Nova Scotia Court of Appeal
Citation: Maynard Holdings Limited v. IFORM Works Inc., 2023 NSCA 14
Date: 20230310
Docket: CA 516755
Registry: Halifax
Between:
Maynard Holdings Limited
Appellant
v.
IFORM Works Inc.
Respondent
| Judge: |
The Honourable Justice Peter M. S. Bryson |
| Appeal Heard: |
February 9, 2023, in Halifax, Nova Scotia |
| Cases Cited: |
Maynard Holdings Limited v. Optimo Group Inc., 2023 NSSC 66; Barefoot v. Paranet Services Inc. (2000), 182 N.S.R. (2d) 117; B.C. Central Credit Union v. Skyview Hotels Ltd., [1994] 2 W.W.R. 341; |
| Legislation Cited: |
Personal Property Security Act, S.N.S. 1995, c. 13, ss. 5(a), 18(4), 19, 63, 64; Civil Procedure Rule 43; |
| Subject: |
Personal property security – Right to redeem secured property – Right to use secured property. |
| Summary: |
Maynard hired a third party contractor, Optimo, to perform foundation work on an apartment building. Maynard loaned money to Optimo and took security on Optimo’s construction crane. Optimo did not complete the project and sold its equipment, including the crane, to IFORM. Maynard claimed it was entitled to use the crane to complete the work but had no right of use under its security agreement. IFORM was prepared to pay out the loan to redeem the crane. The motion judge found Maynard had no right of use of the crane and granted surrender of the crane to IFORM and prohibited Maynard’s use of the crane. Maynard appealed, alleging the judge erred in granting a “recovery order” for the crane upon payment of the debt. |
| Issues: |
(1) Did the judge err in granting conditional surrender of the crane? (2) Did the judge err by enjoining Maynard’s use of the crane? |
| Result: |
Appeal dismissed. The judge did not grant a recovery order but exercised his discretion under s. 64 of the PPSA to require surrender of the crane upon payment of the loan. He did not err in refusing Maynard’s use of the crane because its security accorded Maynard no such right. |
This information sheet does not form part of the court’s judgment. Quotes must be from the judgment, not this cover sheet. The full court judgment consists of 45 paragraphs.
Nova Scotia Court of Appeal
Citation: Maynard Holdings Limited v. IFORM Works Inc., 2023 NSCA 14
Date: 20230310
Docket: CA 516755
Registry: Halifax
Between:
Maynard Holdings Limited
Appellant
v.
IFORM Works Inc.
Respondent
| Judges: |
Wood C.J.N.S., Bryson and Beaton JJ.A. |
| Appeal Heard: |
February 9, 2023, in Halifax, Nova Scotia |
| Held: |
Appeal dismissed with costs, per reasons for judgment of Bryson J.A.; Wood C.J.N.S. and Beaton J.A. concurring |
| Counsel: |
Jasmine Ghosn, for the appellant Scott R. Campbell and Samuel Ward, for the respondent |
Reasons for judgment:
Introduction
[1] Maynard Holdings Limited appeals relief not granted for a claim not made.
[2] The Honourable Justice Peter Rosinski enjoined Maynard’s use of a construction crane and ordered return of construction equipment purchased by IFORM Works Inc. from Maynard’s contractor, Optimo Group Inc. (2022 NSSC 210). But the judge did not grant a Recovery Order for the crane as Maynard claims, and IFORM did not seek that relief.
[3] In August 2020, Maynard retained Optimo to provide form work for foundation and structure of Maynard’s planned apartment development on Roberts Street, Halifax for $1,425,000.00 plus tax. The equipment provoking the dispute consists of a crane and other tools and equipment. Maynard has Personal Property Security Act, S.N.S. 1995, c. 13 security on the crane which it financed but not on the tools and equipment which the parties have called “the Roberts Street Equipment”.
