Synergy Projects Ltd v Destiny Bioscience Global Corp

Court of Queen’s Bench of Alberta

Citation: Synergy Projects (Destiny) Ltd v Destiny Bioscience Global Corp,

2022 ABQB 384

Date: 20220607

Docket: 2003 07757

Registry: Edmonton

Between:

Synergy Projects (Destiny) Ltd. and Synergy Projects Ltd.

Plaintiffs

- and -

Destiny Bioscience Global Corp. Destiny Biotech Inc. and AAA Self Storage Depot Inc.

Defendants

_______________________________________________________

Reasons for Judgment

of the

Honourable Justice M. J. Lema

_______________________________________________________

A. Introduction

[1]

A design consultant to a tenant filed a lien against the landlord’s fee-simple title after the

tenant failed to pay its invoices.

[2]

Was the landlord an “owner” per the Builders’ Lien Act, such that its title was lienable

i.e. as distinct from the tenant’s leasehold interest (which clearly was)? If not, can the lien be

treated, via the BLA’s curative provision, as a lien against the leasehold interest?

[3]

The answers are no and no.

Page: 2

B. Statutory definition

[4]

Here is the BLA definition of “owner”:

“owner” means a person having an estate or interest in land at whose request,

express or implied, and

(i)

on whose credit,

on whose behalf,

(ii)

(iii) with whose privity and consent, or

(iv) for whose direct benefit,

work is done on or material is furnished for an improvement to the

land and includes all persons claiming under the owner whose

rights are acquired after the commencement of the work or the

furnishing of the material [.] [para 1(j)] [emphasis added]

C. Was 718 an “owner” so defined?

All agree that the landlord (718721 Alberta Ltd) is a person “having an estate or interest

[5]

in the land” in question.

No express request

[6]

On the “request” aspect, the design consultant (Smart Grow Pros, LLC) argues that 718

expressly requested that Smart Grow provide its consulting services here.

[7]

It anchors that position exclusively in the terms of 718’s lease with the tenant (Destiny

BioScience Global Corp). According to Smart Grow, the lease obliged Destiny to construct one

or more building on the leased lands, effectively at 718’s request. By extension, it says, 718

necessarily requested Smart Grow to provide its services to assist in the construction of the

building(s).

[8]

[9]

Smart Grow framed that arrangement as an “express request” by 718 for its services.

I reject that framing. Here I adopt and accept the receiver’s description of 718’s

involvement (i.e. effective non-involvement) in the construction process and with Smart Grow:

The only document produced connecting 718 to the [construction] Project is the

Lease.

718 did not contract with [the prime contractor] to construct the Project: Destiny

did.

718 did not retain Smart Grow to provide the Work, and 718 is not a party to the

[consulting-services] agreement between Smart Grow and Destiny.

The Lease does not provide for the payment of tenant inducements by 718, and

from the Receiver’s review of the books and records of Destiny, there is no

evidence of tenant inducements being paid by 718 to Destiny.

Page: 3

The Lease contains provisions which gave 718 the right to approve plans,

specifications, licenses and permits for the improvements to be made on the

Lands prior to construction commencing. Nothing more.

No evidence has been adduced of any dealings or communications whatsoever as

between 718 and Smart Grow or between anyone else and 718 relating to the

[construction] Project.

No evidence has been adduced to establish that 718 had any involvement in the

process of construction.

… the corporate representative of [the prime contractor] … was questioned on his

Affidavit Proving Lien …. At questioning [his] evidence regarding 718’s

involvement was that:

a. No one from 718 ever attended the regular meetings on site in relation to the

construction, and he had no knowledge of them attending at the site for any

reason;

b. 718 did not authorize or direct the work done by [the prime contractor] on the

Project;

c. 718 was never invoiced [by] [the prime contractor] for work on the Project;

d. He had no knowledge of 718 ever being invoiced by the prime design consultant

[presumably meaning Smart Grow] on the Project;

e. 718 never provided any direction regarding the preparation of any design in

relation to the Project;

f. The only contract between 718 and the [prime] contractor was for some soil

remediation; and

g. 718 did not provide any supervision with respect to the construction of the

Project. [footnotes omitted]

[10] In these circumstances, it is obvious 718 did not “expressly request” anything of Smart

Grow: they had no dealings or contact.

[11] Smart Grow effectively acknowledged this by pointing only to the lease terms (or some

of them) i.e. as the source of 718’s “request” for its services.

No implied request either

[12] If any request was made, it was implied, not express. As explained below, I find no

implied request either.

[13] Per Smart Grow, these are the key lease terms reflecting 718’s request for its services

(underlining emphasis by Smart Grow):

1.2(c) Building” means the approximately 100,000 square foot building with the

capability to expand to 300,000 square feet and related structures, improvements

and facilities that the Tenant [Destiny] will construct on the Leased Lands.

[…]

2.1 Landlord’s Work

Page: 4

The Landlord shall perform the Landlord’s Work efficiently, diligently and in a

good and workmanlike and timely manner in accordance with all applicable laws,

ordinances, regulations, permits and licenses.

2.2 Tenant’s Work

The Tenant [Destiny] shall:

a. before starting the Tenant’s Work, provide the Landlord

with the working drawings, plans and specifications for the

Building and related improvements and structures for the

Landlord’s approval which approval will not be

unreasonably withheld or delayed;

b. obtain and maintain all permits, licenses and approvals

required to perform the Tenant’s Work and operate its

business including, without limitation, all required

development, building and occupancy permits. All

applicable permits, licenses (other than the occupancy

permit) and approval must be submitted to the Landlord for

its approval (which will not be unreasonably withheld or

delayed) before commencement of the Tenant’s Work; and

c. perform the Tenant’s Work

i.

in a good and workmanlike manner in

accordance with all applicable laws,

ordinances, regulations, permits, licenses

and approvals; and

ii.

efficiently and diligently in order to have its

facilities completed and ready to operate on

or before the Commencement Date.

