Court case could impact industry on P.E.I.

Colin MacLean
Send to a friend

Send this article to a friend.

SUMMERSIDE – A case involving Summerside’s Curran & Briggs Ltd. and the Bank of Montreal currently before the P.E.I. courts could have an impact on the construction industry of entire province.

Curran & Briggs.

 

The legal battle revolves around P.E.I.’s Mechanic’s Lien Act, which is a set of rules outlining when and how a contractor can recoup compensation in cases of unpaid bills.

P.E.I.’s Court of Appeal is trying to determine who has priority over the remaining assets of the failed Charlottetown Royalty Heights Subdivision development (work started in 2008) and its defunct owner, 100875 P.E.I. Inc.

A lower court’s original decision on the case was made on Aug. 30, 2013, and ruled in favour of Curran & Briggs.

BMO is now appealing.

On Prince Edward Island whenever a project goes bust and a receiver is trying to determine priority of payment amongst the creditors, a Mechanic’s Lien can supersede a bank’s mortgage in some circumstances.

BMO’s appeal could overturn that status quo, which is unique in Canada, giving banks the upper hand, in nearly all circumstances, when the projects they fund goes bankrupt.

Rick Kennedy, who owns Curran & Briggs, said during a recent interview that this case has turned into something bigger than just his company.

He warned that if BMO wins the case, it would leave Island contractors vulnerable when developments they’re working on goes bankrupt.

“Quiet frankly, the mechanic’s lien is about the only piece of security any contractor that gets involved in a contract has as security to get paid,” said Kennedy.

“The bank on the other hand, traditionally they will hold a mortgage, and just like in this case, they will hold personal guarantees of the owners … or even assets outside the actual project – and again that was the case here,” he added.

“Without the sanctity of the mechanic’s lien, the contractor’s left with very little (with which to protect themselves.)”

Kennedy also has a significant financial stake in the BMO’s appeal.

Whichever party wins first priority stands to recoup a large portion of what they weren’t paid by 100875 P.E.I. Inc. Whoever is ranked lower on the priority list probably won’t see as much of a return.

There is about $1.4 million currently being held by the receiver, PricewaterhouseCoopers Inc. and Curran & Briggs is seeking $820,000 of that.

It’s claiming unpaid work on the site of the development, plus the significant legal fees it has accrued fighting for compensation over the last five years.

With this case, and is implications in mind, the Construction Association of P.E.I. has been keeping a close eye on the proceedings.

Ross Barnes, general manager of the association, said the group fully supports Curran & Briggs in their efforts to secure its lien.

“The Construction Association of P.E.I. is appalled that this case has gone on for so long,” said Barnes.

 “Contractors are bearing the burden of development in the province. In the case of Curran & Briggs, the subdivision they built for the owner now has over 15 homes built on the lots, but Curran & Briggs is still fighting for the money owed. Homeowners are enjoying these basics they take for granted while the contractor who did the work waits and waits and waits for their money,” he added.

“Is it fair? Of course not.”

Barnes said that the association has been in talks with the province on what it would like to see done to strengthen the Mechanic’s Lien Act in order to better protect local contractors.

The discussion have been preliminary, he said, but the work is important to help protect local companies.

“It is paramount to safeguard the priority of the Mechanic's Lien,” he said.

BMO declined an offer to comment on this article, citing its status as being before the courts. 

Colin.MacLean@journalpioneer.com

@JournalPMacLean

Organizations: BMO, 100875 P.E.I., Construction Association of P.E.I. PricewaterhouseCoopers Inc.

Geographic location: Prince Edward Island, Canada

  • 1
  • 2
  • 3
  • 4
  • 5

Thanks for voting!

Top of page

Comments

Comments

Recent comments

  • G&P Trucking & Construction Ltd.
    March 21, 2014 - 14:33

    Our support is behind Curran & Briggs in this case. A ruling in favor of BMO would set a dangerous precedent that could change the landscape of the industry and how we conduct our business, if anything, this case should expose what needs to be amended in the current Mechanics Lien Act so this type of situation can be avoided in the future. The ruling of this case will be paramount to all contractors in all trades on P.E.I. Let’s hope the correct decision is made.