[4] The judge found that Maynard terminated its construction contract with Optimo in January 2022. Optimo then conveyed the crane and Roberts Street Equipment to IFORM. IFORM attempted to pay out the loan from Maynard and recover the crane but did not get a clear answer from Maynard regarding the amount due. Maynard wished to retain the crane to finish the work.
[5] IFORM moved for an injunction restraining use of the crane, determination of the debt on the crane and recovery of the Roberts Street Equipment. IFORM was largely successful. Maynard claims the judge erred in:
1. Granting a Recovery Order for the crane.
2. Applying the PPSA to restrain Maynard from using the crane.
3. Granting relief when IFORM’s ownership of the crane was “not established”.
[6] The issues can be more conveniently reordered:
1. Did the judge err in conditionally ordering Maynard to surrender the crane to IFORM?
2. Did the judge err by enjoining Maynard’s use of the crane?
[7] This is in an interlocutory appeal for which leave is required. Although Maynard did not address leave in its factum, leave should be granted but the appeal dismissed. Although there are arguable issues, ultimately Maynard has not established that wrong principles were applied by the judge or a patent injustice results from his decision.
[8] Following the hearing, the Supreme Court issued its decision in Maynard Holdings Limited v. Optimo Group Inc., 2023 NSSC 66. Maynard submits that decision is relevant to this appeal. For reasons addressed below at ¶37, it is not.
[9] After a review of the facts, the issues will be addressed.
Factual Summary
[10] At the time of the motion before Justice Rosinski in July 2022, Maynard was engaged in constructing a multi-unit residential complex on its Roberts Street property in Halifax. As earlier described, Optimo was to supply a crane, forms, tools and associated equipment (the Roberts Street Equipment) for the foundation and structural work. Apparently, Optimo was not well capitalized. From time to time Maynard loaned Optimo money.
[11] In October 2021, Maynard provided $266,106.52 of financing to Optimo secured by a first charge on the crane, evidenced by a Promissory Note in that amount, due December 1, 2025. The Note could be prepaid in whole or in part at any time without bonus, penalty or notice. Loan terms largely not material to this appeal were attached as a schedule to the Note. Maynard registered its security interest in the crane under the PPSA.
[12] In December 2021, Optimo sought Maynard’s permission to assign the construction contract to IFORM which would complete the work for the originally agreed $1.425 million plus an additional $335,000.00. Alternatively, Optimo offered to finish the work, subject to work stoppages until Optimo was able to raise an additional $335,000.00 in financing. Maynard rejected both proposals.
[13] The Maynard/Optimo working relationship broke down. In January 2022, Maynard terminated its contract with Optimo and excluded Optimo from the site.
[14] Without Optimo’s consent, Maynard then used the crane and the Roberts Street Equipment (in which it has no security interest) to continue to work on its apartment building project. Maynard did not make any claims against Optimo with respect to the Note, nor pursue remedies available to it under the PPSA for any alleged default.
[15] On February 1, 2022, Optimo conveyed the crane and Roberts Street Equipment to IFORM. Maynard refused to surrender the crane or Roberts Street Equipment. It wished to retain the crane to finish its project.
[16] In May 2022, IFORM sued Maynard, seeking, amongst other things, damages and fees for unauthorized use of IFORM’s crane and equipment, a recovery order for the Roberts Street Equipment, a declaration of the amount outstanding on the Promissory Note, an order seeking redemption of the crane upon payment of the amount due under the Note and ancillary relief. Maynard replied with a Defence and Counterclaim alleging entitlement to use IFORM’s crane and equipment to finish its project because Optimo had not done so and complaining that IFORM’s efforts at recovery of its property caused loss and damage to Maynard.
[17] As earlier described, IFORM then successfully moved for a temporary recovery order seeking return of the Roberts Street Equipment and an order enjoining Maynard from using the crane and equipment purchased by IFORM from Optimo, a preservation order with respect to the crane, determination of the outstanding amount of the Note, and surrender of the crane upon payment of the Note.