2.3 Access

After execution of this Lease the Tenant shall have full and unrestricted access to

the Leased Lands for the purpose of performing the Tenant’s Work.

2.4 Mutual Cooperation

It is understood that the parties will be performing their respective work

concurrently and in so doing they shall share unrestricted access to the Leased

Lands and each of them shall act reasonably with the coordination of the work to

avoid interference with the other.

[…]

7.2 Demolition

Neither party shall demolish or move the Building or any other buildings on the

Leased Lands unless required to do so by the Authorities [defined in para 1.2(b)

as “any governmental or quasi-governmental authorities having jurisdiction over

the matter at hand …”]

Page: 5

9.1 Tenant’s Obligations

The Tenant shall at its own costs and expense maintain and repair the Leased

Lands (including, without limitation, the Building and other buildings, structures

and improvements thereon and all related systems including, without limitation,

HVAC, mechanical and electrical systems. On the expiration or earlier

termination of the Lease or the surrendering of possession of the Leased Lands:

(a) the Building and all other buildings, structures and improvements to the

Leased Lands shall become the absolute property of the Landlord with the

exception of the Tenant’s fixtures and equipment which the Tenant must remove

and if it fails to do so the Landlord may do so at the Tenant’s expense; and (b) the

Tenant will peaceably quit and deliver up vacant possession of the Leased Lands

including the Building and other buildings structures and improvements thereon

to the Landlord and will leave same in good repair and condition in compliance

with its repair obligations, reasonable wear and tear not inconsistent with prudent

maintenance only excepted. The Tenant shall repair any damage caused by its

removal of its fixtures and equipment.

[…]

Schedule C

Landlord’s Work

The Landlord shall construct at its sole cost and expense an additional approach

off 9^thAvenue in a location mutually determined by the Tenant and Landlord

acting reasonably. Such approach and location to comply with municipal

requirements.

The Landlord shall strip, compact and gravel the area highlighted in blue on

Schedule C in accordance with the Tenant’s approved site drainage plan. The

Landlord will endeavour to perform this work once the following Alta-Link utility

right of ways have been discharged from title, URW 1002 MJ and URW 3862

VF. All materials placed in the previously encumbered utility right of way area to

be sourced from existing on-site materials where the new proposed building(s) are

located. [emphasis added by Smart Grow]

Schedule D

Tenant’s Work

The Tenant shall be responsible for all work and costs with respect to the construction of

the Building and all related improvements and structures required for the Tenant’s business

operations save and except only for the Landlord’s Work.

The Tenant shall submit to the Landlord working drawings of any proposed

Tenant’s Work to the Leased Lands, which drawing must be approved by the

Landlord (such approval not to be unreasonably withheld) prior to

commencement of such work.

Page: 6

It is the Tenant’s responsibility to secure any and all necessary building permits

and approvals required by Leduc County for all Tenant’s Work. Such permits

must be secured and copies provided to the Landlord before any work shall

commence. The Tenant shall also be responsible for making application for a

certificate of occupancy as required by Leduc County.

[14] In a nutshell, Smart Grow sees these provisions (collectively) as obliging Destiny to

construct one or more buildings on 718’s lands. In its view, that translates to 718 requesting both

that such work be performed and that suppliers like Smart Grow provide services to facilitate it.

[15] I disagree.

[16] While the lease clearly contemplated Destiny constructing one or more buildings, it did

not actually oblige Destiny to do so in the sense of making Destiny accountable to 718 for failing

to construct, as explained below.

Rent not tied to state of construction

[17] Destiny’s obligations to 718 under the lease were effectively the same whether any

buildings were constructed or not:

 Destiny’s “ground rent” (i.e. its base rent), detailed in ss 1.1(c), was payable

“from and after the Commencement Date” (s 4.1 of the lease);

 “Commencement Date” was defined as “the earlier of

o January 1, 2019; and

o the day after the Tenant opens for business ….” (ss 1.2(e)); and

 even if Destiny were not “open for business” by January 1, 2019, and whether

such failure was due to a failure to complete construction or otherwise, the base

rent became payable at that point and continued to be payable i.e. regardless of its

“open for business” state or the state of construction (if any).

Rent not linked to tenant’s revenues or profits

[18] No portion of the rent was linked to Destiny’s revenues. While the lease obliged Destiny

to pay “Additional Rent”, such was limited to “sums of money or charges required to be paid by

the Tenant under [the] Lease (except Ground Rent) to the Landlord or otherwise” (ss 1.2((a)).

Per the lease, such sums or charges were limited to “all charges, impositions and expenses of

every nature and kind relating to the Leased Lands as if [the Tenant] were an owner thereof …”

(para 4.3). In other words, no revenue- or profit-linked rent.

Lease binding even if no construction

[19] As well, the lease’s “Tenant Conditions Precedent (“This lease is subject to the following

conditions precedent …”) were limited to:

 “the Tenant obtaining all permits, licenses and approval necessary for the

construction of the Tenant’s Work and the operation of its business on the Leased

Lands on or before September 30, 2018” and

 “the Tenant obtaining approval to cross the Alta Link utility right of ways by

December 31, 2018.”

Page: 7

[20] The tenant’s obligations were not subject to the completion or even the start of

construction of any given building. Instead, its obligations, including the payment of the Ground

Rent (as noted) were triggered once the “obtain permits, licenses and approvals” and “utility

rights of way” conditions were satisfied (both before the end of 2018) and (as noted) the arrival

of January 1, 2019 (when the base rent became payable).

Rent payable even if certain approvals by landlord withheld

[21] Per an element of the “Tenant’s Work”, the landlord’s approval of “working drawings,

plans and specifications for the Building and related improvements and structures” was required

(ss 2.2(a)). While such approval could not be “unreasonably withheld or delayed”, the lease

implicitly recognized the absence of such approval where reasonably withheld or delayed,

without any nullifying or other undermining of Destiny’s obligations to 718, including paying

the base rent.

