anatomy of a disaster part ii © duncan w. glaholt february, 2004
TRANSCRIPT
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Anatomy of a DisasterAnatomy of a DisasterPart IIPart II
© Duncan W. GlaholtFebruary, 2004
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1. A Web of 1. A Web of Relationships in Relationships in
ContractContract
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ACE(A & B)
Jack of Diamonds
Tenderno geotechnicalresponsibilities
Snake Eyes Lending
Feb. 1, 2000
Commit-mentletter
KingContractors
Ltd.
$10m modified CCDC Lucky Streak
GuaranteeCompany$5m P&P Bonds
March 30, 2000: “First Spade”Nov. 2000: “Fully enclosed”Feb. 2001: “Fully poured”
Sub Sub Sub
Workers Suppliers
Property & GCLDeuce Insurance
CGL AutoBuilder’s Risk
Tenants
$ leakage to other jobs
30 liens
6 geotechnical reports Sub-
Cons.
Sub-Cons.
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2. A Web of 2. A Web of Relationships in DebtRelationships in Debt
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s. 44 – Lien
Bonds
s. 5 – contract to
conform
Contracts Bonds
Liens
HB
Q: Does a lien help King?
A: No.
1. CCRA (federal taxation super-priority)
2. CCAA (federal reorganization statute)
P&PBonds
3.BIA (federal insolvency statute – forgeneral creditors only)
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Contracts Bonds
LiensQ: Does a lien help
King’s subs?
A: Yes, if they have paid their own trades
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Contracts Bonds
LiensQ: Does a lien help
workers & suppliers?A: Yes, big time!s. 78 – Priorities
s. 81 – Worker’s priority
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3. A Web of Relationships in 3. A Web of Relationships in TortTort
1.1. Tort = Judicial shifting of losses for injury Tort = Judicial shifting of losses for injury or wrong done to person or propertyor wrong done to person or property
2.2. Tort = NegligenceTort = Negligence
3.3. Independent of ContractIndependent of Contract
4.4. Need to prove duty, breach of duty & Need to prove duty, breach of duty & damagesdamages
5.5. ““Anns” testAnns” test
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Anns v. Merton London Borough CouncilAnns v. Merton London Borough Council, , [1977] 2 All E.R. 492 (H.L.)[1977] 2 All E.R. 492 (H.L.)
(1) Is there a sufficiently close relationship (1) Is there a sufficiently close relationship between the parties […] so that, in the between the parties […] so that, in the reasonable contemplation of the authority, reasonable contemplation of the authority, carelessness on its part might cause damage to carelessness on its part might cause damage to that person? If so,that person? If so,(2)are there any considerations which ought to (2)are there any considerations which ought to negative or limit negative or limit (a) the scope of the duty and (a) the scope of the duty and (b) the class of persons to whom it is owed or (b) the class of persons to whom it is owed or (c) the damages to which a breach of it may give (c) the damages to which a breach of it may give rise?rise?
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4. Process Issues4. Process IssuesProblem:Problem:1.1. Liens get their own court (CLA procedure)Liens get their own court (CLA procedure)2.2. Insolvency proceedings get their own court Insolvency proceedings get their own court
(Commercial List)(Commercial List)3.3. Tort claims get their own court (Superior Court)Tort claims get their own court (Superior Court)4.4. ADR can be chosen in any or all of the above. ADR can be chosen in any or all of the above.
Parties create their own court.Parties create their own court.
Solution:Solution:““Connecting Orders”Connecting Orders”
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Owner’s Eye ViewOwner’s Eye View(Pro’s and Con’s)(Pro’s and Con’s)
ACE
Lender’sMonitor
(Do they oweAce a duty?)
Consultants &Designers
(Causation issueNo “economic”
settlements)
Contractor(action in debt
stayed under BIA)
Insurer(faulty design and
Workmanshipexclusion)
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Subcontractor’s Eye ViewSubcontractor’s Eye View
Sub
Claim onPayment
Bond
Claim inKing
Bankruptcy
Lien(outside
King Bankruptcy)
Trust(outside
KingBankruptcy)
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Insurer’s Eye ViewInsurer’s Eye View
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PrioritiesPriorities
Remember first principlesRemember first principlesNo free rides!No free rides!No unjust enrichment!No unjust enrichment!
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Section 78Section 78
Question 1: is it a building Question 1: is it a building mortgage?mortgage?
yesyes: mortgagee loses priority for : mortgagee loses priority for deficiency in holdback, period.deficiency in holdback, period.
nono: go to Question 2: go to Question 2
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Section 78Section 78
Question 2: When did the first lien arise?Question 2: When did the first lien arise?
Answer: Answer: BeforeBefore mortgage registered or fully mortgage registered or fully advanced? advanced?
mortgagee has priority until lien registered or mortgagee has priority until lien registered or written notice of lien receivedwritten notice of lien received
Answer: Answer: AfterAfter mortgage registered and either fully mortgage registered and either fully or partially advanced?or partially advanced?
mortgagee gets mortgagee gets lesserlesser of of
- actual value when first lien arose- actual value when first lien arose
- all advances made without notice- all advances made without notice
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Section 78Section 78
Question 3: Is it a homebuyer’s mortgage?Question 3: Is it a homebuyer’s mortgage?
Answer: If it is, the above scheme is Answer: If it is, the above scheme is irrelevant and the mortgagee has priorityirrelevant and the mortgagee has priority