1 Competitive Intelligence 2 2010 NBQB 16G

Liens by architects in Atlantic CanadaIt is a commonly held misconception, or perhaps an often overlooked issue, that the provisions of mechanics’ or builders’ lien legislation do not apply to architects. There is some variance in the legislation across the country but in Atlantic Canada a review of the lien provisions makes it clear that architects have rights to lien in certain circumstances and in such cases, owners are required to maintain a holdback from payments in accordance with the provisions of the applicable provincial lien legislation.

While historically only an architect whose prepared plans were actually constructed generally had a right to a lien, the trend across Canada appeared to be shifting toward upholding an architect’s lien under more circumstances. The redrafting of lien legislation in most provinces through the 1990s refocused the justification of a lien on the provision of services to the owner in respect of the land and the courts followed that example.

Recently, there is indication that both legislators and the courts may be shifting back towards a focus on the improvement of property as the justification supporting an architect’s lien, although the definition of what constitutes an “improvement” still varies greatly.

The legislationThe general right to a lien in Nova Scotia is established under section 6(1) of the Builders’ Lien Act:

6(1) Unless he signs an express agreement to the contrary and in that case subject to Section 4, any person who performs any work or service upon or in respect of, or places or furnishes any material to be used in the … constructing, …, improving, or repairing of any erection, building, …, or the appurtenances to any of them, for any owner, contractor, or subcontractor, shall by virtue thereof have a lien for the price of such work, service or materials upon the erection, building, …, and the land occupied thereby or enjoyed therewith or upon or in respect of which such work or service is performed, … in amount to the sum justly due to the person entitled to the lien and to the sum justly owing, except as herein provided, by the owner.

Fall 2012

Editor:

Stephen PenneySt. John’s, N.L.709.570.8881 spenney@stewartmckelvey.com

In this issue Liens by architects in Atlantic Canada

Punishment and defence – recent developments in occupational health and safety

Protecting lien rights in the face of a CCAA application: practical lessons learned from NewPage

Atlantic Construction Counsel LEGAL DEVELOPMENTS OF INTEREST TO BUSINESS IN ATLANTIC CANADA

CHARLOTTETOWN FREDERICTON HALIFAX MONCTON SAINT JOHN ST. JOHN’S STEWARTMCKELVEY.COM & FOLLOW US ON TWITTER

CHARLOTTETOWN FREDERICTON HALIFAX MONCTON SAINT JOHN ST. JOHN’S STEWARTMCKELVEY.COM & FOLLOW US ON TWITTER

2

The provisions of section 6(1) of the Mechanics’ Lien Act of Newfoundland and Labrador are very similar. The Mechanics’ Lien Act of New Brunswick (section 4(1)) and Prince Edward Island (section 2(1)) are nearly identical and more concise:

A person who (a) does, or causes to be done any work upon or in respect of an improvement, or (b) furnishes any material to be used in an improvement, for an owner, contractor or sub-contractor has, subject as herein otherwise provided, a lien for wages or for the price of the work or material, as the case may be, or for so much thereof as remains owing to him, upon the estate or interest of the owner in the land in respect of which the improvement is being made, as such estate or interest exists at the time the lien arises, or at any time during its existence.

The approach is not consistent across Canada. For example:

• The Manitoba Builders’ Liens Act expressly provides at section 36 that an architect retained to provide architectural services in respect of construction or improving land does not have a lien against the structure or land for its professional fees and charges.

• Architects were specifically given the right to claim construction liens in Ontario by virtue of the passage of the Government Process Simplification Act in 1997. A similar change occurred to Saskatchewan’s legislation when “improvement” was redefined to specifically include services provided by an architect.

• Recent changes to Ontario’s legislation also expand the definition of “improvement” to include any installation of equipment that is essential to the normal use of the land or a structure on the land, which could extend lien rights to architects who participate in a building redesign that involves the installation of such equipment.

• In British Columbia, section 4(6) of the Builders’ Lien Act provides that holdbacks are not to be retained from architects and engineers regardless of their lien status.

• The Atlantic Canadian provinces and Alberta chose not to specifically address the lien rights of architects, engineers or their work within their legislation.

