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LIENS - Priorities - Assignees of contract money

Monday, September 16, 2019 @ 9:27 AM  

Lexis Advance® Quicklaw®
Appeal by Liquid Capital from a decision determining that the subcontractors had priority to the holdback. The appellant purchased the respondent’s receivables pursuant to a 2013 Factoring Agreement. The respondent entered into a construction contract with SaskPower whereby the respondent acted as general contractor. The respondent hired several subcontractors for the project. The respondent issued six Progress Invoices to SaskPower for work performed. Each progress invoice deducted the builders’ lien holdback SaskPower was required to maintain. The accounts receivable represented by each of the Progress Invoices was assigned by the respondent to the appellant pursuant to the Factoring Agreement. Each of the Progress Invoices contained an untrue certificate by the respondent that all amounts were paid by it for work for which previous Certificates for Payment were issued. The respondent assigned the Holdback receivable to the appellant in accordance with the Factoring Agreement. Several subcontractors registered claims of lien. Faced with competing claims to the Holdback, SaskPower was granted permission to pay these monies into court. The subcontractors then applied to be paid from the holdback. The appellant argued that it took an absolute assignment of the holdback receivable for which it had made payment in full in accordance with the Factoring Agreement and that s. 70(2) of Builders’ Lien Act should be read in a way that excluded absolute assignments from its scope.

HELD: Appeal dismissed. The assignment of the Holdback did not defeat the claim the subcontractors otherwise had to the Holdback. A plain reading of s. 70(2) led to the conclusion that the assignment was not valid as against any lien arising under the Builders’ Lien Act. There was nothing in the scheme and object of the Act or the application of established legislative norms that should cause the Court to deviate from giving s. 70(2) its ordinary meaning. It was in complete keeping with the specifics of the lien and holdback features of the statutory scheme to interpret s. 70(2) as encompassing absolute assignments of holdback monies. The interpretation urged by the appellant would undermine, if not completely neuter, the protection intended to be provided by the holdback requirement. Rather than promoting the flow of monies down the construction chain, allowing the assignment of holdback monies would result in money leaking from the construction pyramid.

Saskatchewan Power Corp. v. Mainline Industrial Limited Partnership, [2019] S.J. No. 268, Saskatchewan Court of Appeal, R.K. Ottenbreit, R. Leurer and J.A. Tholl JJ.A., July 26, 2019. Digest No. TLD-September162019002