The case of Bank of Montreal v. Exclusive Hardwood Ltd, 2024 ABKB 322 dealt with the intervention of a lien-bond surety in lien-enforcement proceedings, and the procedural concerns involved. This decision underscores the importance of understanding such procedural nuances and appropriate forums within bankruptcy proceedings, particularly regarding lien-enforcement actions.
This case also reinforces the role of the applications judge in handling such matters, and highlights jurisdictional boundaries, emphasizing the distinct roles of the Commercial List and applications judges in the context of insolvency and lien enforcement.
Background
In this case, the Bank of Montreal (BMO) initiated legal proceedings against Exclusive Hardwood Ltd., Action Flooring Ltd., 811044 Alberta Ltd., and David Reid. The issue arose when a lien-bond surety sought to intervene in lien-enforcement proceedings brought by two lienholders against the landowner, who had been placed into receivership. Amidst the insolvency proceedings, a special application regarding the validity and quantification of the liens was scheduled for May 31, 2024, before an applications judge. On May 27, 2024, the lienholders applied to lift the stay of proceedings imposed by the receivership to allow their application to proceed.
The surety attended the application and requested to be added as a party or intervenor, or alternatively, to adjourn the application to seek such relief, but did not file an application for this request. The surety argued that without their involvement, the lienholders' enforcement application would be unopposed given that:
- the landowner was in receivership;
- its counsel had ceased to act; and
- the receiver did not plan to participate.
Issues
The case presented substantial legal issues:
- The appropriate forum for filing applications: The Court evaluated whether the Commercial List Court or the applications judge was the appropriate avenue that the surety should apply for relief to be added as a party or intervenor, or to adjourn an upcoming application.
- The validity of the surety's requests: The Court presented whether the surety's requests to be added as a party or intervenor, or to adjourn the application, should be granted.
Analysis
The Court determined that an applications judge is the proper venue for the surety's requests, given that the upcoming application is scheduled before an applications judge. This decision aligns with the practice that applications for adjournment or party addition should typically be made to the judge assigned to hear the matter. According to the Court of King's Bench Act and the Rules of Court, an applications judge has the same power and jurisdiction as a judge alone in chambers, and holds the appropriate authority to handle such requests.
The Court referenced R v. McCullogh, 2000 SKCA 128, which emphasized that applications related to trial proceedings should be made to the trial judge. Civil Practice Note 1 also supports that applications for adjournment after the applicant's brief has been filed should be made to the judge or applications judge assigned to the application. Additionally, the Court found that paragraph 243(1)(c) of the Bankruptcy and Insolvency Act does not extend the jurisdiction of the Commercial List to cover lien-enforcement proceedings. Rather, the Commercial List's role in this case was limited to deciding on lifting the stay of proceedings.
In Stratum Projects Alberta Inc v. Aman Building Corporation, 2017 ABQB 351, a surety was added to lien-enforcement proceedings under similar circumstances only after an application to the applications judge. This precedent supports the current Court's decision. The surety's argument that it was an "affected party," and should have received the application materials, did not justify obtaining relief from the Commercial List. Rule 6.3(3) of the Rules of Court outlines the procedure that must be followed when making an application to the Court. While thismay affect whether the surety should be added as a party or made an intervenor, it does not justify obtaining relief from the Commercial List.
Conclusion
The surety's requests to be added as a party or intervenor and for an adjournment were dismissed. The ruling emphasized that an applications judge is the correct authority for such matters and clarified the limitations of the Commercial List's jurisdiction over lien-enforcement proceedings. The surety was advised to seek relief from the assigned or an alternative application judge, as applicable.
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