How Close is Close Enough – Alberta Court Deems Equipment Lessor’s Lien Valid Even Though Equipment Was Never On Site

by Corbin Devlin and Moe Denny

A recent Alberta Court of Queen’s Bench decision provides an example where services may be performed on one site yet give rise to lien rights on another site. Northern Dynasty Ventures Inc v Japan Canada Oil Sands Limited considers the validity of builder’s lien claims brought by a lessor of equipment. The decision arises from an appeal of a Master’s Order declaring the lien of a lessor of equipment valid.

By way of background, the Defendant is the operator of an oil sands project near Fort McMurray, Alberta (the “Project”) and entered into a Master Agreement with Highway Rock Products Ltd. (the “Contractor”). In turn, Northern Dynasty Ventures Inc (“NDV”) and Tyalta Industries Inc. (“Tyalta”) were subcontractors to the Contractor. NDV entered into an agreement with the Contractor granting the Contractor an exclusive license to remove sand and gravel from a gravel pit located approximately 30 kilometers away from the Project site (the “Gravel Pit”), accessible by road at a driving distance of 89 kilometers. Tyalta rented to the Contractor equipment used to crush and screen sand and gravel at the Gravel Pit. All of the gravel was provided to the Defendant for its use in connection with the Project.

Tyalta registered a lien against the Project site. The Defendant sought to have the lien discharged on the basis that it was invalid, particularly because the Project was not the location – or even near the location – where the rental equipment was used. Determining the validity of Tyalta’s lien required the Court to interpret section 6(4) of the Builders' Lien Act (the “Act”), which provides:

6(4) For the purposes of this Act, a person who rents equipment to an owner, contractor or subcontractor is, while the equipment is on the contract site or in the immediate vicinity of the contract site, deemed to have performed a service and has a lien for reasonable and just rental of the equipment while it is used or is reasonably required to be available for the purpose of the work.

In coming to its decision, the Court answers three questions: (1) where is the contract site; (2) what is the meaning of immediate vicinity; and (3) is there a common purpose between the sites.

Ultimately, the Court found that the Project was the “contract site.” However, after considering the context of the matter, the Court determined that notwithstanding the distance, the Gravel Pit was within the “immediate vicinity” of the contract site, stating:

I find on the facts of this specific case that the gravel pit and the [Project] site are in the immediate vicinity of each other. Thus, as the rental equipment was at all relevant times located at the gravel pit, the rental equipment was in the immediate vicinity of the contract site... The gravel was not obtained out of country, out of province, or even in central or southern Alberta. Given the nature of gravel pits, immediate vicinity must be considered in context.

When assessing the purpose of the work, the Court found that the work performed at the Gravel Pit using Tyalta’ rental equipment resulted in gravel that was required for the Project. This gravel was not available at the Project and had to be transported from the Gravel Pit. Thus, the Court determined that the two sites clearly had a common purpose, the construction of the Project, and the work performed at the Gravel Pit was an integral part of the overall Project.

In summary, though equipment may not be used at a contract site, a lessor of equipment may have a valid lien against the contract site so long as their equipment was integral to the contract site and used somewhere within the immediate vicinity, which depending on the context may even be a 89 kilometre drive away.

Read the full decision here.