Issue 1: Did the judge err in granting conditional surrender of the crane?
[18] Maynard argues this issue as if the judge had granted a temporary recovery order for the crane. He did not. The temporary recovery order was confined to the equipment over which Maynard had no security. In fairness to Maynard, the judge said IFORM was “entitled to” a “… conditionally ordered Temporary Recovery Order … in respect of the crane”. But IFORM did not seek and the judge did not grant a Temporary Recovery Order for the crane.
[19] The temporary recovery order actually granted did not include the crane which is otherwise described in the companion preservation order granted under Rule 42 and inspection order granted under Rule 17.05 by the judge:
1. Maynard, shall take reasonable steps to preserve, and to protect against loss, injury, or damage attributable to Maynard: a Potain Tower Crane Model No. MD-365 Serial Number 410563, together with one (1) R62B reusable anchor stool with bolts, base plate and nuts, two (2) KR 639A Mast (5m reinforced), two (2) KR639B Mast (10m with climbing lugs), four (4) K639A Mast (with climbing lugs), one (1) transformer 600V/480V/150KVA, 350 meters of 20mm hoist cable, counterweights, and applicable maintenance and Service Books (collectively, the “Crane”).
[20] The judge did grant an order restraining Maynard from using the crane and also provided a process for its eventual recovery:
5. The security interest registered by Maynard in the Personal Property Security Registry pursuant to the provisions of the Personal Property Security Act ("PPSA") in Statement Registration Number 35344183 with respect to the Crane is provisionally fixed in the sum of $266,106.52 as of March 16th, 2022, together with interest of 4% per annum (the "Secured Debt"). Nothing herein shall be so interpreted and construed as prohibiting the Parties to ultimately agree upon a different amount for the debt outstanding and owing by Optimo / IFORM to Maynard or to seek This Honourable Court's further intervention to fully and finally fix the amount of that debt outstanding on the basis of such expedited hearing as may be scheduled.
6. Upon payment of the Secured Debt by IFORM to Maynard by way of certified cheque, or by way of other manner of payment acceptable to Maynard, Maynard will immediately take whatever steps might be necessary to relinquish possession of the Crane to IFORM and will discharge Financing Statement Registration Number 35344183 from the Personal Property Security Registry.
[21] Maynard treats the foregoing as a Recovery Order under Rule 43, with which provisions IFORM had not complied. Maynard submits in its factum:
70. To obtain a Temporary Recovery Order pursuant to Rule 43 of the Nova Scotia Civil Procedure Rules, the party who seeks the order must provide “reliable evidence” of the value of the property and must file an Affidavit and provide “reliable evidence” to establish all of the criteria as set out in Rule 43.03 which is reproduced here:
The party who seeks a temporary recovery order must provide reliable evidence of the value of the property and establish all of the following:
(a) the party is entitled to possession of the property, the party who has possession of the property is not entitled to withhold possession from the party seeking the order, a demand for possession has been made, and the demand has been refused;
(b) the party has retained a lawyer to advise the party about the motion, and received advice about the party’s entitlement to possession and the party’s obligation under the bond. [Maynard’s emphasis.]
[22] Paragraph 5 of the foregoing order merely reflects the statutory right under the PPSA of IFORM, as purchaser of the crane, to ascertain the amount due to Maynard.
[23] Section 19 of the PPSA obliges Maynard to tell IFORM what is owed with respect to the crane:
Right to certain information
19 (1) The debtor, a creditor, a sheriff, a person with an interest in personal property of the debtor or an authorized representative of any of them may require a secured party, by a demand in writing, to send or make available the information or documentation referred to in subsection (3) to the person making the demand or, if the demand is made by the debtor, to any person at an address specified by the debtor.
[…]
(3) Any or all of the following may be demanded pursuant to subsection (1):
(a) a copy of any security agreement providing for a security interest held by the secured party in the personal property of the debtor;
(b) a statement in writing of the amount of the indebtedness and of the terms of payment of the indebtedness, as of the date specified in the demand; […]
[Emphasis added.]
