Liquidity issues within the construction industry have only been exacerbated by the COVID-19 pandemic. Faced with the high-profile collapse of major contractors in the region, the UAE has taken strides to improve upon its existing Bankruptcy Law (Law 9 of 2016) to ensure that it remains capable of facing the very modern challenges presented by the current climate. This includes the introduction of provisions which give debtors limited reprieve in circumstances of “Emergency Financial Crisis” under Law 9 of 2019 amending the Bankruptcy Law.
In Royal Bank of Canada v. A-1 Asphalt Maintenance Ltd. the Court was asked to determine the priority of claims in a bankruptcy between Royal Bank of Canada (the "Bank"), a secured creditor of the bankrupt, A-1 Asphalt Maintenance Ltd. ("A-1") and The Guarantee Company of North America (the "GCNA") a bond company that paid out 20 lien claims and was subrogated to those rights under the Construction Lien Act ("CLA").
The Supreme Court of Canada today released its highly anticipated decision in Iona Contractors Ltd. v Guarantee Company of North America, 2015 ABCA 240 dismissing the application for leave to appeal by the Trustee in Bankruptcy (the "Trustee") of the bankrupt, Iona Contractors Inc. ("Iona").
Iona Contractors Ltd. v. Guarantee Company of North America
The Alberta Court of Appeal released its much anticipated decision addressing the interaction between the trust provisions of the Builders’ Lien Act (“BLA”) and the Bankruptcy and Insolvency Act (“BIA”) in Iona Contractors Ltd. v Guarantee Company of North America, 2015 ABCA 240 on July 16, 2015.
In the recently released Judgment in Bank of Montreal v. Peri Formwork Systems Inc.1, the British Columbia Court of Appeal was called upon to decide whether a Monitor, under the Companies’ Creditors Arrangement Act (“CCAA”)2, or a Receiver, under the Builders Lien Act 3, could borrow monies to complete a development project in priority to claims of builder’s liens registered against the project.
An English rugby club (an unincorporated association of its members) engaged the services of Barnes Webster & Sons (BWS), a construction company. The club’s treasurer signed the contract, which was witnessed by Davies, the club’s president. The club agreed to pay BWS a fixed price plus additional amounts for certain variations in the work, should they arise. The variations were required, but the club did not pay the £147,000 bill for them that BWS presented. BWS made a demand on Davies personally, which he moved to set aside.
In the construction sector solid cash flow throughout the supply chain is the lifeblood of most projects, no matter what size, and is arguably the single most important factor in ensuring that a project reaches its conclusion. However, the cumulative effect of various other factors such as Brexit, escalating global energy prices, the outlawing from 1 April 2022 of the use of the red diesel usage for construction plant, super inflation, higher material and labour costs and the end of government COVID-19 support schemes has led to increased lending costs and smaller profit margins.
With a growing number of projects facing financial difficulty, the importance of maintaining leverage for securing payment is greater than ever. The project itself remains a prime security target for any contractor, subcontractor or supplier for assuring appropriate attention is given to their claims and that payment will be forthcoming in a timely and unencumbered manner. Some very recent developments in the lien realm emphasize the ongoing attention that is being given to lien statutes and the opportunity they provide for maximizing those considerations of security and leverage.
On April 14, 2016, the priority of statutory trust protections afforded to subcontractors and suppliers under Alberta’s lien legislation was strengthened: the Supreme Court of Canada dismissed an appeal in Iona Contractors Ltd. v. Guarantee Company of North America, 2015 ABCA 240, thereby bolstering the priority of the trust even in the face of a bankrupt general contractor.
Pan Canadian Mortgage Group v. 679972 B.C. Ltd., 2013 BCSC 1078 (Pan Canadian), addresses the nature and priority of a purchaser’s lien, which, in general terms, is a financial charge that results when a purchaser pays a deposit toward the purchase price under a contract of purchase and sale.