The evolving scope of the lien rightIn Nova Scotia, the scope of an architect’s right to lien was discussed in Nova Scotia Sand & Gravel Ltd. v. Kidstone Estates Ltd. (1973), 13 N.S.R. (2d) 431. In this case, the court concluded that an architect can maintain a lien for the cost of plans prepared by him if he superintends or directs subsequent building, but stated that the architect wouldn’t be entitled to a lien for the costs of preparing plans alone where the building is not proceeded with. The architect in this case was found to maintain a lien because of his inspection services on site.

The most oft-discussed Nova Scotia case on an architect’s right to a lien, where the architect developed plans but the project did not proceed, is actually a case about an engineering lien. Jenkins v. Wilin Construction Ltd. (1977), 25 N.S.R. (2d) 19, held that an engineer who performed services for a proposed project including the preparation of plans and drawings was entitled to a lien even though the project was never built. The judge found that what is now section 6(1) of the Nova Scotia Builders’ Lien Act was broad enough to encompass plans created by an engineer because the work done by the engineer was work done “with respect to the land”. The court linked the work done by the engineer to the work done by an architect who was granted a right to a lien in a much earlier case on the basis that an architect’s plans are essential to construction work on the property.

While Nova Scotia Sand & Gravel Ltd. has never been overturned, there is a reasonable prospect that a court would apply the Jenkins approach to a situation where an architect is seeking a lien for work on plans that were not acted on.

CHARLOTTETOWN FREDERICTON HALIFAX MONCTON SAINT JOHN ST. JOHN’S STEWARTMCKELVEY.COM & FOLLOW US ON TWITTER

3

Jenkins was considered in the Alberta case of LeDuc Estates Ltd. v. IBI Group, [1992] 4 W.W.R. 561, where the court found that architectural plans are so directly related to the construction process as to fall within the definition of services in respect of an improvement of the land. The issue appeared to be settled in Alberta with Raimond Fung Architect Ltd. v. Dr. Jeremy Chai Professional Corp. (1992), 1 C.L.R. (2d) 114, where the court stated that an architect could assert a valid lien claim for the preparation of plans even though his plans were not used in the project.

In 1246798 Ontario Inc. v. Sterling, [2000] O.J. No. 4261, the court overturned a motion judge’s finding that plans prepared by architects in order to gain a city permit were not lienable. The court commented that:

If obtaining site plan approval enhances the value of the owner’s interest in the land, then it follows that the cost of preparing the documentation that supported the application would also give rise to a lien.

The matter did not proceed to trial to resolve the outstanding issue of whether the city permit had enhanced the value of the owner’s land. The case certainly implied that even if nothing was constructed, if the architect’s work had contributed to improving land value, the architect could well be entitled to a lien.

Is the tide turning back?Recently, in John Barlot Architect Ltd. v. 413482 Alberta Ltd., 2010 ABCA 51, the architects provided services to the contractor with regard to a sales centre and a condominium project. The Court of Appeal upheld the liens related to the sales centre, which was actually constructed. However, liens related to the condominium project, which was not constructed, were invalidated because the bulk of the work involved rezoning, subdivision and dealing with development issues. The court held this was not sufficiently connected to construction of an “improvement” to support a lien. The Raimond case was not discussed. The architect

also argued he could “shelter” non-lienable work under a lien supported by lienable work. The court disagreed, suggesting the value of non-lienable items should be deducted from the purchase price before calculating the holdback amount. The Alberta Court of Queen’s Bench followed both of these findings in UPA Construction Group Limited Partnership v. Lake Placid Properties (Park) Inc., [2010] ABQB 675, in finding that “an architect’s services do not need to be physically performed upon the improvement to give rise to a lien, however they must be directly related to the process of construction”.

The Attorney General of Ontario is considering further amendments to Ontario legislation that would see a deemed division of contracted services of an architect into two parts: supply of services up to and including commencement of the improvement and supply of services thereafter. There is no indication yet whether the change would allow pre-commencement services to be lienable.

The application of the lien rightWhere there is an applicable lien right, an owner must retain the holdback under the lien legislation from all payments to the architect, which holdback is for the benefit of the subconsultants. The architect is in turn obliged to retain the holdback from all payments to its subconsultants, which holdback is for the benefit of sub-subconsultants. It is not uncommon in the industry for owners to overlook the holdback requirement in respect of an architect’s services. This may be because often there are no subconsultants involved.

