Executive Summary: Key Legal and Evidentiary Issues

• Whether Aspen qualifies as an “owner” under ss 1(j) and 6(1) of the Prompt Payment and Construction Lien Act was central to the appeal.

• Xemex filed liens against Aspen after Koor defaulted on payments for leasehold renovations, and recovery efforts against Koor were unsuccessful.

• Aspen actively participated in the renovation project, including approving plans and engaging with Xemex, but did not receive a direct benefit.

• The lease clause granting Aspen immediate ownership of improvements did not equate to a tangible or usable benefit during the lease term.

• The appellate court found no “privity and consent” between Aspen and Xemex despite Aspen’s oversight and construction protocols.

• The Alberta Court of Appeal dismissed the appeal and upheld the chambers judge’s ruling that the lien against Aspen was invalid.

Background and contractual relationships

Koor Energy Ltd (Koor), a tenant of Aspen Properties (Northland Place) Ltd (Aspen), hired Xemex Contracting Inc. (Xemex) to renovate its leasehold space. After Koor stopped paying its invoices, Xemex registered liens against both Koor’s leasehold interest and Aspen’s fee simple interest. Xemex obtained two judgments against Koor totaling $263,242.10 plus costs, but its recovery efforts were unsuccessful. Xemex then sought payment from Aspen.

The issue on appeal was whether Aspen was an “owner” under ss 1(j) and 6(1) of the Prompt Payment and Construction Lien Act, RSA 2000, c P-26.4.

Initial and chambers decisions

The applications judge initially found Aspen to be an “owner,” reasoning that Aspen had an estate or interest in land, had actively participated in the improvements, and had received a direct benefit. However, the chambers judge reversed this ruling. Although Aspen had an interest in land and had impliedly requested the work through active participation, the chambers judge held Aspen received no “direct benefit,” and therefore was not an owner as defined by the Act.

Policy terms and lease clause discussion

Xemex argued that Aspen received a direct benefit based on the lease clause stating:

“All Leasehold Improvements in or upon the Premises shall immediately upon their placement be and become the Landlord’s property without compensation therefor to the Tenant.”

The Court of Appeal rejected this argument. It found that immediate legal ownership did not equate to a direct benefit since Aspen could not utilize or enjoy the improvements during the lease. The improvements were incomplete, unattractive to future tenants, and required $6.00–$8.00 per square foot to make marketable. Thus, Aspen’s benefit was only reversionary and uncertain in value.

Court of Appeal's findings

The Alberta Court of Appeal dismissed the appeal, holding:

• Aspen did not receive a “direct benefit” as the leasehold improvements were incomplete and would cost Aspen to make usable.

• Immediate ownership in the lease clause did not provide a tangible or immediate benefit.

• The work was not done with Aspen’s “privity and consent.” Though Aspen was actively involved in overseeing the construction process, such involvement aligned with its obligations as a prudent landlord and did not constitute the necessary “direct dealing.”

Citing Royal Bank of Canada v 1679775 Alberta Ltd, 2019 ABQB 139, and other decisions, the court emphasized that direct benefit requires more than potential future value or oversight typical of landlord responsibilities.

Conclusion

The Alberta Court of Appeal concluded that Aspen was not an “owner” under the Act. The appeal was dismissed. Aspen’s involvement did not rise to the level of receiving a direct benefit or consenting in the manner required to support a valid lien against its fee simple interest.