Graham Construction and Engineering Inc v Alberta (Infrastructure): Is Strict Compliance Necessary for a Claim Under the Alberta Public Works Act?

May 10, 2022 | Bronwhyn Simmons, Arsham Gill

The Alberta Court of Queen’s Bench clarified the requirements for perfecting a claim under Alberta’s Public Works Act, RSA 2000, c P-46 (the “PWA”) in Graham Construction and Engineering Inc v Alberta (Infrastructure), 2021 ABQB 184 [Graham]. This case arose from a construction project in Grande Prairie, on which Graham Construction and Engineering Inc. (“Graham”) acted as general contractor. The contract was formed in July of 2011 and Graham provided its own invoices and those of its subcontractors to the counterparty to the contract, the Ministry of Infrastructure, on a regular basis as required by the contract. The relationship between the Ministry and Graham came to an end in September of 2018 and the contract was terminated.

After the contract was terminated, claims were filed with the Ministry by various vendors. Many, but not all, of these claims were submitted specifically as “notices” under the PWA. The claims totalled over $60,000,000, and half of that was paid into court under the doctrine of interpleader. 17 parties were paid out of the interpleader funds in 2019 pursuant to court orders, as their claims had been submitted properly under the PWA. 32 other parties, including Graham, pursued claims against the interpleader funds but had not followed the prescribed process under the PWA. This case resulted from an application by Graham to satisfy its claim out of the interpleader funds held in court, despite Graham not having submitted its claim in the proper form.

Since claims against the Crown do not fall under the Builders Lien Act, RSA 2000, C B-7, a contractor or subcontractor who remains unpaid under a contract with the Crown (including the Minister of Infrastructure) must submit a claim to the Crown in accordance with the PWA ss 14 and 15, the relevant portions of which read:

14. (1) When

(a)          a person provides labour, equipment, material or services used or reasonably required for use in the performance of a contract with the Crown for the construction, alteration, demolition, repair or maintenance of a public work, and

(b)          that person is not paid by the party who is legally obliged to pay that person,

that person may send a notice of that person’s claim to the Minister, or agent of the Crown that is responsible for the public work.

. . .

(3)          The notice of claim, other than for a claim referred to in subsection (2), must

(a)          be sent by registered mail not later than 45 days after the last day on which the labour, equipment, material or services were provided, and

(b)          set out the nature and amount of the claim in a form satisfactory to the Crown.

15. In this section, “surety” means a person who guarantees to the Crown the payment of creditors.

(1)          Thirty days after giving notice in writing to the contractor and surety, the Crown may pay the claimant the amount the Crown considers proper and deduct the amount so paid from any money due and payable to the contractor on any account or from the money or security, if any, deposited by the contractor with the Crown.

(2)          If there is insufficient money due and payable to the contractor to permit the deduction, the surety, if any, shall to the extent of the security, pay to the Crown on demand an amount equal to the amount paid to the claimant by the Crown.

(3)          In paying a claim under subsection (1), the Crown may act on any evidence that it considers sufficient and may compromise any disputed liability, and as against the Crown payment is not open to dispute or question by the contractor or the surety, if any, but is final and binding on them.

(4)          Instead of paying the claimant as provided in this section, the Crown may apply to the Court of Queen’s Bench to pay the money into Court on the terms and conditions, if any, determined by the Court and, on the money being paid into Court, the Court may determine the persons who are entitled to the money and direct payment of the money in accordance with that determination.

(5)          Notwithstanding anything to the contrary in any other Act, a person having a claim under section 14 with respect to a public work has priority over any other claimant with respect to any money payable under the contract with the Crown for the construction, alteration, demolition, repair or maintenance of that public work.

Other claimants and potential claimants opposed the distribution of the interpleader funds proposed by Graham, arguing that only they held priority as a result of the wording in section 15(5) of the PWA. Specifically, they argued that Graham had not filed a section 14 claim and those parties that filed such claims therefore had priority for distribution over an entity who did not.

In the lower court, the Master had decided that any contractors and subcontractors whose claims were in substantial compliance with the PWA should be assessed on a case-by-case basis. This in effect created two priorities – first priority for claims that were “perfected” by virtue of having been submitted in accordance with the PWA; and a secondary priority, on a case-by-case basis, for claims for which the Minister had sufficient notice because Graham had submitted invoices in their respects, but that had not otherwise been “perfected” by a claim being submitted in accordance with the PWA. The Master’s decision was appealed to the Court of Queen’s Bench.

