Chandos Construction Ltd v Deloitte Restructuring Inc, 2023 ABKB 349

Court of King’s Bench of Alberta Citation: Chandos Construction Ltd v Deloitte Restructuring Inc, 2023 ABKB 349 Date: 20230608 Docket: 1603 19909 Registry: Edmonton Between: Chandos Construction Ltd Applicant - and - Deloitte Restructuring Inc in its capacity as Licensed Insolvency Trustee of the Estate of Capital Steel Inc and not in its Personal Capacity Respondent _______________________________________________________ Reasons for Decision of the Honourable Justice Peter Michalyshyn _______________________________________________________ Introduction [ 1 ] This is an appeal from the decision of an Applications Judge on a Builders’ Lien /limitations period issue.

The issue that resolves the appeal is as posed by the appellant: in the circumstances of this case is a Statement of Claim required when monies are paid into Court pursuant to s 48 of the former Builders’ Lien Act ( BLA ), now the Prompt Payment and Construction Lien Act , RSA 2000, c P- 26.4 . For reasons which follow, the answer is yes. The appeal is accordingly dismissed.

Background [ 2 ] In Chandos Construction Ltd v Deloitte Restructuring Inc , 2022 ABQB 78 , the Applications Judge sets out the history of the proceedings. They need not be repeated in detail here, but I note in particular: • By way of a Consent Order granted November 8, 2016 (the “Consent Order”), the sum of $165,801.44 was paid into court by the respondent Chandos. Those funds stood in place of certain lands as security for a lien of the lienholder Deloitte, as Trustee in bankruptcy. • The Consent Order does not set out a process for how or when the lien could be enforced.

The Consent Order adjourns the determination of the issues between the parties sine die . Paragraph 4 of the Consent Order does provide, amongst other things, that any interested party may apply to this Honourable Court to: (

a) Dispute the validity and amount of the lien; (

b) Dispute the liability of the Applicant [Chandos] to the Respondent [Deloitte]; (

c) Determine a lesser amount of the security or to set the lien funds; or (

d) Set off any amount owing against the security where set off is otherwise permitted by law. • Nothing happened in the lien action until Deloitte’s application on September 14, 2021. Chandos filed a counter application on September 15, 2021. • While the lien action was adjourned sine die by the Consent Order, much was happening in related bankruptcy proceedings. The parties in the bankruptcy proceeding litigated through the Court of Appeal and to the Supreme Court of Canada on an enforceability/contractual

interpretation question. Deloitte succeeded in both appellate courts. But for Deloitte’s success on the enforceability/contractual

interpretation question, no claim would have been sustainable by Deloitte in the BLA litigation. [ 3 ] The Applications Judge decided two things: • First, he rejected Deloitte’s contention that given the Consent Order, and given the law in Driden Industries v Sieber 1974 Alta SCAD 14 and like cases, it was unnecessary to issue a Statement of Claim in the BLA proceedings. • Second, he rejected that the BLA limitation period was suspended during the bankruptcy proceedings finally decided in the Supreme Court of Canada on October 2, 2020.

The Applications Judge found rather that the BLA limitation period ran from the Court of Appeal’s decision, made January 29, 2019. No s 49 BLA action was commenced within the applicable two-year limitation period thereafter, and was therefore statute-barred. Analysis [ 4 ] The standard of review of the Application Judge’s decision on this appeal is well established. The appeal is de novo and the standard of review is correctness ( Bahcheli v Yorkton Securities Inc , 2012 ABCA 166 at para 12 ). [ 5 ] In the appeal Deloitte frames its issues as follows: 1.

Was a Statement of Claim necessary when, as here, monies are paid into court pursuant to s 48 of the BLA ? 2. Related, does the Limitations Act apply to extinguish a lienholder’s claim where monies are paid into Court and the issues are adjourned by consent? 3. If the Limitations Act does apply, when did the applicable limitation period begin? Chandos frames the issue simply as – did Deloitte take the steps required by the BLA to enforce its lien within the applicable limitation period?

