decision in Bird Construction Co. Ltd. v. Ownix Developments Limited (1980), 15R.P.R. 239 (Ont. Sup. Ct. (Div. Ct.)) where he highlighted policy concerns with limiting liens to situations where the “owner” hascommitted to paying an amount. The absence of a commitment by the owner to pay for the building was said to immunize the ownerfrom liability. Cory J. held: “[t]hat contention would seem to fly in the face of the very purpose of the Mechanics’ Lien Act, R.S.O. 1970,c. 267 [now R.S.O. 1980, c. 261]” (at para. 37).

The Court went on to observe that were it otherwise the contractor who had done thework “would be deprived of its lien rights as against those who directly benefit from such work” (at para. 37). [30] On the basis of the foregoing, West L.J.S.C. concluded that “[a]ppellate courts have thus consistently rejected the argument thatan owner whose interest is liable to a lien can avoid that liability simply by contending that he is under no contractual obligation to pay.”He added at para. 49 that the amount of the lien limited as it is to “the sum justly owing ... by the owner” is not confined to the sumlawfully owing by the owner under a contract.

He explained: “The words used in the

section import a requirement that the amount to beconsidered is one which is equitable in the circumstances.” [54] Obcorp argued that the profit-sharing arrangement in the Agreement does not deprive it from its entitlement to a builders’lien. [55] During argument, the Trustee referred to several additional cases not in the filed briefs: the Muzzo Brothers decision itself,Kvaerner Enviropower Inc v Tanar Industries Ltd, 1994 CarswellAlta (QB), and Beaudoin v Waters, 1997 CarswellAlta 435 (QB).

Ienquired of counsel as to whether there was any authority for the proposition that for a builders’ lien to be valid there needed to be anamount presently due to the claimant. The Trustee agreed to submit further argument on the point, and Obcorp agreed to respond to thenew cases and the Trustee’s further submissions. [56] In the further submissions, the Trustee states the questions as: 1. Can a statement of lien be validly registered when the lien claimant has no enforceable legal claim or underlying enforceable debt?And 2.

Do Acera and Muzzo Brothers say that a statement of lien can be registered in the absence of an enforceable debt? [57] The Trustee references the principle cited in Kvaerner, a 1994 decision of Justice Dea, where the Court stated at para 42: The amount due to a lien holder measures the monetary value of his lien.

The existence of a debt is a condition precedent – no debt nolien. [58] In Beaudoin, a 1997 decision of Justice Fruman, the Court stated at paras 58 and 60: A builders’ lien cannot exist independently of an enforceable obligation to pay…a lien may only be claimed in respect of amounts towhich the lien holder has an enforceable legal claim.

There must be an underlying debt to give rise to a valid lien. [59] Justice Verville stated at para 87 of Caburn: A lien claim cannot exist independently of an enforceable obligation to pay for work performed or materials furnished (at para 87). [60] The Trustee notes that in Acera, Martin JA (concurring with the majority decision) stated: I accept that a builders’ lien must be premised on an underlying enforceable obligation to pay. (at para 49) [61] In its supplemental argument, the Trustee argues that “it is difficult to see how – in the face of such clear language (Kvaerner,Beaudoin and Caburn) – it could be argued that Acera supports the contention that lien rights can arise when no amount is owed to thelien claimant”. [62] Ultimately, the Trustee argues that the majority in the Court of Appeal took its quotation from Muzzo Brothers at par out ofcontext, and should not be read in the context of

section 6 of the BLA. [63] The Trustee correctly points out that the Acera and Muzzo Brothers cases were cases that concerned the

interpretation of thedefinition of “owner” in the BLA, and not the general

interpretation of

section 6. [64] Alternatively, the Trustee argues that “even if Acera and Muzzo Brothers do stand for the principles attributed to them byObcorp – which is not admitted – the Trustee submits this would bring Acera and Muzzo Brothers into direct conflict with expresslanguage of

section 6 of the Builders’ Lien Act which states that lien rights only exist ‘for so much of the price of the work or material asremains due to the owner’.” [65] As such, the Trustee says the Court is obliged to adhere to the express language of the BLA.