Enforceability of Section 15(5) of the PWA

The primary issues before the Court of Queen’s Bench were whether the Master had erred in holding that there were two different classes of claimants as defined by the PWA — those who “complied” and those who “substantially complied” with the notice requirements under s 14 – as well as how the PWA restricted the different claimants. Additionally, the Court considered whether s 15(5) of the PWA was enforceable, whether a claimant must submit a claim in a specific format to trigger s 15 of the PWA, and which of the parties had valid claims under the PWA.

The Court of Queen’s Bench first considered whether s 15(5) of the PWA was unenforceable for ambiguity and uncertainty. Under this section, claims where notice is given under s 14(3) of the PWA are given priority over other types of claims, although this priority is limited to “any money payable under the contract with the Crown.” The PWA does not identify the fund to which the priority attaches, which Graham argued rendered s 15(5) unenforceable. Additionally, Graham argued that interpreting the PWA to require strict adherence to the notice provisions would allow parties to claim money that was earned and payable to other claimants, simply because a particular form was used instead a submission of certified invoices.

The Court rejected Graham’s argument on the basis that it did not account for a key purpose of s 15(5) of the PWA, which was to create more certainty in determining how the Crown would decide which claims would be paid under the PWA. The secondary case-by-case priority class created by the Master would have the effect of detracting from the clarity created by 15(5) of the PWA, so the Court of Queen’s Bench overturned this part of the Master’s decision. As such, the Court clarified that claims under the PWA must be submitted in accordance with s 14(3) in order to be successful.

Whether Non-Compliant Notice is Sufficient Notice

The Court of Queen’s Bench next considered whether claims of which the Minister had notice existed independently of whether the required notice was given under s 14(3) of the PWA, such that a claim under s 14(1) of the PWA maintained its priority regardless of the notice given. Graham argued that a person who sought protection of its claim under the PWA could read s 14 as being permissive rather than mandatory because of the presence of the word “may” in the below portion of the section:

14(1)…that person may send a notice of that person’s claim to the Minister, or agent of the Crown that is responsible for the public work,

Accordingly, Graham argued that formal notice in accordance with s 14 was not required to maintain a claim under the PWA, and as such it was entitled to  share in the distribution of any of the interpleader funds held in court. Graham alleged that the invoices it had provided to the Ministry were sufficient for the purpose of entitling it to a share in the interpleader funds held in court.

This argument was dismissed by the Court, which held that notice in accordance with the PWA was required to entitle a party to claim under the PWA. The Court held that while the Master’s decision, which had created a secondary, case-by-case priority for parties that had not strictly complied with the PWA notice provisions but had given notice to the Ministry, was “…attractive by creating a fallback access to the funds in court, it was incorrect in law.” A formal notice requirement was held to be sensible and necessary because it is necessary that the remedies created by the PWA only be available to those parties that brought themselves within the PWA, and not  every party that delivered an invoice. The Court stated that there must be a triggering event in order to create the necessary clarity in the s 15 PWA process, and serving an actual notice as described in section 14 was what triggered the application of section 15.

Another argument advanced by Graham was that the PWA s 15(5) created a priority which those parties that had complied with the notice requirements for invoices had valid claims to the interpleader funds. This argument, too, was unsuccessful. The Court held that it was clear that only those claims that exist by virtue of being properly claimed for goods and services provided and having met the notice requirements of s 15 of the PWA had priority and access to PWA remedies. Any party whose claim fell outside of ss 14 and 15 of the PWA was disentitled from PWA remedies, and would have to pursue its claims outside of the PWA proceedings.

Conclusion

Ultimately Graham was unsuccessful in its attempts to bring its claims within the PWA such that it could make a claim against the interpleader funds held in court. This case is a caution to contractors and subcontractors working on public works projects commissioned by the Crown – it is necessary to follow the procedures set out in s 14 of the PWA should the necessity for making a claim arise. Properly issued invoices and other forms of non-PWA-compliant notice will not suffice to preserve the priority of a claim under the PWA.


Join our Alberta construction lawyers on May 11, 2022 for an overview of the changes to the upcoming Prompt Payment and Construction Lien Act. They will discuss critical insight on what your organization can and should be doing to prepare.

Click here to register and webinar details.

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.