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LIENS - Priorities - Between lien holders and other types of creditors - Execution creditors

Tuesday, August 01, 2017 @ 8:35 AM | By John Carson


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Appeal by the National Bank of Canada (National Bank) from the determination of priority of liens filed against the assets of Coast Resources Ltd. (Coast). National Bank provided various loans to Coast, a company engaged in exploration and development of oil and gas properties in Saskatchewan. Coast granted National Bank security for the amounts advanced, including a fixed and floating charge demand debenture. National Bank registered its security interests in Coast's real and personal property, securing indebtedness totaling $5.4 million. In 2014, National Bank obtained appointment of a receiver and manager over Coast's assets. The receiver determined that certain builders' liens filed by the respondents were valid. In 2015, the court approved the sale of Coast's assets, with an order discharging the liens with provision for holding back proceeds pending determination of priority between National Bank and the respondents. The chambers judge applied the Court of Appeal decision in Canada Trust v. Cenex (Cenex) in concluding that s. 22 of the Builders' Lien Act gave the respondent lienholders priority over National Bank. National Bank appealed on the basis that Cenex was wrongly decided, and therefore the chambers judge's ruling was incorrect.

HELD: Appeal allowed. The priority of builders' liens relative to other kinds of security interests was not addressed by s. 22 of the Builders' Lien Act, as the ordinary and grammatical meaning of the provision addressed attachment and scope rather than priorities. The Cenex case was decided incorrectly by extending the meaning of "all the estates and interests in the mineral concerned" to the equity of other creditors, and by interpreting s. 22's statutory predecessor as creating a priority unique to severed ore. In the absence of clear legislative intent to the contrary, s. 22(2) was to be read as clarifying the nature of the assets to which builders’ liens attached, not as establishing priorities between builders’ liens and other kinds of security. The chambers judge's decision with respect to the priority of the respondents' lien claims was accordingly set aside.

KNC Holdings Ltd. v. FTI Consulting Canada Inc., [2017] S.J. No. 317, Saskatchewan Court of Appeal, R.G. Richards C.J.S., R.K. Ottenbreit, N.W. Caldwell, P.A. Whitmore and J.A. Ryan-Froslie JJ.A., July 20, 2017. TLD-July312017004