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).
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.
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.
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.
Download the entire issue for this article and more.
For more issues, visit our website or visit our archive for past issues.