LAW 439: CONSTRUCTION LAWCOURTNEY GIBBONS

EXAM CODE: 1323FALL 2018

Table of ContentsOwner’s and Builder’s Responsibilities....................................................................5

Owner’s Responsibilities....................................................................................................5CCDC2........................................................................................................................................... 5The Delay Claim............................................................................................................................ 6Design and Construction Defects..................................................................................................6To Third Parties............................................................................................................................ 6Misrepresentation / Non-Disclosure.............................................................................................7To Builder...................................................................................................................................... 8

The Builder’s Responsibilities...........................................................................................9In Contract – CCDC 2.................................................................................................................... 9To Third Parties............................................................................................................................ 9

Builders Liens........................................................................................................11Lien Claimants and Lien Rights.......................................................................................11The Lienable Interest and Time Limits for Filing A Lien................................................12Certificate of Completion and Potential Difficulties.......................................................13Loss or Discharge of Liens...............................................................................................14The Holdback...................................................................................................................15The Trust.........................................................................................................................15

Dispute Resolution.................................................................................................17Procurement of Builder’s Services.........................................................................19

Pre Ron Engineering – McMaster....................................................................................19R. V Ron Engineering & Construction (Eastern) LTD (1981) SCC..................................19Process Must Be Transparent and Fair...........................................................................20Rule: duty to not have any secret preferences, if you do and fail to disclose a challenge will likely be successful (Chinook Aggregates Ltd. v The Municipal District of Abbotsford)......................................................................................................................20The Privilege Clause........................................................................................................20Only Compliant Bids Can Be Accepted............................................................................20The Consultant’s Role......................................................................................................21The Duty Owed to Subcontractors (Trade) By Owners....................................................21Contractor’s Remedy for Breach.....................................................................................21

The Designer’s Responsibilities.............................................................................23A. Standard of Care..........................................................................................................23B. To Owner.....................................................................................................................23

Under RAIC 6.............................................................................................................................. 23Meet Budget................................................................................................................................ 23In the Bid Process....................................................................................................................... 23Issuing Progress Certificates and Letters of Assurance.............................................................23

C. To Builder....................................................................................................................23Global Takeaway for Duties to the Builder.................................................................................23Full and Accurate Disclosure......................................................................................................23Field Reviews.............................................................................................................................. 24

D. To Third Parties..........................................................................................................24Design - Winnipeg Condominium Corp v Bird Construction Co Ltd, [1995] SCC.......................25Duty to Warn............................................................................................................................... 25Field Reviews.............................................................................................................................. 25

Responsibility of Building Regulators...................................................................27

2

Legislative Scheme..........................................................................................................27Common Law: Sole source of responsibility...............................................................................27Provincial Legislation.................................................................................................................. 28Local Bylaws............................................................................................................................... 28

Insurance in the Construction Industry.................................................................29Property Insurance (Course of Construction Builder’s Risk Insurance)........................29Professional Liability Insurance......................................................................................30General Liability Insurance.............................................................................................31Bid Bond..........................................................................................................................32Performance Bond...........................................................................................................32Labour and Material Payment Bond................................................................................32

Project Structures..................................................................................................33Classical Structure (Design Bid Build)............................................................................33Design Build Structure....................................................................................................33Public Private Partnerships (P3s)...................................................................................34Codes and Statutes..........................................................................................................34Emerging Issues for the Construction Industry..............................................................34

Building Green............................................................................................................................ 34Integrated Project Delivery and Building Information Modeling................................................34

Environmental Issues in Construction Law............................................................35Provincial Legislation......................................................................................................36Case Law..........................................................................................................................36Federal Legislation..........................................................................................................37Common Law Liability.....................................................................................................37Contractual Considerations.............................................................................................38

3

4

OWNER’S AND BUILDER’S RESPONSIBILITIES

Owner’s Responsibilities

CCDC2 CCDC2 is a standard form of agreement between Owner and Contractor where the basis of payment is a stipulated sum for an agreed upon amount.

It was developed to be a consensus document representing all parties involved. It comprises articles of agreements (parties, the price etc) but also the project specifications, drawings, a hierarchy of documents

CCDC 2Headings Broad Categories Details

Agreement Between Owner/ContractorDefinitions Change Orders,

change directives, construction equipment, contract documents (price, time contract itself), drawings, owners, who are sub-contractors etc.

General Provisions

Contract docs, rights and remedies

Administration of the Contract

Authority and role of consultant, review and inspection of work

Consultant: make sure progress/quality is in line with the contract, makes recommendations to owner whether to pay/not pay based on progress, but is NOT liable for contractors work Authority to mandate the contractor to do work If any errors due to consultant, the OWNER bears the risk – contractor would sue Owner to recover, owner would sue the consultant Duties consultant owes owner is an independent contract from the one from the owner and contractor – this is to protect the consultant

Execution of the work

Control of the work, doc review, subs and suppliers

Contractor must correct deficiencies Owner has obligation to coordinate work with contractor, who reviews the scheduling (GAANT Charts) How are drawings reviewed during and prior to project beginning (time for review, payments for drawings etc)

Allowances Cash and contingency allowances

Payment Financing, progress payments, substantial performance, holdbacks

Owner’s obligation to holdbacks (fund lien accounts to pay sub-trades)

Changes in the Work

Change order and change directives, delays, owner’s right to make changes

Owner vis a vis contractor can make change orders Separate expected duration and productivitySets out provisions to deal with instances that give rise to delays – labour disputes, adverse weather etc, contract time shall be extended, however contractor won’t be entitled to compensation (non-compensable delay) No extension shall be made for delay unless notice in writing is given to the consultant no later than 10 working

5

days after commencement of the delay (owner is entitled to know for a range of reasons, maybe to give him ability to make other changes managing the site)

Default Notice Owner’s right to perform the work

Contractor/owner can terminate contract/work if owner doesn’t live up to obligations in contracts, but must give notice in writing

Dispute Resolution

Authority of consultant, methods of negotiation

If dispute not resolved, resolved through binding arbitration

Protection of Persons and Property

Protection of work and property, toxic and hazardous substances, construction safety

Toxic and hazardous substances are the responsibility of the owner if it is not the fault of the contractor

Governing Regulations

Taxes, duties, laws and fees, workers comp

Insurance Insurance, contract security

Builder’s Risk insurance Security – performance bonds and surety to insure contractor – if contractor defaults, surety would pay out owner

Indemnification, Waiver of Claims

Indemnification, waiver of claims, warranty

Provide that parties will indemnify each other if party is sued by someone else subject to limits (indemnifiable event)

The Delay Claim

Parties to a contract will abide by the provisions set out in the prime contract as to delay, which include notice in writing of delay. Owner entitled to notice from contractor to adjust their budgets, which is why contactor must give notice in writing (Foundation v UGG)-Kraft v Martech-project for Prince George courthouse-project ended six months late

Design and Construction Defects

WarrantyStrata Plan LMS 1463 v Krahn Bros Construction Ltd, 2003 BCSC (aff’d 2004 BCCA)

Leaky Condo litigation – The developer is not liable to owners and subsequent purchasers for deficiencies in condo defects under the Real Estate Act unless they do NOT disclose the deficiencies

Implied Warranty of FitnessEach party in a contract has an implied contractual obligation that what the parties put into a building or structure are reasonably materially fit for their intended purpose (BC Rail Ltd v Canadian Pacific Consulting Services Ltd)

-construction of long rail tunnel with electrified rails-CPCS has done many of these projects, always uses same design/build

-found tunnel was extremely wet and smelled like sulfur-system that carries current began to corrode and fail within months

-it was found that the sulfur was destroying the metal in the tunnel-CPCS claims rail system was properly constructed

To Third Parties

Physical DamageDonoghue v Stevenson and neighbourhood principle vs. economic loss

In Donoghue, it was very much harm to the person, not to the bank account Economic loss – heavily reliant on need to establish a special relationship of proximity and confine

scope of recognition of duty

Economic Loss6

We are going towards:o Reasonable relianceo Negligent Representation

In the UK they’ve moved away from Anns and finding liability via CL Unless you’re in one of the strict categories, you can’t recover for negligence – it’s up to the

legislation

Winnipeg Condos (1995) SCC (faulty masonry that fell off) Tort Duty: Contractors owe a duty in tort to future inhabitants (not in privity) for the cost of repair

of dangerous defects (not necessarily shoddy/substandard)o Encourages socially responsible behavior for contractorso Factors: degree of damage (shoddy workmanship or dangerous defect)

Liability: Amount of liability will be limited by reasonable cost of repairing the dangerous defect in the building and restoring it to a non-dangerous state

With passage of time, it is increasingly difficult for owners of building to prove defect is attributable to negligence of contractor and NOT inevitable wear and tear by every building

Winnipeg Condos picked up on Laskin’s defense in Rivtow, that you can extend the rule in Donoghue and Stevenson to economic loss

J.P. Metal Masters Inc. v David Mitchell Co. (1997) SCC Improper shelving design from the architect led to increased costs JP argued that standard in industry is that architects need some structural basis for drawings (can’t

just be concepts) JP reasonably relied on architect’s drawings

Failure to Warn

Rivtow Marine Ltd v Washington Iron Works, (1974) SCC Duty to warn: There is a duty to warn when it comes to negligent manufacturing or design, and a

failure to warn may result in an action, even in cases where the loss is purely economic

Surrey v Carroll-Hatch & Associates, BCCA Facts: Surrey wanted to build something, turned to a structural planner and asked him to work with

engineer, asked him to find out soil samples. Engineers said that there is a compressed mud, but should bore down deeper as there is unstable material down – you need to go deeper. Architect of Surrey lied to engineer, and Architect said to engineer just write a report to the city saying everything is ok. Part of the way through the build, it was apparent that soil was faulty and so Surrey sued engineer (no contract in negligent misrepresentation and succeeded)

Holding: Engineer knew when it prepared designs that it misrepresented the bearing capacity of the soil, didn’t disclose that they wanted more tests, that the comfort letter re soil report was false, so the engineer was liable

Misrepresentation / Non-DisclosureMisrepresentation

Sub-contractors action against designer Despite not being in privity, sub-contractors can sue designer in tort for implied representation that

the designs are buildable.o Occurs when a designer drafts construction documents that are ultimately unworkable by the

contractor and/or sub-trades (Designer knows that the trades are going to rely on what is delivered – if one discovers that it cant be, and incurs loss recoverable in tort)

Hercules Managements Ltd v Ernst & Young, (1997) SCCDuty of care arising from oral or written communication. Misstatement + condition expressly/impliedly that representor undertakes some responsibility

7

Words can inflict harm far removed from origin, more durability and portabilityo However, misrepresentation must relate to the intended purpose and audience of the

representationo Concerns : indeterminate liability, floodgates, freedom of expression

Physical injury to self or property vs pure economic loss (courts are more strict) No substantial diff between negligent actions and negligent words when it comes to physical injury

Hedley Byrne: HL recognized that a duty of care can arise w/ respect to careless statements that cause pure economic loss.