[66] In its supplemental submissions, Obcorp argued that the use of the wording “due to” in

section 6 of the BLA does not requirethat an amount be currently due and payable to a lien claimant.

Rather, Obcorp says that the wording “imports equitable considerationssuch that the amount ‘due to’ a lien claimant is the value of the improvements h/she has made to a land-owner’s lands (provided thatland-owner is found to be an owner under the Builders’ Lien Act).” [67] Obcorp distinguishes Beaudoin and Caburn on their facts; that in Beaudoin the lien claimant was a volunteer such that noamounts were ever payable to the claimant, and in Caburn the landowner had not requested that the work be done. [68] Obcorp argues that what is required to support a builders’ lien is that there be an enforceable obligation, but not necessarily animmediately enforceable obligation.

It cites Graham Construction & Engineering

(1985) Ltd v LaCaille Developments Inc, 2006ABQB 898. In that case, Justice Hughes (as she then was) stated at paras 264-265: [264] In assessing whether the builders’ lien registered by Graham on December 17, 1998, was for an amount grossly in excess of theamount due to it or expected to become due to it, I first look to the authorities construing the words “due” and “expects to become due”within the meaning of the Builders’ Lien Act: Sunshine Contracting Ltd. v. Kerna Construction Ltd. (1989), 35 C.L.R. 95 at 100-103(Alta. Master); Kvaerner Enviropower Inc. v.

Tanar Industries Ltd. (1994), (AB QB), 157 A.R. 366 at para. 44 (Q.B.),aff’d (1994),1994 ABCA 346 ,157 A.R. 363 (C.A.); and Beaudoin v. Waters (1997), 34 C.L.R. (2d) 283 at para. 60 (Alta.

Q.B.). [265] It is clear from these authorities that Graham was entitled to register a builders’ lien on December 17, 1998, for amounts to whichit had an enforceable legal claim in debt, that is, for amounts owing and due and amounts owing but not yet due… [69] The builders’ lien issue in that case was whether Graham’s builders’ lien had been for an amount grossly in excess of theamount due to it or expected to become due to it.

Analysis [70] I will deal with the Trustee’s first two objections to the validity of Obcorp’s Builders’ Lien that: The builders’ lien issue in that case was whether Graham’s builders’ lien had been for an amount grossly in excess of the amount due toit or expected to become due to it (a lien cannot exist if there is no enforceable obligation to pay the claimant, and there must be anamount due to the claimant) together, as they are in most aspects interrelated.

The Trustee’s fundamental premise appears to be that for a builders’ lien to be valid, there must be something presently or currently dueto the lien claimant from the owner. The flaw in that argument is that the Trustee does not recognize that there are different types ofowners and different types of interests in land that can be liened by a claimant. [71] Individual sections of a piece of legislation like the BLA cannot be read in isolation from the rest of the Act.

In its essence,the BLA allows a contractor, subcontractor, labourer (all as defined) or materialman to file a builders’ lien against the interest in therelevant lands of an owner (as defined) for work or services on an improvement (as defined). The “owner” does not need to be the feesimple owner. It can be a purchaser of the fee simple, a mortgagee, a landlord or a tenant, the holder of a right of way, or in the case ofimprovements to mines and minerals, the holder of a profit à prendre.

This is not intended to be an exclusive list. [72] Cases such as Hamilton (City of) v Cipriani, (SCC), Northern Electric Co Ltd v Manufacturers LifeInsurance Co, [1977] 2 SCC 762, and Phoenix Assurance Co of Canada v Bird Construction Co, (SCC), [1984] 2S.C.R. 199 created a greater awareness of the potential for liening the interests of “owners” other than the owner of the fee simpleinterest in the land.