Same if other approvals withheld

[22] Same for “all applicable permits, licenses (other than the occupancy permit) and

approvals”, which also required landlord approval (ss 2.2(b)). Such approval could not be

“unreasonably withheld or delayed”, but (implicitly) it could be reasonably withheld or delayed,

again without any dilution of Destiny’s obligations to 718.

“Building” loosely defined

[23] Beyond that, “Building” was defined in open-ended and general terms i.e. “the

approximately 100,000 square foot building with the capability to expand to 300,000 square feet

and related structures, improvements and facilities that the Tenant will construct on the Leased

Lands.”

[24] Per this definition, what particular building or buildings were constructed were matters

for Destiny to decide and essentially matters of indifference for 718. Again, its rent entitlement

was triggered by the identified conditions precedent being satisfied and January 1, 2019 arriving,

with no linkage to whether the construction of any particular building (of whatever

specifications) was completed or even started.

No actual commitment by tenant to complete construction by particular date

[25] As between 718 and Destiny, as noted, the latter was “responsible for all work and costs

with respect to the construction of the Building and all related improvements and structures

required for [its] business operations …” (Schedule D).

[26] Per ss 2.2(c), Destiny was obliged to perform that and its other Tenant’s Work (obtaining

permits, etc. and submitting drawings, etc. to 718 for approval) “efficiently and diligently in

order to have its facilities completed and ready to operate on or before the Commencement

Date.”

[27] As noted, that meant the earlier of when it opened for business and January 1, 2019.

[28] However, that target date was effectively aspirational.

[29] First, the “efficiently and diligently” language imports a “best efforts” standard. If

completion of Destiny’s facilities (however defined) by the target date was an absolute

requirement i.e. independently of whether Destiny had been “efficient” or “diligent”, those

Page: 8

buffer terms would not have been used (e.g. “Destiny shall complete its facilities by no later than

January 1, 2019”).

[30] Second, the lease did not oblige Destiny to tackle the construction on its own, instead

implicitly authorizing it to employ a construction contractor and others to perform the work. This

“work efficiently and diligently” clause must be understood as obliging Destiny only to do its

best to play its role, whether central or marginal, in the construction process. Destiny was not

guaranteeing that, even with its own best (efficient and diligent) efforts, any particular

building(s), let alone its full “facilities” (again, however defined) would be complete by any

particular date.

[31] Nothing in the record showed that the project’s failure here was attributable to any lack

of efficiency or diligence on Destiny’s part. In any case, whatever led to the project going off the

rails, it is not obvious or apparent, on this record, that the failure represented any kind of lease

breach by Destiny.

[32] Third, and most important, as already noted, nothing in the lease’s benefits for 718

hinged on whether Destiny’s facilities were completed, or even started, by January 1, 2019 or

any particular date.

[33] It is hard to conceive how failure to meet that benchmark, whether by Destiny or others

(or combined), represented a lease breach i.e. as giving rise to any enforceable right for 718 i.e.

in the sense of “You missed that target; look at the prejudice caused to me.”

No implied request by 718 even if lease obliged Destiny to construct

[34] Destiny anchored its “implied request” theory largely on the lease obliging Destiny to

build and that obligation effectively being a request by 718 that construction occur and, by

extension, a request for services by suppliers such as Smart Grow.

[35] On this point, it cited Consolidated Gypsum Supply v BLR Construction (1984) 55 AR

340 (Smith J.). There, the City of Edmonton leased lands to the Alberta Housing Corporation,

which in turn contracted with a contractor to build a housing project. The contractor in turn

contracted with a subcontractor, who liened the City’s title after non-payment by the contractor.

[36] Smith J. found that:

By the terms of the [City-AHC] lease, the City requires the tenant [AHC] to

construct the public housing units and specifies the exact form the improvements

must take. This provision in a lease is sufficient to make the lessor an owner as

defined in … the Act.

[37] But Smith J. did not reproduce the key lease terms or otherwise explain why they

justified this characterization.

[38] As well, he anchored that conclusion on Northern Electric Co Ltd v Manufacturer’s

Life Insurance Co, [1977] 2 SCR 762, where the tenant was effectively a construction contractor

for the owner, the owner was to receive not only base rent but also a share in the ongoing rental

income generated by the development, the development contemplated “a building of a specified

description”, the owner was effectively the financier of the project (“the construction was to be

paid for by [the owner]”), and the owner inspected the ongoing work.

Page: 9

[39] That core involvement, from which the “request” element was found, is sharply different

from 718’s very limited involvement here.

[40] I agree with Graesser J.’s assessment that “[Consolidated Gypsum] is [not] consistent

with Fung [discussed further below] or Stealth [Enterprises Ltd v Hoffman Dorchik, 2000

ABQB 311 [Hawco J.] (affd 2003 ABCA 58) and ... no longer represents the state of the law in

Alberta regarding a “request”: Royal Bank of Canada v 1679775 Alberta Ltd, 2019 ABQB 139

at para 182.