The record on appeal [ 6 ] Deloitte argues in the appeal that the “full factual and procedural history [was] not before, nor considered by, the [Applications Judge]”. It argues of course that a consideration of that record is now relevant. In particular, it says things were said and positions were taken by Chandos in the bankruptcy proceedings which are relevant to how this court should decide the appeal.

It says the evidentiary and procedural history in the two actions is intertwined and “necessary to understand why certain steps were taken, or not taken, to deal with the validity of the lien…” [ 7 ] For its part, Chandos says the record in the bankruptcy proceedings is not properly before the court, and is not relevant, except in a narrative sense as outlined in the history of the proceedings before the Applications Judge.

[ 8 ] I agree with Chandos on the question of the record in the bankruptcy proceedings. The obvious point is that while related factually, the BLA and bankruptcy proceedings are legally and procedurally distinct.

The more subtle point is that, as argued by Chandos, matters such as relief sought, evidence adduced, and submissions and argument made in the bankruptcy action are not relevant to the determination of the appeal in the BLA action. [ 9 ] Different considerations might apply if Deloitte pointed to evidence relevant to the BLA proceeding that it relied on when deciding when, how or whether to comply with the s 49 BLA Statement of Claim requirement.

However, there is nothing – even in the amplified record in the appeal – to suggest that anything said or done by Chandos anywhere influenced Deloitte’s thinking around s 49 compliance. [ 10 ] (Deloitte points to Chandos’ submissions made in the bankruptcy proceedings at all levels of courts that certain lien-relevant matters between the parties remained to be determined. In particular, Deloitte points to submissions – not evidence mind you – before the Supreme Court that it was unclear if there would even be amounts owing.

Based on those submissions, Deloitte says it could not have known if an injury existed that warranted bringing a proceeding until a certain warranty period expired. Again, Deloitte says it was only in oral submissions again in the Supreme Court, on January 20, 2020, that it learned the warranty had expired. It was on this January 20 2020 date, Deloitte now says, that was the earliest opportunity for a limitation period to run against it. Still, the fact is that by the time the within appeal was argued, the two-year s 49 BLA limitation period had long passed.

And indeed, in argument in the appeal, through counsel Deloitte made it clear it had no intention ever to issue pleadings pursuant to s 49 of the Act .) The Statement of Claim requirement [ 11 ]

Section 49 of the BLA says proceedings to enforce a lien shall be commenced by Statement of Claim. No Statement of Claim issued. Chandos says that as a result, Deloitte failed to take the steps required by the BLA to enforce its lien within the applicable limitation period.

Deloitte says the s 49 requirement is not absolute, and that in law and in practice it took sufficient steps to preserve its interests. [ 12 ] The parties agreed there may be circumstances when by agreement and/or order the s 49 requirement is unnecessary. [ 13 ] Both counsel in the appeal refer to template orders under s 48 of the BLA that may spell out a procedure to be followed when monies are paid into court. A form of template order was also before the Applications Judge. As he noted, the procedure may, or may not, obviate the need for a s 49 Statement of Claim.

The template order procedure for example specifically entertains the filing of a “statement of the plaintiff’s claim” if authorized by a separate Court Order, to stand in the place of other BLA -required commencement procedures relating to s 48 of the BLA . The template order provides that if neither the BLA -required commencement procedures, nor a “statement of the plaintiff’s claim” are in place within a prescribed period of time, “the lien shall cease to exist”.

This suggests that unless the parties agree otherwise, the template order takes the rights and obligations in the BLA seriously. [ 14 ] The Consent Order was not a template order, at least as those templates now exist. For example, there is nothing in the Consent Order that can be said to be a “statement of the plaintiff’s claim”. As noted above, paragraph 4 does allow any interested party to “(

a) dispute the validity and amount of the Lien”. However, the Consent Order is silent with regard to a process or procedure in that regard, whereas the template order is detailed and unequivocal with regard to process following the BLA . Paragraph 4(

b) of the Consent Order allowed any interested party to “dispute the liability of the Applicant (Chandos) to the Respondent (Deloitte); interestingly, there is no reciprocal provision allowing the Respondent to dispute the liability of the Applicant. The Consent Order then adjourns “the determination of the issues between the parties” sine die.