The consequences for failure to retain the holdback are primarily risk of double payment of that amount. For example, if on a contract with an architect for $100,000 an owner does not retain the required holdback of 10 per cent ($10,000), but instead fully pays the $100,000 to the architect, it risks paying again the amount of the holdback it should have held to satisfy valid lien claims by subconsultants. A subconsultant who performs services

CHARLOTTETOWN FREDERICTON HALIFAX MONCTON SAINT JOHN ST. JOHN’S STEWARTMCKELVEY.COM & FOLLOW US ON TWITTER

4

has a lien upon the owner’s property, which is secured by the holdback retained by the owner. The owner will be liable to the subconsultant up to the amount of the holdback required to be retained ($10,000 in this case). If the owner has paid out the full $100,000 to the contractor/architect, it will still be liable to satisfy a valid subconsultant lien claim up to the amount of the required holdback. Thus, the risk of double payment where the holdback was not retained.

As noted above, the owner’s holdback is for the benefit of the subconsultants. Thus, if there are no subconsultants, the risk of double payment is minimal where the holdback was not retained. On the basis that the architect has a direct contract with the owner, it can bring a claim for breach if it is not paid, as well as asserting a lien on the property where it has not waived that right.

While an architect may be able to waive its right to a lien under the applicable legislation, it cannot waive the rights of its subconsultants (or independent contractors if it has any) to claim a lien. Nor can any party agree to exclude the application of the lien legislation (and the lien provided) for anyone providing manual labour.

Practically speaking, there is no regulatory offence for failing to hold back in accordance with the statutory obligations. The primary concern for the owner is being required to pay for certain work twice. There are a number of potential ways to mitigate this risk:

• a covenant by an architect not to retain any subconsultants, together with an express waiver of its lien rights;

• an indemnity by the architect in favour of the owner against liens by subconsultants; or

• security provided in place of the holdback.

Of course, these possible solutions must be considered in the context of the trust provisions under the applicable lien legislation.

What this means for youWhile there is some variance across Canada, architects do have a right to lien for services that are directly connected to an improvement or construction. There is little doubt that this is the case in Atlantic Canada, though there may be some argument over the scope of that right.

In general, where an architect prepares plans and designs which are implemented in a construction project, there will be a right to lien for the amount owing in respect of the services. The right to lien is less clear where the construction does not actually proceed, but where the services can be linked to some improvement in the owner’s interest in the land, there may be a right to assert a lien. At least until there is further legislative change restricting that right. There are other nuances which affect the scope of this lien right which require consideration in the context of the particular circumstances. However, as a general rule it is prudent for construction parties to assume that an architect will have a right to lien for its services and that payments made to an architect or its subconsultants will be subject to the holdback provisions of the applicable lien legislation.

David HenleyHalifax, N.S.902.420.3381 dhenley@stewartmckelvey.com

Michelle McCannHalifax, N.S.902.444.1724 mmccann@stewartmckelvey.com

CHARLOTTETOWN FREDERICTON HALIFAX MONCTON SAINT JOHN ST. JOHN’S STEWARTMCKELVEY.COM & FOLLOW US ON TWITTER

5

Punishment and defence – recent developments in occupational health and safety Workplace health and safety has always been a concern of owners in the construction industry, especially in light of strict legislation across Canada. In 2012, we have seen a number of significant penalties resulting from an infraction of health and safety regulations, a workplace accident or a fatality on the construction site. It has become abundantly clear that owners are ultimately responsible for workplace safety on their work sites. It continues to be difficult – but not impossible – to mount a defence where an infraction has been noted or an injury has occurred.

Two recent cases emphasize the importance of the owner’s role in monitoring health and safety on the work site and establishing policies and procedures geared towards a safe work environment.

The first, R v Metron Construction Corporation, 2012 ONCJ 506 (“Metron”), demonstrates that a corporation can be criminally responsible for the actions of an independent contractor on the work site. The lesson is to choose your site supervisor carefully, and to ensure he/she is working within established safety guidelines.

The second, Guild Contracting Specialties (2005) Inc. v. Nova Scotia Occupational Health and Safety Appeal Panel, 2012 NSCA 94 (“Guild”), demonstrates that the due diligence defence is alive and well and that the regulatory bodies established through occupational health and safety legislation cannot create process or procedures that limit the owner’s ability to put such a defence forward. However, to take advantage of the due diligence defence, the owner must be able to demonstrate an active effort to participate in health and safety on the work site, by ensuring that all

representatives of the company are following legislation, implementing safety policies and developing clear preventative measures to avoid accident or injury.