[41] In Stealth, the owner of an apartment block agreed to sell to a condominium-intending

party, which started but could not complete various renovations. Hawco J. found that the owner

was not an “owner” per the BLA definition, stressing its minimal participation in the renovation

work:

… I am satisfied that [the owner] knew generally what was planned, what was

happening on a fairly regular basis, and what was going on. Unfortunately

for the [lien claimant], this is not enough. It is clear from the decision in Royal

Trust v Bengert Construction Ltd [cited below] that whether there is a “request” in

any given case is a question of fact. While that request may be express or implied

in the circumstances, in all of the cases which Laycraft CJA reviewed in that

decision, there was: “an active participation by the entity eventually held to have

made “request” and so to be within the definition of ‘owner’.” [italicized

emphasis in original]

…

In this case, there was no active participation by [the owner]. [It] may have

directed or given approval to [the general contractor] to carry out certain work

with respect to cleaning apartments so they could be re-rented; however, that

work was relatively minimal. Certainly [the owner] obtained a benefit from the

work which was done in that some of the suites had been upgraded and the lobby

was expanded and made more visually appealing. Work had been done on the

exterior. But none of the renovations were carried out at their request. They

could [not] have cared less about condominiumizing this building. They had

no say in what was done, they gave no directions with respect to how

anything should be done. The only way in which they stood to benefit was

should the transaction not proceed, they would receive, without paying for them,

certain upgrades. … [emphasis added]

[42] Smart Grow also cited Suss Woodcraft Ltd v Abbey Glen Property Corporation, [1975]

5 WWR 57 (D.C. McDonald J.) on this aspect. But there the owner conceded the existence of an

implied request by it for the lienholder’s work on the property, accordingly with no exploration

of the facts making that concession inevitable, wise, or otherwise sensible.

[43] The mere fact of Destiny constructing did not mean that 718 was impliedly (or otherwise)

requesting any goods or services here.

No “active involvement” by 718

[44] In any case, 718 was not “actively involved” in the construction.

Page: 10

[45] Here I adopt the analysis in Royal Trust Corp of Canada v Bengert Construction Ltd,

1988 ABCA 58:

Whether there is a “request” in a given case is a question of fact. …

…

In MacDonald v MacDonald-Rowe Woodworking Co, (1964) … 39 DLR (2d) 63

(PEISC in banco), Campbell C.J. reviewed a number of cases, and in my

respectful view, correctly summarized their effect. At p 98 he said:

Analysis of [certain] cases leads us to a reasonably clear

appreciation of the concept “request” in [the PEI Act] – it must be

decided on the facts of each individual case; it does not necessarily

involve a direct communication by alleged owner to contractor; it

does involve something more than mere knowledge and

consent.

In ordinary language the word “request” indicates the idea of an

active or positive proposal, as contrasted with mere passivity

or acquiescence. Webster groups it as a synonym with “ask” and

“solicit”, synonyms which agree in meaning “to seek to obtain by

making one’s wants or desires known.” “Request”, he says, has a

suggestion of greater certainty and formality in the manner of

asking.

The Supreme Court of Canada has considered the definition of “owner” in similar

words in other statutes in three cases since 1976: City of Hamilton v Cipriani,

[1977] 1 SCR 169 …; Nor Electric co v Mfr Ins Co, [1977] 2 SCR 762 … and

Phoenix Assur Co v Bird Constr Co, [[1984] 2 SCR 199]]. None of these cases, in

my opinion, stands for the proposition that contracting with a builder, of itself,

brings one within the definition of “owner.” In all of those cases, there was an

active participation by the entity eventually held to have made a “request”

and so to be within the definition of “owner.” [paras 18, 24 and 25] [emphasis

added]

[46] In Acera Developments Inc v Sterling Homes Ltd, 2010 ABCA 198, the Court of Appeal

found “sufficient interaction” between an owner-developer and a builder to tag the former as an

“owner”:

… the [owner] was actively involved in the supervision of the construction ….

The lien claimant was contractually bound to construct improvements to a

specific standard and scope. Indeed, [the owner’s] architectural and

construction guidelines required that [it] approve the construction plans,

elevations, finished grades, finishing materials and colours, final grade slips,

setbacks, foundation designs, auxiliary buildings and fencing, and landscaping.

All such plans were approved prior to construction. The construction was

inspected by [the owner] as work progressed. In my opinion, that is sufficient to

conclude that the homes were constructed at the request of the [owner]. [para 36]

[emphasis added].

Page: 11

[47] The Court of Appeal contrasted that finding to its conclusion in K & Fung Canada Ltd v

N V Reykdal & Associates Ltd, 1998 ABCA 178, where it confirmed Master Laycock’s “no

implied request” analysis and Prowse J.’s endorsement of it. Here is Master Laycock’s key x-ray:

… the [owner-landlord’s] participation in the substantial renovations consisted of:

a. approving concept plans; and

b. approving the selection of paint for the exterior of the building.

The [owner-landlord] did not select the general contractor, did not prepare a

set of plans or approve a set of construction plans, did not control funding for

the construction, did not provide any on-site supervision or inspection; did not

receive any participation rent [--] in summary there is not sufficient evidence

that the landlord actively participated to the extent that the court ought to

find that the applicants made an implied request of the [lien claimants] to do

work or provide materials. [emphasis in original]

[48] For similar analyses and outcomes, see also Lighting World Ltd v Help-U-Build

(Edmonton) Inc, 1998 ABQB 930 (Ritter J. as he then was) (paras 15-25); 1276761 Ontario Ltd

v 2748355 Canada Inc, 2005 24749 (ONSC) (Bryant J.) (paras 9-12); and Lincoln

Mechanical Contractors v Cardillo, 2011 ONSC 664 (Henderson J.) (paras 11-26).

[49] And Master Prowse’s helpful survey of implied-request-by-landlord cases in Labbe-

Leech Interiors Ltd v TRL Real Estate Syndicate (07) Ltd, 2009 ABQB 653 at paras 4-12.

Applying those cases, he found a landlord’s partial control over work scheduling and payment of

a leasehold-improvement allowance were insufficient to show an implied request for a

contractor’s services.

[50] And his decision in Encore Electric Inc v Haves Holdings, 2017 ABQB 803 (payment

of leasehold-improvement allowance, with no “participation rent” and only “relatively minor”

involvement in construction, insufficient to show such a request – paras 18 and 19).

[51] Same here: even if the lease obliged Destiny to construct a building or buildings, 718

played a largely a passive – “knowledge and consent” – role i.e. was not actively involved in the

construction process in any material way.