Approach in Canada: focus on special relationship to ground liability and ease floodgates concern (that words alone establishing liability means D need only reasonably foresee harm, i.e. does away w/ neighbour principle.)

Queen v Cognos, SCC [P sues for negligent misrepresentation during the job interview causing him econ loss.]

Employee says you negligently informed me of this. Cognos says well the contract says you can be discharged without notice – Court says there was a negligent statement the effect of which was different than what was stated in the contract

- Authority for Framework of Negligent Misrepresentation in Canada USE THIS FIRST! 1. Duty of care between representor and representee exists based on ‘special relationship’ [only DoC

step] (HM)o Representor has knowledge of representee’s identityo Representee uses info for specific use

2. Representation is untrue, inaccurate, or misleading (misrepresentation)3. Representor acted negligently in making representation (SOC applicable, & breached it)4. Representee relied reasonably on negligent representation (Causation)

o Reasonably foreseeable to representor that representee will rely on infoo Would be reasonable for representee to rely on info

5. Reliance was detrimental to representee b/c damages resulted (damages)

Hercules Management: Establishment of negligent misrepresentation as category of duty of care (Before Cooper)Ps, shareholders, relied on neg. misrep. in auditor’s reports to their pure econ loss. Duty of care negated by policy concerns (lack of specific use). [Hercules comes after Cognos, and expands #1]

(1) Prima Facie Duty of Care : in negligent misrep, the proximity relationship arises b/c of P’s reasonable reliance on D’s words:

(a) D ought to reasonably foresee P relying on his word, and (b) reliance by P in circumstances would be reasonable.

Indicia of Reasonable Reliance from (factors that are considered):o D has in/direct financial interest in transaction in which representation was madeo D is professional/someone w/ special knowledge/skillo D provided advice/info in course of his businesso Advice/info given deliberately and not on social occasiono Advice/info given in response to inquiry/question

(2) Policy Considerations : main one in negligent misrep is unlimited liability/litigationo Should be cut down by 1) did the knowledge of P’s identity and 2) did the P use the

statements in question for the specific use for which they were prepared.

- Integrating neg. misrep. into Anns/Kamloops framework: no need to go through framework every time, as long as knowledge of representee’s identity and specific use of info are part of analysis. Est of category btwn representors and representees is done. You must see if particular person being sued has an obligation to particular person suing, i.e. whether there is proximity on the specific facts.- But within such a broad category there will be many possible sub-categories (many different

8

situations/parties)

Wigmar Construction Brought claim for negligently prepared geotechnical soils report. No question that report was

improperly prepared. Evidence of reliance by Wigmar is lacking-simply relied on subcontractor Denmor (who relied on the report)

Cardinal Construction Ltd v Corporation of the City of Brockville et al (1984) (Ont H Ct J) – wasn’t appealed, but sketchy…

Engineers owe a duty to tenderers for who will rely on the information provided – the standard is with reasonable accuracy dependent on the nature of the work for the contractor to prepare a bid

o If engineers does not have specific info, he has a duty to inform the bidders that he doesn’t vouch for the accuracy of his report

o In BC, the trend is to protect the engineer from 3rd party claims in negligence by contractors

To BuilderBG Checo International v BC Hydro & Power Authority (1994), BCSC

For negligent misrepresentation, you can choose whichever route to pursue to get damages, whether in contract or in tort, so long as you don’t double recover

Edgeworth Construction Ltd v ND Lea & Associates Ltd, (1993) SCC Court found that engineer not covered by exclusion clause in K with province, reasonable for the

contractor to rely on the report (not reasonable for contractor to do all that work without even having a bid). Engineer owed DOC to person who read and used report and reasonably relied on it

In general, designers, consultants, and other professionals can limit their liability through their contract by inserting a caveat emptor clause, similar to:

o “Don’t rely on the information we are delivering, if you want more work done, pay us to do it or do it yourself.”

In an owner-designer-contractor relationship, any disputes in the designer-contractor relationship with no contract would be dealt with in tort. Those not in privity are subject to a claim in tort.

If a designer wants to limit their liability, one can:1. Put a disclaimer in document which will strip the argument that the contractor reasonably relied on

this2. Include in the general contract that limitation of liability is for the express benefit for the tender and

can be directly maintained by the owner or engineer to avail the defence of the employee (the contract was made for your benefit of the liability of exclusion provision)

The Builder’s Responsibilities

In Contract – CCDC 2

Schedule. Workmanship and Materials, Delays, Extras, Site Conditions, Disputes

To Third Parties

Winnipeg Condos changed the law: Whether you are builder, designer, supplier, you owe a duty to people with whom you have no

contract if they have proximity with you (i.e. are likely to suffer damage from a dangerous defect or healthy and safety issue for something you have failed to do) and you have to make them whole for the costs they’ve incurred to correct those dangerous defects

SCC says from policy standpoint this makes sense

9

Note: arguably, this never changed the law on non-dangerous defects, but case never tells us how to define dangerous. La Forest makes a point to clearly say this doesn’t apply for just “shoddy construction”

10

11

BUILDERS LIENS

Lien: A lien is a cost-effective tool for securing the recovery of unpaid contract amounts owed to a construction party. A lien is intended to give those who have assisted in the improvement of land an interest in that land or the improvement until such time as they are paid.

Overview Regulation: Almost exclusively regulated by Statute (Builder’s Lien Act, Strata Property Act)

o The Builder’s Lien Act seems to balance all parties involved (owners, contractors, sub-Cs) Newer things to arise under the new statute include multiple holdbacks, progressive holdbacks

3 main concepts of the Builder’s Lien Act

1. Right to make a lien (s. 2)o Remedy against the land against improvements so owner cannot take advantage of materials

or others If real in rem property interest – s. 2

o File lien in LTO, then commence an action within 1 year2. Right of owner to limit liability (Holdback) (s. 4)

o Holdbacks : amount held by owner in payment to GC 10% of each payment If owner has followed procedures, this fund is available If GC hasn’t made payments to someone, it shouldn’t be hardships to owner to pay out

this – the holdback limits the liability Limitation of liability (s. 34) - Max aggregate amount that may be recovered under this

Act by all lien holders from the same contractor/sub is the greater of: a) amount owing to the contractor/sub b) the holdback in relation to the contract between the contractor/sub

o Lien holdback vs. deficiency holdback Deficiency holdback once you finish deficiencies, we’ll give you your full amount Lien holdback provides rights/remedies to contractors and sub-contractors

3. Trust – Unpaid workers (sub-contractors, contractors) have ability to be paid via trust for benefit of the workers (s. 10)

o The money in the trust is a remedy as a beneficiary if the contractor/sub use the funds for unauthorized purposes (not related to the project)

o Remedies are separate Breach of trust – GC receives money and then diverts to another owner Claim against GC/sub-C for breach of trust (claims against officers, 3rd parties (banks))

o Purpose: money received by GC/sub-C is for the benefit of those underneath

Lien Claimants and Lien Rights S. 2 – Lien remedies

This is a remedy against land and improvements on the land so the owner cannot take advantage of these benefits without paying for the work done

o Does not apply to improvements after owner filed a notice of interest in the LTO (way out for non-contracting owner)

In rem

Lien Claimants (1) A contractor, subcontractor or worker who, in relation to an improvement

o (a) performs or provides work, (b) supplies material, or (c) does any combination of those things referred to in paragraphs (a) and (b)

o has a lien for the price of the work and material, to the extent that the price remains unpaid, on all of the following

(d) the interest of the owner in the improvement; (e) the improvement itself; (f) the land in, on or under which the improvement is located; (g) the material delivered to or placed on the land.

12

o Contractor needs direct interaction with owner; Sub needs direct interaction/contractual relationship with contractor; etc.

s. 2(2) says Builder’s Lien Act does not apply to a person who performs or provides work or supplies material to an architect, engineer or material supplier. (for these parties to have a lien must fit into one of the categories above)

Improvement (definitions) (S.1) : anything made, constructed, erected, built, altered, repaired or added to, in, on or under land, and attached to it or intended to become a part of it, and also includes any clearing, excavating, digging, drilling, tunnelling, filling, grading or ditching of, in, on or under land

Deemed Improvement (S. 3) (1) An improvement done with the prior knowledge, but not at the request, of an owner is deemed to

have been done at the request of the owner.o (2) Subsection (1) does not apply to an improvement made after the owner has filed a notice of

interest with LTOo (3) Subsection (1) does not apply to an improvement on land owned by the government.

John Perkins/Peter Wardle Partnership v Domus Design Co (1984), BCCA (under old Act) – Need actual improvement to the land

Example of an invalid lien due to not doing/causing to do something regarding an improvement on land

o Doesn’t include an approval for the development of land (i.e a permit) A lien must be based on an improvement on the land

o The development didn’t go through, there was no improvement on the land, even though there was a substantial increase in value to the land. This is not the sort of improvement contemplated by the Builder’s Lien legislation

Northern Thunderbird Air Ltd v Royal Oak Mines Inc (2002), BCCA – “in relation to” for lien claimants definition

In relation to” is to be read as meaning “in direct relation to” or “in relation to an integral part of the improvement” and despite inclusive wording of the definition of “services,” the definition is not to be read as limitless

o Services (definitions) : includes (a) services as an architect or engineer whether provided before or after the construction of an improvement has begun, and (b) the rental of equipment, with an operator, for use in making an improvement;

There must be a direct connection between the service and the improvement. The purpose of the Act would not be achieved with a lesser limitation, such as reasonably necessary.

o Consider in context of s. 2 (1) and context of entire Builder Lien Act

Kettle Valley Contractors Ltd v Cariboo Paving Ltd (1986), BCCA – requires integral/necessary part of actual construction

Facts: Paved roads were subcontracted by contractor Kettle Valley to Cariboo which subcontracted to Hamblin (sub-sub C) a minor part of its work to be completed in a gravel pit away form the improvement in land. Hamblin argued that this work was “on” the improvement land.

Work done offsite can be the subject of a lien claim, but the work or services must be an integral and necessary part of the actual physical construction of the project

Affirms ability for sub-sub C’s to sue Dissent: If the work is not on the improvement, than it should not be entitled to a lien

Pedre Contractors Ltd v 2725312 Canada Inc (2004), BCSC – work must directly benefit the Owner’s property

Facts: Contract to install fibre-optical conduit in condo development, conduit installed in building and ran off property into manholes – All the work performed and material supplied by Pedre, including that performed and supplied outside the boundaries of the Property, was of direct benefit to the Property and an integral and necessary part of the actual physical construction of the improvement, and therefore can form the subject of an improvement on the land – had the work not be of a direct

13

benefit to the property, the lien probably would not have been able to be filed A claim for a lien can be filed even if the work and materials were supplied off the lands in respect of

an improvement constructed off the lands. However, the work performed, and material supplied must directly benefit the owner’s property (considered integral and necessary for the project)

The Lienable Interest and Time Limits for Filing A Lien S. 20 of Builder’s Lien Act and S. 88 of Strata Property Act set out the time limits for filing a lien

Lien claimants must strictly abide by claim timelines (these are statutory requirements)o Main exception: Shimco there are specific sections that give rise to a separate and distinct

lien to holdback funds (ie extended time to claim against the holdback fund) Time limits

o The available time to file a lien starts running in 3 different circumstances: o S. 20(1) A lien claim must be filed no later than 45 days after the date on which the

certificate of completion was issued, a project is abandoned, or canceled An architect/engineer can ask the contractor or subcontractor to determine whether

the contract or subcontract has been completed within 10 days after the date of the request as per s. 7(3).