  • Cardigan Excavators Ltd.
    March 20, 2014 - 18:31

    As a small business owner, I fully support Curran and Briggs in this very unfortunate endeavor. The Mechanics Lien Act is the only security we have to get paid for a job completed. This applies to businesses both big and small. If we do not have the Mechanics Lien Act to protect our payment, businesses are putting themselves at an even higher risk of going out of business and there will be fewer startups because of that risk. With today’s economy, the last thing we need is to put more risk on the business owner. I truly hope that the appeal court supports the lower court’s original decision and gives the business owner priority.

  • Duffy Construction Ltd
    March 20, 2014 - 14:29

    The Mechanic's Lien Act is the one thing that has left some comfort to a contractor that he can be protected from a developer or owner not paying for equipment, labour & materials being used on a project. In this case with Curran & Briggs, it appears to me that the Bank of Montreal wants to take security on Curran & Briggs's work that was already completed & paid for. If The Bank of Montreal had taken the proper security before the project was started, they would not have been in this position at this time. It is my feeling that if this appeal over turns the original Supreme Court's decision of Aug, 2013, it will be a sad day for all contractors. All the best to Curran & Briggs & I am sure the court's ruling will stand true.

  • Joe Murphy
    March 20, 2014 - 09:32

    The Mechanics’ Lien Act has provided priority of payment protection to Island contractors for their contract work when an owner/developer fails to pay. This has worked well over the years and was confirmed by the Supreme Court of PEI Trial Division’s decision in August 2013. However, there is currently an appeal of this decision by a mortgage holder before the Supreme Court of PEI Appeal Division challenging the Supreme Court of PEI Trial Division’s decision. Case in point - Curran & Briggs, the contractor, and the Bank of Montreal, the mortgage holder in a subdivision development in the Charlottetown area. If the Trial Division’s Court’s decision is overturned by the Appeal Division, then not only Curran & Briggs but the whole construction industry of PEI will be greatly impacted financially. The PEI Road Builders & Heavy Construction Association fully supports Curran & Briggs and all Prince Edward Island construction industry contractors in agreeing with the Supreme Court of PEI’s Trial Division’s decision of August 2013 granting priority of payment protection to the contractor under the Mechanics’ Lien Act.

  • Joe Murphy
    March 20, 2014 - 09:31

    The Mechanics’ Lien Act has provided priority of payment protection to Island contractors for their contract work when an owner/developer fails to pay. This has worked well over the years and was confirmed by the Supreme Court of PEI Trial Division’s decision in August 2013. However, there is currently an appeal of this decision by a mortgage holder before the Supreme Court of PEI Appeal Division challenging the Supreme Court of PEI Trial Division’s decision. Case in point - Curran & Briggs, the contractor, and the Bank of Montreal, the mortgage holder in a subdivision development in the Charlottetown area. If the Trial Division’s Court’s decision is overturned by the Appeal Division, then not only Curran & Briggs but the whole construction industry of PEI will be greatly impacted financially. The PEI Road Builders & Heavy Construction Association fully supports Curran & Briggs and all Prince Edward Island construction industry contractors in agreeing with the Supreme Court of PEI’s Trial Division’s decision of August 2013 granting priority of payment protection to the contractor under the Mechanics’ Lien Act.

  • Island Coastal Services Ltd.
    March 12, 2014 - 15:04

    All contractors, subcontractors, material suppliers and service providers should be interested in this case. If weaknesses in the current version of the Mechanics' Lien Act are exposed during this appeal process it will be incumbent on all stakeholders to encourage legislators to make the necessary changes to strengthen the Act so that it works as intended. Another aspect of construction activity that is being highlighted by this case (and other recent projects) has to do with under-financing of projects. In most cases where Mechanics' Lien Holdback (in P.E.I. the rate is 15%) is identified on contractor invoices the owner does not borrow the holdback monies and set the funds aside. Instead he saves on interest costs by paying the net invoice amount. Effectively, the contractors are helping to finance the project. If a project runs into financial trouble, the holdback monies cannot be borrowed and consequently are not available for distribution. So, a contractor who has performed 100% of his work may only receive payment to 85% or less for the work performed. Not a good scenario. Economic conditions are changing and construction financing is not easily obtained. The construction industry does not often have the opportunity to scutinize business plans or financing arrangements before entering into construction contracts. Our major form of protection is the Mechanics' Lien Act. If it is determined that this protection is an illusion the consequences for the construction industry will be huge. Every legal case is decided on its own merits. Even if Curran and Briggs Ltd. is successful (and we hope they are) it does not mean the Act should not be strengthened to provide the required protection to owners, contractors and suppliers. Perhaps this case is a needed wake-up call. Good Luck to Curran and Briggs Ltd.