It is difficult to reconcile cases such as the Northern Electric case with all of the provisions in builders’ lienlegislation, as it is difficult if not impossible for owners other than the fee simple owner to get the protection afforded by makingholdbacks. [73] Muzzo Brothers is an early example of this new line of cases. There, Muzzo Brothers was an insulating and plasteringsubcontractor to the construction manager for a shopping centre owned by Cadillac Fairview. Cadillac Fairview had agreed to sell itsinterest in the lands to a developer, Farlinger.

The purchase and sale agreement provided that Cadillac Fairview would retain title to thelands until it had been fully paid by Farlinger. Farlinger subsequently assigned its interest in the lands to Smoke Hill, who hiredFarlinger to be its construction manager. Farlinger contracted with Muzzo Brothers. Work commenced, but Smoke Hill failed to pay itssubcontractors. That resulted in builders’ liens being filed against the lands (which were still in Cadillac Fairview’s name).

CadillacFairview terminated the purchase agreement and sought to have the builders’ liens discharged. [74] Muzzo Brothers is about whether Cadillac Fairview, as an unpaid vendor, fits within the definition of “owner” in the OntarioMechanics’ Lien Act. I do not need to detail how West J found Cadillac Fairview to be an owner and its interest in the lands subject to themechanics’ liens that had been filed. For the purposes of this decision, it suffices that there was never a suggestion that Cadillac Fairviewowed Farlinger (the construction manager) anything.

Liability was found against Cadillac Fairview not on the basis of unjust enrichment,but rather on finding it was an owner, and thus responsible to the lien claimant. [75] Cadillac Fairview’s principle argument – that there was no amount justly owing by Cadillac Fairview – was rejected, as hadbeen the case in Hamilton and Northern Electric. West J stated at pages 22-23:

Counsel for Cadillac argued forcefully that the effect of this subsection was to eliminate any lien against Cadillac's interest as there is noamount "justly owing" by Cadillac because Cadillac never contracted with any of the subcontractors or suppliers. He conceded that thewords "except as herein provided" in s-s. (1) refer to the holdback provisions of the Act. As a result of these provisions an owner can beliable to lien claimants for more than the sum owing by him to his contractor. Cadillac, however, was not obliged to maintain anystatutory holdback.

While on its face this argument appears to have considerable merit, its application in the manner proposed would completely frustrate thepurpose for which the Act was created. It would render meaningless the extended definition of owner as it would restrict liability to thosepersons who were in a position of privity of contract. This would be contrary to the expressed will of the Legislature in providing thatprivity of contract is not a condition precedent to the imposition of liability. Similar submissions were considered in the three judgments previously referred to. In Northern Electric v.

Manufacturers Life, supra,Laskin C.J.C., commenting upon s. 5 of the Nova Scotia Act which is similar to s. 5 of the Ontario Act, said at p. 772 S.C.R.:

Section 5, so far as relevant, declares that a lien arises when a person performs work upon or furnishes material to be used in theconstruction of a building "for any owner, contractor or sub-contractor".

It seems plain to me that once it is determined that therespondent is an owner within s. 1(d), as being a person at whose request and on whose behalf work is done or materials are furnished inrespect of land in which that person has an estate or interest, it is also "any owner" under s. 5, as a person for whom the work is done orthe materials are furnished in respect of the construction project. [76] The Trustee raises the same argument here, although in a different context. The Trustee seeks to distinguish Muzzo Brothersand Acera on the basis that those were cases that did not deal with

section 6 of the BLA or its equivalent. [77] However, the passages quoted above make it clear that West J was very alive to the argument that something had to be “justlyowing” by the owner to the lien claimant.