If a certificate of completion is issued, the architect/engineer must within 7 days give the certificate to, all persons who submitted a request for the certificate, including the owner, head contractor

Court may also order a certificate of substantial completion if the payment certifier fails to issue the certificate (S. 7(5))

o S. 20(2) governs that in respect of liens in relation to the head contract. The time period for filing a lien under 20(2) starts running when the contract completed, abandoned or terminated, and is also for 45 days.

o Must also file a certificate of pending litigation (CPL) within 1 year of substantial completiono No distinction between all lien claimantso Depends on when the head contract is over

Triggering eventso Will be the first triggering event that is applicable even if there are multiple potential

triggering events 1. Certificate of completion (S. 7) 2. If no certificate but there is a head contractor/general contractor in place Starts from when

the head contract is completed, abandoned, or terminated Completed: Substantial completed/performed (determined objectively from the

financial criteria: what has been paid; what was the total contract; what has been completed – 3 2 1 formula)

FOR STRATA: S. 1 (4) on a strata lot it is completed no later than the date that it is first occupied

Abandoned S. 1 (5): 30 days when no work has been done, unless the cause of the

succession of work is a (gives a list)3. If no certificate & no head contractor/general contractor in place Starts from when project

is substantially fit for use

Different types of Owners: Non-contracting owners – when owner has leased property to tenant who contracts to have work

done on the propertyo As per Builder’s Lien, can be an owner if have equitable interest in land

Deemed authorization of owners (S. 3(1))o Tenant If tenant does the work, but registered owner is aware of what’s going on, they are

an owner

Certificate of Completion and Potential Difficulties Once a certificate of completion has been issued either on the subcontractors work or on the entire

project, the 45 day window starts to run.

14

o Architect or consultant is not obligated to notify all potential affected parties about the certificate of completion.

o Onus is on the unpaid subcontractors to be aware of when this is issued to make sure they are entitled to the right under the Builder’s Lien Act.

Lien claimants generally have 2 options to claim a lien File a lien against the land (must file a lien at the LTO) File an action for the monies in trust for the project

Important difference in Liens Lien against the holdback is a separate claim from a lien against the land.

o Lien against the holdback is not filed in the Land Title Office. Lien claimant must start a law suit in the Supreme Court of British Columbia alleging its lien before the holdback monies are paid out.

o This means that the 45 day lien period used in the lien against the land does not apply to the lien against the holdback. A claimant that failed to take steps to perfect its lien against the land, can still assert a claim of lien against the holdback. The claimant would be entitled to share pro-rata in the holdback funds with all other lien claimants.

o The lien against the holdback is dependent on whether the holdback funds were ever kept or have been paid out.

Payment out of the holdback can be made after the expiry of the 45-day holdback period provided a claim of lien against the land has not been filed and no proceeding has been commenced to enforce a lien against the holdback (s. 8).

o Since Shimco, our Court of Appeal has confirmed that where there is no holdback, or a holdback has been wrongfully paid out, a person whose land lien has been extinguished cannot later commence proceedings to enforce a lien against a nonexistent holdback: (Wah Fai Plumbing & Heating Inc. v. Ma, 2011 BCCA 26)

Shimco Metal Erectors Ltd v Design Steel Constructors Ltd, [2002] BCSC 238, 99 BCLR (3d) 59, aff’d 2003 BCCA 193

Facts: Shimco didn’t file a CPO in LTO Wording of s. 8(4) of Builder’s Lien Act demonstrates the intention of the Legislature to create a 3rd

remedy for lien claimants: to file a lien against the holdback.o No reference to a limitation for a holdback period. If you miss that statutory limitations can

send out a Shimco notice Shimco lien is found in s. 4(9) of the BLA

No Holdback available whenWhere there is no holdback funds available, or a holdback has been wrongfully paid out, a person whose land lien has been extinguished cannot later commence proceedings to enforce a lien against a nonexistent holdback (Wah Fai Plumbing)

Loss or Discharge of Liens S. 23-25 Can obtain a discharge of liens, end a disruption caused by lien, paying out disputed claims, providing security etc.

S. 23 Allows owner or other parties to pay money into court to remove the lien and themselves from a fight (claimants fight for a cut). Removes a party from holdback liability.

S. 24 Security – An owner can post security for the builder’s lien that amounts the contractor has not paid out.

S. 25 Application – An owner, contractor, or lien claimant can apply to the court to cancel a lien

Section 23 allows people to pay money into court to remove themselves from the fight (claimants can duke out for a cut)

Lesser amount of either:o (a) Entire amounto (b) Amount owing by owner to applicant – no less than the statutorily amount

If total exceeds holdback, greater holdback is payable into courto S. 25 Can be made by petition

15

Section 24 An owner can post security for the builder’s lien that the contractor has not paid out. Security can be paid into court, trust, security for the professional or sub-contractors payments.

Substitutes the posted security for the land/improvement to the land When posting security, amount of security to remove it is usually the amount of the lien itself,

although it doesn’t have to be (Nanaimo Contractors Ltd – Reducing amount of security)o Courts should be cautious before ordering a reduced amount of security (Q West Van Homes

Inc v Fran-Car Aluminum Inc)o The standard industry practice is generally 10-15% of the face value of the lien as security for

costso BUT, no legal requirement to post any amount as security for costs in the ordinary course of

a s. 24 application. Unless expressed in contract, the owner doesn’t have to pay any particular amount of security for costs (Tylon Steepe Homes).

Construction parties stopped providing security for cost after this case Test for amount of security (Q West Van Homes Inc v Fran-Car Aluminum Inc)

1. Consider what claims should be taken into account when fixing security.  2. Determine what amount of security is appropriate. o Whether to order security for less than amount claimed. Factors (Q West Van Homes Inc v

Fran-Car Aluminum Inc):1. Look at the lien claims of the parties to determine if it is plain and obvious they will not

succeed (a prima facie case will suffice) 2. Do not consider any unsustainable claims for fixing the appropriate amount of security 3. To exercise discretion, after looking at the evidence as a whole and taking into account

the BLA’s objectives, in fixing the amount that is appropriate security (Judge has discretion)

Court Mechanism for posting a security Section 24 of the Builders Lien Act provides a mechanism for a property owner to post security with

a court to discharge a lien from title and thus gain some flexibility for the conduct of its business. o The courts also have discretion to order security that is less than the amount being claimed in

certain circumstances. While standard practice may require an owner to post the full amount of the lien (plus an amount as security for costs), it is important that potential lien claimants document and present convincing and comprehensive evidence regarding their claims in order to prevent reduced security being ordered under Section 24.

Discharging lien from title: owners and contractors seeking to discharge a lien from title should consider whether they can make counterclaims or detail circumstances that could support such action. In these economically uncertain times, owners can definitely benefit if they have to post security that is less than the full amount of the lien claim.

M3 Steel (Kamloops) Ltd v RG Victoria (Construction) Ltd, 2005 BCSC – When entitled to lien claims Builder’s Liens are separate from delay claims, and you cannot off Subcontractors are not entitled to any part of the holdback fund until the last of the lien claims is

determined at trial.” Otherwise, other lien claimants might be prejudiced by depletion of the pool of holdback money.

Section 25 An owner, contractor, or lien claimant can apply to the court to cancel a lien Court sees to it that there is something that allows for cancellation of the lien, being that a lien has

been extinguished under ss. 22-23, the claim of lien has been satisfied, a clearly invalid lean, or discharge (or others)

West Fraser Mills Ltd v BKB Construction Inc, 2012 BCCA – Cancelling a lien claim The only possible basis to cancel the liens under section 25 of the Act was on the basis of whether the

liens were:o Filed out of time or in the wrong form; Filed against wrong property; frivolous, vexatious or

abuse of process

The Holdback Holdbacks

S. 4 of BLA provides for the holdbacks16

o Minimum statutorily amount for this – must retain the 10%. Can claim against each holdbacks Main holdback – 10% of each payments on each contract between Contractor and Owner Other holdbacks – 10% of each payments on each contract between Contractor and Sub-

contractorso Multiple holdbacks: Not just the owner holding back from GC; GC may hold back from subs; etc.

(each part of the pyramid you are holding back that minimum 10%) S. 5 requires owner to put holdback money into an account (Jointly administered) (Holdback Account)

o Exceptions: 5(a) Government body (s.3 – Builder’s Lien Amendments Act)

“any public body in Canada – municipalities,” Rationale: contractor should not be worried that they are not going to pay

Size of the contract (5)(8)(b) Aggregate value for material is under $100k

S. 6 Prohibited release of holdbacko Owner, cannot set off with delay claim saying you will hold this holdback (held for benefit of

multiple lien claimants) S. 7-9 release of the holdback

o No money should be paid out of account without agreement o Payment may be made after expiry holdback periodo Timeframe for releasing holdback is 55 days (can release it as early as this)

Since timeframe for filing a lien is 45 days, it is designed to clear after anyone can file a lieno Progressive release (S. 9) Don’t have to wait until the end of the project to get the money

The Trust S. 10 Trust provision

o All money paid to Contractor/subcontractor constitutes as a trust fund – can only be used to pay the trust beneficiaries

When it is received, receiver becomes trustee in connection with the improvements contractor/subcontractor is a trustee

o (1) & (2) does not apply to money from architect/material supplier S. 12 person who receives money must credit it against the debt of the improvement What happens when breach? Civil liability, quasi-criminal, criminal

o Claim for breach of trust is maintainable even if you failed to perfect your lien claim

Limitation periodS.14  action by a beneficiary or against a trustee of a trust created under section 10 must not be commenced later than one   year after

(a) the head contract is completed, abandoned or terminated, or(b) if the owner did not engage a head contractor, the completion or abandonment of the improvement in respect of which the money over which a trust is claimed became available.

