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BLOG: Legal update at the VRCA Construction Leadership Forum

0 36 Government

by JOC News Service

Lawyer David Volk led a look at recent court decisions that could affect the construction industry at a session at the Vancouver Regional Construction Association's Construction Leadership Forum on May 6 in Whistler, B.C.
BLOG: Legal update at the VRCA Construction Leadership Forum

Volk first looked at builder's liens, and pointed to a case titled Atlas Painting v 501 Robson Residential Partnership. In this case, the subcontractor put in a big lean for the Telus Gardens project on West Georgia in Vancouver. They had a fixed price contract of approximately $1.5 million, and near the end of the contract there were problems and Atlas was terminated. The same day they were terminated they filed a lien for $1.2 million.

Negotiations quickly started between the general contractor and Atlas, who then said they would agree to a lesser degree of security of $600,000. The owner took a hard line and said they wouldn't post a bond for the lien claim, and in fact applied in court to cancel the lien. At the hearing, Atlas agreed to security of $400,000 and the court was not receptive to Atlas's position. The court commented Atlas "should have known better" than to file a lien for $1.215 million and also noted the company was sophisticated and knew how liens worked. Atlas was a litigant in 59 Supreme Court cases since 1990. The court did not cancel the lien, due to the complexity of the underlying contractual dispute. They found Atlas's agreement to lower lien security "rescued it from a finding of abusive conduct."

An insurance case involving Epcor tower in Edmonton, Ledcor v. Northridge, involved a window washing company at the very end of construction. They needed a "construction clean" to rid the building of other dust.

Bristol, the window washing company, damaged the windows, by "using dull or inappropriate blades to scrape off the dirt," resulting in $1.2 million in damage. An insurance claim was made, but the policy had an exclusion. The exclusion said the policy did not cover "making good on faulty workmanship." Ledcor claimed on the policy, but the claim was denied.

This went to trial in 2013, and it was found that damage to windows was not excluded. There was much back and forth in court but finally in the Supreme Court of Canada it was decided it was covered, as this was "all risks" insurance.

Elan Construction v South Fish Creek Recreational Association is a tendering case that deals with damages for breach of Contract A when the contractor underbids Contractor B.

Elan, the bidder, was the low bidder to the SFCRA for the general contract for an arena project. About ten bids came in, and Elan was the lowest by $400,000. But the project went to another company, because there was a "sole and unfettered discretion" clause which allowed it to pick someone based on a matrix based point system.

Bu the court said SFCRA didn't use the points system, because if they had it would have favored Elan. The trail judge accepted that Elan proved damages in the form of lost expected profit of $705,000. The judge reduced the award to $1,000 because Chandos (the firm that was awarded the contract) faced the same adverse conditions that Elan would have faced.

But the Court of Appeal, which said "sole discretion" doesn't mean the owner had carte blanche, said that the SFCRA did not prove that Elan would have suffered the same fate as Chandos, and that there was "superficial comparison evidence" between Elan and Chandos.

In Valard Construction v. Bird Construction, the construction project was to build a large garage and work was subcontracted to a firm called Langford, which failed to pay Valard since it was insolvent.

Valard chose not to lien the project out of concern they would "rock the boat," and Valard would lose out on further oil sands work.

Valard eventually sued Langford in February 2017, and obtained default judgment (Langford didn't dispute) but the company was insolvent.

There was a bond, which is a requirement of subcontract between Bird and Langford that Langford provide a Labour and Material Payment Bond. This essentially says that if Langford couldn't pay up, they could get money from the bond. Bird was a trustee on that bond, so they were sued by Valard, who said Bird should have told them about that bond. It went to the Alberta Court of Queen's Bench, who said Bird is not required to inform sub contractors about the bond. This may yet go to the Supreme Court of Canada, and if the Supreme Court goes against the Court of Queen's Bench decision it could affect many other projects.

Notice provisions in a contract came into play in Ross-Clair v AG (PWC). This was a contract o build management office at Millhaven Penitentiary. Ross-Clair was the general contractor on a $7.9 million job, and they submitted a claim for $1.43 million because of delays. This case says when you submit a claim, you have to justify it at that time, so decisions can be made.

The engineers said they did not get enough information, and the extension was to 2010 but the project wasn't completed until 2012. The expert claim report was not provided by Ross-Clair until 2013l four years past when the claim was issued.

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