[52] Construction was effectively Destiny’s affair, as the lease reflects. The “Building”

definition refers to the building and other facilities “that the Tenant will construct.” The core of

the “Tenant’s Work” was its responsibility for “all work and costs with respect to the

construction of the Building and all related improved and structures … save … for the

Landlord’s Work.” (The latter work was limited to constructing a certain connector road and

performing certain drainage-related work on a portion of the Property -- nothing to do with any

building construction.) The tenant’s duty to work “efficiently and diligently” (discussed further

below) was “in order to have its facilities” ready by a defined point.

No contribution to construction costs directly or indirectly

[53] Finally, the lease did not oblige 718 to pay any amount towards building construction,

whether directly, by leasehold-improvement allowances, or otherwise.

Conclusion on “implied request” (none here)

Page: 12

[54] I do not accept Smart Grow’s argument that the identified-by-it or any other lease terms,

on their own or combined, amounted to an implied request by 718 that Destiny construct any

particular building.

[55] The prime mover here was Destiny: it did not pursue the construction here because it was

obliged to 718 to do so or even because 718 requested it. Destiny pursued what was effectively

its own project because it wanted to.

[56] This was not a joint venture or co-production between 718 and Destiny.

[57] 718 was effectively a bystander, collecting its rent and observing, but not requesting, any

construction. It was largely in the background as Destiny went about constructing “its” building

and “its” facilities.

[58] Even if the lease obliged Destiny to construct, it was constructing on its own behalf, not

somehow constructing for itself and 718.

[59] Whether 718 ultimately expected to benefit and, if so, whether such benefit(s) were direct

and indirect are different questions (explored below).

[60] This case is at the far (limited participation) end of the “involvement” spectrum.

[61] In all of these circumstances, it is not appropriate to regard Destiny’s requests for labour

and materials (including Smart Grow’s services) as impliedly made on 718’s behalf as well.

[62] For the reasons outlined above (including the limited-participation factors highlighted in

para 9), I find no “implied request” here by 718 for Smart Grow’s services.

[63] Given my earlier “no express request” conclusion, that is sufficient to remove 718 from

the “owner” definition.

[64] I note that this outcome squares with a forecast offered by E. Mirth, Q.C. in his article

“Improvements by Tenants: -- Who is Lienable?” [1987] 25 Alberta Law Review (No. 3) 333 at

360, commenting on a prototypical ground lease (somewhat akin to that here – see bolded

similarities):

By a ground lease the landlord typically leases land only to the tenant, who

develops a building for his own specific use or for sublease to third-party

tenants. Typically, the ground lease will require the approval of the landlord of

plans and specifications, will stipulate the standard or quality of work, and will

permit inspection a lessor’s engineer. Typically also, there will be no financing

offered by the landlord. Financing would be by independent third-party loan

and would not involve the landlord at all. In this example there is clearly

nothing that could be identified as a compensation going from the landlord to the

tenant for the construction of the building, other than perhaps the benefit of the

rental flow. On the other hand, when the lease terminates or expires the

building becomes the property of the landlord and the landlord does have some

limited involvement in the construction process through plan approval and

inspections. Further, the lease will inevitably provide an undertaking by the tenant

to build the building in question and will often include the requirement that it be

built within set time limits and to certain standards. The lease likely provides as

well that fire loss will be payable to the landlord and will be applied to

reconstruction unless the lease is terminated ...

Page: 13

On balance, one would expect that this situation does not include much risk on the

landlord’s part of liability for the tenant’s liens .... [emphasis added]

[65] I explore below whether, if the necessary “request” had been found, any of the final-four

criteria (“on whose credit”, etc.) were present.

D. No “direct benefit” either

[66] Smart Grow only pointed to one of those criteria: “direct benefit.”

No rent-related direct benefit

[67] I see no such benefit here, where 718’s rent entitlement was the same whether

construction of any particular building was completed or even started and where 718 did not

receive any profit- or revenue-based rent.

No reversion-related direct benefit

[68] Any “reversion” benefit, whether stemming from a lease forfeiture or natural termination

(ss 9.1, 14.1 and 14.2) was subject to eclipse by Destiny’s exercise of an option to purchase at the

appointed times (ss 5.1 to 5.4).

[69] In any case, a landlord’s reversion does not qualify as a “direct benefit”, per Graesser J. in

Royal Bank of Canada v 1679775 Alberta Ltd, 2019 ABQB 139:

All three of the Supreme Court cases, Northern Electric [[1977] 2 SCR 762], Hamilton v

Cipriani [[1977] 1 SCR 69] and Phoenix v Bird [[1984] 2 SCR 199] make it clear that

there must be some immediate benefit for there to be a “direct benefit.” ...

It would, in my view, be inappropriate to find a “direct benefit” from a

reversionary interest that would only materialize 80 years hence, or from a

speculative contingent interest based on a possible future default by a tenant.

The same principles apply to the possibility of a forfeiture arising from a

purchaser’s default.

… The inevitability of a landlord’s reversionary interest in tenant improvements

has not by itself been found to be a direct benefit so as to make a landlord an

owner. More is required for that. …

It is true that the Developers stood to potentially benefit if … Reid-Built

defaulted in its obligations under the lot purchase agreements, Reid-Built was

then unable to cure any such defaults and, finally, the lots were then forfeited

or foreclosed by the Developers against Reid-Built. However, that possibility is

far too speculative and dependent on too many contingencies to be

considered to be a “direct benefit” to the Developers.