Establishing a breach of trust Person you have contractual privity with has absconded with funds If institution acting in good faith in normal course business, difficult to establish breach of trust

against institution (EB Horsmen) Breach of Trust issues – Factors: Knowledge of the breach; Knowledge of source of funds was on

account of the project; Knowledge K holdback wasn’t large enough to pay accounts

Priority and Ranking of Claims – ADD TO INDEX Priority and Ranking – Ask if it is worth pursuing a lien claim?

o Bank Mortgage v Lien claimant Don’t file a lien if there is a mortgage by a bank – the bank can just foreclose the

mortgage as it has a priority and take clear title without the lien on (Mortgagee > Lien Claimant)

o Lien claimant v Lien Claimant There is no priority based on date of claim (ie doesn’t matter who is first), they will

share equally o Lien claimant v S. 10 Breach of trust

Prof: likely a better right to the claim if you perfect your lien claim

17

o S. 10 Breach of trust v S. 10 Breach of trust No better right by filing first. Would likely have to claim pro rata

Review the act re this – do you want to spend money on legal costs and time going forward if you don’t have a strong claim going forward

18

DISPUTE RESOLUTION

Some ADR options can arise by building them into the contract (Provisions mandate what parties do if a dispute)

Can contain neutral evaluation provisions (Referee/umpire at outset, parties agree saying the dispute will be looked at by a chosen referee for a non-binding decision, so they can guide parties back onto working terms)

Role of Counsel in preparing clients: Preparing for mediation:

o Talk about strengths/weaknesses of case – so that client can think about outcomeso Take an adversarial position – what is it that you wanto You can put the facts on the table in a way that workso Inform the client of the other options that are out there

Navigating avenues for resolution (Civil Resolution Tribunal – online claim filing, small claims mediation and F2F negotiations)

Mediation (preferred method of dispute resolution in the construction industry) 3rd party neutral: shouldn’t have acted for either party before; no vested interest in outcome of

mediation; etc. o The mediator is there to help and does not make the decision. Parties involved are empoweredo To be effective must maintain role as neutral and establish trust with parties

Often occurs earlier in process b/c parties don’t want to pay the costs of other dispute methods + want informal process to start

No effect on future negotiationso Cannot used a failed mediation (or any failed settlement negotiation) in court as evidence

against the other party. Protected by privilege that you cannot disclose this Costs

o Will share costs of mediation unless agreed otherwise. During the process of mediation can negotiate costs as part of the mediation (ie a bargaining chip).

o Can avoid huge costs of litigation Online mediation

o No live mediator involved, it is the software that facilitates the discussion. It is becoming more sophisticated and allow people to negotiate more complex disputes (may be in real time)

PROS: Non-Adversarial: Parties have a desire to preserve the working relationship given that construction scene is a small industry. Much less expensive – no lawyer fees, disclosure fees, insurance, etc. Litigation makes no sense for small-mid companies. Efficiency: Courts take forever especially when there are a multitude of parties. Fatal to construction projects to stagnate. Solution based: Goal is to let parties find a solution so that they can thrive. Given that it is in everyone’s best interest to have a successful project, all parties will benefit if a solution is found and they can move on. In construction being “right” is not important if the project dies. Complexity of issues

CONS: Information: Parties usually don’t get full disclosure. Predictability: The result might be less predictable than in the courts which has a highly structured process. Experts: Can’t retain experts and present their case like in courts Finality: Decision may not be binding

When is ADR triggered? Construction K’s usually specify a process. Ex. all disputes will be referred to arbitration (excludes court, can’t sue, that’s it), or negoatiation for 7 days, and timelines on this. Timeline in CCDC: Consultant makes binding interpretations unless notice of dispute is delivered within 15 days. If a dispute (parties disagree as to the interpretation, application or administration of the K) is not solved by consultant it will be settled by ADR (8.1.1). Consultant can take over to keep the project going, if he makes mistakes the owner must pay for it (8.1.3). Parties shall appoint a mediator within 20 working days of bid closing or 10 working days after either party requests. (8.2.1) The parties must make all reasonable efforts to resolve their disputes by amicable negotiations and agree to provide, without prejudice, frank, candid and timely disclosure of all relevant facts, info and documents to facilitate negotiations (8.2.3) If there is no agreement after 10 working days (or other timeline agreed to), project manager must terminate

19

(8.2.5) Arbitration can be initiated within 10 working days of mediation being terminated (8.2.6) If neither side indicates they want it to be arbitrated immediately the disputes are paused until the contract has been terminated/abandoned or there has been a substantial performance of work (whichever is first) (8.2.8).

Options for Alternative Dispute Resolution (ADR)Structure Advantages Disadvantages

Consultant Decision

Contractual Provisions Submissions by Owner/Builder Timing

Required by Contract Timely, inexpensive non-

adversarial

Possible Bias Incomplete Info Consultant in Conflict Ongoing working relationship

compromised Consultant’s self-interest

Negotiation

Decision makers Manuscript form

Speedy Preserves working relationship Avoids more costly process – F2F

meeting Informal process with no rules of

procedure More likely to resolve the issue

(approx. 98% of the time)

No full disclosure. Working on limited facts

Forego some legal remedies Compressed time frame Tensions/anger preclude

settlements – sometimes parties don’t “hear” each other

Mediation(Preferred method in Construction)

Use of 3rd neutral party to facilitate a discussion between the two parties

Key feature: entirely within parties’ hands whether they settle (THEIR DECISION)

Role of mediator is to foster environment for productive meeting to take place

Interests-based negotiation (people have positions, but they also have interests)

Appointed mediator, mediation agreement, written briefs, oral presentation, caucusing with mediator, written settlement agreement

Doesn’t generate precedent! Without prejudice – invites parties

to have open dialogue nothing said will affect them if matter goes to trial

Hallmarks: Private, non-binding, speedy, less costs, expert mediators, non-adversarial, 3rd party neutral, empower parties, remedies not available in court

Preserves working relationship Private, confidential, result is the

parties’ result, helps preserve relationship, inexpensive (1-2 day negotiations, not 4-5 year trials) Parties feel they are involved and assists knocking down barriers to settlement

Voluntary: do not settle unless it is something you want

Allows parties to have discussions they would not have face-to-face

Without full disclosure Compromise legal remedies No precedents No decision on factual legal issues

Referees Designated as per contract Pre-appointed by both parties Timing of decision

Speedy, timely, non-binding Adjudication in UK, every

construction project deemed to have adjudication provisions

Non-binding Incomplete Info Compromise legal issues

Med-Arb Mediation, that if no mediated settlement at the end, switches to arbitration with same mediator

Gets a decision but with a soft start

Overcome the challenges of being open and transparent in mediation conversations

Q: How do parties conduct themselves in the mediation, knowing that whatever is said may go into the decision made in the arbitration?

Arbitration

By contract Management (at start of the process the venue and rules of arbitration would be decided)

Essentially private litigation. Process that has rules, procedure, fact determinator that decides issues. All done in private

Adjudicator, restricted appeals Uncitral (international) Rules

facilitator, appointment of

Structured, private, binding process, expertise in decision maker, no-precedent, speedy

Flexibility: can make it similar to courtroom or differentiate – tailored to fit parties

Governed by rules parties agree to (more flexible than litigation) – however, tough to reach agreement on who would be arbitrator

Can be slow and expensive (paying for judge/arbitrator to hear and write decision)

No less expensive than going to court

No precedent – not bound by stare decisis

In absence of agreement, can’t compel someone to arbitrate

Lack of appeal process: unlikely to get an appeal, unless arbitrator

20

mediator, document disclosure, depositions, written briefs, hearing

Enforcement of awards: enforcement orders are similar to court orders (Ex: BC allow arbitrator orders to be enforced similar to orders of the court). Fairly easily enforced in reciprocal jurisdictions

Ability to appeal restricted (error of fact not considered; law restricted)

Uncitral has ability to apply internationally – no inherent jurisdiction

acted outside their powers (May be an advantage if parties want finality)

Litigation

Statement of claim, statement of defense, 3rd party proceedings, document disclosure, deposition rights, experts, trials, appeals

Formalized Process: Full disclosure, full exploration of facts and legal issues, right to cross-examine, public, comprehensive rules, right of appeal, precedent value

Know how the process will role out (rules of court, serving parties, responses etc.)

Very time consuming, very expensive, unpredictable results, adversarial process

Have surrendered the outcome to a Judge (unpredictable)

ADR Spectrum

Negotiation (non-structured)

Referees Mediation Met-Arb Arbitration Litigation (structured)

PROCUREMENT OF BUILDER’S SERVICES Pre Ron Engineering – McMaster McMaster University v Wilchar Construction Ltd (1971), 22 DLR (3d) 9, [197xx1] 3 OR 801 (Ont H Ct J)

Law before Ron Engineering caseo Construction industry in Canada, owners purported to hold broad discretion to do the

whole process to their advantage—very unfair, not transparento Structural differences: the invitation to bid/tender was generally considered to be an invitation

to treato Bids and tenders that came in were considered to be the offer, no k form in this regime until

the bid(offer) was accepted by the owner no express or implied terms imposed on owners in treating the offers that were

submitted Legal responsibility only arose when the offer was accepted

R. V Ron Engineering & Construction (Eastern) LTD (1981) SCC Ron case preambleSCC says previous system permitted unfairness, brought disrepute to the construction industry. When a bid is submitted, it seems fair to impose on both parties obligations within that procurement process (obligations are both express an implied). When the successful bidder is chosen, that bidder would be obliged to enter into K stipulated in KA, which is KB. Ron caseRon submitted bid and during the bid opening, the Ron bid was substantially lower than the other bid. Clearly there was a mistake – Ron forgot to include labour costs in his bid. Ron told the owner they could not accept the bid because there was a mistake, but owner says no and accepts bid anyway. Ron then refused to sign KB. Issue- whether owner could then seize the bid securities/bonds that Ron supplied with its bid. Because, if the

owner choses to award KB and the contractor refuses to sign KB, the bid securities are forfeit – usually 10% of the bid amount.

HoldingSCC says that Ron bid did not have the patent error on its face and could not escape on the basis that the bid was not capable of being acceptedRule : Contract A and Contract B approach used in Canada Contract “A” Analysis

21

Putting out a call to parties to submit their tenders is the invitation to unilateral contract A, this doesn’t mean that you will be awarded the Contract, but rather that you accept the offer and are now in agreement for Contract A which is the owner potentially selecting/considering you for Contract B.

The contractor is accepting Contract A upon submitting tender and putting out an offer into bilateral Contract B which will be awarded to the party with the lowest tender price

Following Ron Engineering three key principles in the law of tendering emerged: a) Only a compliant tender can be accepted by an owner;b) The lowest compliant tender “should” be accepted; andc) The owner owes bidding contractors a duty of fairness in analyzing the tender bids.

Principles operate to limit discretion of owner in awarding Contract B and ensure fairness/transparency of tendering process.

Exclusion clause Application of these principles was modified by the inclusion of exclusion clauses or "privilege"

clauses by owners in tendering documents. Inclusion of an exclusion clause in the invitation for tender that provided that "the lowest or any

tender shall not necessarily be accepted" meant that the owner no longer had an obligation to accept the lowest bid. (M.J.B. Enterprises Ltd. [1999] SCC ("M.J.B."))

However, later decisions clarified that such an exclusion clause does not give an owner the ability to accept any bid; a decision to accept a bid other than the lowest bid must be done in good faith + based on objective reasons (see e.g.: Sound Contracting Ltd. v. City of Nanaimo, 2000 BCCA 312).

Tercon SCC leaves open the possibility for a properly crafted exclusion clause to permit an owner to breach a fundamental term of Contract "A" (such as the requirement to only accept a compliant bid). However, the Court stressed that such a result would require a clear and unequivocal exclusion clause.

