Supreme Court of Canada
Board of Industrial Relations v. Avco Financial Services Realty Ltd. et al., [1979] 2 S.C.R. 699
Date: 1979-06-14
Board of Industrial Relations (Defendant) Appellant;
and
Avco Financial Services Realty Limited (Defendant) Respondent;
and
Homeplan Realty Limited (Plaintiff) Respondent.
1978: November 22; 1979: June 14.
Present: Martland, Ritchie, Dickson, Beetz and Estey JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR BRITISH COLUMBIA
Mortgages—Priorities—Unpaid wages—Statutory lien payable in priority over any other claim—Mortgages made prior to lien—Mortgages not affected—Lien attaches only to employer’s equity in the property—Payment of Wages Act, 1962 (B.C.), c. 45, s. 5A [added 1970, c. 35, re-en. 1973, c. 68].
By a mortgage dated August 1, 1973, Melvin Joseph Goodine and his wife, Shirley Goodine, mortgaged their residence in Prince George, British Columbia, to secure the sum of $16,300 owing to Homeplan Realty Ltd. Mr. and Mrs. Goodine executed a second mortgage (dated February 5, 1974) on the land in favour of Midtown Securities Ltd. to secure the sum of $9,000. By an assignment dated February 8, 1974, Midtown assigned its interests under this mortgage to Avco Financial Services Realty Ltd. Both mortgages and the assignment were registered in the Land Registry office. Thereafter employees of Mr. Goodine earned wages and Mr. Goodine failed to pay those wages to them. In respect thereof and pursuant to s. 5(1)(c) of the Payment of Wages Act, 1962 (B.C.), c. 45, as amended 1973, c. 68, the Board of Industrial Relations made two certificates (dated December 6 and 18, 1974) certifying that Mr. Goodine owed wages to certain employees in amounts that aggregated $8,804.80. Thereafter, pursuant to an order obtained in foreclosure proceedings instituted by Homeplan, the land was sold. The proceeds of sale amounting to some $28,000 were held in trust pending the determination of who were entitled to them.
A stated case asked for the opinion of the Court as to the priority and in what amounts the proceeds of the sale of the land should be distributed as among Home-
[Page 700]
plan, Avco and the Board. In brief, the question was whether the Board, under s. 5A of the Act, was entitled to priority in respect of the certificate over the claims of Homeplan and Avco under their mortgages.
In respect of the sale of the interest of Melvin Goodine in the land, the trial judge held that the proceeds of sale should be applied first in payment of the amount owing to the Board, second, in payment of Homeplan’s mortgage claim, third, in payment of Avco’s mortgage claim, and the balance to Melvin Goodine. In respect of the sale of the interest of Shirley Goodine, he held that the proceeds of the sale should be applied first in payment of the Homeplan mortgage claim, second, in payment of the Avco mortgage claim, and the balance to Shirley Goodine.
Upon appeal, the Court of Appeal, by a majority decision, decided that the order of priorities, in respect of the sale of Mr. Goodine’s interest should be first in favour of the Homeplan mortgage claim, second, in favour of the Avco mortgage claim, third, in favour of the Board, and the balance to Mr. Goodine. From that judgment the Board appealed to this Court.
Held: The appeal should be dismissed.
The property to which a s. 5A lien attaches is not defined nor identified. In the absence of a specific statutory provision to that effect, it should not be construed in a manner which could deprive third parties of their pre-existing property rights.
This view is supported by subs. (2) of s. 5A which was added to the statute in 1973 and which provides that a certificate issued under s. 5 shall constitute a lien and charge under subs. (1) from the date the wages were earned. From that date, the lien attaches to the employer’s property and, as provided in subs. (1), it will take priority over any other claim, including an assignment or mortgage. In other words, after the lien attaches, its priority is unaffected by a disposition of his property made by the employer. Where a mortgage has been made prior to the lien attaching, it is not affected. The lien will only attach to the employer’s equity in that property.
In the present case, the lien was subsequent in time to both the Homeplan and the Avco mortgages. It could, therefore, only attach to the employer’s equity in the land.
APPEAL from a judgment of the Court of Appeal for British Columbia, allowing an appeal by the respondent Avco Financial Services Realty
[Page 701]
Limited from the judgment of Ruttan J. in a special case to determine the priority of various claimants to the proceeds of a sale of land. Appeal dismissed.
D.M. M. Goldie, Q.C., and P.R. Sheen, for the appellant.
G. Davis, for the respondents.
The judgment of the Court was delivered by
MARTLAND J.—This appeal involves the interpretation of s. 5A of the Payment of Wages Act which was added to that statute (1962 (B.C.), c. 45) by 1970 (B.C.), c. 35, and amended by 1973 (B.C.), c. 68.
