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.
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.