Process Must Be Transparent and Fair

Rule: duty to not have any secret preferences, if you do and fail to disclose a challenge will likely be successful (Chinook Aggregates Ltd. v The Municipal District of Abbotsford)

The Privilege Clause Ability to except bids other than the lowest bid (Sound Contracting Ltd v Nanaimo)Facts: Not Nanaimo’s practice to always accept the lowest tender. Request for tenders on the Hammond Bay contract included a number of specific relevant provisions including: - Article 18 Tender Rejection (The owner reserves the right to reject any or all tenders; the lowest will not necessarily be accepted)

Nanaimo reserves the right to waive informalities in or reject any or all tenders or accept the Tender deemed most favorable in the interests of the City of Nanaimo

- Article 19 Award (Awards shall be made on tenders that will give the greatest value based on quality, service and price.)

Preference shall be given to local suppliers where quality, service and price are equivalent

Holding: Appeal allowed, contract could be awarded to 2nd lowest bidder.

Key points from MJB Enterprises : Privilege clauses Purpose of the tender system

o Provide competition, and thereby to reduce costs, although it by no means follows that the lowest tender will necessarily result in the cheapest job (many low bidders end up being in financial difficulties and so extra costs are afforded to the owner whose right to recover them from the defaulting contractor is usually academic).

Prudent owner will consider not only the amount of the bid, but also the experience and capability of the contractor, and whether the bid is realistic in the circumstances of the case

The discretion to accept not necessarily the lowest bid, retained by the owner through the privilege clause, is a discretion to take a more nuanced view of “cost” than the prices

22

quoted in the tendersRule: Privilege clause in the request for tenders releases tenderer from the obligation to award the work to the lowest bidder if there are valid, objective reasons for concluding that better value may be obtained by accepted a higher bid.

Moves us even further away from the low-price bidder Implied term – Owner is allowed to take a general view and decide if a certain bid is one they really

want to work with Past dealings

o Past dealings didn’t constitute and undisclosed criterion, past dealings are probably the best indicator of how a proposed relationship will come to work out in practice, BUT

o Discretion to lean on past dealings should not be exercised in way as to punish or to get even for past differences

Analysis Previous dealings between these parties provided the basis for the additional criteria addressed by

Nanaimo The staff of Nanaimo city did not act unfairly or other than in good faith in determining

which tender provided the “greatest value based on quality, service and price” to the City

Case where discretion clause was not valid (Graham Industrial Services v Greater Vancouver Water District)

Government tried to exercise discretion to award to contractor that did not comply with all of the terms and conditions of the process (didn’t have equipment/experience necessary to complete the work)

Rule: court says discretion clause was not valid because it was not exercised in a reasonable, good faith manner. Requirement of good faith use of the discretion clause

Only Compliant Bids Can Be Accepted

Non-Compliant Bids (MJB Enterprises v Defence Construction Ltd , (1951) SCC ) Cannot accept a non-compliant bid even with a privilege and discretion clause. Court will look at

presumed intention of the parties when they entered into KA (ie was not the intention of both parties that the k could be awarded to a noncompliant bidder)

Principal is subject to the specific agreement contained in KA

Outside the contract A/B Analysis (Midwest Management 1987 Ltd v BC Gas Facility Ltd (1999)) Outside of the contract A/B analysis owners have no duty of fairness. Without compliance, owner is

under no duty to the bidder If owner awards to bidder outside KA, owner cannot rely on any provisions in KA if you weren’t

within KA when you did the disputed action (Tercon Contractors Ltd v British Columbia (Transportation and Highways) (2010) SCC)

The Consultant’s Role Owner is under no obligation to advise the unsuccessful tenderer of the reasons for its rejection.

(Cegeco Construction Ltée v Ouimet (1991)) No obligation on either the consultant or owner, to advise the tenderer of any concerns with respect

to the tender, the tenderer's qualifications, etc. (Cegeco Construction Ltée v Ouimet (1991)) Consultant should be unbiased, does not mean they need to be disinterested (WIB Co Construction v

Central Okanagan School District No 23 (1998) (BCSC)

Opinions of Architect/Engineer (Stanco Projects Ltd v HMTQ & Aplin & Martin Consultants Ltd, 2004 BCSC)

Architect/engineer usually recommends to the owner which bid should be acceptedo Sometimes they give advice saying the bid is noncompliant—should not do this because not

qualified Rule : if owner relies on non-lawyer’s advice of noncompliance, non-lawyer could be liable to owner

for damages awarded on challenge from contractors23

Rules of procurement (Stanco Projects Ltd v HMTQ & Aplin & Martin Consultants Ltd, 2004 BCSC)Rules of procurement apply to dealings between contractor and sub trades

implied term of KA with sub trade that if the contractor gets the main bid for KA of the project, they have to award the bid to the sub trade

Rule: can put in an express term in the sub trade KA that contractor does not have to use the sub trade bid in the ultimate decision, otherwise the implied term is you will award the bid to the subtrade

The Duty Owed to Subcontractors (Trade) By Owners Relationship between Owner and sub – (Ken Toby Ltd v British Columbia Buildings Corp , 1999 BCCA)

Ron analysis not applicable to owner sub relationship. No contractual relationship between owner and sub during bidding process. However, Owner may

have duty to subs to ensure integrity of bid depository process

Ron KA and KB analysis applies to Owner and Sub (Naylor Group Inc v Ellis–Don Construction Ltd, 2001 SCC)

The Ron KA and KB analysis applies to this relationship <Naylor, Ron Brown>. Depending on the language of the tender docs a contractor may have a duty to enter into a contract

with the sub. upon acceptance of contractor’s bid to owner <Naylor>.Rule: Under the rules of a structured bid depository, the subcontractors price that is used in the

tender of the prime contract to secure a successful prime contract must be used for Contract B unless there is a reasonable objection not to use them

Contractor’s Remedy for Breach Contractor as plaintiff: damages for lost profit <Naylor>. In calculating profit should take into consideration unexpected site conditions but not speculative contingencies <Naylor>. (Naylor Group Inc v Ellis–Don Construction Ltd, 2001 SCC)

24

25

THE DESIGNER’S RESPONSIBILITIES

A. Standard of Care Test for standard of care

TEST for professionals: the standard of the ordinary skilled man exercising and professing to have that special skill. (Bolam v Friern Hospital Management Committee, [1957])

o Must apply the standard that others with similar training and in similar circumstances would make.

Where there are two different schools of professional practice (both having recognition among practitioners), it is not negligent for a practitioner to follow one in preference to another

o If a contract specifies a different standard, will be held to this standard and this is a departure from the Bolam standard (BC Rail Ltd v Canadian Pacific Consulting Services Ltd, [1990] BCCA)

Contract between parties actually specified SOC: “in accordance with leading international consultants”

B. To Owner

Under RAIC 6

Meet BudgetRule: the obligation to provide a design that is not only construable (ie. It can be built) and that it can be constructed w/in the budget (Saxby & Pokorny v Fowler (1977), ABCA)

In general, there is an implied condition that the final cost will be within a reasonable range of the estimate

An architect is under a duty to client to keep abreast from rising costso Architects are bound to have reasonable amount of skill in their profession and use a

reasonable amount of care in carrying out their work

In the Bid ProcessOften times contractors asked architects whether which bidder is compliant, which one has the best bid

Offloads the liability of anything to the architect Can be held liable for this (Stanco Projects v BC) Province tendering for waterworks, Stanco is one of bidders and is unsuccessful. Province went to

own designers re compliant bids, and they said Stanco wasn’t, but they WERE. They said it was fine o Province should have known this was a compliant bid, they proved it was compliant, and

wanted damages for the contract because they had a compliant bido Then province sued engineer – it was an error on part of the engineer– successful – very big

case

Issuing Progress Certificates and Letters of AssuranceLetters of Assurance: where municipalities who issues building permits will only do so if they receive from the developer a LoA from the various design professional.

C. To Builder

Global Takeaway for Duties to the BuilderWhere a consultant makes a representation to another party – builder or otherwise – about site conditions or suitability of a particular project, the consultant needs to exercise reasonable care in doing so measured against that Bolam standard.

It is reasonable foreseeable that a contractor will rely on the representations of a consultant to their detriment

Situations involving designers and builders Expectation that whatever the designer has put down on paper is in fact buildable:

26

o Going to perform it’s intended function and be fit for its intended purpose. Issues of Negligent Misrepresentation between Designer and Builder

Full and Accurate DisclosureOwner prepares the design – no K between builder and designer

Law of misrepresentation – Hedley Byrneo Representation, negligently made, rely on it, rely on detriment, reliance was reasonable,

suffer damage

Reasonable Reliance of Professionals: Rule: Cannot rely on professionals if conditions state that you do your own research (JJM Construction Ltd v Sandspit Harbour Society (1998), 1999 BCSC)

JJM needed to do their own research/investigations into the quarry, and as such, couldn’t have reasonable relied on it because they ought to have gone out before submitting the price and investigating since the tender conditions essentially said to do so

Distinguishing JJM there was nothing here saying the contractor needs to do their own investigation Rule: The work of a consultant, absent language present in JJM, will be held liable if they do

not do a good job (Edgeworth Construction Ltd v ND Lea & Associates Ltd, [1993] SCC) Diff than JJM because there was nothing here saying the contractor needs to do his or her own

investigation. Unreasonable to expect contractor to do own investigation on many miles of roadway that is the engineer’s job.

Rule : (Negligent misrepresentation + remedy): Must put Contractor in position they would have been in without it. (BG Checo)

Hydro had to cover the costs because in the tender documents, it stated that said Hydro would clear the right of way.

DO ALL THESE CASES MEAN THAT THE BUILDER CAN ALWAYS LOOK TO THE CONSULTANT? NO! Think JJM Consultants are not required to tell the builder how to do the work

o They can say that this is the road alignment, or this is the building etc., but how you go about doing it is up to you.

Field ReviewsGoal of those performing reviews: To ensure work is continuing in general conformance with the specifications

Consultants and designers fall into 2 broad categories: Pure Design Work Here are the specs, here is a report etc. Field Reviews through letters of assurances, reviews work as it proceeds

Field Reviews Places obligation on consultant to ensure work is proceeding with design Job does not end because construction starts, but carries on through the construction phase

o Will be called upon to do field reviews of the work as it proceeds, ie. Looks at the quality of the work

o Failure to detect issues with the construction will result in difficulties down the road. What you need to think of is what ought to have been seen when the person was onsite that day. If

the consultant is there once a week for an hour, it will be an issue of fact whethero Must look if the frequency of the field review was appropriate

Ex: if the standard is once a week, and show up once a month or if the standard is 2 hours, and are there for five minutes potentially for finding these actions negligent

Sources of Field Review responsibility: Contract – ie go to the site but also go to sign Regulatory framework framing, plumbing, engineering inspections

27

o Letter of assurance – City is really offloading liability to designers – generally very onerous on the smaller parties, but it was either the city or the designers – only out is wording that says “work is generally in conformance with the design”

Obligations between parties - Westcoast Transmission v Interprovincial Steel and Pipe Corporation et al, (1985) BCSCRule: Where an owner hires 2 parties to perform 2 different and distinct tasks, no obligation arises between the two parties. Engineer’s negligence transfer to the owner in a claim from builder.