The Act sought to protect employees in every industry, business, trade and occupation (subject to specified exceptions) in respect of the payment of their wages by employers. Sections 5 and 5A provide as follows:
5. (1) Where the Board, or its duly authorized representative,
(a) before the expiration of six months following the latest date on which the employer failed to comply with the requirements of this Act has received information that indicates that an employer has failed to pay to an employee all wages earned, and
(b) is satisfied that the employee is not proceeding with any other action for the recovery of the unpaid wages,
the Board may, at any time,
(c) make a certificate in which shall be set forth the wages owing, including therein the pay to which an employee is entitled under the Annual and General Holidays Act and by an order made under section 10A of that Act and, in addition, an amount not in excess of all other unpaid wages earned by the employee within the last six months of his employment with that employer;
(d) send a copy of the certificate to the employer by registered mail, giving him eight days from the date of the mailing of the certificate within which to present evidence and make representation.
(2) The Board, after such investigation as it considers adequate, including the holding of such hearings as it deems expedient, and consideration of representation (if any) from the persons concerned, may
[Page 702]
(a) confirm the wages owing as set forth in the certificate; or
(b) cancel the certificate and
(i) make another certificate, in which shall be set forth the wages owing; or
(ii) take no further action.
(3) The Board may at any time cause the certificate confirmed or made under subsection (2) to be filed with
(a) The Registrar of a County Court if the wages owing as set forth in the certificate are equal to or less than the monetary jurisdiction of the County Courts; or
(b) a District Registrar of the Supreme Court if the wages owing as set forth in the certificate exceed the monetary jurisdiction of the County Courts;
and thereupon the certificate shall be enforceable as a judgment or order of the County Court or of the Supreme Court, as the case may be, in favour of the Board for the recovery of a debt in the amount of wages owing as set forth in the certificate.
(4) An appeal lies to the Court of Appeal from the Board upon any point of law raised before the Board under this section, and the rules that apply to an appeal from a judgment of the Supreme Court apply.
(5) The decision of the Court of Appeal is final.
5A. (1) Notwithstanding any other Act, the amount of wages set forth in a certificate issued under section 5 constitutes a lien and charge in favour of the Board payable in priority over any other claim or right, including those of the Crown in right of the Province, and, without limiting the generality of the foregoing, such priority shall extend over every assignment, including an assignment of book debts, whether absolute or otherwise, every mortgage of real or personal property, and every debenture.
(2) A certificate issued under section 5 shall constitute a lien and charge under subsection (1) from the date wages were earned, and shall extend to all moneys due from any source to the employer named in the certificate, including moneys due or accruing due from any contract, account receivable, and insurance claim.
(3) Subsections (1) and (2) shall apply to every certificate issued under section 5, whether issued before or after this section comes into force.
[Page 703]
The agreed facts in the stated case may be summarized as follows:
(a) Melvin Joseph Goodine and his wife, Shirley May Goodine, by a Mortage dated August 1, 1973, mortgaged their residence in Prince George, British Columbia, to secure the sum of $16,300 owing to Homeplan Realty Limited (“Homeplan”);
(b) By a Mortgage dated February 5, 1974, the Goodines mortgaged the said lands and premises in favour of Midtown Securities Ltd. to secure the sum of $9,000. By an Assignment dated February 8, 1974, Midtown Securities Ltd. assigned its interests under this mortgage to Avco Financial Services Realty Limited (“Avco”);
(c) On December 6, 1974, the Board of Industrial Relations (“the Board”) certified, pursuant to section 5(1)(c) of the Act, that Melvin Goodine was an employer to whom the Act applied and who owed his employees wages in the amount of $701.50, the same being earned after the dates of registration of the first and second mortgages. The Certificate issued by the Board was filed in the Registry of the County Court of Cariboo, British Columbia, on January 9, 1975;
(d) The Board subsequently further certified that Melvin Goodine was an employer subject to the provisions of the Act who owed his employees the sum of $8,103, the same being earned after the dates of registration of the first and second morgages. This Certificate was confirmed on December 27, 1974, and was filed in the Prince George Registry of the Supreme Court of British Columbia on January 13, 1975;
(e) On January 16, 1975, the District Registrar of the Supreme Court of British Columbia certified that the Board had obtained Judgment against the said Melvin Goodine for the sum of $8,103 and on January 20, 1975, the Board caused the Certificate of Judgment to be registered in the Prince George Land Registry Office;
(f) On February 18, 1975, Homeplan commenced foreclosure proceedings in the Supreme Court of British Columbia in respect of the lands and premises subject to the Mortgage referred to in paragraph (a) above and on July 25, 1975, Homeplan obtained an order nisi and in the same proceedings obtained, on September 19, 1975, an Order for the judicial sale of the said lands and premises.
