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Legal Blog: Construction

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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May
01
2021

Omnibus

Posted in Construction

Most court decisions will deal with one to four issues of law. Some deal with more, but usually those decisions are very long. In University Plumbing v. Solstice Two Limited, a 2019 decision of the Ontario Superior Court of Justice, the judge dealt with eight discrete issues in a mere 31 paragraphs.

An eight ball on a pool table.

Set Stage

A contractor performed mechanical work for a corporate developer and was not fully paid for its work. Notwithstanding the developer’s numerous promises to pay and a request, with which the contractor had initially complied, that the contractor wait until the developer received anticipated funds from Tarion Warranty Corporation, the developer still did not pay. Finally, the contractor commenced a trust action against the developer and its two directors, who were also officers, for $103,000, which, with accrued interest, had ballooned to $345,000.

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Apr
13
2021

Release

614128 Ontario Ltd (Trisan Construction) v. City of Toronto 2020 Ont CA

Contractor and owner entered into a settlement agreement by which the owner paid a significant sum in exchange for a release stating that there were no further outstanding claims on the projects. At the time, two of the five projects involved had not been completed as to deficiencies and there were contractual completion holdbacks for both projects. The contractor then took the position that it should receive not only the settlement amount, but also the holdback amounts. The court dismissed the claim stating that, at the time of the settlement, the contractor was fully aware of the money the owner had held back and, if it had intended these funds be paid in addition to the settlement amount, it could have stipulated that in the settlement agreement.

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Mar
26
2021

Change Order/Directives

EllisDon v. Winnipeg Airports 2018 Man (QB)

General and owner disagreed as to the valuation of various change directives for the project. The contract documents (based on CCDC 18 – like CCDC 2 but for civil works) had conflicting provisions as to what could be included in the valuations and what could not. (i) The trial judge relied on the CCDC clause that listed the contract documents in order of priority if there was a conflict between them. (ii) For change directives, the contract stated that the general had to prove its entitlement to payment of the costs before they could be reimbursed and the judge upheld that requirement. However, in the case where some of the subcontractors either settled with the general or went bankrupt, the judge allowed the costs. The judge held that there was no unjust enrichment because the owner suffered no detriment from what it anticipated when it signed the contract and issued the change directives. (iii) The owner also attacked a number of the change orders. The judge noted that the signing of a change order constituted a change to the lump-sum price and that, in this case, the change orders were signed off by the owner and the consultant. Accordingly, the judge held that it was not open for the owner to attempt to claw back amounts that the general had charged pursuant to quotations that it had submitted.

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Mar
15
2021

Fixed Price Contract

1157391 Ontario Inc. v. Ortiz 2020 Ont SCJ

Defendant owner wanted contractor to justify costs on a fixed price contract payable in stages of construction. The judge held this was unnecessary. The defendants had no right to convert a fixed price contract into a labour and material contract by their wishful thinking.

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