D. To Third Parties Test for Negligence (Anns test)

1. Whether the relationship between the two parties discloses sufficient foreseeability and proximity to establish a prima facie duty of care, AND

2. Whether there are any residual policy considerations which ought to negate or limit that duty of care

Design - Winnipeg Condominium Corp v Bird Construction Co Ltd, [1995] SCCExtended scope of DOC to those end users who may well suffer damage from a dangerous defect. No reason to draw that line in the sand – we should be encouraging people to take steps to avoid “dangerous defects” (substantial danger to public safety).

Everyone in the construction process owes a duty of care to those with whom are NOT in contract but are foreseeably affected

Note: arguably, this never changed the law on non-dangerous defects, but case never tells us how to define dangerous. La Forest makes a point to clearly say this does NOT apply for just “shoddy construction”

Duty to Warn(Overruled): Said no liability for pure economic loss; says there was no physical damage. (Rivtow)

Current Rule Rule: Triggers duty on part of Architect to warn the city so they could make an informed decision

(Surrey v Carroll-Hatch & Associates, [1979] BCCA) Reasonably foreseeable to the Arch. that city would suffer damage if engineer would proceed with

the design without doing more investigation (soils). So, didn’t absolve engineer – he’s still liable for what he did – but Arch also liable!

Field ReviewsEffectively establishes the test Anns and Others v London Borough of Merton, [1977]

1. Is there proximity between the parties that should bring the duty of care2. If so are there reasons not to impose it (policy considerations)

Case with building inspector: ought to have in contemplation who will live in that building, so that is the proximity

28

29

RESPONSIBILITY OF BUILDING REGULATORS

Legislative Scheme Liabilities of Public Authorities:Generally

Just because you do something which you have a statutory duty to do, does not give you license to do it negligently in the private sphere <Home Office>.

o Once city undertakes responsibility to inspect, must do so without negligence, unreasonable to rely on Contractor assurances <Hospitality>

o An act performed in the exercise of a statutory power may breach a common law duty of care – doesn’t matter whether what the statute created was a power or a duty <Anns>.

o The more operational a power the more likely there will be a common law duty <Anns>. o A policy based decision cannot be reviewed by the courts <Anns>.

Government power to limit liability Define what crown corps can do, stipulate whether the avg person can or cannot have a claim against

the government against defects (Local Government Act)o Plan Checkers

Under the Local Government Act plan checkers CANNOT be liable for plan checking even if negligent, if they have relied on a certified engineer/architect letters of assurance

It doesn’t protect them though on building inspection Government liability

o Gov. has been liable for failing to issue a stop work order for faulty construction of foundations (Kamloops v Nielson)

Vancouver Charter o City of Vancouver’s regulatory authority re plan checking and building inspection

cannot be found liable for ANY regulatory process they do (doesn’t cover gross negligence)

o Vancouver has a specific clause making it not liable in cases where you check plans even if you do so negligently.

o Kaizen (BCCA) – 17 million worth of paintings in a 10k garage, Christmas lights on tree lights the house on fire – no sprinklers – issue whether there should have been sprinklers – electrical inspector said the building code didn’t require them – the Court upheld legislation, it foreclosed any action against the city

Regulatory authorities (city of Van, plan-checking engineering departments) 2 main functions

1. Enforce building permits against the designers (Plan Checking) Only granted when regulatory

2. Building Inspection For key features that could present issues for human health and safety – checking work

by one of the sub-contractors Ex. building foundations, electrical, plumbing, HVAC

Occupancy Permit – Owner cannot move in if regulatory body doesn’t issue Occupancy Permit

Common Law: Sole source of responsibility Establishing a duty of care (Anns and Others v London Borough of Merton):

Rule: Reasonable foreseeable that in not doing the plan checking and failing to enforce a stop work order that this particular harm would occur. (liable for failure to issue a stop work order) Kamloops v Nielsen, [1984] 2 SCC Prior to Kamloops could be NO recovery in law for the tort of negligence when the result is pure economic loss

Hedley Byrne allows it for negligent misrepresentation Rivtow allows it for failure to warn

30

Kamloops allows it for pure economic losso Winnipeg Condos Professional liability for negligent o Kamloops Gov. liability for operational decisions that are negligently made

Includes the framework of how to measure how Gov. authority is found liable for an act or omission

o Cooper Inspector of mortgages – not liable for the failure to police and regulate Court found that inspectors job wasn’t to find that 3rd party wasn’t effective, but to

regulate mortgages generally – from the statutory scheme, there was no proximity between inspectors and private individuals

Their job was to study the problems, make the recommendations, and then move onto the next one

Rule: Introduces policy considerations to negate the duty on the first branch (Cooper v Hobart)

Provincial LegislationLocal Government ActWhere does the regulatory authority even get their authority?

- Provincial legislationo The local government Act

Provision that says local governments have the power to be involved in building regulation

Source of the authority to do the above-mentioned activities o Vancouver Charter

Special piece of legislation Says even where negligent in the above duties, city CANNOT be liable

Local BylawsLegislation does not protect building inspection

- If the building inspectors are out there inspecting projects where inspectors fail to take certain actions, they are still exposed to liability for negligent inspection

- Nothing in the legislation to protect them and no public policy reasons to negate the duty that is owed

31

INSURANCE IN THE CONSTRUCTION INDUSTRY

Property Insurance (Course of Construction Builder’s Risk Insurance)

CoC Builder’s Risk coverage: covers “physical damage” to property on a particular project. It covers all sub-trades, owners, professionals (architects/engineers) against ANY insurable interest in the entire project (Commonwealth Construction v Imperial Oil)

The Court “recognizes the realities of industrial life” when interpreting contracts by SCC Purpose of builder’s risk insurance:

o Owner gets promise that contractors will have funds to rebuild in case of losso Contractors get protection against crippling cost of starting over

What the COC covers CoC Covers only “physical damage” to property (Simcoe) – all risk of direct physical loss of or damage to the property insured

Initial Issue: What claims does the COC cover? (Check declaration page + policy for who is ensured); (Start with included coverage then look at exclusions)

Situations coveredo IF physical damage not excluded by policy occurs, then the policy with insure the resultant

damage EX: building collapses or burns down, scaffolding falls down and causes damage

scaffolding or building, the CoC policy would cover the physical damage sustainedo Physical damage to property done in transit to be used in the project (ex. excavator being

transported, breaks etc)o If physical damage is to an integral aspect affecting the whole of a project, the whole project

is faulty (Simcoe) Simcoe faulty design plates securing the bridge deck (substructure) to the bridge

pilings causing the bridge to fall into the river means the whole bridge is faulty Parties Covered

o All parties against any insurable interest in the entire project (Sub-trades, owners, architects/engineers)

o If they cause any damage to any property interest, they can be liable – therefore they have an insurable interest in the entire project

o If there is damage within the course of construction, COC gets things going quickly/gets people back to work so as to minimize delays and loss etc.

COC Does NOT cover the cost of “making good faulty workmanship, material or design” Situations not covered: A) Faulty or improper material; B) Faulty or improper workmanship; C)

Faulty or improper design

Faulty Design Originally, “faulty workmanship” was not fit for its intended purpose (Queensland Government

Railways – OVERTURNED)o Queensland because the bridge was swept away in the 1 in 200-year flood, and it didn’t

function as a bridge, it wasn’t fit for its intended purpose which was a bridge o Manufactures’ Mutual Insurance ltd. v Queensland Government Railways Even if

you could, no one at the time could realize design would fail in these circumstances, the exclusion clause applied

Overturned this in CNR, faulty workmanship was that which is designed not to the highest reasonably known standard that is reasonably acceptable in the circumstances (CNR Co v Royal and Sun Alliance)

o Narrow interpretation of the exclusion best accords with parties’ intentions based on plain meaning of words

o CNR under Queensland tunnel burrowing machine was faulty workmanship because it wasn’t fit for its intended purpose, as it got stuck burrowing under the St. Lawrence, therefore cannot claim property damage under CoC policy

o CNR under CNR tunnel burrowing machine wasn’t faulty workmanship because the owner 32

retained world leading engineers to design a tunnel burrowing machine to burrow through this hard rock and did everything he could to avoid something like this, therefore they can claim property damage under the CoC policy

Exception to exclusion: CoC policy DOES cover damage resulting from faulty workmanship/design These are all costs but-for costs incurred prior to the damage occurring Tension: whether this was damage resulting from the faulty workmanship OR the cost of making

good faulty workmanshipo Resultant Damage: physical damage to insured property other than cost of rectifying the

defect or fault that caused the physical damageo Cost of making good: cost the insured would have incurred had the defect/fault been

discovered immediately before the physical damage

Interpreting of Insurance Coverage (Ledcor construction ltd. v Northbridge Indemnity Insurance Co.)

Use CORRECTNESS TEST for interpretation of standard form contracts. Insurance coverage interpreted broadly; exclusion interpreted narrowly

o If unambiguous give effect to clear language of contracto If ambiguous

Apply rules: 1) interpretation consistent with reasonable expectations of parties if supported by policy language 2) Do not have unrealistic results or results the parties would not have contemplated 3) Interpretation consistent with the interpretations of similar insurance policies

If still ambiguous can apply contra proferentem rule to construe policy against insured party

To commence an action, must be commenced within 2 years Ex. if building foundation floods – 2 years from that date to bring an action against an insurer if your

initial claim is denied

Professional Liability Insurance Professional liability insurance policy: insures professional consultants (usually architects/engineers – check if professional outside domestic domain) when the consultant in the course of business make any errors, omissions or negligent acts in the performance of their professional service. Arises from one’s capacity as a professional to provide advice, specs, or plans to an owner or a builder, and have it relied on by potential 3rd parties. (Claims Based Policy)Can be in respect of a few different parties:

Owner – due to property damage, delay costs, or any extra costs incurred as a result of an error or omission

Builder – due to delays and extra costs incurred as a result of an error or omission Third Parties – due to property damage, economic loss, bodily injury incurred as a result of an error

or omission

2 main pre-conditions for seeking protection under a professional liability insurance policy:1. Claims must be made and reported during the policy period2. Prior knowledge of a claim is excluded (Agresso Corp)

o If prior to a claimant taking out a professional liability policy is aware of circumstances that will give rise to a claim that will fall within the policy period, you are not covered for that claim

o If acting for architect/engineer, under the professional liability insurance policy, tell them to inform their insurer as soon as there is a possibility of damage so as to fall within the policy period

33

Policy Interpretation (Reid Crowther and Partners Ltd. v Simcoe and Erie General Insurance Co.) Types of policy interpretation

o Occurrence policy (general liability insurance policy): focus on the occurrence giving rise to the claim. If it occurred during the policy, insurer is liable even if the claim is made after the period

Covers property damage arising from a particular occurrenceo Claims-made policy: insurer is liable to indemnify the insured for claims made during the

currency of the policy, regardless of when the negligence occurred Arises out of an injured party filing a notice of civil claim against the insured

Policy interpretation is FACT SPECIFIC: in each case look at the particular wording of the particular policy rather than labels

Defence and Indemnity CoverageDuties of insurance policies

Duty to defend – the insurer will hire a lawyer at the insurer’s expense (Errors and Omissions policy; Comprehensive liability policy)

o Governed by pleadings. Duty to defend restricted to claims as set out in pleadings that fell within policy wording (Nicholls V American Home Assurance Company)

o Look beyond labels and examine substance of allegations contained in pleadings (Non-Marine Underwriters)

o Determine if Duty to Defend (Progressive Homes): Coverage, exclusions, then exceptions

Duty to indemnify – the insurer will pay the insured the full cost of a successful claim against the insured

o If claim made against insured which, if proven, would trigger the duty to indemnify, there is an obligation of the insurer to defend the insured is triggered. (Nicholls v American Home Assurance Company)

o Insurer may try to duck out of coverage because they know that if you make a claim there is a massive possibility that they are going to pay out a lot.

