Elizabeth Townhouses Ltd. v. Sigurdson, [1975] 2 SCR 449

Supreme Court of Canada

Elizabeth Townhouses Ltd. v. Sigurdson, [1975] 2 S.C.R. 449

Date: 1974-10-01

Elizabeth Townhouses Ltd.

and

Harold S. Sigurdson as Trustee in Bankruptcy of Elizabeth Townhouses Ltd. (Defendants) Appellants;

and

Dieleman Planer Company Ltd. (Plaintiff) Respondent.

1974: May 16, 17; 1974: October 1.

Present: Laskin C.J. and Judson, Spence, Beetz and de Grandpré JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR BRITISH COLUMBIA

Mechanics’ liens—Building project—Cessation of construction work—Bankruptcy of owner—Project subsequently sold and completed—Whether claim for lien by materialman filed within statutory time limit—Meaning of “abandonment”—Mechanics’ Lien Act, R.S.B.C. 1960, c. 238, s. 23(2).

The respondent materialman, between July 1, 1969, and September 30, 1970, supplied lumber to the appellant company for a townhouse project and claimed a balance owing of $81,340.23. Financial difficulties were experienced by the company as early as July 1970, and the evidence indicated that no work was done on the project after December 9th and that little had been done in the preceding months. On December 18, 1970, a creditor filed a petition in bankruptcy and a receiving order was made on December 31, 1970, and a trustee appointed. At that time most, but not all, of the townhouse units had been completed. The project was later sold and, as required by the terms of sale, construction was completed within the time limit set, March 15, 1971. A claim for lien by the materialman was filed on February 8, 1971.

The question raised was whether the claim for lien was filed within the statutory time limit, i.e., “not later than thirty-one days after the improvement to which the material has been supplied has been completed or abandoned.” The Courts below held that it was.

Held: The appeal should be dismissed.

[Page 450]

Cessation of work and abandonment are not necessarily co-existant. In order to constitute abandonment a cessation of work would have to be permanent in the sense that it was not intended to carry the project to completion. A change in ownership of the improvement does not in itself constitute an abandonment, nor does a mere cessation of work.

APPEAL from a judgment of the Court of Appeal for British Columbia[1], dismissing an appeal from a judgment of Harvey Co.Ct.J. Appeal dismissed.

R.C. Bray and R.G. Ward, for the defendants, appellants.

M.I. Catliff and L.W. Perry, for the plaintiff, respondent.

The judgment of the Court was delivered by

JUDSON J.—The question here is whether a claim for lien by a materialman was filed within the statutory time limit. The British Columbia Courts, at trial and on appeal, have held that it was. The lien claimant is Dieleman Planer Company Ltd; the owner was Elizabeth Townhouses Ltd., now in bankruptcy.

The provision for filing a lien by a materialman is contained in s. 23(2) of the Mechanics’ Lien Act, R.S.B.C. 1960, c. 238. It reads as follows:

23. (2) A claim of lien for materials supplied may be filed as in this Act provided at any time after the contract to supply the materials has been made, but not later than thirty‑one days after the improvement to which the material has been supplied has been completed or abandoned, or the contract for the construction or making of the improvement otherwise determined…

The previous legislation, R.S.B.C. 1948, c. 205, s. 20(1)(b), had required that the lien be filed in the case of a claim for materials “after the expiration of thirty-one days after the completion of the erection, building”, etc.

[Page 451]

The materialman, the plaintiff, Dieleman Planer Company Ltd., between July 1, 1969, and September 30, 1970, supplied lumber to the defendant company and claims a balance owing of $81,340.23. The claim for lien was filed in the Kitimat Registry Office on February 8, 1971, and in Prince Rupert Land Registry Office on February 10, 1971. By these dates most, but not all, of the units of the townhouse project had been completed.