I have difficulty distinguishing Georgetown's situation from that of a landlord

who gets to keep the improvements at the end of the tenant's term, or in the

event the tenant defaults under the lease and the landlord has the right to

terminate it. As I discussed above, there is no landlord-tenant case of which I

am aware where the reversion, or ability of the landlord to keep the

Page: 14

improvements on the tenant's default has been characterized as a "direct

benefit" in itself. The landlord, or here Georgetown, may have received a benefit,

but the benefit cannot be characterized as a "direct" benefit. [paras 147, 149, 150,

154, 156 and 190 [emphasis added]

[70] And Industrial Refrigerated Systems v Quality Meat Packers, 2015 ONSC 4545

(Perell J.):

It is almost inherent or inevitable that a landlord will benefit if its tenant

makes improvements to the leased premises, however, with respect to factor

(d), the “direct benefit” (one of the four factors that are required for a lien

claim in addition to an expressed or implied request), there must be more

than the benefit as a reversioner: Pinehurst Woodworking Co. v.

Rocco, supra; Haas Homes Ltd. v. March Road Gym and Health Club

Inc., supra, at para. 17; Lincoln Mechanical Contractors, a Division of Lincoln

Plumbing & Heating Ltd. v. Cardillo, supra, at para. 30. [para 23] [emphasis

added]

[71] And Balzer’s Canada Inc v Atco Power Canada Ltd, 2004 SKQB 104 (Kovach J.):

For a landlord to be an owner under the Act, the improvement must have been for the

landlord’s direct benefit, not just any benefit. People enter contracts because they

perceive the contract as a benefit to them; the fact that the Facility benefits PCS in some

way does not in itself make the benefit “direct”. For example, Sutherland J. in Pinehurst

Woodworking Co. v. Rocco (1986), 13 O.A.C. 121 (Div. Ct.), said it was clear that

“benefit as a reversioner is not a direct benefit as referred to in the definition” of

owner under the Act. See also D.B.M. Heating & Air Conditioning Ltd. v. Lark

Manufacturing Inc. (1990), 37 C.L.R. 113; [1990] O.J. No. 319 (QL) (Ont. Master).

In Gearing [v Robinson, (1900), 27 OAR 364], the tenant renovated the interior of the

building; pursuant to the lease, the landlord had the option to terminate the lease early on

paying for the actual cost of repairs but did not exercise the option. To constitute a “direct

benefit”, the improvements must benefit the landlord when the materials are

supplied. It is not enough to have a possibility of benefit in the future. [para 21]

[emphasis added]

[72] And Haas Homes Ltd v March Road Gym & Health Club Inc, 2003 8607 (ONSC)

(Sedgwick J.):

Page: 15

As to element (d), is there evidence to support a finding consistent with the case law that

the improvements made to the property by Haas were made for the direct benefit of

958670 [landlord]? The improvements were made by Haas to the tenants’ demised

premises for the purpose of fitting-up a health club. Any direct benefit to 958670’s

reversionary interest in these premises is nebulous in view of subsequent events.

Within months of completion of the improvements to the tenants’ demised premises,

the tenants stopped paying rent and abandoned the premises. They subsequently

went bankrupt. 958670 incurred major expenses fitting them up for alternative use

as business offices. There is also authority in this court that the benefit to a landlord, as a

reversioner, is not a “direct” benefit within the meaning of the definition of “owner” in

ss. 1(1) of the Act. Pinehurst Woodworking Co. v. Rocco et al (1986), 38 R.P.R. 116

(Div. Ct.). In my view, there is insufficient evidence to support a finding consistent with

the case law that the improvements made by Haas were made for the direct benefit of

958670. [para 17] [emphasis added]

[73] I note here that, per the receiver’s first, second and fourth reports, while one of the proposed

buildings was completed, another was only 40 to 50 per cent complete, with “[e]stimated costs to

complete per the original specifications [of] $50 to $60 million.”

[74] The record in insufficient for me to gauge whether, on the ground, 718 experienced a

“direct”, or any, benefit in the failed-project circumstances here.

No certainty of benefit in any case

[75] In any case, even if construction had been completed, with the lease imposing no

particular structure specifications, and with the lease potentially running for 25 years (i.e. base

term of 15 years (ss 1.1(b)) plus two potential 5-year extensions (s. 15.1)), and with “reasonable

wear and tear not inconsistent with prudent maintenance” permitted, nothing guaranteed that any

structures inherited by the landlord would have had any particular value.

[76] This is especially so given the specific (marijuana-cultivation-and-research) focus of the

proposed structures. It is impossible to predict whether such purpose-built structures (if all

completed), up to 25 years on, would have retained any particular net value for the landlord i.e.

versus being effectively worn out or, in any case, unattractive to other potential tenants at the

time.

Conclusion on “direct benefit”

[77] For these reasons, I would not have found a “direct benefit” here i.e. assuming 718 was

an “owner” per the BLA.

E. Curative aspect

[78] Smart Grow also argued that, if its lien against 718’s fee-simple interest was off-target,

the lien should be treated as “substantial compliance” towards liening Destiny’s leasehold

interest i.e. regarded as an effective lien against that interest.

Registration requirements

[79] Here are the key registration requirements for a lien, per s. 34 BLA:

Page: 16

(1) A lien may be registered in the land titles office by filing with the Registrar a

statement of lien in the prescribed form.

(2) The statement of lien shall set out

(a) the name and residence of

(i) the lienholder,

(ii) the owner or alleged owner, and

(iii) the person for whom the work was or is

being done or the materials were or are being

furnished,

(b) the date when the work was completed or the last materials

were furnished, or if the statement of lien is filed before the

completion of the contract or subcontract, as the case may be, a

statement that the work is not yet completed or the materials have

not yet all been furnished,

(c) a short description of the work done or to be done or of the

materials furnished or to be furnished,

(d) the sum claimed as due or to become due,

(e) a description, sufficient for registration, of the land and

estate or interest in the land to be charged, and

(f) an address for service of the lienholder in Alberta. [emphasis

added]

Curative provision

[80] Here is the “curative” provision (s. 37):

(1) A substantial compliance with section 34 is sufficient and a lien shall not be

invalidated by failure to comply with any requirements of section 34 unless, in the

opinion of the court, the owner, contractor, subcontractor, mortgagee or some other

person is prejudiced by the failure.