[Page 704]
(g) The lands and premises were accordingly sold for the sum of $28,100 which is held in trust for distribution pursuant to a Court Order determining the order of the priority of the claims of the Board, Avco, Homeplan, Melvin Goodine and his wife, Shirley Goodine.
The stated case asked for the opinion of the Court as to the priority and in what amounts the proceeds of the sale of the land should be distributed as among Homeplan, Avco and the Board. In brief, the question was whether the Board, under s. 5A of the Act, was entitled to priority in respect of the certificate over the claims of Homeplan and Avco under their mortgages.
In respect of the sale of the interest of Melvin Goodine in the land, the trial judge held that the proceeds of the sale should be applied first in payment of the amount owing to the Board, second, in payment of Homeplan’s mortgage claim, third, in payment of Avco’s mortgage claim, and the balance to Melvin Goodine. In respect of the sale of the interest of Shirley Goodine, he held that the proceeds of the sale should be applied first in payment of the Homeplan mortgage claim, second, in payment of the Avco mortgage claim, and the balance to Shirley Goodine.
Upon appeal, the Court of Appeal, by a majority decision, decided that the order of priorities in respect of the sale of Mr. Goodine’s interest should be first in favour of the Homeplan mortgage claim, second, in favour of the Avco mortgage claim, third, in favour of the Board, and the balance to Mr. Goodine.
Both Courts below have commented on the lack of clarity in the wording of subs. 5A(1) and I share this opinion. The lack of clarity is significant when one considers the broad scope which the Board seeks to give to the interpretation of this provision. In essence, the Board’s submission is that the statutory lien created by s. 5A applies to any property in which the employer has an interest and that it overrides rights acquired by third parties in such property at any time, even though such rights were acquired prior to the time when the lien comes into existence.
[Page 705]
The difficulties created by this interpretation are stated by Robertson J.A., who delivered the reasons of the majority in the Court of Appeal:
Section 5A(1) starts out by being unclear in an essential respect: It fails to state what is the object of the lien and charge. To make sure of it one must by implication insert words. Should they be “upon the property of the employer”? Or, “upon all property in which the employer has an interest”? Or, along the lines of present s. 49(1) of the Workers’ Compensation Act, should they be upon “the property or proceeds of property, real, personal or mixed, used in or in connection with or produced in or by” the business with respect to which the employer became indebted for wages? Or should they be upon something else?
If the first phrase “upon the property of the employer” were inserted by implication, in the case at bar it might, I think, comprise only Mr. Goodine’s equity of redemption in the land. If the second phrase—and this is the implication for which the Board contends—were inserted it would confiscate, in order to pay wages owing by an employer, not only land in which he might have an equity, but also, for example, land of which he was only a lessee for years.
A second essential respect in which s. 5A(1) lacks clarity is that, assuming that one can identify the property to which the lien attaches, it is not clear from the words “every mortgage of real or personal property, and every debenture” whether the encumbrance must be one made by the employer or may be one created by another. Suppose that X owned land and mortgaged it to Y and later sold the land, subject to the mortgage, to A, an employer: is it intended that the claim of A’s employees for wages embodied in the Board’s certificate shall take priority over Y’s mortgage?
Another example of the difficulty created by the Board’s broad interpretation of s. 5A is the case of an employer purchasing a family residence from a vendor under an agreement for sale, title to the land remaining in the vendor. If the Board’s contention is correct, a lien under s. 5A arising after the agreement for sale was made would attach to the land, rather than to the employer’s equity in the land and could deprive the vendor of his title, even though the purchaser’s equity in the land was minimal.
[Page 706]
The lien under s. 5A is not limited in its scope, as, for example, under the Workers’ Compensation Act, to property used in, or in connection with, or produced by the industry with respect to which the employer is assessed. The property to which a s. 5A lien attaches is not defined nor identified. In the absence of a specific statutory provision to that effect, in my view it should not be construed in a manner which could deprive third parties of their pre-existing property rights.
I agree with the Court of Appeal that this view is supported by subs. (2) of s. 5A which was added to the statute in 1973 and which provides that a certificate issued under s. 5 shall constitute a lien and charge under subs. (1) from the date the wages were earned. From that date, the lien attaches to the employer’s property and, as provided in subs. (1), it will take priority over any other claim, including an assignment or mortgage. In other words, after the lien attaches, its priority is unaffected by a disposition of his property made by the employer. Where a mortgage has been made prior to the lien attaching, it is not affected. The lien will only attach to the employer’s equity in that property.
In the present case, the lien was subsequent in time to both the Homeplan and the Avco mortgages. It could, therefore, only attach to the employer’s equity in the land.
I agree with the disposition made by the Court of Appeal and would dismiss this appeal with costs.
Appeal dismissed with costs.
Solicitors for the appellant: Russell & DuMoulin, Vancouver.
Solicitors for the respondents: Ray, Wolfe & Co., Vancouver.
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