[24] Paragraph 6 of the foregoing order reflects IFORM’s right of redemption under s. 63 of the PPSA, which provides in part:
Redemption
63 (1) In subsection (2), “secured party” includes a receiver.
(2) At any time before the secured party has disposed of the collateral or contracted for its disposition pursuant to Section 60, or before the secured party is deemed to have irrevocably elected to retain the collateral under Section 62, any person entitled to receive a notice of disposition under subsection 60(8) or (11) may redeem the collateral, unless that person has otherwise agreed in writing after default, by tendering fulfillment of the obligations secured by the security interest, together with a sum equal to the reasonable expenses referred to in clause 60(3)(a) to the extent that such expenses have actually been incurred by the secured party.
(3) Where more than one person elects to redeem pursuant to subsection (2), the priority of their rights to redeem is the same as the priority of their respective interests. […]
[Emphasis added.]
[25] Under s. 64 of the PPSA, the court is authorized to enforce, among other things, IFORM’s right of redemption under s. 63:
Powers of Court
64 (1) In this Section, “secured party” includes a receiver.
(2) On application by a debtor, a creditor of a debtor, a secured party, a sheriff or any person with an interest in the collateral, the Court may
(a) make any order, including a binding declaration of a right and injunctive relief, that is necessary to ensure compliance with this Part or Sections 18, 37, 38 and 39;
(b) give directions to any person regarding the exercise of rights or the discharge of obligations under this Part or Sections 18, 37, 38 and 39;
(c) relieve a person from compliance with the requirements of this Part or Sections 18, 37, 38 and 39;
(d) stay enforcement of rights provided in this Part or Sections 18, 37, 38 and 39; or
(e) make any order necessary to ensure protection of the collateral or of the interest of any person in the collateral.
[Emphasis added.]
[26] The judge’s conditional order for surrender of the crane was not pursuant to Rule 43 on Recovery Orders, but under the PPSA. The judge did find IFORM had met the test for an interlocutory injunction, but respectfully, that was unnecessary because IFORM was not seeking interim injunctive relief for return of the crane, but relief under the PPSA. IFORM wanted surrender of the crane upon payment of the debt. Any order to enforce this right was final, not interlocutory. An order requiring surrender of the crane upon payment of the debt was a s. 64 implementation of the right of redemption granted in s. 63. Accordingly, all IFORM needed to do was prove title and right of possession on payment of the debt. The judge found:
[50] This debt arises from the promissory note and there is no dispute that the amount outstanding at March 16, 2022 is $266,106.52, nor that it attracts 4% interest per annum.
[51] This is the only security interest as against the Crane. There is no evidence to support there being any security interest against the Roberts Street Equipment.
[52] It is in the interests of justice to make such order forthwith and consequently a declaration, as it would permit IFORM to pay off the promissory note thereby giving it an unencumbered likely ownership interest in the Crane.
[53] Maynard will be receiving the money it is owed. The promissory note provided for full payment of the outstanding debt at any time.
[54] It is also reasonable that Maynard be required to cooperate fully in facilitating the release of the security.
[55] I am well satisfied that IFORM fully intends to expeditiously pay off the security interest of Maynard.
[56] Once that security interest is released, Maynard likely will have no entitlement to possess or use the Crane beyond that point in time.
[57] To avoid any prejudice to IFORM arising from inherent delays in this process, it is also in the interests of justice to immediately order Maynard to cease its use of the Crane in its construction work or in any other manner, without the express agreement of IFORM.
[58] I conclude that it is not in the interests of justice, as an alternative to such a PPSA “cease and desist” order, a Preservation Order, or an Inspection Order, to require that Maynard provide proof of insurance, proof of maintenance, and proof that the Crane is safely secured, and regular daily reports on the use of the Crane, where, with a mere payment and release of the security interest, IFORM alone likely will be the owner of the Crane, with no other party entitled to possession or use thereof.
