Canadian Pacific Railway Company v Kelly Panteluk Construction Ltd.: Narrow Clarifications and Broad Baseline Setting

I. INTRODUCTION

Canadian Pacific Railway Company v Kelly Panteluk Construction Ltd.¹ clarifies the applicability of builders’ lien legislation to federal undertakings. In doing so, the Court of Appeal for Saskatchewan offers a thorough explanation of the mechanics of the holdback and trust provisions of The Builders’ Lien Act.² This explanation contains a detailed and broadly applicable review of the builders’ lien case law that has developed in Saskatchewan.

At the time of writing, the construction industry in Saskatchewan is awaiting the proclamation of The Builders’ Lien (Prompt Payment) Amendment Act, 2019³ and The Builders’ Lien Amendment Regulations, 2020⁴ (together, “Prompt Payment Amendments”), which are predicted to significantly alter construction law in the province.⁵ Viewed from this perspective, Kelly Panteluk, in addition to advancing the law concerning the issues it addresses, serves as a comprehensive judicial statement of the current legal landscape in this area prior to the coming into force of the Prompt Payment Amendments.

II. THE DECISION

Kelly Panteluk mainly concerns whether and how Kelly Panteluk Construction Ltd. (“KPCL”), the general contractor to a Canadian Pacific Railway Company (“CP”) construction project (which includes constructing embankments for a railway spur near Belle Plaine) could advance a claim for certain funds set aside by the railway pursuant to the BLA (the “Holdback Monies”).⁶ A preliminary question arose from KPCL’s advancement of its claim through a summary action distinct from two other ongoing actions, to which KPCL was a party, and which concerned the same spur embankment failure.⁷ The Court concluded that this was neither multiplicitous nor an abuse of process and proceeded to the main issue.⁸ The Court ultimately found that, pursuant to the BLA, KPCL could not claim the Holdback Monies by way of the holdback provisions.⁹ Yet, the Court found that it was possible to claim them as trust monies¹⁰ and that the summary procedure of an originating application under s. 17 was an appropriate method to seek payment of the funds.¹¹

Justice Ottenbreit explained that “the retention of a statutory holdback, the creation of a holdback trust account and the charge on the holdback are all dependent on the existence of a lien against land.”¹² Since the spur embankment was central to the operation of a railway as a federal undertaking, the right-of-way it occupied was not lienable.¹³ The rationale underlying this is simple: Builders’ lien legislation, as a matter of jurisdiction, can only apply to a federal undertaking “to the extent that [the legislation] does not interfere with [the federal undertaking’s] essential functioning.”¹⁴ In other words, the possibility of enforcement and realization of the lien was sufficient to render the holdback provisions inapplicable to the lands that contained the railway spur.¹⁵

This is not to say that the holdback cannot possibly attach to projects concerning federal undertakings. Indeed, the BLA provides for charges against the holdback (as opposed to real title) in cases of non-lienable Crown interests in land,¹⁶ and the corresponding Ontario legislation has a similar provision specifically for railway rights-of-way.¹⁷ In Saskatchewan, however, there is no statutory extension of the charge on the holdback to railway projects within the BLA.¹⁸ In noting as much, the Court in Kelly Panteluk quietly signalled clearance for the Legislature to advance on this track despite a passing impression of countervailing federal jurisdiction.

Despite the inapplicability of the holdback provisions, KPCL was not left without recourse, because, as the Court explained, the trust provisions of the BLA did not depend on the existence of a lien.¹⁹ Generally speaking, beyond the holdback’s character as monies capable of being charged by way of a lien, it holds a distinct character as trust monies set aside for the benefit of the contractor.²⁰ In interpreting the trust provisions, writing for a unanimous Court on this point, Ottenbreit J.A. found that “[a] trust claim is not ‘parasitic’ on the existence of a lien as with the holdback provisions,”²¹ and that since the trust provisions did not depend on a real interest, there was nothing precluding their application to federal undertakings.²² The grounding for this distinction was that Ottenbreit J.A. considered it “unlikely that a…trust claim could interfere with the essential operation of the railway since the remedies…are not directed at…land essential to its operation as a federal undertaking.”²³ Therefore, KPCL could rely on the BLA trust provisions for its remedy.

Echoing the preliminary procedural issue, another point in dispute concerned the section of the BLA that KPCL used to assert its claim to the Holdback Monies in their character as trust funds.²⁴ KPCL sought to use s. 17,²⁵ which provides for an application for directions.²⁶ CP, however, submitted that KPCL should have used s. 86 instead,²⁷ which provides for commencing an action by statement of claim.²⁸ The Court was unanimous in holding that s. 17 could be used to seek immediate payment of the Holdback Monies on the facts,²⁹ and (at least implicitly) that an application judge is entitled to interpret a contract to such ends.³⁰ However,  Justices Caldwell and Barrington-Foote, for the majority, took a narrower view than Ottenbreit J.A.’s concurrence, finding that the section “does not contemplate an application to prove and enforce a contractor’s…claim for payment for services or materials supplied to an improvement,” nor an application that “would require the adjudication of CP’s claim for damages.”³¹ In other words, while in the instant case relief could be granted using s. 17’s summary procedure, the section would not obviate the need for a full trial in more issue-laden claims.

With that, KPCL was entitled to return to Chambers to seek immediate payment of the Holdback Monies, using the trust provisions of the BLA, by way of originating application for directions under s. 17.³²

III. COMMENTARY

The issues in Kelly Panteluk required the Court to engage in a detailed exercise of statutory interpretation and a wide survey of Canadian builders’ lien case law. While the decision has significance for contractors involved with projects that concern federal undertakings and clarifies a number of procedural issues with respect to holdback claims, it carries with it additional import.

