PME Inc Plaintiff - v. -, 2021 ABQB 889

Court of Queen’s Bench of Alberta Citation: PME Inc v Enerkem Alberta Biofuels LP ( Enerkem Alberta Biofuels GP Inc), 2021 ABQB 889 Date: 20211108 Docket: 1703 24920 Registry: Edmonton Between: PME Inc Plaintiff - and - Enerkem Alberta Biofuels LP by its general partner Enerkem Alberta Biofuels GP Inc, Enerkem Inc and the City of Edmonton Defendants _______________________________________________________ Endorsement of W.S.

Schlosser , Master of the Court of Queen's Bench of Alberta _______________________________________________________ [ 1 ] The issue for these cross applications is the extent to which a lienholder can increase the lien fund by applying equitable principles and recent developments in the law of contract. PME Inc (‘PME’) seeks partial

Summary Judgment for five of six contracts with Enerkem Alberta Biofuels LP by its general partner Enerkem Alberta Biofuels GP Inc, Enerkem Inc (‘Enerkem’).

Enerkem applies under s 48(1) and s 18(3) of the Builders' Lien Act , RSA 2000, c B-7 for a declaration of Enerkem’s maximum liability under the liens filed by PME and a discharge of the liens against both Enerkem’s leasehold interest and the City of Edmonton’s residual interest on payment of the declared amounts. [ 2 ] Enerkem conditionally admits the following amounts (referenced by job number): PP71 $1,887.32 (unpaid holdback) PP77 $16,689.98 (unpaid invoices) PP85 $690,209.97 ($20,848.82 unpaid holdback and $669,361.15 unpaid invoices) PP87 $147,505.09 (unpaid holdback), $13,046.60 (unpaid invoice) PP100 $431,702.58 (unpaid invoices plus holdback of $391,092.43 for a total of $867,825.81) [ 3 ] The parties had reached an impasse prior to these two afternoon applications.

Enerkem refused to pay, in part, because PME would not hand over the closing documents. PME also liened the interest the City of Edmonton which it had agreed not to do.

[4] Payment of the amounts indicated above will fully resolve contracts PP71 and PP85 on provision of the closing qualitycontrol documents on PP85. [5] Enerkem argues that some of the conditionally admitted amounts exceed the amounts it would contractually be obliged topay in respect of some of the liens registered. It is willing to pay these amounts into court or, conditionally to PME, subject to set off andlien validity issues; such as registration of the liens against the City interest and timing of the filing. [6] PME is opposed to any reduction of the face value of their liens.

They argue that the Court should first apply IFPTechnologies (Canada) Inc v EnCana Midstream and Marketing, 2017 ABCA 157 (which in turn applies Sattva Capital Corp vCreston Moly Corp, 2014 SCC 53) to consider the factual matrix to determine the objective intent of the parties. This includes the entirewritten text of the written contract, the relevant contractual background and the commercial context (IFP at para 8-9). In a lien fundsetting, PME argues that the Court is not to anticipate the success of Enerkem’s arguments,

interpretations and defenses in advance oftrial and thereby reduce the lien fund. PME further argues that I should apply the organizing principle of good faith found in Bhasin vHrynew, 2014 SCC 71 to imply terms. [7] The PME-Enerkem contracts (eg PP87 and PP100) are stipulated price contracts that eliminate an arbitration clause andpermit the parties to litigate their dispute in court proceedings. PME argues that, following IFP, contractual

interpretation and theintention of the parties cannot be determined without reference to the factual matrix, the relevant contractual background and thecommercial context. Bhasin v Hrynew, 2014 SCC 71, presumably, adds a further dimension. In other words, the lien amounts can nolonger be reduced short of a full trial. PME also argues that contract PP100 was amended to permit payment for some work based ontime and materials, which would constitute a novation.

Another factor is whether the parties actually followed the wording of thecontract when the work was being performed (1693737 Alberta Inc v Mid-West Contracting Ltd, 2014 ABQB 637 at par 60 perRobertson M). [8] PME further argues that C M Callow Inc v Zollinger, 2020 SCC 45 at paras 107, 109 show that the Bhasin duty is adoctrine of contract law and the measure of damages is contractual damages corresponding to contractual expectation interest.