I find there is no merit to the Trustee’s argument here. [78] The principles in Northern Electric were recognized by McDonald J (as he then was) in Suss Woodcraft Ltd v Abbey GlenProperty Corporation, (ABQB) when he found on the facts of the case that the landlord in a shopping centre was an“owner” for the purposes of the BLA despite the fact that the work had been done by the claimant for a tenant. [79] While the present case is not about who is an owner or what is the appropriate interest to be liened, this line of cases makes itclear that there is no requirement that the person whose interest in the lands is sought to be charged does not need to owe the lienclaimant anything, if the lien claimant is a contractor, or the contractor if the lien claimant is a subcontractor, labourer, material supplier,or sub-subcontractor. [80] In Suss Woodcraft, the landlord owed the tenant’s contractor nothing.

In Northern Electric, Manufacturers Life owed nothingto the general contractor for whom Northern Electric worked. There, the work had been done for the general contractor to thedeveloper’s tenant. [81] Fast forward 45 years to Acera.

In that case, the Court of Appeal unanimously found a builders’ lien against the fee simpleowner valid even though the lien claimant was not entitled to be paid anything by the fee simple owner, but rather had been permitted todo work on the land in anticipation of subdivision approval. [82] In Acera, the case for unjust enrichment was the “equitable” consideration referenced by the majority, but there was certainlyno amount “due” to Sterling Homes from Acera, and certainly nothing that was currently or presently owing.

Sterling Homes was apurchaser from Acera and was building solely for its own account. [83] If I apply these cases and principles to the case at bar, I find absolutely no support for the Trustee’s proposition that thereneeds to be an amount presently owing to the lien claimant for the lien to be valid. [84] That proposition flies in the face of common construction contract provisions such as “pay when paid” provisions, deferringpayment by the contractor to its subcontractor until the contractor has received payment for that work from the owner.

It cannot bereconciled with any other delayed payment provisions in the contract, such as payment of builders’ lien holdbacks. As an example ofthat, a subcontractor may fully complete its work on its subcontract early in the construction process. Under the BLA, the subcontractoris not entitled to receive the holdback release of 10% of its subcontract price until the entire project is substantially complete. That wouldundoubtedly be long past the filing deadline for a builders’ lien.

Holdback release is tied to construction completion milestones, notcontractual payment provisions. [85] To give effect to the Trustee’s argument would mean that a subcontractor who has yet to receive its holdback amount wouldnot have a valid builders’ lien for their holdback. [86] There are many other circumstances where a contractor might defer payment from the owner, such as where there are costoverruns, the owner has cash flow difficulties, and the contractor is prepared to “finance” the construction costs until a later date.

Surelythe BLA does not intend to deprive a contractor in such circumstances of its lien rights if it is eventually unpaid or underpaid. [87] As a matter of pure

interpretation,

section 6 of the BLA says there is a lien “for so much of the price of the work or material asremains due” to the person. [88] The Trustee is attempting to read words into

section 6, such as “immediately due” or “presently” due. In my view, if “due”meant what the Trustee suggests, they would not have to add the adverbs to support their proposed

interpretation. [89] The online Oxford English Dictionary, hpps://www-oed-com.ezproxy.ae.talonline.ca, defines “due” as: That is owed, appropriate, allotted, or attributable to someone or something, and derived senses.

(

a) That is owed or payable as an enforceable obligation or debt; owing. (

b) With to or unto followed by an indication of the person or party to whom the debt or other obligation is owed. (

c) With noun or noun phrase as complement: designating a debt or obligation owed to the person or party indicated by the complement. (

d) Originally U.S.

With noun or noun phrase as complement: designating a person or party to whom the debt or obligation indicated by the complement is owed. [ 90 ] The ordinary meaning of “due” does not include when the debt or obligation is to be satisfied. “Owing” does not mean payable. [ 91 ] There is no purpose served under the BLA to artificially limit the ability of an unpaid person to be able to exercise lien rights. [ 92 ] As to the second aspect of the Trustee’s argument, that Obcorp is not entitled to be paid anything by Golfside because all of the work done by Hustle/Obcorp under the Agreement was their contribution to the joint venture, I frankly do not understand that argument.