Overview of health and safety penaltiesIn most provinces legislation provides for three types of penalties:

• administrative penalties under occupational health and safety legislation: generally imposed where there has been a minor injury or a noted infraction, these penalties range between $250 and $4,000 per infraction in Atlantic Canada.

• penalties for committing a statutory offence: these “quasi-criminal” charges proceed through the courts, and it is the court that decides the fine and other consequences. Each of the Atlantic provinces caps the fine at $250,000 for each offence. However, additional fines can be imposed for each day that the offence continues. The courts are also given discretion to impose “creative” penalties, such as additional fines for health and safety education or a requirement to publish all facts of the accident. In rare cases, an individual who has committed an offence can be imprisoned.

• criminal negligence: these charges proceed under the federal Criminal Code, and are exceedingly rare despite amendments in 2004 that made it easier to charge a corporation with criminal negligence. To succeed the Crown must prove:

• the conduct of a “representative”, acting within the scope of their authority, showed wanton and reckless disregard for the lives or the safety of others; and • a “senior officer” departed markedly from the reasonable standard of care expected to prevent harm.

Where criminal negligence is proven, the court sets the fine or other penalty, with reference to a number of factors set out in the Criminal Code to account for when sentencing an organization, including:

CHARLOTTETOWN FREDERICTON HALIFAX MONCTON SAINT JOHN ST. JOHN’S STEWARTMCKELVEY.COM & FOLLOW US ON TWITTER

6

• any advantage realized by the organization as a result of the offence;

• the duration and complexity of the offence;• the degree of planning involved in carrying out the

offence;• whether the organization attempted to conceal its

assets to encourage a lower penalty;• the impact the sentence would have on the economic

viability of the corporation and the continued employment of its employees;

• the cost of investigation;• other regulatory penalties that have been imposed on

the organization; and• whether the organization or any of its representatives

have been convicted of a similar offence or previously sanctioned under provincial legislation for similar conduct.

Overview of defences• Due diligence: it is open to the owner to argue that

it made every effort to prevent every infraction and to prevent harm. If the owner can demonstrate such due diligence, there has been no violation of any statute and the criminal charges or administrative sanctions should be dropped. To succeed in this defence, the owner must demonstrate it took all reasonable steps to ensure a healthy and safe worksite.

• Reasonable care: where an owner has been charged with criminal negligence, it is also open to the owner to prove that there was not wanton or reckless disregard for the lives or safety of other persons on the part of any of its representatives. Effectively, if the owner can show there was no intent to violate legislation or cause harm, the criminal negligence charges will not succeed. Note, this defence is not available for statutory offences or administrative penalties, as there is no requirement to prove intent for owners to be penalized.

Metron - owner criminally liable for actions of supervisorThis summer, the Ontario Court of Justice reviewed the tragic circumstances that resulted in the death of construction workers on Christmas Eve, 2009. At the end of the work day, the site supervisor and five of his workers climbed onto a swing stage to travel back to the ground. Shortly afterwards the platform collapsed. Five men fell 14 floors to the ground. Four of them died as a result of their injuries and a fifth suffered serious injury. The sixth person had properly attached himself to a safety line and was prevented from falling – he was, therefore, uninjured.

The investigation into the incident revealed three serious safety hazards that resulted in this tragedy:

• The swing stage used was not up to code. Although appearing new, it had no serial number or other identifier as required by health and safety legislation and by industry practice. It arrived without a manual, instructions or other product information or design drawings, which are specifically required under legislation. Testing of the swing stage revealed that it hadn’t been properly constructed and was not safe to transport six workers.

• Only two lifelines were available for the swing stage. The normal practice on site was for only two workers to be on the swing stage at any time. It was inexcusable for the supervisor to allow six people to use the swing stage simultaneously without appropriate lifelines.

• Drug use: a toxicological analysis determined that three of the employees had marijuana in their systems.

Metron plead guilty to the criminal negligence charges, acknowledging that the site supervisor was directing the workforce and that he permitted the three infractions. Metron proposed a fine of $100,000 on the grounds that the “real responsibility” for the accident lay with the faulty swing stage. The Crown proposed a fine of $1 million, noting the serious infractions and the tragic consequences of those infractions.