However, today only 5% of these types of cases find its way to the court days – less and less are settled in mediation because of the cost of defending the claims

What constitutes “Property Damage”

To be covered under this policy, the claim must be a result of property damage. This does not include a cost of economic loss (making good faulty workmanship), as this is a main exception to what can be claimed under this plan.

OLD – Privest v Foundation asbestos when left undisturbed doesn’t cause any physical damage – so even though DFO told them to remove it, it didn’t cause any physical damage

o The claim advanced was not “physical damage to property”, but that the work was not done properly. Therefore, the claim is for the cost of redoing or replacing work product not properly installed claim for pure economic loss, NOT property damage, therefore NOT a claim that triggered the duty to indemnify

o Pleadings had to contain a claim that the building had been physically injured to trigger a defence obligation (damages in leaky condo situation) (Swagger construction vs Ing Insurance)

CURRENT – Progressive Homes Look to the pleadings – if possibility that the claim will fall within the policy (physical damage) and if proven the insurer will indemnify the insured, the duty to defend is triggered

o Whether or not the presence of faulty workmanship of materials might “possibly” constitute physical damage to or destruction of property is determined by the pleadings

o Category of “Property Damage” can include defects

Requirements of Insured

Under this policy (as in the General Liability policy), the insured party MUST:1. Report any claim against you to your insurer as soon as practicable (within a reasonable period of

time having regard to circumstances)o If the insured fails to report to the insurer in a reasonable time, this may amount to prejudice

34

to the insurer If so, the insured will

o Test in the Insurance Act: has the late reporting caused prejudice to the insurer? If yes insured will not be covered under the policy If no the insured will be covered As a lawyer, challenge the insurance company – When did you file the notice, what was

the content of it, is what you told the insurance company complete and accurate? etc. 2. Must cooperate with the insurer at their cost

o Includes: meetings with lawyer, briefs for trial, making full disclosure to insurer, returning phone calls etc.

o Failure to comply with this might arise to prejudice

General Liability Insurance General liability policy: is an “occurrence” based policy that covers property damages as the result of an occurrence during the policy period. The insurance can cover all projects (a “Wrap Up” policy) or a particular party depending on the nature of the contract. Policy generally concerns third parties and covers liability for occurrences that include damages, and property damage or bodily injury. (Occurrence-based coverage)

What constitutes “Physical Damage” to Property Claim MUST be result of property damage

Claim MUST be result of property damage. This does not include a cost of economic loss (making good faulty workmanship), as this is a main exception to what can be claimed under this plan.

CURRENT – Progressive Homes Look to the pleadings – if possibility that the claim will fall within the policy (physical damage) and if proven the insurer will indemnify the insured, the duty to defend is triggered

o Whether or not the presence of faulty workmanship of materials might “possibly” constitute physical damage to or destruction of property is determined by the pleadings

o Category of “Property Damage” can include defects

General liability Insurance does NOT cover: Professional Services – this is for the Professional Liability policy (P. 28) Liability Assumed Under Contract Work Product

Requirements of Insured

Under this policy (as in the Professional Liability policy), the insured party MUST:1. Report any claim against you to your insurer as soon as practicable (within a reasonable period of

time having regard to the circumstances)o If the insured fails to report to the insurer in a reasonable time, this may amount to prejudice

to the insurer If so, the insured will

o Test in the Insurance Act: has the late reporting caused prejudice to the insurer? If yes insured will not be covered under the policy If no the insured will be covered As a lawyer, challenge the insurance company – When did you file the notice, what was

the content of it, is what you told the insurance company complete and accurate? etc. 2. Must cooperate with the insurer at their cost

35

o Includes: meetings with lawyer, briefs for trial, making full disclosure to insurer, returning phone calls etc.

o Failure to comply with this might arise to prejudice

Bid Bond Bid Bond situation: When contractor submits a bid to the owner, they must provide a bid bond for security (usually 10%). If the contractor is awarded the contract and does NOT want to enter the contract, the contractor will forfeit the bond.

Holds the bidders accountable and protects the owner so that they aren’t receiving poor bids

Performance Bond Parties

Surety: party who guarantees obligations of the Principal; Principal: party whose obligations are guarantee by the bond; Obligee: Party who receives the benefit of the bond

Performance Bond situation – performance bond is enforcer that secures performance of contractual obligations

If contract is awarded to a contractor, the contractor must give a performance bond to cover the contractual obligations of the project (value is usually 50% value of contract).

Holds contractor accountable for contractual obligations, and if the contractor doesn’t perform (or goes insolvent), the owner can take this performance bond.

Performance bonds entail taking all the obligations of the contractor not just simply completing the work. Covers completion of all contractual obligations (Whitby)

o Surety can adopt principal’s position and step into shoes of the party that has messed up (Colt Engineering Construction v Bond Architects and Engineers)

Seizure of Performance Bond For owner to seize the performance bond, there must be a default by the contractor (Lac La Ronge).

o Surety has an obligation to investigate the claim promptly, but cannot be asked to respond until Principal has defaulted

Surety is entitled to reasonable notice to determine whether a contractor has defaulted before being required to pay out (Fraser Gate Apartments).

Labour and Material Payment Bond Contractor pays this bond to builder. If builder doesn’t pay sub-trades, owner will pay out of this bond. Can claim directly against Surety

Benefitso Owner is able to keep work on the project moving o Protects subcontractors and supplies b/c ensures they are paid

Notice for a L&M Bond (Elance Steel Fabricating Co. v Falk Brothers Industries)o Failure to give notice of a claim under the L&M Bond is not fatal. o If there is no prejudice to the surety with imperfect compliance the court has authority to

grant relief

36

PROJECT STRUCTURES

Classical Structure ( Design Bid Build) Situation: Owner puts a project to tender, a designer (architect/engineer) prepares specs and plans in respect of the owner’s call for tender (generally lowest bidder). The tenderers responded to builders as per the specs and start the project. During the course of construction, the designer inspects their work and reports back to the owner.

There is a prime consultant contract that is a contract between the owner and consultant/designer (most often the architect/engineer)

o If architect RAIC 6o If engineer ACEC 6

There is builder’s contract (CCDC 2) between the owner and buildero The content of this agreement includes things like field reporting and supervision, change

order procedures (change with signoff from engineer/architect for liability), change directives, dispute resolution strategies etc.

Popularity: people know what they are getting (time tested); can fit wide range of projects in this model

Issues between Parties Since no contractual nature between contractor and designer, there are many problems that arise, especially in the field of procurement. The main parties to this area of conflict are the builders who are building the project and the designers who create the project for the owner. These are usually the engineer/architect.

Builder argues: o We were misled by ambiguous plans – we interpreted the designs as best we could

The quantities are less than required We needed to undertake particular procedures that were not in the contract that

forced us to overspend (ex. geotechnical reports)o Had we been involved in the first place, this wouldn’t have occurred

Designer argues: o The builder didn’t build the project according to the specs and plans provided

Ultimately, Owner will pay bill and can choose to sue someone, whether it is the designer, builder, or both.

Design Build Structure Designer and builder are one in the same (ie same team)Situation: Owner puts a design out to tender for a design-build consortium that includes the builder and designers that enter into the project as a joint venture and a partnership. This consortium both designs and builds the project. No consultant reporting straight to the owner that is separate from the builder – the designer/consultant consults and builds alongside the builder, and if the designer screws up, there is limited liability to the owner. Several contractors are invited to bid on project

Governed under a Design Build Contract (CCDC 14)

These projects are not necessarily built for the initial occupants, but usually built for an owner/developer who then sells

Strengths Weaknesses No adversarial system – less antagonism

between the designer and builder as they are on the same team

Lower Costs – all resources are in-house, there

Projects are generally built on time – if you need to talk to an architect, they are down the hall

Often better quality – all parties involved

Lack of owner control – owner is more hands-off which can jeopardize their interestso Is forced to rely only on the

regulatory body to enforce the owner’s interests

Can’t control the designer directly (potential collusion) – no 3rd party consultant watching what the designers

37

in the project are working together towards a common goal

under the builder/sub-trades to do things they should (could lead to worse quality)o To address this, the owner will

usually retain a consultant to oversee things generally (quantity surveyor to look over pricing of contracts and internal consultants)

Public Private Partnerships (P3s) Situation: Owner is public agency (government) who hires a consulting team (with the help of lawyers) to prepare an “indicative design” in a draft project agreement that is a simplified version of a full complete design. The substance of the contract is for a private company to design, build, and finance the construction of the project, but also to operate and maintain the project over the course of a -30 year period. Often times this maintenance/operating contract is as big as the construction contract (valuable to the successful bidder)

Developed originally as a way to develop public infrastructure, allowing the parties to get the project how they want it, completed on time and for the price they paid.

Advantages: Builder will get the maintenance/operating contracts lasting 25/30 years

o Since the builder is operating the project past it’s completion date for a long period of time (25/30 years), they want to build it properly the first time so as to maximize revenue

The builder would want to ensure the cost of the project equals the amount of money running it over $25 years

Want to ensure that the facilities management team maintains everything really well to make sure you don’t incur any massive bills throughout the 25-30 years

Partner is the Provincial Governmento Speed and efficiency because you have a strong partner

Builder’s protect themselves by having a substantial amount of input into the project agreement (more below)

Summary of how a P3 project would flow: Step 1 – RFQ : Owner issues an RFQ (request for qualifications) getting many responses for builders

(maybe 10) including financial statements and rough designs. These proposals are then evaluated by the owner’s evaluation team to assess the certainty of their proposals (ex. Deloitte looks at financial capacities), and to reduce them to a shortlist of around 3 of them.