Further,they say that cases such as Penvidic v International Nickel, (SCC), [1976] 1 SCR 267 at 275 – 277 treats a breach of anobligation to have uninterrupted and exclusive possession of the work site and control of the work as a type of claim that isdistinguishable from the Peter Kiewit line of cases (Peter Kiewit Sons' Co v Eakins Construction Ltd, (1960) (SCC),SCR 361).

Analysis [9] The law has not been kind to lien claimants who wish to increase the lien fund with novel arguments. [10] Peter Kiewit shows how difficult it is for a contractor to claim quantum meruit for a contract that has been performed, evenunder protest. [11] Stevenson JA for the Court, in Community Capital Management

(1976) Ltd v Master Mechanical Plumbing & Heating Ltd,1981 ABCA 149 (at para 13) cites Noranda Exploration Co Ltd and Noranda Mines Ltd v Sigurdson, (SCC), [1975]5 WWR. 83 (SCC) saying: “If it is not payable under the contract lienholders cannot have resort to it. This

interpretation is consistentwith the view that this type of legislation is directed towards ensuring that the holdback is retained, not to the creation of an additionalfund for lien claimants: ...” (emphasis in the original). See also Lloydminster Roman Catholic Separate School District No 34 v BorderCity Transit Mix

(1980) Ltd, (AB QB) per Funduk M (at para 41), Guglietta v Oldach, (AB QB),Northern Eau Claire Construction v Boddez, (AB QB) per Funduk M (at para 20). [12] The owner may also set off against the fund (eg Neptune Coring (Western) Ltd v Sprague-Rosser Contracting Co Ltd, 2020ABQB 277 per Kendell J at paras 23 and following). [13] I accept that PME’s claims are essentially contractual. I further accept that the modern law of contract has evolved and maynow be receptive to PME’s very resourceful arguments. However, it is typically very difficult to set up a quantum meruit beyond thecontract limitations.

PME seeks, amongst other things, to imply some terms and for a portion of contract PP100; a novation that changedthe contract from fixed price to time and materials. PME argues that the Court should grant partial

Summary Judgment but that the liensshould remain at full value until the matter is resolved at trial, lest it be undersecured. Enerkem has admitted the amounts noted abovesubject to its claims set off and lien validity issues. [14] I acknowledge that a party attempting to have lien security reduced bears a heavy onus. However, a s 48 application is not asubstitute for trial and the weight of the decided cases is to limit rather than to expand the lien fund (eg Community Capital, Noranda). Iacknowledge that Peter Kiewit can provide a harsh result, but also that it is not dissimilar to the facts of this case. [15]

Section 18 of the Builders Lien Act creates an extraordinary, statutory in rem remedy to protect contractors. Lien protection isnot full indemnity but only partial security. As the law now stands, it is much easier for an owner to set-off against the second part of thefund than it is for a contractor to claim more on a quantum meruit, or a quasi contractual basis. [16] I acknowledge that the point of the cases cited by PME is to find and interpret contractual terms. However, the protection andthe remedies under the Builders Lien Act are not unlimited.

Though it may seem ironic, once you need equity to reach the amount soughtin a construction dispute, you are almost always outside the protection of the Builders Lien Act. [17] The weight of authority is against inflating the lien fund by using equitable principles, implied terms, or a novation thatconflicts with the written terms of a construction contract. [18] There were a series of express contracts governing the relation between the parties. The contracts were neither frustrated nor

rescinded. For the purposes of setting the lien fund there is no power for the Court simply to substitute a new contract, or another form of obligation for the contract that was in fact performed. Disposition [ 19 ] The liens are discharged conditionally on payment of the sums referenced in paragraph 2, either into Court or to PME, on suitable terms. The balance of the claims are to proceed to trial. The parties may attend for a s 53 Order to facilitate this if necessary. [ 20 ] As there was mixed success, each side will bear its own costs.

Heard on the 23 rd and 24 th day of March, 2021 and the 8 th day of June, 2021. Dated at the City of Edmonton, Alberta this 8 th day of November, 2021. W.S. Schlosser M.C.Q.B.A. Appearances: Daniel Carroll, QC and Ryan Krushelnitzky Field LLP for the Plaintiff, PME Inc Darren Bieganek, QC and Tara Matheson Duncan Craig LLP for the Defendants, Enerkem Alberta Biofuels LP by its general partner Enerkem Alberta Biofuels G.P. Inc, Enerkem Inc.