(2) When, in the opinion of the court, a person is prejudiced by a failure to comply with

section 34, the lien shall be invalidated only to the extent that the person is prejudiced by

the default.

(3) Nothing in this section dispenses with the requirement of registration of a lien.

[emphasis added]

[81] The receiver opposed any curative relief, seeing no substantial, or in fact any,

compliance, towards liening Destiny’s leasehold interest.

“Substantial compliance” analysis

[82] I find no substantial compliance and, as a result, no curable (or any) lien against Destiny.

Page: 17

[83] Here, both the right (leasehold) interest and the right interest-holder (Destiny) were

missed by Smart Grow’s registration.

[84] That is not “substantial compliance”, with a forgivable shortcoming: it is complete non-

compliance.

[85] Smart Grow’s own position reflects its awareness of the difference between 718 and its

fee-simple interest, on the one hand, and Destiny and its leasehold interest, on the other. Per

Smart Grow’s brief:

... there is no irregularity with the registration of [our] Lien against the fee simple

interest in the Lands held by 718.

Consequently, even if it were ultimately determined by the Court that [we are]

unable to assert [our] Lien or any lien rights against the leasehold interest

formerly held by [Destiny] in the Lands, this has no bearing on and is not

determinative of the enforceability of [our] lien rights as against 718.

[86] Smart Grow’s core argument was plainly that its lien against 718’s fee-simple title was

on-target, not that it was aiming at Destiny and its leasehold interest and somehow missed the

target.

[87] Depending on the facts in a landlord-tenant scenario, a lien claimant may have rights

against the tenant only, against both the tenant and the landlord, and (at least in theory) against

the landlord only.

[88] As explained above, the only “owner” here was the tenant.

[89] It was obviously open to Smart Grow to file a lien against the tenant’s leasehold interest,

even with no separate leasehold title. 718’s title reflected the registration of many liens described

as registered against that leasehold interest.

Requirements of standard lien form

[90] The standard-form lien document (Government of Alberta – Land Titles – BUL-1 – Form

A – Statement of Lien) requires the lien claimant to state (among other details) whether it

“claims a Lien under the Builders’ Lien Act in the fee simple estate OR (specify if some other

type of estate or interest applies)”, as well as the name of the person or corporation “for which

work or materials were or are to be provided.”

[91] In this case, Smart Grow correctly identified Destiny as the “work recipient.”

[92] But it explicitly identified, as the target interest, “the fee simple interest”, crossing out the

words “OR (specify if some other type of estate or interest applies” and expressly named 718 as

the fee-simple-interest holder.

[93] In this circumstance, I see the naming of Destiny as the “work recipient” as neutral. With

the “land and interest” focus on 718 and its fee-simple title, the implication is that such work was

provided at the “express or implied request” of 718 and that one (or more) of the “other four”

criteria were satisfied here, tagging 718 as the (or at least an) “owner” per the BLA definition.

(These arguments were not accepted – see above.)

Page: 18

[94] In other words, nothing in the mere naming of Destiny as the work recipient necessarily

signals any intention to tag Destiny and its leasehold interest with the lien, at least via this

registration.

[95] Smart Grow was right in asserting no “irregularity” in its registration as against 718: it

did everything it had to do, form-wise, to assert a lien against 718’s fee-simple interest.

[96] The problem for Smart Grow, as explained above, is that, despite an ostensibly correct

lien form, 718 was not an “owner” per the BLA, making its fee-simple interest unlienable.

[97] In others, it had a technically correct registration, but (in the end) no factual basis for

registering that lien.

[98] When it comes to Destiny’s leasehold interest, it had no registration at all.

[99] We are not facing a registration against Destiny’s leasehold interest that is somehow

irregular, with the task being to gauge when the “compliance” was “substantial.”

[100] Paragraph 34(2)(e) requires (as the identified form reflects) that the lien claimant include

“a description, sufficient for registration, of the land and estate or interest in the land to be

charged.”

[101] For its own reason(s), it elected to file a lien against 718’s fee-simple interest. But no lien

against Destiny’s leasehold interest.

[102] Smart’s now-found-to-be-off-target lien against 718, by definition, cannot be treated as

compliance, partial compliance or any-degree-of-compliance of its lien-registration duties as

against Destiny.

Non-registration of lien not curable

[103] The BLA’s compliance section expressly places non-registration of a lien beyond its

curative powers:

Nothing in this section dispenses with the requirement of registration of a lien.

[104] If a party registers no lien at all against a particular party or that party’s interest, the

curative provision has no role to play: it cannot relieve against complete non-compliance.

Weight of Alberta authority precludes curative relief here

[105] Smart Grow acknowledges the existence of Alberta cases denying curative relief where a

registered-against-fee-simple-interest lien should have been registered against a leasehold

interest. It referred here to Encore Electric Inc v Haves Holdings, 2017 ABQB 803 (Master

Prowse) at para 27 and Royal Bank of Canada v 1679775 Alberta Ltd, 2019 ABQB 19

(Graesser J.) at paras 159-173, both of which include (partially overlapping) catalogues of other

cases standing for the same proposition.

[106] To those cases I would add the unreported decision of Master Hanebury in Pacer

Corporation v Imperial Oil Resources Ltd, described by Master Robertson in International

Brotherhood of Electrical Workers, Local 424 v Imperial Oil Resources Ventures Limited,

2017 ABQB 434 as follows:

The respondents refer to Pacer Corporation v Imperial Oil Resources Limited,

an unreported oral decision of Master Hanebury in Action No. 1301-12187. This

application involved the same project as the one we are dealing with.