CHARLOTTETOWN FREDERICTON HALIFAX MONCTON SAINT JOHN ST. JOHN’S STEWARTMCKELVEY.COM & FOLLOW US ON TWITTER

7

The court settled on a fine of $200,000 plus a victim fine surcharge of $30,000 noting that the fine represents three times the net earnings of Metron in its last profitable year.

Owners should note that Joel Swartz, the president and sole director of Metron, also entered a guilty plea to several quasi-criminal charges under Ontario’s Occupational Health & Safety Act. His fines and surcharges totalled $112,500.

In both the criminal and quasi-criminal charges, all parties agreed that it was the conduct of the site supervisor that directly resulted in the accident. The site supervisor was not an employee of Metron, but was an independent contractor that Metron had contracted with to oversee the work on the site. Nevertheless, it was agreed that he was both a representative and senior officer of Metron. Since there was a guilty plea there was not legal analysis, leaving open two possible arguments in defence:

1. It is arguable that an independent contractor is not a “senior officer” of a corporation. If this argument is accepted and it can be shown that all senior officers demonstrated reasonable care, a defence may be possible in a similar situation.

2. There is a technical argument that suggests section 22.2 of the Criminal Code sets out a two part test that requires first, wanton and reckless disregard for safety by the representative, and, second, that a senior officer departed markedly from the reasonable standard of care. The technical argument is that this involves an action by two people – first a representative, then a senior officer – and not an action by a single supervisor fulfilling both roles.

Whether either argument could be successful is a question for a future case. Note, however, that Metron is only the second case to proceed under the Criminal Code’s new negligence provisions and may create a precedent that is difficult to depart from.

Guild: defence of due diligence still strongIn September 2012, the Nova Scotia Court of Appeal released a decision concluding that there is no reason that the labour board considering an appeal of an administrative penalty under Nova Scotia’s Occupational Health and Safety Act (“OHSA”) should be limited to considering the amount of the penalty. The court reasoned that by limiting an appeal to the amount of the fine where a compliance order hadn’t been appealed, the panel had effectively prevented employers from raising a due diligence defence, which is not “justifiable or permissible under the legislation as it presently exists”.

In Guild, the employer was charged with failing to have an appropriate eyewash available on site. A compliance order was issued and Guild complied with the order, obtaining an eyewash station that could flush the eye for 15 minutes per the compliance order’s requirements. Compliance orders are a direction to the employer to take an action that will bring the employer into compliance with occupational health and safety legislation and/or create a more safe work environment. They generally provide a strict time limit for compliance.

Guild filed a compliance notice advising that they had complied with the compliance order. It was more than two months later before an administrative penalty was issued.

Guild appealed the administrative penalty under section 11 of the Occupational Health and Safety Administrative Penalty Regulations.

Guild put forward the due diligence defence that, although they did not have an eyewash station that could clean the eye within 15 minutes at the time that their site was inspected, it was not needed at that time because there were no dangerous substances on-site that would require that level of eye washing. Guild submitted that the eye-wash station on-site was compliant with the OHSA and its regulations when no hazardous substances were on-site.

CHARLOTTETOWN FREDERICTON HALIFAX MONCTON SAINT JOHN ST. JOHN’S STEWARTMCKELVEY.COM & FOLLOW US ON TWITTER

8

Guild’s argument was not considered and the panel deciding the case stated that it wouldn’t consider the validity, appropriateness or necessity of the underlying compliance orders during an administrative penalty appeal. The only issue the panel was willing to consider was whether the amount of the penalty was appropriate.

The director submitted to the Court of Appeal that if an appellant chooses not to appeal a compliance order, then the finding in the compliance order that there has been a contravention of the OHSA or its regulations becomes final and binding and there is no further avenue of appeal.

Justice Farrar concluded that:

Quite frankly, I cannot on reviewing the record, the OHSA and the submissions of the parties, see how this conclusion could be reasonable.

The court’s language is strong. Justice Farrar says that the panel’s reasons for its position are “non-existent”. Their conclusion could not fall “within the realm of any reasonable outcome” and there is nothing in the OHSA or its regulations that suggest it is correct for the panel to effectively eliminate the due diligence defence at the appeal of administrative penalty stage.

