What damages can you lien for? PME Inc v Enerkem Alberta Biofuels LP (Enerkem Alberta Biofuels GP Inc), 2021 ABQB 889

June 8, 2022 | Emma L. Johnston, Mark Puszczak, Ryley Schmidt

The decision of the Alberta Court of Queen’s Bench in PME Inc v Enerkem Alberta Biofuels LP (Enerkem Alberta Biofuels GP Inc)[1] considers whether the lien fund or the value of a builders’ lien under the Alberta Builders’ Lien Act, RSA 2000, c B-7 (the “BLA“), can be increased by applying equitable principles and recent developments in the law of contract. This decision provides an interesting contribution to prior case law on the subject, which stands for the general principal that (with some exceptions) a lien does not exist for damages. It also raises several important questions regarding the breadth of the amounts which can properly be liened under the framework of the BLA, as well the implications on lien fund calculation carried by developments in the law separate from the BLA.

Background

The majority of the reasons in PME are concerned with the application of the owner, Enerkem Alberta Biofuels LP (“Enerkem“), to reduce the amount secured by the lien of the contractor, PME Inc (“PME“), pursuant to sections 48(1) and 18(3) the BLA. In particular, Enerkem sought to limit PME’s lien claim to conditionally admitted amounts for unpaid holdback and invoices under a series of stipulated price contracts between the parties while excluding additional amounts claimed under PME’s lien on a quantum meruit basis.

For its part, PME argued that the lien could not be reduced without the benefit of a full trial and sought the inclusion of the quantum meruit amounts under its lien on the basis of both:

  1. The decision of the Alberta Court of Appeal in IFP Technologies (Canada) Inc v EnCanada Midstream and Marketing, and the need to consider the factual matrix, including the written text of the written contract, the relevant contractual background, and the commercial context, in order to determine the objective intent of the parties;[2] and
  2. The organizing principle of good faith set out in the Supreme Court of Canada decision in Bhasin v Hrynew, and its ability to imply terms into the parties’ contractual relationship.[3]

Ultimately, Master Schlosser disagreed with PME and held that the liens were to be conditionally discharged upon payment of only the admitted amounts into court, or to PME directly, with the balance of PME’s claims to proceed to trial for determination.[4] In other words, the quantum meruit amounts were not found to be properly secured by the lien pending trial.

Although he did not close the door entirely on the prospect of arguments akin to PME’s in the future,[5] Master Schlosser found the weight of authority to be “against inflating the lien fund by using equitable principles, implied terms, or a novation that conflicts with the written terms of a construction contract.”[6] He further found there to be “no power” under the BLA for a court to substitute the parties’ contractual obligations – even if another form of obligation was in fact performed.[7]

Comparison with the Alberta Queen’s Bench decision in JV Driver

Interestingly, in reaching this conclusion Master Schlosser did not reference the Alberta Court of Queen’s Bench’s earlier decision in Krupp Canada Inc. v. JV Driver Projects Inc., 2014 ABQB 259, which dealt with the issue of whether a lien can properly include additional contractual or damages claims.

In JV Driver, which was decided in the context of a summary judgment application, Master Robertson observed there to be a commonly drawn distinction between damages for breach of contract in respect of work that the claimant has not been able to do and for which it has not billed, and for damages in relation to work done for which the claimant seeks compensation.[8] While the latter are lienable, the former are presumptively not.

He then went on to set out the following three conclusions upon a thorough review of relevant case law:[9]

  1. Where the lienholder has done work on or in respect of an improvement, or furnished material to be used in or in respect of an improvement, then that person has a lien for so much as “remains due to him”, either pursuant to an agreed price or on a quantum meruit basis (pursuant to section 4 of the BLA);
  2. If the amount the lienholder claims as remaining due is for damages in tort or for breach of contract but not relating to work actually done on or in respect of the improvement, then there may be a damages claim, but it is not properly part of a lien; and
  3. If it is not clear whether the claim is properly the subject of a lien, then on the standard used for summary judgment applications the amount to be posed as security should be the higher amount and the issue left to the trial court or, perhaps, to a later application before trial once further facts have been learned in the questioning process.