[Emphasis added.]
[27] Despite the equivocal language of “likely” ownership, the judge later clarified:
[64] Similarly, in relation to the Crane: It is undisputed that the Crane was bought by Optimo, that Maynard terminated its contract with them no later than mid-January 2022, and that IFORM purchased all of Optimo’s assets including the Crane and the Roberts Street Equipment in early February 2022 and completed payment therefor by February 23, 2022.
[Emphasis added.]
[28] The evidence fully supports this conclusion.
[29] Maynard relies on s. 5(a) of the PPSA to argue that it possessed a builders’ lien which was unimpaired by its PPSA security:
Act does not apply
5 Except as otherwise provided in this Act, this Act does not apply to
(a) a lien, charge or other interest given by rule of law or statute unless the statute provides that this Act applies;
[30] Maynard maintains:
83. In the decision of the learned motions judge, there is no consideration of the fact that the promissory note respecting the Crane included an agreement that the crane would indeed be tied to Optimo’s the [sic] lien holdback under the Builders’ Lien Act.
84. Section 45(1) of the Builders’ Lien Act, [Tab 10, BOA], permits a Builder’s Lien on Chattel, and states:
Builder’s lien on chattel
45 (1) Every mechanic or other person who has bestowed money or skill and materials upon any chattel or thing in the alteration and improvement in its properties, or for the purpose of imparting an additional value to it, so as thereby to be entitled to a lien upon such chattel or thing for the amount or value of the money or skill and materials bestowed, shall, while such lien exists, but not afterwards, in case the amount to which he is entitled remains unpaid for three months after the same ought to have been paid, have the right, in addition to all other remedies provided by law, to sell by auction the chattel or thing in respect to which the lien exists, on giving one week’s notice by advertisement in a newspaper published in the county in which the work was done.
[Emphasis added.]
[31] Maynard says it had a builders’ lien predating its PPSA security, based simply on loaning money to Optimo. These submissions are incorrect. There is no evidence Maynard altered or improved the crane so as to add value to it. Financing the crane’s purchase or loaning money to Optimo does not create a builders’ lien in the crane. Maynard has a security interest in the crane but does not have what it asserts in its factum as “a pre-existing right to possession and use of the crane, before any PPSA registration […] occurred when Maynard loaned additional funds”.
[32] Then Maynard’s insists IFORM did not establish ownership or a right of possession. This contradicts the evidence and the judge’s finding.
[33] Because the original agreement of Purchase and Sale between IFORM and Optimo was not placed in evidence, Maynard says there was no evidence of IFORM’s ownership of the property. But in fact, there was such evidence—exhibited to the affidavit of IFORM’s sole director, Navid Saberi, is a “general conveyance” made the February 1, 2022 whereby Optimo conveyed to IFORM the crane and equipment for “the sum of $1.00, and other good and valuable consideration now paid by the Grantee to the Grantor […]”.
[34] And to repeat, the judge found:
[64] Similarly, in relation to the Crane: It is undisputed that the Crane was bought by Optimo, that Maynard terminated its contract with them no later than mid-January 2022, and that IFORM purchased all of Optimo’s assets including the Crane and the Roberts Street Equipment in early February 2022 and completed payment therefor by February 23, 2022.
[35] On the record, IFORM established ownership of the crane, subject to Maynard’s security interest.
[36] Maynard also complains the judge was wrong to provide for surrender of the crane to IFORM because IFORM had no immediate right to possession because money was owed under the Note. This misconstrues what happened. The judge did not order surrender of the crane immediately, and did not say IFORM could have the crane without paying Maynard. Rather, he conditionally set the debt and surrender process because Maynard had failed to give a proper payout figure to IFORM and had refused surrender of the crane.
