In September 2016, Capital Steel, a subcontractor of Chandos, filed an assignment in bankruptcy and Deloitte was appointed as trustee. At the time, Capital Steel had been working on a project for Chandos and, as a result, was not able to complete its scope of work. 

In October 2016, Deloitte, as trustee of Capital Steel, registered a builders’ lien for amounts allegedly owed by Chandos for Capital Steel’s work on the project. In November 2016, Deloitte and Chandos executed, and the Court granted, a Consent Order directing the lien be discharged from title and security be paid into Court. The Consent Order was provided a separate Court docket number and expressly stated:

This Order shall be filed as the Originating pleading in this Action, and, upon filing, was provided a separate Court docket number.

In March 2017, Deloitte brought an Application, in the bankruptcy proceedings of Capital Steel, seeking direction on the interpretation of the subcontract as between Capital Steel and Deloitte, as well as a direction that the funds held in Court as security for the lien be paid to Deloitte as trustee. The former issue was ultimately appealed to the Supreme Court of Canada, which, in 2020, held that a term of the subcontract was void. No decision respecting the payment of the funds held by the Court as security for the lien had been issued.

In September 2021, Deloitte filed an Application, this time in the Court docket commenced by the Consent Order, seeking a declaration that the lien was valid and directing payment of the security held in Court to it as trustee. In response, Chandos filed a cross-Application seeking the return on the security funds that had been paid into Court nearly five years prior on the basis that the limitation period had lapsed as a result of Deloitte having failed to file a Statement of Claim as against Chandos to enforce the lien or otherwise collect amounts allegedly owed.

The Applications were first heard by an Applications Judge, who granted Chandos’ Application. The Applications Judge ruled that no remedial action to enforce the lien had been commenced within the limitation period, including under the Consent Order docket and, therefore, Chandos was entitled to payment of the security held in Court. Deloitte appealed the decision, which appeal was dismissed by the Justice in Chambers. Deloitte appealed that decision to the Alberta Court of Appeal.

What the Court Said

The Court of Appeal was asked to determine whether the limitation period had been correctly applied in the circumstances, i.e. whether filing and serving a Statement of Claim was necessary under the Builders’ Lien Act, and whether Capital Steel estate’s claim was, in fact, limitation barred.

In determining the application of the limitation period under the Limitations Act, the Court held that the only issue to be determined was when the “injury”, being the collection of alleged outstanding amounts for which the lien had been registered, warranted bringing a proceeding.

Deloitte argued, among other things, that proceedings were not justified until after the issuance of the Supreme Court of Canada’s decision respecting the enforceability of the terms of the subcontract. The Court of Appeal dismissed this argument, including because the parties’ actions in having litigated the enforceability of the terms of the subcontract to the Supreme Court of Canada was in and of itself sufficient to demonstrate that the claim warranting proceedings. Accordingly, the Court of Appeal found that the latest the limitation period commenced to run was the date the lien was registered, being October 2016, and therefore an action for a remedial order needed to be brought by no later than October 2018.

Deloitte argued that it had sought a remedial order within the limitation period by virtue of either: (i) the filing of the Consent Order in November 2016; or (ii) the filing of the Application seeking a direction respecting the interpretation of the terms of the subcontract and direction on the funds held by the Court as security be paid to it in March 2017. However, Chandos argued neither were sufficient as section 49 of the Builders’ Lien Act required proceedings be commenced by way of the filing of a Statement of Claim.

The Court of Appeal held that the requirement under section 49 of the Builders’ Lien Act was mandatory. However, it also held that non-compliance with that requirement is not automatically a fatal error but rather a curable irregularity if the other party has not suffered prejudice. Accordingly, the failure of Deloitte, as trustee for Capital Steel, to issue a Statement of Claim was not fatal, but was an irregularity capable of being cured. The Court of Appeal further held that the Consent Order qualified as a commencement document for the lien’s enforcement, including because of its express language, the parties having consented to same, and a separate Court docket number having been issued thereunder.

The Court of Appeal also held that the Consent Order amounted to a proceeding for a remedial order that satisfied the requirements of the Limitations Act because it specifically contemplated resolution of the lien proceedings, including validity and quantum. Accordingly, the estate of Capital Steel’s lien claim was valid, had not lapsed by the passage of time, and its appeal was granted and the matter remitted to the trial Court.

Takeaways

This decision underscores the importance of procedural compliance in lien enforcement and limitation periods under lien legislation, even when there are parallel and ongoing insolvency proceedings. It clarified that while the requirement to file a Statement of Claim is mandatory, non-compliance may not necessarily invalidate proceedings if it does not prejudice the opposing party.

This case also highlights the nuanced application of limitation periods under the Limitations Act, and that parties should not consider an applicable limitation period to be suspended while a related issue is litigated.

Lastly, the Court of Appeal emphasized the use of the published template order when applying to discharge a lien by way of posting security into Court, which, if utilized in this case, may have avoided the procedural dispute.

However, the validity of the requirement for a Statement of Claim to be commenced within 180 days contained within that template order was called into question in Lesenko v Wild Rose Ready Mix Ltd, 2024 ABKB 333. Although the Court of Appeal did not reference the Lesenko decision expressly, it noted in a footnote that “there is no reason why the court cannot make a procedural order setting a deadline within which steps must be taken. A consent order is still an order of the court, not a contract. The equivalent time limitation in the order can, unlike the limitation period in the statute, be extended by the court: R. 13.5(2).”

If you would like advice on the interpretation and implications of contractual rights as they relate to construction projects, please contact Anthony Burden or Tristen Pomerance in Calgary, Ryan Krushelnitzky in Edmonton, or any member of Field Law's Construction Group for guidance and assistance in this area.

Link to decision: Chandos Construction Ltd. v. Deloitte Restructuring Inc., 2024 ABCA 403