In a recent Alberta decision, the court had to determine what constituted the contract site in a dispute between two subcontractors in builders’ liens claims.
The operator managed an oil sands project near Fort McMurray, Alberta.
In August 2013, the operator entered into a Master Purchase Agreement with a contractor who then hired two subcontractors.
In September 2013, the first subcontractor entered into a written agreement with the contractor whereby it granted the subcontractor an exclusive license to remove sand and gravel from a gravel pit which was located approximately 30 kilometers away from the project site, accessible by road with a driving distance of 89 kilometers.
The second subcontractor rented to the contractor equipment used to crush and screen sand and gravel at the gravel pit.
All of the gravel was provided to the operator for its use in connection with the project.
At all relevant times, the second subcontractor’s equipment was located at the gravel pit and not at the project site.
The contract between the contractor and the first subcontractor was terminated by the first subcontractor due to unpaid accounts owing by the contractor.
The two subcontractors then filed liens against the operator’s lease for unpaid accounts rendered to the contractor. The lien fund was set in the sum of $671,684, $403,010.02 of which had been paid to the first subcontractor.
The entitlement to the balance of the lien fund was the subject of the application before the lower court.
The first subcontractor argued that the second subcontractor’s lien was invalid because it did not satisfy s. 6(4) of the Builders’ Lien Act, which reads:
6(4) For the purposes of this Act, a person who rents equipment to an owner, contractor or subcontractor is, while the equipment is on the contract site or in the immediate vicinity of the contract site, deemed to have performed a service and has a lien for reasonable and just rental of the equipment while it is used or is reasonably required to be available for the purpose of the work.
The first subcontractor submitted that the “contract site” was the project site, and argued that the gravel pit was not in the immediate vicinity of the project site.
The second subcontractor replied that having the rental equipment in the specific areas covered by a mineral lease was not required to establish lien rights and all that was necessary was a sufficient nexus to the use of the rental equipment and improvements to the estate or interest to which the lien attached.
The contract site had not been defined in the contracts associated with the project.
The court found that the project site was the “contract site”.
The court explained that second subcontractor’s equipment was used to crush and screen gravel and sand for use in constructing the project. The court stated that, although the first subcontractor had reaped the financial benefits, given the exclusive lease of the gravel pit granted to it, the gravel pit was not improved: nothing was constructed at the gravel pit. The off-site work performed using the rental equipment resulted in gravel and sand that was used in constructing the project, and directly contributed to the actual physical construction of the improvement. The court accepted the second subcontractor’s argument that the rental equipment was part of the overall project or common purpose in relation to the project.
As a result, the court found that the gravel pit and the project site had some geographical proximity. However, the court noted that s. 6(4) of the Builders’ Lien Act requires more that geographic proximity: it requires the equipment to be in the immediate vicinity of the contract site.
The court found that the gravel pit and the project site were in the immediate vicinity of each other. Thus, as the rental equipment was at all relevant times located at the gravel pit, the rental equipment was in the immediate vicinity of the contract/project site. The court stated that given the nature of gravel pits, immediate vicinity must be considered in context.
Therefore, the court found that the project site was the “contract site”, as the two sites were in the immediate vicinity of each other. Additionally, the court found that that there was a common purpose in the work being done at the gravel pit and at the project site, as the work being done at the gravel pit was part of the “overall’ project.
As a result, the court found that the second subcontractor had satisfied the requirements of s. 6(4) of the Builders’ Lien Act and its lien was therefore valid.
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