Step 2 – RFP : Owner issues an RFP and the shortlisted companies respond to this, process is confidential between the 3, provides a more detailed design of what the project looks like. Bids are then scored, and owner selects a “preferred proponent”

o The substance of the RFP is critically important – owners may include provisions like we can accept a non-compliant bid, we can change the scope of work at any time etc

Step 3 – Negotiation : As per the RFP, the owner can negotiate with the preferred proponent (contrary to Ron Engineering) for the specs, price, dates of completion, and so on.

o Proponents can request for more information if they need additional information, and owners can issue requests for clarification clarifying specific terms in the bid.

Nothing is binding on anyone in the collaborative sessions unless it is produced in writing

o If you can’t close a deal with the preferred proponent, the owner can go with the 2nd proponent and start negotiating with them

This P3 structure has gone into the private industry Integrated Project Delivery (IPD) (below)

Codes and Statutes Vancouver Building Bylaw #9419-2007 (Now #10908-2014)

38

Provincial Legislation BC Building Code 2006 Federal Legislation National Building Code 2005LEED Standards

Emerging Issues for the Construction Industry

Building GreenConsumer/international DemandLEED Standards

Integrated Project Delivery and Building Information ModelingIntegrated Project Delivery (IPD)

BIM modeling (Building Informational Modeling) Idea that this will be shared with the owner, facility managers, sub-contractors etc

o This fits with the P3 model because you’re sharing the design with everyone – example: when they put the piping in, they sort out the design problems before they even install the project

Creates HUGE issues re design, cyber breach etc

ENVIRONMENTAL ISSUES IN CONSTRUCTION LAW

The main issues that stem from environmental issues in air, land, and water: Issue of developing on marginal land

o Important b/c only place where development industry is still growing is “Brown fill sites”. There is huge pressure on ministry to lower standards required of land.

Common Lawo Exposure for creating environmental hazards – ex. operating on piece of land and there is a

spill of hydrocarbons – Probably engaging nuisance (contamination on neighbors’ land, smoke from work done on site) or negligence

BC Hydro v Environmental Appeal board (Below) o Very few cases that go to public forum, everyone wants to make a deal on environmental

issues (Gehring v Chevron Canada limited - case where damage distribution made little sense may show why people do not want to go to court)

Contracto Liability can be assigned in contract, or if it is contaminated, the CCDC first assigns it to the

owner stemming from prior contamination of the site prior the job starting However, if the contractor discovers contamination and makes it worse, contractors

can be responsible if they haven’t notified the right parties to clean up the siteo Covers all of these issues on allocation risk and liability in contract

Regulatory o Federal Environmental Act, Fisheries Act, or Contaminated Sites Regulation

Proactive method to guard against environment in green building industry o Building “green buildings” re energy usage, building materials that are hazardous to human

health and safety, insulation that gives off too much heat, green roofs (keeps the building cool in the summer and warm in the winter)

LEED standards – gives you points to do certain things with your building (green roof, excess water, energy saving etc)

o Trouble is that you could score significant amount of points in only 1 category of air, land, or water

Prior to the Regulatory liability created by the Environmental Management Act, there was little liability outside the common law actions of nuisance and negligence

1990s Part IV of Environmental Management Act modeled after the US Superfund – regulations that supplement the act

39

S. 47 EMA – Person responsible for remediation of contaminated site is retroactively jointly, severally, and absolutely liable

o Jointly If only guy left standing, then legislation would allow you to pursue otherso Severally o Absolutely can NOT avoid this even if you are a responsible persono Persons responsible include owners (includes current and subsequent owner), operators

(drycleaners) (s. 45(1)), producers, parties responsible for migrating (s. 45(2))o Just pick the person with the deepest pocket. It is their problem to find the other parties to

also pay for it

Environmental remediation litigation is triggered by: Public authorities

o If they find a contaminated site upon reports o The government would target these sites for cleanup o Cases dealt with what parties COULD be responsible and what defenses could be used

Site Profile on Sale of a Property o If an owner sells a piece of property that has a commercial/industrial use, the seller must get a

site profile filed with provincial registry and must tell purchaser of any contamination to the land

o Purpose: parties can NOT escape liability by just selling your property ®British Columbia Hydro A “Responsible Person” – A merger of 2 companies

cannot absolve the constituent parts of a company of future obligations for their past actions – if company goes under, the person owning the company would still be liable (Merger between Hydro and BC Electric, liability of the new company (Hydro) of BC Electric’s)

Buyer buys contaminated site o They can sue previous owner for any contamination of their site if they are a bona fide

purchaser Migration

o If the contamination has migrated from its original site, the remediating company has to clean up their own site but ALSO the other sites you have contaminated and pay for the costs involved

o You can recover all your legal costs and pursue responsible parties: remediation can happen after or before the remediation process.

o Huge part of litigation…

Provincial Legislation

Environmental Management Act, S.BC 2003, c53 Casts a wide net for responsibility and liability for remediation: establishes new cause of action;

determines what is a contaminant; determines who is responsible; potential to stop the project dead (BAD)

S. 24 Sets out waste management planso Contractors: If just provide contracting or consulting services related to the construction of

buildings and facilities at the contaminated site S. 46 – exemptions from persons responsible for remediation into 3 main groups:

o Innocent Purchaserso Innocent Owner/operators

S. 46(1)(d) at the time person becomes owner/operator:o Site was contaminatedo Person had no knowledge or reason to know site was contaminatedo Person undertook all appropriate inquiries into previous ownership and

uses of site consistent with customary practice If person owner, person didn’t transfer interest in the site Owner/operator didn’t cause or contribute to contamination (ex: contaminated

only by migration) S. 46(1)(e) if wasn’t a contaminated site, and during ownership didn’t cause the

site to become a contaminated site 40

Others: act of god (a) or war (b), someone exercising due diligence re substance/act of a third party (c), migration of substance (j)

o Others Gov. bodies acquiring ownership of a contaminated site Non-responsible parties: Transporters (s. 19); Sureties (s. 20); Insurers and

Insurance Brokers (s. 21); trustees receivers, municipalities, etc. S. 47(1) states that a person who is responsible for remediation of a contaminated site is

absolutely, retroactively and jointly and separately liable to any person or government body for reasonably incurred costs of remediation of the contaminated site, whether incurred on or off the contaminated site (also in Domovitch v Willows)

Other important Sections Part 8 – Soil relocation; Part 9 – Remediation plan approval; Part 11 – Site Investigations; Part 15 –

Orphan sites

Case Law Do not use land in way that is harmful to your neighbors. Nuisance has been a citizens weapon in battle for better environment Owner - ®Beazer East

“Right of control” and “controls the use of” “real property” in the definition of “owner” in EMA

o A parent corporation can be responsible for the clean up costs of its subsidiary (would be termed an operator)

Owners and operators subject to the EMA do not require actual control of the day-to-day operations and can be found liable for contamination and subsequent remediation of contaminated sites (Company operated a site for 50 years owned by parent company Beazer was named as responsible person of remediation order)

o Ownership alone cannot fix company with responsibility under legislation s owner/operator, must look to whether owner exercised some measure of de facto control over subsidiary’s operations)

o Beazer Owner’s control of subsidiary over finances, organizational and decision-making structures, lease for site, and involvement of environmental affairs of its subsidiary

“Responsible Person” – ®British Columbia Hydro An amalgamation of 2 companies cannot absolve the constituent parts of a company of future

obligations for their past actions Successor public utility corp. is responsible for actions of its predecessor corp. Environmental laws

can apply retroactive (Merger between Hydro and BC Electric, liability of the new company (Hydro) of BC Electric’s)

o Hydro argued that the legislation creating Hydro and the specific wording of the merger between Hydro and BC Electric established that Hydro only assumed the liabilities and obligations of BC Electric as they existed immediately before amalgamation – BC Electric did not have liability before amalgamation and the Act did not apply retroactively to create that liability on that date

Non-Natural use of land – Ryland’s and Fletcher Strict liability for a D who causes damage to a P from the escape of a substance which constituted a

non natural use of the land (Very useful for pleading b/c of the strict liability aspect)

Innocent purchaser – ®Workshop Holdings Ltd Innocent purchasers are NOT responsible for remediation efforts if there is no evidence that a

contamination was obvious at the time of purchase (here, Workshop Holdings was innocent purchaser)

Factors used to determine (focus on the time of the acquisition):o Personal knowledge/experience of the owner re contamination o Relationship of the purchase price to the value of the property if uncontaminatedo Commonly known or reasonably ascertainable information about the property o Obvious presence, indicators, or feasibility of detecting contamination by appropriate

inspection

41

Innocent Owner/operator – O’Connor v Fleck s. 29 EMA Owner/operator is not liable for remediation costs if they can show at the time of

acquisition1. Site wasn’t contaminated2. They didn’t cause the site to become contaminated through disposal, handling, or treatment of

contaminated substance

However, in this case, s. 29 of the CSR disqualified the landlord from the exemption because there was abundant evidence of the landlord’s knowledge of D’s operation and it could not be said that the landlord had no reasonable basis for knowing that the operations would cause the site to become contaminated (ex. landlord regularly visited the site, knew general operations of brass/aluminum foundry of D tenant, received complaints from other tenants)

o Provisions with respect to enforcement of standard lease terms and standard you must leave the property in after lease

s. 39(1) EMA An owner is a person who is in possession of, has the right of control of, occupies or controls the use of real property, for example, a person who has any interest in the real property

Canadian Forest Products Both the Provincial and Federal crown can recover damages for degradation to the environment

caused by a third partyo Expanded CL remedies available for Provincial and Federal crown from simply injunctive

relief and damages for clean up costs (Controlled fire by D to log went awry, spread over the winter due to negligence of Canfor and sloppy firefighter work, apportioned 70% Canfor 30% Province)

o Gov. can sue a polluter on behalf of the people of Canada in its Parens Patriae capacity for damage to environment caused by negligence of a 3rd party

CN v ABC Recycling Ltd A party can only claim costs of remediation that are “reasonably incurred.” (this included legal costs)

o Burden rests on the plaintiff to prove the reasonableness of these costs o Reasonable legal costs incurred to pursue those parties responsible for the contamination are

recovered on a full indemnity, actually incurred basis (ABC contaminated CN’s land with metals, hydrocarbons and PCBs through business)

Cost Recovery – Domovitch v Willows 2016 BCSC 1068 There is absolute strict liability, that is jointly and severally applied D had purchased property with oil tank in it. Purchased with knowledge of this and assurances that

it had been sorted out. Later decided to do work on the property and decided the oil tank had to come out. When purchased property taken on responsibility to take it out. Found it had been leaking into property. Sued Willows (lived there in past, not seller) was successful

Voluntary clean up – Workshop Holdings ltd. v CAE Machinery ltd. Proposition that you do not have to go to the ministry. If voluntary clean up can take advantage of

clean up provisions and go after previous owners without going to the ministry first

Federal Legislation Fisheries Act (Difficult to deal with fisher office – problems that harmful alteration, disruption or destruction on fish habitats (HADD))Canadian Environmental Protection Act

Common Law Liability 1. Nuisance BC Hydro v Environmental Appeal board2. Negligence3. Failure to Warn

42

Contractual Considerations 1. CCDC 22. RAIC 6

43