Master Robertson ultimately dismissed Krupp’s application to reduce the security it had posted due to the complexity of weeding out what did and did not qualify as damages (on the factual record before him) and the language of the contract between the parties.[10]  Importantly, the contract in that case entitled JV Driver Inc. to a change order any time that its costs were affected by changes imposed by Krupp Canada Inc. Master Robertson found this provision to be broad enough to capture the amounts claimed in the disputed lien, including a $19,000,000.00 loss of productivity claim on the basis that if a productivity claim is for quantum meruit and is a arising from delays imposed by the general contractor it is a claim “for work on or in respect of [a] improvement” and accordingly “remains due.”[11]

Conclusion and takeaway

Despite the apparently different results reached in PME and JV Driver, the two decisions can be reconciled on the following basis:

  1. The starting point in terms of what a lien claimant may seek under a lien remains the express wording of the BLA itself, and which requires the amount(s) claimed to be “for so much of the price of the work or material as remains due to the person …”[12] Further instructive is the fact that the BLA directs such amounts to be calculated with reference to “the contract price or the actual value of the work done and materials furnished, if there is not a specific contract price.”[13]
  2. Damages incurred owing to a breach of any obligation associated with the organizing principle of good faith would appear, by their nature, to be more akin to the non-lienable category of damages identified by Master Robertson in JV Driver and therefore unlikely to form the proper subject of a lien.
  3. PME’s reliance on the factual matrix in support of its argument that the parties’ amendment and novation of its written contract did not appear to be supported by much (if any) evidence to demonstrate (i) this having occurred, or (ii) how the amounts which it sought to lien on this basis satisfied the requirements of the BLA.
  4. PME’s application included a request for partial summary judgment, which likely involved admitting the express contractual amounts owing.

As a result, a lien claimant ought to be cognizant of the following in registering and seeking to enforce a lien that includes costs associated with the performance of the work, but not contractually acknowledged as owing:

  1. The starting point and general touchstone in an analysis of what amounts can be properly liened will involve the wording of the BLA, the parties’ written agreement (if any), and any other written contract documents.
  2. If a lien claimant intends to include damages sustained as part of its lien, it must be prepared to show how these amounts constitute damages in relation to work done and for which the claimant seeks compensation. To the extent that any of these amounts constitute damages for work that the claimant has not been able to do and for which it has not billed, they will not be lienable.
  3. The ability to identify express evidence or contractual documentation in support of the amounts claimed may serve as the difference between success and failure in respect of any argument in this respect.

[1] PME Inc v Enerkem Alberta Biofuels LP (Enerkem Alberta Biofuels GP Inc), 2021 ABQB 889 (“PME“).

[2] PME at para 7, citing IFP Technologies (Canada) Inc v EnCanada Midstream and Marketing, 2017 ABCA 157 at paras 8-9.

[3] PME at para 7, citing Bhasin v Hrynew, 2014 SCC 71.  I

[4] PME at para 19.

[5] PME at para 13.

[6] PME at para 17.

[7] PME at para 18.

[8] Krupp Canada Inc. v JV Driver Projects Inc., 2014 ABQB 259 (“JV Driver“), at paras 139-140.

[9] JV Driver, ibid at para 156.

[10] JV Driver at paras 171-172.

[11] JV Driver at paras 157-163.

[12] BLA, s. 6(1).

[13] BLA, s. 4.

Disclaimer

This publication is provided as an information service and may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice.

Miller Thomson LLP uses your contact information to send you information electronically on legal topics, seminars, and firm events that may be of interest to you. If you have any questions about our information practices or obligations under Canada's anti-spam laws, please contact us at privacy@millerthomson.com.

© 2022 Miller Thomson LLP. This publication may be reproduced and distributed in its entirety provided no alterations are made to the form or content. Any other form of reproduction or distribution requires the prior written consent of Miller Thomson LLP which may be requested by contacting newsletters@millerthomson.com.