[37] By its supplementary submissions, Maynard now adds the recent decision in Maynard v. Optimo assists Maynard on its use of the crane because the judge found that Optimo had abandoned the contract, whereas in this case, the judge found Maynard had terminated the contract. Maynard submits there is an “inconsistency”. Even if true, it would not matter, because any right Maynard would potentially have to use the crane depends on the terms of the security it holds. It has nothing to do with any findings in Maynard v. Optimo. Second, as IFORM correctly argues, any “apparent inconsistency” is unpersuasive because the parties are not the same, the issues are not the same, and the evidence is not the same.
Issue 2: Did the judge err by enjoining Maynard’s use of the crane?
[38] Maynard suggests, “Implicitly, Maynard agreed to finance the Crane for the sole purpose of ensuring it could continue to use the Crane on the jobsite”. If this was Maynard’s intention, it should have been expressed in the Note or attached loan terms. Absent a contractual right in the security agreement, s. 18(4) of the PPSA prevents Maynard from using the crane for its own purposes:
18(4) Subject to subsection (2), a secured party may use the collateral
(a) in the manner and to the extent provided in the security agreement;
(b) for the purpose of preserving the collateral or its value; or
(c) in accordance with an order of the Court.
[Emphasis added.]
The Note and attached loan conditions did not authorize use of the crane by Maynard.
[39] Maynard mistakenly argues that its contractual issues with Optimo must be resolved before any conveyance could occur from Optimo to IFORM because Maynard had a security interest in the crane. Maynard may have a claim against Optimo for breach of contract. But the Note and attached loan conditions do not prohibit Optimo’s sale of the crane.
[40] Maynard adds that the “equities” support its claim to use the crane to complete its project. Citing Barefoot v. Paranet Services Inc. (2000), 182 N.S.R. (2d) 117, Maynard quotes:
[27] I would add if one considered the "equities of the situation" as did the courts in Businex Business Centres (Canada) Inc. v. T.R. Services Limited et al. (supra) and in Abel/Noser Corp. v. Computerized Portfolio Services Inc. those equities overwhelmingly are in favour of the plaintiff. He is building a home and requires the property in the container. He paid for the property and, without it, he may incur substantial damage. The defendants interest is confined to allegations of payment under a contract.
[41] Maynard assumes it stands in the same shoes as the plaintiff in Barefoot. It does not. In Barefoot, the plaintiff was an owner who had paid for the property in question, wrongfully withheld from him by the defendant. Maynard is a security holder, entitled to have its debt paid. Maynard is not an owner, deprived of its property for which it had paid, as was the plaintiff in Barefoot. Maynard is not entitled to use the crane and refuse to surrender it to the owner who has offered to pay out the debt.
[42] Next, Maynard argues it is “commercially reasonable” that it should be able to use the crane to complete the construction which Optimo has failed to do. But that does not defeat IFORM’s proprietary claim for possession of the crane upon payment of the secured debt to Maynard. Absent a term in Maynard’s security saying so, it would not be “commercially reasonable” to deprive IFORM of its proprietary right owing to a contractual dispute between Maynard and Optimo.
[43] Maynard also relies on B.C. Central Credit Union v. Skyview Hotels Ltd., [1994] 2 W.W.R. 341, to argue its right to use the crane. In Skyview, a non-party lessor unsuccessfully challenged a receiver’s use of Skyview’s leased equipment. Maynard equates the lessor with IFORM here. It is an inapposite analogy. The successful receiver in Skyview had prior secured rights under mortgages and debentures to operate the hotel business, including use of the leased equipment. In this case, Maynard’s security gives it no such right of use over the crane.
Conclusion
[44] With respect, Maynard’s appeal is misconceived. It seeks to appeal Recovery Order relief never granted by the judge and asserts rights of use over the crane never conferred by the security it holds.
[45] The appeal should be dismissed with agreed costs of $3,000.00, inclusive of disbursements payable by Maynard to IFORM.
Bryson J.A.
Concurred in:
Wood C.J.N.S.
Beaton J.A.