Obcorp is a creditor of Golfside to the extend of its contributions, just as Metrocan is a creditor of Golfside to the extent of its contributions to the joint venture. Each is entitled to be repaid its contributions prorata, out of any revenues to Golfside. [ 93 ] Golfside’s sole business activity was the development and sale of the Lands. The only revenues from the sale of the Lands would come to Golfside. Before there would be any funds to distribute between the two joint venturers, the expenses had to be paid. [ 94 ] In the ordinary course, absent the bankruptcy, the Lands would be sold.

The sale proceeds would be applied as set out in the Agreement: firstly, to pay the selling costs, and then to reimburse the venturers for their contributions. In essence, Obcorp was assigned the role of general contractor under the Agreement. Obcorp was responsible to pay for everything necessary to subdivide the Lands, including arranging for and paying for the physical improvements to the Lands necessary to achieve subdivision approval and ready the resulting lots for sale.

It was entitled to receive its costs from Golfside, and any ultimate profits would be divided according to the Agreement: 50/50. [ 95 ] I am aware of no case law suggesting that a joint venture “partner” is not entitled to a builders’ lien against the lands on which it performs work. That would deprive such a joint venturer of a major form of security for its work, and it could have a drop-down effect on the lien rights of its subcontractors and suppliers. [ 96 ] Joint ventures were considered in Northern Electric , but there it was in the context of determining whether or not Manufacturers Life was an owner.

The trial judge found that Manufacturers Life was a joint venturer with the owner, which assisted his determination that they were an owner with the meaning of the Mechanics’ Lien Act . [ 97 ] Here, Obcorp has no legal interest in the Lands themselves. The Lands are owned solely by Golfside. Obcorp is not an “owner” under the BLA . It has never claimed to be.

If it had unpaid trades or suppliers or labourers who had all performed work or supplied materials to the Lands, there are certainly arguments that could be raised as to whether Golfside would be an “owner” for the purposes of any such liens. [ 98 ] None of this is consistent with the fundamental objective of the BLA to see that people who provide work, services or materials in the construction of an improvement to lands should get paid. [ 99 ] Interestingly, the principles in these cases have been used as defence, in the event the lienholder has not liened the correct interest in the lands (see for example LT Interior Drywall Ltd v Sofa Centre Inc , 2003 ABQB 552 and Royal Bank of Canada v 1679775 Alberta Ltd , 2019 ABQB 139 ).

Builders’ lien cases frequently refer to strict

interpretation of builders’ lien legislation because the legislation takes away property owner’s rights. [ 100 ] In recent years, that principle has been clarified to distinguish between the scope of lien rights and the enforcement of those rights. As noted by Kendall J in Northern Dynasty Ventures Inc v Japan Canada Oil Sands Limited , 2020 ABQB 275 at para 17 : [7] Our Court of Appeal has set out the interpretive approach to be followed in respect of this Act, and explained that a liberal approach may be taken to determining the scope of a lien right, but a strict

interpretation is placed on the procedure that is required to enforce a lien: Tervita Corporation v ConCreate USL (GP) Inc , 2015 ABCA 80 at para 5 ; see also E Construction Ltd v Sprague- Rosser Contracting Co Ltd , 2017 ABQB 99 at para 47 ; Davidson Well Drilling Limited (Re) , 2016 ABQB 416 at para 22 . Our Court of Appeal also explored the purpose of this Act in Maple Reinders Inc v Eagle Sheet Metal Inc , 2007 ABCA 247 at para 22 , aff’d 2006 ABQB 150 . In Tervita Corporation the Court of Appeal stated at para 8: [8] The Builders’ Lien Act creates an extraordinary statutory remedy. The lien rights under the Act must be given a practical

interpretation, so as not to unduly prejudice the rights of owners and third parties: Canbar West Projects Ltd. v Sure Shot Sandblasting & Painting Ltd. , 2011 ABCA 107 at para. 14 , 39 Alta LR (5th) 38, 502 AR 235. [ 101 ] Kendall J continued at para 25: [25] As noted, a liberal approach is to be taken in determining whether the claimant has lien rights. After that threshold is reached, a strict

interpretation is required of the registration requirements. [ 102 ] There is no doubt that Northern Electric is good law in Alberta despite any possible differences between the lien legislation in Nova Scotia in 1976 and Alberta’s BLA . As was neatly put in Balzer's Canada Inc. v. Atco Power Canada Ltd. , 2004 SKQB 104 :

