Legal Blog

Delay Claim

One of the most difficult claims to prove is a delay claim involving an entire construction project. It is difficult because each component of the project is dependent on another. How much of the delay was caused by sub #1, by sub #2, by the owner, by the general? How should the delay damages be quantified? An interesting delay claim was dealt with in Westeinde Construction Ltd. v. Murlee Holdings Ltd., a 2001 decision of the Superior Court of Justice.

Who Done It

The general commenced construction on a store for the owner on May 17 but, as the judge put it, construction came to a grinding halt in early June. The owner had ordered a halt to steel fabrication because the owner’s specs did not comply with the Ontario Building Code. This ultimately delayed the project for 7 weeks.

Further, although there was a new target substantial completion date of December 16, actual substantial completion was not achieved until January 31, an additional 7 weeks later. The general alleged and the trial judge accepted that 5 weeks of the additional 7 weeks was the result of inefficiency of construction in Ottawa in the winter. Two weeks was due to the Christmas shutdown.

The general had originally agreed that it could complete the construction of the store by October 25. That completion date was obviously rendered impossible by the owner-induced 7-week delay. What did the owner do? It stated that it was not responsible for the delay costs because, prior to the award of contract, it had written the general a letter in which it stated: “Guaranteed completion of construction and delivery of substantial performance of the project by October 26, 1996, excepting strikes or Acts of God.”

The owner alleged that somehow this statement made the general liable for all delays, even if the owner caused them. The owner not only refused to pay delay costs, it refused to pay the general over $200,000 that the owner admittedly owed on contract. The owner claimed set-off, alleging that the general was liable to it for $1.8 million in lost profit resulting from the delay in its store opening.

No Way

The judge did not accept the owner’s position regarding responsibility for delay. He ruled that “the evidence overwhelmingly demonstrates the fact that both parties had entered into an agreement in accordance with CCDC2 1994 contract and the provisions of section 6.5 dealing with delays” and “to accept the Defendant’s contention that the contact has been amended by inserting that one line in one letter … is not reasonable.” We would have chosen a stronger description – like nonsense or asinine.

How Much

Unfortunately, we cannot report on the exact quantification of the delay claim because many items that the judge assessed were not seriously disputed by the owner and were referenced to an exhibit that was not reproduced. Accordingly, we can only comment on some of the larger disputed items.

The general first claimed for 7 weeks (i.e. the initial delay) of lost wages for its site staff. The judge reduced this amount by 30%. He stated that “surely, they did something productive either for this project or some other project for the Plaintiff” during this period. This reduction not only seems reasonable, it could probably have been greater. We doubt that the site staff sat on their hands during the entire 7 weeks that the project was shut down.

The general also claimed the project manager’s hourly charge out rate during that time. Noting that the project manager was responsible for 3 or 4 projects, the judge reduced this claim by 50%. Again, we feel that the judge was generous to the general in this regard.

The general then claimed for an impact delay of an additional 7 weeks. The judge reduced that number to 5 weeks. He stated that the owner should not have to pay for the 2-week Christmas shutdown for which the general would have paid regardless. He did, however, allow the same categories of damages for the remaining 5 weeks as he had allowed for the previous 7-week delay claim.

The judge reduced the claims for on-site salaries and the project manager’s charge out rates by the same percentage as he reduced them for the initial 7-week period. This, we suggest, was wrong. We can well understand that when there is a total shutdown, a general will have its staff doing something useful, although not necessarily as productive as the original job they were slated to do. This is not the situation when a project slides past its projected duration. The site staff and project manager are still working on the project. They are just not as efficient. The judge should not have deducted anything from the extended 5-week claim.

Final Insult 

Since the judge decided that the owner was responsible for the delay, he also dismissed the owner’s counterclaim. Just in case the judge was subsequently held to be wrong on appeal, he assessed the owner’s damages for loss of profit. He stated: “A party who alleges loss of profits of over 1 million dollars has responsibility to prove, to the Court’s satisfaction, that there was, in fact, such loss of profits. The evidence in this matter falls far short of having met that onus.” We presume that the owner did not take its counterclaim very seriously either and had used it simply as a bargaining tool.

SNF HAPPENINGS

Jonathan Speigel and Ian Latimer have swapped their Bachelor of Law (LL.B.) degrees from University of Toronto for Juris Doctor (J.D.) degrees. They each paid $61.00 for the privilege. You do not have to call them doctor but, no doubt, they would be tickled to hear it.

In addition to having been certified in 1996 by the Law Society of Upper Canada as a specialist in civil litigation, Jonathan Speigel has recently been certified by the Law Society as a specialist in construction law. There are presently 14 lawyers in Ontario certified in construction law.