  • FitzGerald & Snow (2010) Ltd.
    March 10, 2014 - 15:38

    The mechanic lien legislation is the primary means available to a contractor when an owner and/or developer defaults form bankruptcy, etc. Financial agreements between a developer/owner and lending institution should in no way prevent the contractor from receiving payment for work completed as these agreements are not part of the contract and details of the agreement are not privy to the contractor. Contractors in numerous instances have to provide contract security by means of a certified cheque or bond to a client before a contract commences for their protection to ensure the project is completed if the contractor goes bankrupt. Contractors need to ensure that the courts uphold the contractor’s priority on the mechanics lien or the method of payment to contractors will have to be revised to protect contractors as there is no other avenue available to the contractor. The integrity of the mechanic lien provides confidence to the contractor to enter into contracts with clients. Without this confidence, it has the potential to have a significant negative impact on the construction industry in PEI.

  • Precision Mechanical Inc.
    March 08, 2014 - 15:19

    I feel the decision that comes down from this appeal has the potential to change how construction takes place on PEI. The original ruling was clear in that Curran & Briggs have priority over the mortgage holder. If this is not the ruling, it leaves island contractors with no support at all if the developer of a project goes bankrupt . Island contractors are part of the small business community who hire local citizens, buy local products/ materials and pay provincial tax so the provincial legislation has to protect the contractors in order to allow the island economy to grow. I sat in on both the March 2013 hearing and the appeal this week as our company has also been involved in a project where the developer filed for bankruptcy protection leaving us owed a significant amount of money. Curran & Briggs operate on Island Values, " Trust & Fairness". Let's hope this appeal does not make contractors have to change how we conduct business in the future by requiring payment first.

  • Precision Mechanical inc.
    March 08, 2014 - 07:43

    I feel the outcome of this case is very important on how construction will be carried out on PEI in the future. The ruling from the March hearing upholds the only protection contractors have to get paid when a developer goes bankrupt. Contractors employ Islanders, purchase materials on PEI, pay taxes- all factors in advancing the local economy. The Mechanics Lien Act is in place to protect contractors by giving them priority. I have set in on the 2013 March court session and the appeal hearing this week as our company is unfortunately also involved in a project that ended in bankruptcy with a significant amount owing to us. It is companies such as Curran & Briggs that conduct business on old " Island Values" -- Trust & Fairness, that take risk every day. If the banks win here Island contractors will have to adapt with the new order of the day , " Get Paid Up Front".

  • The Island Construction Limited
    March 07, 2014 - 10:17

    Mr. Kennedy is correct – the Mechanics’ Lien Act is short, simple and straightforward. A contractor’s lien arises when work begins and subsequent loans, mortgages or other security cannot supersede the priority of the lien. This priority is often the only security that the contractor has, as opposed to the numerous options lenders have at their disposal to secure their loans. The Act explicitly recognizes this priority. In our opinion, the trial judge correctly ruled in favour of Curran & Briggs. If the limited protection afforded to contractors in the Act and confirmed by the trial decision is not upheld, the construction industry will need to adapt very quickly, to the detriment of contractors and developers alike.

  • Peter Brown Bayside Builders
    March 07, 2014 - 09:47

    This is a huge reversal of exposure for contractors/suppliers and their employees. And a very costly to our whole Island Economy. Nobody will work for anyone without cash in hand. I pray justice and common sense will prevail.

  • KIngs County Construction Limited
    March 07, 2014 - 07:25

    If we as a contractor in the construction industry are not going to be protected by the mechanics lien act then we will not be able to work for developers without being paid up front for the work. It is terrible that Curran and Briggs have to go through this and hopefully justice will be served.

  • Rick Kennedy
    March 07, 2014 - 07:08

    As an owner of C&B I am obviously biased in my wishes for this case. But I can say that I am not sure anyone knows more about this case than I do and the facts speak for themselves. The Mechanic's Lien Act is a relatively short and easy read and it does offer protection to a contractor or supplier of goods in cases like this one. If a bank, and in this case the Bank of Montreal, thinks they should ALWAYS rank first in cases like this failed development (keeping in mind banks normally have other security to minimize their risk - that is expected in today's business world) would basically remove the only security a contractor/supplier of goods has to ensure they get paid. Fair? I think not. The intention of the Mechanic's Lien Act? Again, can't see it.