It was apparent as early as July 1970 that Elizabeth Townhouses Ltd., was experiencing financial difficulties. The mortgagee was refusing to make further advances although the evidence indicates that the project could have been completed well within the amount of mortgage moneys still to be advanced. On December 18, 1970, a creditor filed a petition in bankruptcy and a receiving order was made on December 31, 1970, and a trustee appointed.

At the date of the receiving order, it is clear from the evidence and the findings of the two Courts that no work had been done since December 9th and that little had been done in the preceding months. But it is equally clear that the project was 92 per cent completed—75 units were rented, 10 units were ready for rental, and 22 units were incomplete. The cost of completion was estimated at $117,000 but there was a balance of $341,237.38 remaining to be advanced by the mortgagee, Central Mortgage and Housing Corporation.

Shortly after the trustee was appointed, the mortgagee imposed certain terms, one of which was that the project must be sold to a purchaser financially and technically satisfactory to it. A contract for purchase was made with a purchaser satisfactory to the mortgagee for the trustee’s equity of $210,000, plus the unadvanced mortgage moneys. The terms of sale required the construction to be completed by March 15, 1971. The contract of sale was approved by the Court. The buildings were duly completed

[Page 452]

within the time limit set.

Both Courts have held that the decision must turn upon the interpretation of s. 23(2) of the Act. McFarlane J.A., in the Court of Appeal, had some difficulty with the concluding words “or the contract for the construction or making of the improvement otherwise determined.” He stated that the appellants themselves had not raised this question either at trial or on appeal; that in any event, there was no such contract in this case, Elizabeth Townhouses being its own contractor; and finally, that the parties had proceeded on the basis that the time for filing the Dieleman claim was governed by the words

not later than thirty-one days after the improvement to which the material has been supplied has been completed or abandoned.

He therefore defined the problem as one of abandonment and agreed with the trial judge and the majority reasons delivered by Seaton J.A. on this point. These reasons are:

Central to the appellants’ main argument is the position that the situation was absolutely hopeless for the appellant company, and it must be deemed to have abandoned. In my view that misses the question and one must look to the evidence, not to see whether they ought to have abandoned, but to see whether they did in fact abandon.

It is clear that work ceased, but in my view cessation of work and abandonment are not necessarily co-existent. In order to constitute abandonment a cessation of work would have to be permanent in the sense that it was not intended to carry the project to completion. Work on this project ceased before 10th December but the evidence is clear that it was intended that work be resumed when the financial problems had been overcome. It was likely that those problems would be overcome because the cost of completion was more than offset by the funds remaining to be advanced on the mortgage.

I agree with the learned trial Judge that it is difficult to determine the intention of the company and

[Page 453]

that this difficulty is made more severe by the several roles played by the directors as creditors, part of the management committee and so forth. I think that he was wholly justified in concluding as he did:

“Nowhere throughout the evidence can I discern any intention by anyone able to control the destiny of the project to abandon the improvement, nor was there in fact such an abandonment as I construe that word. It is true that there was a short cessation of work on construction of the uncompleted portion of the improvement but this, I think, is only one factor to consider and an insignificant one in comparison with the paper work and other efforts proceeding continuously to enable actual construction to continue. A change in ownership of the improvement does not in itself constitute an abandonment, nor does a mere cessation of work.”

The findings of fact justified by the evidence defeat the appellants’ contention that the respondent fails by reason of late filing.

I agree with these reasons. This branch of the appeal fails.

On the amount of the claim, the trial judge found in favour of the claimant for the full amount of $81,340.23. The majority in the Court of Appeal agreed with the trial judge. McFarlane J.A. would have reduced the amount by $17,185. My opinion is that no error has been shown in the majority reasons of the Court of Appeal and that this branch of the appeal also fails.

I would dismiss the appeal with costs.

Appeal dismissed with costs.

Solicitors for the defendants, appellants: Bouck, Edwards & Co., Vancouver.

Solicitor for the plaintiff, respondent: Laurence W. Perry, Smithers.