[13] In order to determine who is an owner under the Act, the court may consider the substance of the transactions, as well as theform: Hamilton (City of) v. Cipriani, (SCC), [1977] 1 S.C.R. 169; Northern Electric Co. v. Manufacturers LifeInsurance Co., (SCC),[1977] 2 S.C.R. 762; Phoenix Assurance Co. of Canada v. Bird Construction Co., supra. InHamilton, supra, the city originally planned to contract directly with the general contractor to build a sewage plant.

Due to fundingdifficulties, the city arranged an agreement with the Ontario Water Resources Commission whereby the Commission undertook to buildthe plant and pay the contractor. The city would repay the Commission over a 40-year term and convey the land to the Commission onrequest (no request was made).

The court found that the Commission’s involvement accorded with a role of banker, not owner. [103] In this case, all of the requirements for a valid builders’ lien are met: Golfside is the fee simple owner of the Lands; Golfsiderequested (via the Agreement) Hustle to construct or arrange for the construction of improvements to the Lands; Hustle did so; theAgreement obliging Hustle to continue to provide services to the Lands continued to the time of Golfside’s bankruptcy; Hustle filed abuilders’ lien within 45 days from the bankruptcy. [104] As such, I find that Obcorp’s Builders’ Lien is valid, subject to the Trustee’s further argument that the work and services doneby or for Obcorp do not qualify as an “improvement”.

That is dealt with below. 3. Was the work done by Hustle/Obcorp sufficiently connected to an improvement to land so as to support a valid builders’ lien? [105] Obcorp’s obligations under the JVA were divided into two phases. The first phase related to negotiations with the Town andwork to have the Lands subdivided. That work involved retaining and paying for engineering and planning consultants and taking theproject to the stage where a plan of subdivision could be registered.

There is no evidence that any of that work resulted in any physicalimprovement to the Lands. [106] The second phase obliged Hustle to construct, install and pay for all services required by the Services Agreement and theDevelopment Agreement. It also obliged Hustle to fund all costs to complete the subdivision to get the subdivided Lands ready for sale.That included payment of offsite levies to the Town under the Development Agreement and pay for the costs of an independent engineerto supervise the construction of the services. [107] I do not need to spend much time on this aspect of the appeal.

There is a well-developed body of law under the BLA. There arelikely some parts of Obcorp’s claim that are not properly lienable. [108] Whether something is an improvement for the purposes of the BLA is dealt with in Hett v Samoth Realty Projects Limited, (ABCA). That case is the starting point for any analysis on this issue. [109] From the facts and the evidence put forward by Obcorp, it is clear that Hustle caused physical work to be done on the Lands,including any work on the services under the Services Agreement.

Those activities clearly support a builders’ lien. [110] Other aspects of Obcorp’s claim do not support a builders’ lien, such as negotiating the development agreement with the Town,legal work to clear title, planning work, and payment of property taxes. [111] Here, the Trustee rejected all parts of Obcorp’s claim and it appears to have conducted no analysis of the individual aspects ofObcorp’s builders’ lien claim. I have no doubt that had it done so, it would have concluded that some portions of Obcorp’s claim couldsupport a builders’ lien; other portions could not.

For example, in IBI Group v Leduc Estates Ltd., 1994 ABCA 5, the Court of Appealheld that subdivision approval work was not an “improvement.” But there was no rational or legal basis to reject things that clearlyinvolved construction such as services (utilities and roadways). [112] This is not an “all or nothing” matter.