Again, it is silent with regard to a process or procedure for bringing anything back, or for the impact of any rights or obligations of the parties under the BLA , or otherwise. [ 15 ] The template order includes that “Nothing in this Order shall in any way restrict the rights or obligations of the parties under the Builders’ Lien Act except as expressly stated herein.” Again, this is a reflection that the template order takes the rights and obligations set out in the BLA seriously. [ 16 ] No one in the appeal seriously argued, and I would not find in any event, that the Consent Order was intended, or could be read without more, to restrict the rights or obligations of the parties to it under the BLA , except as expressly stated in the order. [ 17 ] Outside of the Consent Order, no one pointed to any agreement to circumvent or extend the applicable limitation period. [ 18 ] The Applications Judge considered Deloitte’s reliance on Driden Industries v Sieber 1974 Alta SCAD 14 and like cases.

After considering the case in detail, the Applications Judge concluded that even if it applies, the parties did not do what was directed by the court in Driden . That is to say, no direction was sought or indeed agreed to between the parties relevant to the s 49 requirement of a Statement of Claim. [ 19 ] Deloitte also argues TRG Developments Corp and Kee Installations Ltd 2015 ABCA 187 , both for its reliance on Driden , and for the general proposition that it is unnecessary and impractical to initiate multiple proceedings in builders’ liens proceedings.

Deloitte argues against what it calls unwanted “formalism” ( Canbar West Projects Ltd v Sure Shot Sandblasting and Painting Ltd , 2011 ABCA 107 at para 14 ) that accompanies s 49 BLA compliance in circumstances such as here. [ 20 ] While there is little doubting these authorities as far as they go, what’s missing is any further or more specific authority that says – again in circumstances such as exist here – that s 49 of the BLA really does not mean what it says. TRG Developments is not such a case, any more than Driden .

And not unduly to question general propositions – nor the legislature’s overall intention to create a

summary and efficient process for liens to be processed and adjudicated – still, Deloitte’s authorities are of limited value to me in deciding the specific s 49 BLA question in the appeal. [ 21 ] Finally, in their respective supplementary submissions the parties expanded on their initial and conflicting submissions as to what I should take from the relevant general practice in builders’ liens adjudication regarding s 49 BLA compliance. The parties pointed

to numerous examples of orders which, with some exceptions, do explicitly set out a litigation process outside the operation of s 49 of the former Act . These examples were referred to together with numerous additional decided cases also meant to reflect to some extent prevailing builders’ lien practice.

These materials are helpful, but ultimately not determinative of what I have to decide. [ 22 ] Having considered the record now in the appeal before me which is considerably amplified from what was before the Applications Judge, I find no authority in law or in practice that in the circumstances of this case no Statement of Claim need have issued. Conclusion [ 23 ] To return to the issues as framed by counsel: 1. A Statement of Claim pursuant to s 49 was necessary in the circumstances here – which include that no other agreement or order existed effectively dispensing with its application; 2.

Accordingly, the expiry of the s 49 limitation period applies to extinguish the lienholder’s claim; 3. As to when the applicable limitation period began, the question does not arise given Deloitte’s position that it had no obligation to issue a Statement of Claim in compliance with s 49 and had no intention of doing so even at the time of the appeal. [ 24 ] In sum, having found that Deloitte took no steps as required by the BLA to enforce its lien within the applicable limitation period, the appeal is dismissed. Heard on the 15 th day of September, 2022; further written submissions filed October 13 and 14, 2022.

Dated at the City of Edmonton, Alberta this 8 th day of June, 2023. Peter Michalyshyn J.C.K.B.A. Appearances: Shauna N. Finlay Reynolds Mirth Richards & Farmer LLP for the Appellant Brad Angove Duncan Craig LLP for the Respondent