With its broad canvas, the judgment clearly illustrates intricate operative aspects of the BLA and confirms the ongoing importance of Saskatchewan builders’ lien decisions,³³ as well as those from outside provincial borders.³⁴ Moreover, the decision is broadly beneficial to contractors seeking payment of BLA holdback or trust monies. Such parties now have strong assurances that their claims may be brought forth by way of summary procedure and they have a clear articulation of the tools that Chambers judges have at their disposal to interpret construction contracts to such ends. In Kelly Panteluk, the Court of Appeal struck the proper balance between ensuring that contractors have uncomplicated access to BLA remedies and maintaining procedural rigour with respect to the types of claims permitted by s. 17.

Finally, given that the Prompt Payment Amendments are predicted to significantly affect how builders’ liens are used in Saskatchewan,³⁵ it is timely and helpful that the Court of Appeal took this opportunity to provide a detailed judicial description of the manner in which builders’ lien legislation functions while also highlighting some important nuances. Kelly Panteluk is a snapshot that illustrates the legal landscape of builders’ liens in Saskatchewan just prior to the coming into force of the Prompt Payment Amendments. Going forward, construction law practitioners and other observers now have a comprehensive baseline in Kelly Panteluk from which to gauge both the judicial effect of prompt payment on the legal landscape and to point to in support of the continued relevance of keystone decisions in the area.

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^* JD Candidate (Saskatchewan).

¹ 2020 SKCA 123 [Kelly Panteluk].

² SS 1984-85-86, c B-7.1 [BLA].

³ Bill 152, An Act to amend The Builders’ Lien Act, 3rd Sess, 28th Leg, Saskatchewan, 2018 (assented to 15 May 2019), SS 2019, c 2.

⁴ Sask Reg 92/2020. At the time of this blog’s publication, the Prompt Payment Amendments had not been brought into force.

⁵ See e.g. Caroline J Smith & Collin K Hirschfeld, “Saskatchewan Introduces Prompt Payment Bill for Construction Industry” (26 November 2018), online: McKercher LLP <www.mckercher.ca/resources/saskatchewan-introduces-prompt-payment-bill-for-construction-industry> [perma.cc/Y3ZA-XLH8]; John Dipple & Jeremie Roussel, “Saskatchewan Consulting on Prompt Payment & Adjudication Regulations” (9 July 2019), online: MLT Aikins <www.mltaikins.com/construction/saskatchewan-consulting-on-prompt-payment-adjudication-regulations> [perma.cc/7SRJ-6LV3].

⁶ Kelly Panteluk, supra note 1 at paras 1–3, 33.

⁷ Ibid at paras 46, 56, 62–64.

⁸ Ibid at para 74.

⁹ Ibid at paras 115–17, 177.

¹⁰ Ibid at paras 162, 177.

¹¹ Ibid at paras 163, 198–99.

¹² Ibid at para 115. Justices Caldwell and Barrington-Foote substantially agreed with Justice Ottenbreit’s minority opinion but disagreed as to the appropriate breadth of s 17 of the BLA (supra note 2), which will be distinguished where necessary (Kelly Panteluk, supra note 1 at paras 178, 199).

¹³ Kelly Panteluk, supra note 1 at para 91.­

¹⁴ Ibid at para 127. See ibid at para 91.

¹⁵ See ibid at paras 86-91.

¹⁶ BLA, supra note 2, s 26, quoted by Kelly Panteluk, supra note 1 at para 111.

¹⁷ See Construction Act, RSO 1990, c C.30, s 16(3), quoted by Kelly Panteluk, supra note 1 at para 113.

¹⁸ Kelly Panteluk, supra note 1 at para 114.

¹⁹ Ibid at paras 128, 177.

²⁰ BLA, supra note 2, s 6. See also W Brent Gough & Collin K Hirschfeld, Saskatchewan Builders’ Lien Manual, 2nd ed (Regina: Law Society of Saskatchewan, 2014) at 22–23.

²¹ Kelly Panteluk, supra note 1 at para 128, citing Brook Construction (2007) Inc. v Blackwood Contractors Limited, 2015 NLCA 18 at para 20, 385 DLR (4th) 270 [Brook Construction].

²² Kelly Panteluk, supra note 1 at para 128.

²³ Ibid at para 127.

²⁴ Ibid at paras 76–78.

²⁵ Ibid at para 76.

²⁶ BLA, supra note 2, s 17.

²⁷ Kelly Panteluk, supra note 1 at para 79.

²⁸ BLA, supra note 2, s 86.

²⁹ Kelly Panteluk, supra note 1 at paras 163, 178.

³⁰ Ibid at paras 167, 173–74, 199.

³¹ Ibid at para 198.

³² Ibid at paras 171–72, 200.

³³ See e.g. Town-N-Country Plumbing & Heating (1985) Ltd. v Schmidt (1991), 86 DLR (4th) 716, 1991 CanLII 7989 (Sask CA); Ahmed v 583962 Saskatchewan Ltd. (cob Reid-Built Home) (1994), 125 Sask R 241, 1994 CanLII 4542 (CA); Axcess Capital Partners Inc. v Allsteel Builders(2) Limited, 2015 SKCA 33, 383 DLR (4th) 334.

³⁴ See e.g. Brook Construction, supra note 21; Iona Contractors Ltd. v Guarantee Company of North America, 2015 ABCA 240, 387 DLR (4th) 67.

³⁵ See e.g. Smith & Hirschfeld, supra note 5; Dipple & Roussel, supra note 5.