A builders’ lien is not nullified by including items in it which are not properly lienable.Those items do not taint other items that are otherwise the subject matter of a valid builders’ lien. [113] Conversely, performing work that qualifies as an improvement does not necessarily elevate other work or services on the sameproject to the status of improvements and being capable of supporting a builders’ lien. Determining the validity of a builders’ lienrequires an analysis of all the tasks performed [114] The Trustee made no fact findings on which it could properly apply the provisions of the BLA.

I have no hesitation finding thatits conclusion that the work was incapable of supporting a lien was unreasonable. [115] That aspect of the Trustee’s disallowance cannot stand. This said, it should be more of an accounting exercise to determine whatportions of Obcorp’s lien are valid and those which are not. Conclusions [116] To answer the questions posed in this application/appeal: 1. Can a builders’ lien be valid if there is no amount “currently due and payable” to the builders’ lien claimant? Answer: the “enforceable claim” does not need to be immediately or presently payable; 2.

Can work performed by a joint venturer for the joint venture entitle the contractor/subcontractor/materialman/worker to claim abuilders’ lien for that work if the work is the worker’s or contractor’s contribution to the joint venture? Answer: there is no basis at law to disentitle a contractor who also happens to be a joint venturer from liening the other joint venturer’sinterest in the subject lands if the joint venturer otherwise performed work or services or supplied materials to the lands that qualify as animprovement;

3. Was the work done by Hustle/Obcorp sufficiently connected to an improvement to land so as to support a valid builders’ lien? Answer: some of the work (particularly relating to the design, construction, and supervisions of construction of the services necessary for the subdivision are sufficiently connected; other items in Obcorp’s claim will have to be carefully reviewed to ensure they fit within the Hett v Samoth parameters; 4. Can a statement of lien be validly registered when the lien claimant has no enforceable legal claim or underlying enforceable debt?

Answer: the lien claimant must have an enforceable claim for payment for their work, services, or materials, but that claim does not need to be against the person whose interest in the lands is sought to be charged. The enforceable claim does not need to be founded on a contractual entitlement and that equitable considerations may be applied; 5. Do Acera and Muzzo Brothers say that a statement of lien can be registered in the absence of an enforceable debt?

Answer: as with the answer to question 4 above, these cases hold that the underlying claim does not have to be contractual and may arise out of equitable principles. The majority in Acera did not consider the issue and did not deal with the chambers judge’s rejection of unjust enrichment on the facts of the case. As such, the majority’s decision appears to be based on the chambers judge’s finding that a case for unjust enrichment had not been strictly made out.

Justice Martin’s concurring reasons questioned the chambers judge’s finding on unjust enrichment and directed the trial of an issue on whether there was a restitutionary remedy arising out of Acera being the “proximate cause for the services being rendered or the work being done”. Muzzo Brothers is to the same effect. At para 49, West J concluded that the sum justly owing by the owner “is not confined to the sum lawfully owing by owner under a contract. The words used in the

section import a requirement that the amount to be considered is one which is equitable in the circumstances.” He stated that it would be “unjust to allow Cadillac to benefit from the work and services performed or supplied by the lien claimant on the subject lands without bearing some responsibility to pay.” No actual analysis of the requirements for unjust enrichment or any other equitable remedy was done.

The Ontario Mechanics’ Lien Act at the time provided a mechanics’ lien to the claimant “to the sum justly due to the person entitled to the lien”, such that there is no fundamental difference between the Ontario regime and that in Alberta. [ 117 ] It is implicit in my conclusions that Obcorp does indeed have a provable secured claim in bankruptcy to the extent that its claim includes “improvements”. Comments [ 118 ] In the context of the facts of this case, my first impression was whether or not this was an appropriate matter for application of the Bankruptcy and Insolvency Act , RSC 1985, c B-3 .

