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Legal Blog: Construction

Sep
02
2021

Pure Economic Loss

Ottawa Carleton Standard Corporation No. 838 v. Redevelopment Group 2019 Ont SCJ (Div Ct)

Condo brought an action against the developer for construction deficiencies and negligent repair of them, including allegations of damages to the exterior of the building from water infiltration and corrosion. The developer commenced a third party action against the condo’s management corporation, alleging that the management corp was charged with keeping the building in a proper state of repair and negligently failed to follow proper maintenance procedures that would have prevented the damages from occurring or would have minimised that damage. The developer did not claim that it had an independent cause of action against the management corp; rather, it claimed that the management corp had a duty of care to the condo such that the condo could have joined the management corp in its action. The management corp moved to strike the third party action against it. The court rejected its arguments. The court held that the damages that the management corp may have caused would not have allowed the developer to claim contributory negligence against the condo; no one pleaded that the management corp was the condo’s agent and, even if it were, the management corp never advised the condo of the water problems.

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Jul
20
2021

Extraction Lien

1140676 Ontario Inc. 2650997 Ontario Inc. 2021 Ont SCJ

Extraction of rock (such as a quarry) is not an improvement to the land and is therefore not lienable.

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Jul
01
2021

Two Rungs

Posted in Construction

With apologies to Albert Einstein, to whom this saying is attributed: the definition of insanity is doing the same thing over and over again and expecting a different result. Subs who make a claim against an owner, two rungs up on the construction ladder, for breach of trust under the Construction Act (or the old Construction Lien Act, which is unchanged in this regard) fall into that definition. Such was the case in Tremblar Building Supplies Ltd. v. 1839563 Ontario Limited, a 2020 decision of the Ontario Divisional Court.

An individual standing on the top rung of a ladder.

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Jun
23
2021

Breach of Trust

Electro-Works Ltd. v. Fogler, Rubinoff LLP 2021 Ont SCJ

Lawyers had received settlement funds on behalf of a contractor who ultimately went bankrupt. Some of these funds were paid to subcontractors, some went to the contractor, and some were used to pay the lawyers’ account for work that it had performed for the contractor. The plaintiff subcontractor had not been paid because the contractor had informed the lawyers that no money was owed to that subcontractor. The plaintiff subcontractor successfully sued the lawyers for the amount they applied towards their account based on the lawyers being in knowing receipt of trust funds.

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Jun
21
2021

Cost Plus

Infinity Construction Inc. v. Skyline Executive Acquisitions Inc. 2020 Ont SCJ

A cost plus, CCDC 3 contract does not grant an unlimited right to the contractor to perform any work it wishes. It still has an obligation to exercise a degree of diligence in carrying out work so as to not incur costs significantly higher than the estimate without prior approval. Courts will imply a term preventing payment for wasteful and uneconomic use of labour and materials and, if there is an estimate providing a guidepost, the final price should fall somewhere near the estimate – unless the contractor promptly notifies the owner of an expected overrun. In this case, the contractor’s work and invoices were satisfactory. Contractual interest did not run until the invoices were provided, but there was no reason to eliminate interest in its entirety.

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Jun
17
2021

Limitations

Canning Construction Limited v. Dhillon 2021 Ont SCJ

A lawyer had failed to perfect the plaintiff’s claim for lien. Ultimately, the defendant went bankrupt and the plaintiff was unable to collect any money. The plaintiff waited until 2019 to commence its action, even after being told by the lawyer in 2014 that the lawyer had failed to perfect the lien. The plaintiff claimed that it had not discovered its cause of action against the lawyer until it finally realised that it would receive no monies under the bankruptcy. The judge disagreed and held that, subjectively, after receiving a statement of affairs of the bankrupt, a reasonable corporation represented by counsel ought to have known that there would not be full recovery. The judge noted that the plaintiff could not say that it was legally inappropriate to bring the action because (i) the plaintiff had not relied on the superior knowledge of the lawyer regarding an attempt to ameliorate the loss, and (ii) although the plaintiff had pursued an alternative remedy to obtain its money, that alternative remedy was not sought against the lawyer, but against a third party.

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Jun
14
2021

Setting Down Delay

Tarion v. Dunhill Development 2019 Ont SCJ

The plaintiff brought a motion under Rule 48.14, just before the five-year deadline, for an extension to set the matter down for trial. The Master refused to grant the extension because (i) the plaintiff was not able to account for 3½ years of the 5 years of delay and (ii) did not adduce sufficient evidence to rebut the presumption that the defendant would be prejudiced if there were an extension. Although the plaintiff noted that its engineering firm was still active, it did not address whether the engineering witness were still available nor did it reference the evidence of the contractors who had performed the remedial work.

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Jun
11
2021

Scott Schedule

One Source Fire and Life Safety Inc. v. Prica Group Construction Management Inc. 2021 Ont SCJ

The parties were ordered to produce Scott Schedules. A Scott Schedule performs the function of particulars, giving definition to the pleadings and therefore to the relevance of questions on discovery. The order specified that the defendant had to identify separately all deficiencies, incomplete work, and work omitted by agreement with a detailed description of each item. The defendant stated that it was unable to fully comply with the order because it had hired a replacement contractor to correct all deficiencies and complete the work and did not get a breakdown of the various deficiencies and completion items. The plaintiff requested an order, upon which the judge agreed, prohibiting the defendant from advancing any new claims for deficiencies without leave. That order could have been far more stringent.

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Jun
09
2021

Discretion – Good Faith

Dominus/Cityzen Brampton SWQRP Inc. v. City of Brampton 2020 Ont SCJ

A site plan agreement allowed for a security deposit of $646,000 and gave the City the discretion to release part of it. The developer had done everything other than approximately $50,000 of work. It had not been able to do that because of opposition from neighbouring landowners. The City refused to reduce the security to $50,000, probably because the neighbouring landowners had also sued the City and the developer. The judge noted that the City was wearing two hats: the first as the municipal regulator and the second as the actual owner/user of the development. The court held that the City had exercised its discretion in bad faith. The fact that the City had been sued in its capacity as owner did not give it a right to set off possible future damages against the security deposit obtained in its capacity as municipal regulator.

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May
03
2021

Insurance Coverage in CCDC Contracts

Posted in Construction, SNF News

For the GCs among you:

We have a new CCDC41 2020. You may think it applies only to a CCDC2 2020 form of contract, but you would be wrong. For example, section 11.1.1 of CCDC2 2008 states:

… the Contractor shall provide, maintain and pay for the following insurance coverages, the minimum requirements of which are specified in CCDC 41 – CCDC Insurance Requirements in effect at the time of bid closing

Section 11.1.1 of CCDC5B 2010 is identical and, I expect, all the other CCDC contracts are the same or similar. The point is: subject to any supplementary conditions, CCDC41 2020 governs insurance regardless which CCDC form of contract you use.

The insurance coverage in CCDC 41 increases most limits from $5mil to $10mil. The extra premium should be included in your tenders and your insurance coverage should comply.

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