What this means for youThe Guild case shows that the defence of due diligence is available to owners. To exercise this defence, you must be able to prove that you took every reasonable step to ensure compliance with occupational health and safety legislation and to ensure a safe and hazard-free workplace. With that in mind, owners may want to review their procedures for supervising work sites and have contractors sign off on specific policies or procedures for ensuring a safe work site. Given the Metron case, there is a very real risk that in the future owners will be held responsible for the actions of any subcontractors or independent contractors that they

work with and may want to have a better understanding of the safety records and practices of those subcontractors to better protect themselves against the possibility of health and safety violations on their work sites.

Michelle McCannHalifax, N.S.902.444.1724 mmccann@stewartmckelvey.com

9

CHARLOTTETOWN FREDERICTON HALIFAX MONCTON SAINT JOHN ST. JOHN’S STEWARTMCKELVEY.COM & FOLLOW US ON TWITTER

Protecting lien rights in the face of a CCAA application: practical lessons learned from NewPage When an owner is unable to meet its financial obligations, it may, under certain circumstances, seek protection under the Companies Creditors Arrangement Act, RSC 1985, c.C-36 (“CCAA”). The CCAA is a remedial statute which grants the court broad powers to facilitate the making of an arrangement or compromise between the debtor company and its creditors while the debtor company either attempts to reorganize its affair. Or, in more recent times, to sell substantially all of its assets to preserve it as a going concern under new ownership, or to wind up or liquidate.1

The outcome of an unreported motion in NewPage Port Hawkesbury Corp., (Re)2 this summer is a reminder that when faced with the insolvency of an owner, there are steps you may take to protect your lien rights and minimize potential losses.

NewPage’s builders’ lien discharge motion In September, 2011, NewPage sought and obtained protection under the CCAA. Among NewPage’s creditors were various builders’ lien claimants. On July 27, 2012, counsel for NewPage brought a motion seeking an order vacating and discharging these builders’ liens, the certificates of pending litigation registered against lands owned by NewPage and the actions associated with the liens.

The motion was ultimately successful and on August 1, 2012, Deputy Prothonotary Wood issued an order vacating the liens, discharging the certificates of pending litigation and dismissing any actions associated with them on the

effective date set out in the Plan of Compromise and Arrangement.

The circumstances of the various lien claimants varied. Some appear to have not perfected their liens within the time prescribed in the Builders’ Lien Act, RSNS 1989, c. 277. Others failed to file a proof of claim within the time stipulated in the claims process order. Others consented to being treated as unsecured creditors.

What can I do? When an owner enters CCAA protection, it is clear that there is not enough money to go around. As such, it may not be possible to recover all that is owed to you. However, by knowing the rights and remedies available under builders’ lien legislation and the CCAA, you’ll put yourself in the best possible position to maximize recovery.

Preserve and perfect: Under builders’ lien legislation, a lien arises in favour of a contractor as soon as he or she begins work or furnishes materials to the project. However, the lien does not become an effective charge against the owner’s interest in land until it is preserved and perfected. A claimant with a preserved and perfected lien is a secured creditor for the purposes of the CCAA3.

A lien is preserved when a claim for lien is registered against the owner’s interest in the subject property pursuant to legislation.

A lien is perfected by issuing a statement of claim and/or registering a certificate of pending litigation.

Typically, in a CCAA proceeding, the court will afford protection to the debtor company by “staying” all proceedings against the insolvent company. This stay prevents any party from commencing or continuing any legal action, including the preservation or perfection of a lien, against the debtor. In these circumstances, the court

1 First Leaside Wealth Management Inc., Re, 2012 ONSC 1299 2 NSSC, Hfx No. 355063 3 CCAA, s.2.

10

CHARLOTTETOWN FREDERICTON HALIFAX MONCTON SAINT JOHN ST. JOHN’S STEWARTMCKELVEY.COM & FOLLOW US ON TWITTER

This newsletter is intended to provide brief informational summaries only of legal developments and topics of general interest and does not constitute legal advice or create a solicitor-client relationship. The newsletter should not be relied upon as a substitute for consultation with a lawyer with respect to the reader’s specific circumstances. Each legal or regulatory situation is different and requires review of the relevant facts and applicable law. If you have specific questions related to this newsletter or its application to you, you are encouraged to consult a member of our firm to discuss your needs for specific legal advice relating to the particular circumstances of your situation. Due to the rapidly changing nature of the law, Stewart McKelvey is not responsible for informing you of future legal developments.

appointed monitor, is a valid exercise of the court’s inherent jurisdiction. Therefore, it is important not to unnecessarily abandon your claim by failing to file a proof of claim on or before the claims bar date.