I say that in the context that this is essentially a fight between two creditors: Obcorp and Metrocan. The only purpose for bankruptcy here is to alter the contractual relationship between Obcorp and Golfside set out in the Agreement by giving Golfside’s controlling shareholder priority to the funds in Golfside over Obcorp because Golfside’s contributions to the joint venture were secured to a related corporation. This bankruptcy has no other purpose than that. Outside bankruptcy, the lands would be sold and creditors other than the joint venturers and their related entities would be fully paid.

The joint venturers would then recover their contributions on a pro-rata basis. [ 119 ] It would appear from the Agreement that neither party contemplated that they would get priority over the other to the return of their respective contributions, or that the other party would get priority over them. Neither party has raised good faith performance of the other’s contractual obligations, following the Bhasin v Hrynew , 2014 SCC 71 line of cases. It does seem to me that there may be an argument along those lines on the facts of this case.

But is also appears that it is now too late for that because of these proceedings. [ 120 ] The effect of the bankruptcy, absent the validity of Obcorp’s Builders’ Lien, would have been to have Golfside (through a related entity) recover most or all of its contributions to the exclusion of Obcorp. That does not seem fair to Obcorp. But fairness is not always the end result in a contract dispute. [ 121 ] The filing of a builders’ lien by Obcorp may produce an equally unfair result, excluding Metrocan from making any recovery of its contributions to the joint venture.

But I do not fault Obcorp from filing a lien when it did – it had little choice but to do so in the face of Metrocan’s initiative to assert priority. [ 122 ] I doubt that the Bankruptcy Act was intended to be used solely for the purpose of assisting one creditor get a leg up over another, but that appears to be have countenanced to date in cases such as creditors using the BIA to oust some of the Canada Revenue Agency’s and Workers’ Compensation Board super-priority claims. [ 123 ] I note the BIA was amended in 2019 to expressly add duties of good faith on all interested parties: Good faith 4.2

(1) Any interested person in any proceedings under this Act shall act in good faith with respect to those proceedings. Good faith — powers of court

(2) If the court is satisfied that an interested person fails to act in good faith, on application by any interested person, the court may make any order that it considers appropriate in the circumstances . [ 124 ] As with good faith in contractual performance, good faith in the bankruptcy proceedings has not been raised in this case. I simply point this out as there may well be other fights in other cases that will turn on these principles, rather than principles of

interpretation and stare decisis . Result [ 125 ] The Trustee’s decision to reject Obcorp’s Builders’ Lien was incorrect in its application of the principles of the BLA to the legal issues relating to the amount due to Hustle/Obcorp. The Trustee’s decision was unreasonable in its holding that the work and services provided by Obcorp did not constitute improvements to the Lands. [ 126 ] I find that Obcorp’s Builders’ Lien is a valid builders’ lien, validly registered against the Lands. I make no finding on the value of the Builders’ Lien.

It is obvious to me that some aspects of the claim are lienable, but others are likely not lienable. [ 127 ] The amount so determined is a valid secured claim in the bankruptcy. [ 128 ] I expect that the parties, acting reasonably, should be able to agree on the appropriate value of the Builders’ Lien. If they are not able to agree, it would be appropriate for the Trustee to value the lien as that is essentially one of its functions in bankruptcy under the BIA.

As I noted above, this is likely more of an accounting exercise, as long as the Trustee is properly instructed under Hett v Samoth and the cases following it. [ 129 ] I leave the issue of costs to be worked out by the parties. If they cannot agree, I reserve jurisdiction to deal with them at the appropriate time. I expect that the exchange of written submissions will be sufficient to deal with any issues if they do arise. Heard on the 8 th day of April, 2021. Dated at the City of Edmonton, Alberta this 1st day of June, 2021. Robert A. Graesser J.C.Q.B.A.

Appearances: Tom Gusa, Nicholas Williams, Jonathan Hillson, Dentons Canada Ltd. for the Trustee, BDO Canada Limited Justine Bell, McLennan Ross LLP for the Respondent, Obcorp Holdings Inc.