Executive Summary: Key Legal and Evidentiary Issues

• Enforceability of a possessory lien after dismissal of the underlying debt action for long delay under Alberta’s Limitations Act.

• Effect of the expiration of the limitation period on the right to retain possession of property under a statutory lien.

• Impact of procedural delay and litigation tactics on the parties’ ability to seek remedial orders and enforce rights.

• Distinction between a possessory lien as a statutory right versus a common law right, and implications for enforcement after litigation is dismissed.

• Court’s discretion to order the return of property when both parties failed to advance their claims.

• Divergent judicial views on whether a possessory lien can survive when the underlying debt is no longer enforceable by remedial order.

Background and litigation history

This case concerns a dispute between 1832067 Alberta Ltd., carrying on business as AB Logistics, and Dowcar Metals Inc. AB Logistics stored pipe for Dowcar at two storage facilities in Alberta. In 2015, AB Logistics claimed Dowcar had not paid all the agreed-upon storage fees and asserted a right to retain possession of the pipe until its outstanding invoices were paid. Dowcar commenced replevin proceedings on July 17, 2015, to recover over $3 million worth of pipe stored at Scotford and claimed damages of $250,000 for wrongful detention. An ex parte replevin order was granted the same day, allowing Dowcar to take possession of the pipe, with a requirement to maintain at least $250,000 worth of pipe at Scotford until further order of the court.

AB Logistics defended the replevin action and, on November 6, 2015, commenced a separate debt action seeking judgment for the amounts alleged to be outstanding for storage services, claiming a priority for payment by way of a possessory lien and requesting the sale of the pipe to pay the debt. The possessory lien was said to secure a claim of $115,250 USD. On July 18, 2018, the court ordered that AB Logistics, as a bailee for reward, could maintain a possessory lien over Dowcar’s pipe at Scotford to the extent of $150,000 in Canadian currency, and the value of pipe required to be held was reduced to $150,000, with the balance to be released.

Litigation then stalled. On February 17, 2022, Dowcar applied to dismiss AB Logistics’ debt action for long delay under rule 4.33 and sought an order releasing the pipe. The applications judge found that nothing had been done to significantly advance the debt action for more than three years and that Dowcar’s request for release of the pipe did not amount to participation justifying continuation of the action. The debt action was dismissed for long delay, and an order was granted releasing the pipe. The judge stayed the release order until May 31, 2022, to allow for further applications.

AB Logistics appealed the dismissal of its debt action, and its outstanding applications—including a contempt application against Dowcar and an application to dismiss the replevin action for long delay—were heard together in a two-day special justice chambers hearing. The chambers judge agreed that three years had passed without significant advance in the debt action and upheld the dismissal and release of the pipe. The chambers judge also granted AB Logistics’ application to dismiss the replevin action for long delay and dismissed the contempt application.

Policy terms and statutory interpretation

The parties argued the appeal under the Possessory Liens Act, RSA 2000, c P-19, not the Warehousemen’s Lien Act. Section 4(1) of the Possessory Liens Act provides a bailee a particular lien on property for charges due under the contract of bailment. Section 8 allows a person entitled to a lien to detain the property until the debt is paid. AB Logistics argued that the expiration of the limitation period for suing on the debt did not extinguish the debt itself or its right to retain the pipe under the lien.

The majority of the Court of Appeal rejected this argument, finding that AB Logistics’ possessory lien was a product of statute, not common law, and that the right to detain property under section 8 only applies if there are charges “due to” the bailee. With Dowcar immune from liability due to the Limitations Act, there were no charges “due to” AB Logistics. The majority noted that both parties failed to advance their claims and that the litigation stalemate was of their own making.

Majority and dissenting judgments

The majority (Justices Slatter and Kirker) held that AB Logistics’ possessory lien could not survive the dismissal of its debt action and the expiry of the limitation period. The statutory right to detain the pipe was contingent on there being a debt “due,” and with Dowcar immune from liability, no such debt existed for the purposes of the lien. The majority found that the dismissal of the debt action eliminated AB Logistics’ claims for judgment on the debt, priority payment based on a possessory lien, and an order for the sale of the pipe, and that the order releasing the pipe was a natural consequence of the dismissal for long delay. The appeal was dismissed.

Justice Grosse, dissenting, agreed with much of the majority’s reasoning but disagreed on the fate of the possessory lien. She argued that the Possessory Liens Act does not require a court order or ongoing litigation for a lien to exist and that the debt could remain “due” even if it was not enforceable by court action. She would have allowed the appeal only as it related to the order for return of the pipe to Dowcar, finding no legal basis to disqualify AB Logistics from exercising its statutory right to hold the pipe.

Outcome

The majority dismissed the appeal, confirming that AB Logistics lost its right to retain the pipe under a possessory lien once its debt action was dismissed for long delay and the claim became statute-barred. The court ordered the return of the pipe to Dowcar. No specific monetary amount was awarded in this decision, but Dowcar was the successful party, regaining possession of its property.