By Jared Epp, Robertson Stromberg Barristers and Solicitors
Building contracts, like CCDC contracts, frequently require
parties who disagree over things like extras to submit particulars
of their dispute to an engineer for determination. The findings of
the engineer can then be challenged by either party in arbitration.
The detail that must be included in these dispute notes was
recently discussed by the Ontario Court of Appeal in
Ross-Clair v.
Canada (Attorney-General).
The Facts
In this case, a general contractor (“Ross-Clair”) was hired by the
federal government to build management offices at the Millhaven
Institution, which is a maximum security prison located in Bath,
Ontario. The parties’ contract set out detailed requirements in
terms of how Ross-Clair was to submit claims for extras:
35.3 When the contractor has given a notice referred
to in GC 35.2, the contractor shall give the Engineer a
written claim for extra expense or loss or damage within
thirty (30) days of the date that a Final Certificate of
Completion referred to in GC 44.1 is issued and not
afterwards.
35.4 A written claim referred to in GC 35.3 shall contain
a sufficient description of the facts and circumstances of
the occurrence that is the subject of the claim to enable
the Engineer to determine whether or not the claim is
justified and the contractor shall supply such further
and other information for that purpose as the Engineer
requires from time to time.
If either the Owner or Ross-Clair disagreed with the findings
of the Engineer, they could elect to have the issue determined
through binding arbitration. However, arbitration was only available
if and after the Engineer made a finding.
A number of issues arose during construction, most of which
centered on Ross-Clair’s inability to meet the scheduled completion
date, which was January 24, 2009. A number of letters were
exchanged between the parties on this issue. These letters later
formed the foundation for Ross-Clair’s claim for extras and
provide context to the dispute.
- December 5, 2008 Ross-Clair informs the Engineer that an
extension is needed to complete due to delays caused by the
owner and that Ross-Clair has incurred additional costs of
$1,437,976. Ross-Clair indicates it will provide a breakdown
of these costs in the future.
- December 16, 2008 the Engineer advises Ross-Clair that it
needs more information before it can process a claim for
extras.
- February 27, 2009 the Owner reminds Ross-Clair that it has
failed to complete the project on time.
- March 2, 2009 Ross-Clair informs the Owner that Ross-Clair
is entitled to an extension due to owner caused delay. RossClair
also attaches a document listing the sub-contractors it
owes money to for the project. These costs total $1,437,976.
- April and May 2009 both the Owner and Engineer request
that Ross-Clair provide additional documentation in support
of its extras claim.
- October 6, 2009 the Owner grants Ross-Clair an extension
to complete without prejudice to the right to object to the
extra costs Ross-Clair is claiming.
- March 31, 2011 Ross-Clair claims additional costs of $766,700.
- April 2, 2011 the Owner advises Ross-Clair that its letters did
not contain enough information for the Owner to be able to
process the claim for extras.
- February 10, 2012 the Engineer certifies the project as being
complete.
- May 28, 2013 Ross-Clair provides the Owner with a detailed
report breaking down its claim for extras.
Ultimately, the Owner refused to pay Ross-Clair’s claim for
extras. However, the Owner also instructed the Engineer not
to make a finding in response to Ross-Clair’s May 2013 report,
thereby depriving Ross-Clair of the ability to seek arbitration.
Ross-Clair then sought a court order requiring the Engineer to
rule on its claim for extras.
The Results
In considering this issue, the Court discussed whether or not the
letters prepared by Ross-Clair gave the Engineer sufficient information
about the claim for extras. At the outset, the Court noted
that the detailed report submitted by Ross-Clair in May 2013
could not be considered because it was delivered, contrary to GC
35.3, more than 30 days after the Final Certificate of Completion
was issued. This meant that the details of Ross-Clair’s claim were
limited to what it set out in its 2008 and 2009 letters.
In considering whether or not these letters had enough detail to
satisfy the notice requirements in the parties’ contract, the Court
stressed the fact that the contract needed to be interpreted as
a whole. This meant that the provisions in the contract, which
regulated how extra work would be priced (ex. costs of labour,
materials, costs to hire sub-trades, over-head mark-up costs)
needed to be outlined and detailed in the claim for extras, as
without it the Engineer would not have the information needed
to make a meaningful decision.
The court was also very concerned with the fact that Ross-Clair
had not responded to the Owner or the Engineer’s request for
more information until May 30, 2013, which was more than 12
months after the project was completed. Given these circumstances,
Ross-Clair was not allowed to advance its claim for
extras.
Conclusion
The decision reached in Ross-Clair is significant for a number of
reasons including:
- It reiterates the importance of ensuring that the strict notice
provisions, in terms of dispute notes, be followed. Had RossClair
provided its detailed report for extras within 30 days
of completion, the court might have required the Engineer
to rule on whether or not these extra costs were legitimate;
- It confirms that “one-liner, emailed” notices of dispute are
often not good enough. Rather, contractors must, and can be
expected to, take care to alert the owner as to when extra
costs have been incurred as well as to provide the owner with
meaningful information as to what these extra costs consist
of. For example, if a contract states that extras will be paid
on a cost-plus basis, it may not be enough for a contractor to
say it is been delayed and it has suffered a certain amount of
damages. Rather, detailed breakdowns of labour and material
costs, as well as a specific explanation as to why these costs
were incurred, should be provided in the initial dispute note;
and
- It highlights the importance, particularly for an owner, of
having a diligent engineer on site. Had the Engineer not told
Ross-Clair that it needed more details to process its claim,
the court may have had more sympathy for Ross-Clair’s plight.
Ultimately, Ross-Clair serves as a reminder to contractors that
they need to take care in completing notices of dispute, and also
reminds engineers and project managers that they can demand
information that they need to fairly evaluate requests for additional
payment both in terms of whether or not the extras are
legitimate and what the cost of the extras might be.
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