Page: 19

A transcript of the decision was provided. An application to strike a lien had been

brought in morning chambers. She had reserved and given oral reasons. The

statement of lien clearly stated that the lien was against “the fee simple

interest of Imperial Oil Resources Limited”. She noted that any interest

Imperial had was either in a leasehold interest or an interest in the mineral

rights. Following Electric Furnace Products and Canadian Helicopters she

determined that the lien was registered against the wrong estate in lands and

the error cannot be cured by section 37... [paras 94 and 95 of IBEW, Local

424] [emphasis added]

[107] I would also add, as “compare and contrast” decisions finding “substantial compliance”,

Wil-ton Construction Ltd v Amerada Minerals Corporation of Canada, 1989 ABCA 213 (lien

registered against lease in question, albeit not describing the specific interests created under it –

paras 3 and 10-12); Norson Construction Ltd v Clear Skies Heating & Air Conditioning, 2017

ABQB 544 (Bast J.) (lien registered against right land and interest in land but misnaming owner

– paras 23-29); and International Brotherhood of Electrical Workers, Local 424 v Imperial Oil

Resources Ventures Limited (cited above) (Master Robertson) (unpatented lands (not registered

at Land Titles Office); as a result, lien claimant uncertain of precise interest to claim against;

claimant “[doing] best he can by claiming a lien against the unregistered interest of the owner –

whatever it is” – paras 79-120).

[108] In each of the “compare and contrast” cases, there was partial or at least attempted

compliance at tagging the right owner and interest in question, unlike here.

Outlier case (favouring curability here) not endorsed

[109] The only case cited by Smart Grow in support of its “substantial compliance” position is

Empire Drywall Ltd v Kim (1982) 21 Alta LR (2d) 399, where Master Quinn found “substantial

compliance” where a lien, sought to be registered against a subtenant, was registered against the

landlord’s fee-simple interest. He held:

For a lien to be validly filed, it must be filed within the time allowed and

against the right land. Counsel opposing the validity of the lien submitted that

the filing against the fee simple title was tantamount to filing on the wrong

property. Counsel for the plaintiff submitted that the lien was, in fact, filed

on the very property to which the material and services had been supplied,

and that the lien was in substantial compliance with s. 25 of the Builders’ Lien

Act. No authority directly on point was cited by either counsel.

In my opinion, the lien should be treated as being filed against the right

property and should be found to be in substantial compliance with s. 25

[predecessor of s. 34 BLA] aforesaid. There was no evidence of prejudice to any

party and, in my opinion, the lien should be found valid, pursuant to s. 27 of the

Builders’ Lien Act. I note that s. 35 of the Land Titles Act, R.S.A. 1980, c. L-5,

which permits the issuance of a leasehold title, is permissive and not mandatory.

The owner of a leasehold interest is not obligated to take a leasehold title. [paras 3

and 4] [emphasis added]

[110] As far as I can tell, Empire Drywall stands alone on this point. The weight of Alberta

case law goes the other way, per the “no substantial compliance” cases identified above, the

Page: 20

cases cited in those cases, and (by inference) the identified “substantial compliance” cases

(where at least some degree of compliance in tagging the correct estate or interest was present).

[111] Master Quinn did not explain why he isolated, as core requirements, filing “within the

time allowed and against the right land.” As noted above, identification of the estate or interest

to be charged is equally a core, or base, requirement.

[112] I respectfully disagree with Master Quinn’s analysis and accept and adopt the otherwise-

consensus Alberta approach to the leasehold-interest-correct-but-fee-simple-targeted issue.

Conclusion on “substantial compliance”

[113] Section 37 exists to forgive less-than-perfect compliance with the BLA’s registration

requirements.

[114] It does not exist to waive complete non-compliance.

[115] Here, Smart Grow’s position was that 718 was the “owner” and that its fee-simple

interest was the right target. It was wrong about that.

[116] It took no steps to register a lien against Destiny or its leasehold interest.

[117] Section 37 does not authorize a complete “track switch” i.e. conversion of a lien aimed at

one party and one interest into one aimed at another party and interest.

[118] That goes beyond its perfection-of-substantial-compliance function.

F. Effect of lien-related orders

[119] As the receiver understood it, Smart Grow also argued that its position was somehow

enhanced by one or more orders by which the liens were discharged from title and certain

proceeds were substituted for the land(s) in question i.e. as security for the liens.

[120] I did not read Smart Grow’s materials as raising that argument.

[121] In any case, the receiver correctly describes (as paras 65-69 of its brief) what those orders

accomplished and their neutral effect on priorities.

G. Lien timing

[122] The receiver argued that, all aside from the merits (or otherwise) of Smart Grow’s lien

against 718, it was filed out of time.

[123] The receiver did not press this argument at the application, apparently in light of Smart

Grow’s evidence, per its affiant, that work was performed to a certain date which would make its

lien registration timely.

[124] The receiver pointed to the absence of underlying evidence (e.g. invoices or other timing-

of-work records) to prove that work had actually been performed to the claimed date.

[125] But it does not appear that Smart Grow’s affiant was cross-examined on the point.

[126] In these circumstances, I decline to make any out-of-time finding.

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H. Conclusion

[127] To recap:

 718 was not an “owner” per the Builders’ Lien Act;

 as a result, Smart Grow’s lien registered against 718’s fee-simple interest was

off-target;

 that registration cannot be treated, via the curative provision or otherwise, as a

lien against Destiny’s leasehold interest;

 the lien-related orders here are neutral on priorities; and

 I would not have found that the 718 lien was filed out of time.

[128] The receiver is entitled to its Schedule C costs of the application.

[129] I thank all counsel involved for their helpful written and oral materials.

Heard on the 29^thday of April, 2022.

Dated at the City of Edmonton, Alberta this 7^thday of June, 2022.

M. J. Lema

J.C.Q.B.A.

Appearances:

Mark Alexander

Miller Thomson LLP

Stuart J. Weatherill

Emery Jamieson LLP

Counsel for the Applicant Smart Grow Pros

Darren R. Bieganek, Q.C. / Brad Angove

Duncan Craig LLP

Counsel for the Respondent Receiver