However, if you have missed the claims bar date, all may not be lost. The court may, on application, permit a claimant to file a claim beyond the claims bar date in certain circumstances. These circumstances will depend on the specific facts of each case6 but generally include whether the claimant’s delay was caused by inadvertence, whether the claimant has acted in good faith and the relative prejudice that may result in allowing the late claim7.

What this means for you The best protection against a potentially unpleasant situation is to see it coming. Each of the mechanics’ lien statutes in Atlantic Canada allow a lienholder to, at any time, demand specific information from various parties, ranging from the mortgagee to unpaid vendors, contractors, subcontractors or the owner. Although this right appears to be rarely used, it can provide you with valuable information regarding the financial shape of the project, including the names of parties to a contract, the state of various accounts and details of the state of payment under mortgages.

Misty WatsonSaint John, N.B.506.632.8317 mwatson@stewartmckelvey.com

will generally permit a claimant to preserve or perfect its lien either with the consent of the monitor or by motion.

If you have not preserved or perfected your lien prior to the debtor company entering CCAA protection, it is critically important to apply to the court to lift the stay for the purpose of allowing you to do so before the time in the applicable builders’ lien statute expires. Once this time limit has passed, your lien will expire and cannot be revived by the court.

Continuing the lien action: In some builders’ lien statutes, such as New Brunswick’s Mechanics’ Lien Act, a preserved and perfected lien must be (a) set down for trial or (b) an application must have been made to the court to continue the action within a year of being commenced.4 Much like the time limits within which to preserve or perfect a lien, once the year elapses without the required action being taken, the lien expires and cannot be revived by the court.

Therefore, it is important to be aware of any expiration provision in builders’ lien legislation in the province in which you’re working. and if necessary, to apply to the court to lift the stay to allow you to continue your lien action before the expiry of the relevant time period.

Proof of claim: In proceedings under the CCAA, a court may set out in an order a claims process which includes a claims bar date. A typical order will state that if a proof of claim is not filed by the claims bar date it is “forever barred and extinguished”. In ScoZinc Ltd., (Re.)5, the Nova Scotia Supreme Court affirmed that authorizing such a process, whereby claims must initially be identified and assessed by a court

4 RSNB 1973, c.M-6, s. 52.1 5 2009 NSSC 136 6 BA Energy Inc. (Re.), [2010] A.J. No. 920 (Q.B.)7 Blue Range Resources Corp. (Re.), [2000] A.J. No. 1232 (CA).

11

Service First

1. We will work to provide you with the highest quality of confidential, ethical legal services.

2. We will work with you to develop a full understanding of your business / organization and expectations.

3. We will pursue your work conscientiously and without delay. We will work together with you to establish time specific goals and objectives that meet your needs.

4. We will delegate work to our lawyers who have the legal expertise and experience appropriate to both the nature and complexity of the matter and our understanding of your expectations. Where deemed appropriate by you, we will designate a qualified lawyer as an alternative service contact to ensure continuity of service when the lawyer responsible for your matter is not available. At your request, we will work with you to develop practical fee estimates. We will always strive to add value.

5. At your request we will provide documentation that outlines the scope of the legal services to be provided; the potential timeline for handling the matter; a list of the client team members and alternate service contact, with their fields of expertise; and our lawyers’ contact information.

6. We will meet and strive to exceed your expectations and always welcome your feedback. We will from time to time, seek from you, either formally or informally, an assessment of our performance.

7. We will maintain effective channels of communications including keeping you informed of all significant developments in the legal matter and responding to your contact in a timely fashion.

8. Accounts will be easy to understand. We will always be receptive to client feedback on our billing practices. When issues arise, we will treat them seriously and respond promptly.

9. If you are dissatisfied with our services, or if you feel we have failed to meet any of these commitments, we ask that you call the service lawyer on your matter, the alternate service lawyer, the local Practice Manager or Managing Partner to discuss your concern. We will honestly and fairly address your concerns.

CHARLOTTETOWN FREDERICTON HALIFAX MONCTON SAINT JOHN ST. JOHN’S STEWARTMCKELVEY.COM & FOLLOW US ON TWITTER