tag:blogger.com,1999:blog-55240039034671600792024-03-27T01:16:04.878-07:00Alberta Construction Law BlogMcLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.comBlogger60125tag:blogger.com,1999:blog-5524003903467160079.post-40774625661859103992021-10-20T13:28:00.003-07:002021-10-20T13:28:38.596-07:00Put Your House in Order (Part II) – Keep Your Records Straight<p class="MsoBodyText"><b> </b><!--[if gte mso 9]><xml>
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</xml><![endif]--><span lang="EN-US"><b>by <a href="https://mross.com/law/People/LawyerProfile/Jennifer_Davis.cid477" target="_blank">Jennifer Davis</a></b><br /></span></p><p class="MsoBodyText"><span lang="EN-US">Often the steps taken prior to litigation
commencing, or even disputes arising, can assist in mitigating potential
damages. </span></p>
<p class="MsoBodyText"><span lang="EN-US">Preservation, contemporaneous recording,
and organization of records is not only important during the litigation process
but is an integral part of any strategy to successfully defend all possible
claims and minimize overall liability. </span></p>
<p class="MsoBodyText"><span lang="EN-US">How documentation is preserved and
organized is partially dependent on what type of claims may be expected arising
from a dispute. Regardless of the dispute, the importance of contemporaneous
record keeping cannot be stressed enough. </span></p>
<p class="MsoBodyText"><span lang="EN-US">Construction projects can come with a
litany of potential issues, including delays, defaults, deficiencies, and
disputes. Besides the necessity of adhering to contract requirements, it is
essential that these issues are papered contemporaneously when they are
occurring. </span></p>
<p class="MsoBodyText"><span lang="EN-US">The key component to a successful claim
(or defence of a claim) is strong documentary evidence taken during the period during which these issues were occurring. For termination of a contractor or
subcontractor, for example, the various defaults, responses, notices,
correspondence, reports, and essentially all indicators that termination was
warranted will need to be preserved. </span></p>
<p class="MsoBodyText"><span lang="EN-US">Recording and preserving evidence in real
time is not only advantageous, but necessary. </span></p>
<p class="MsoBodyText"><span lang="EN-US">In Alberta, a trial of a claim may not
occur until several years after the litigation commences. By that point in time,
memories have faded, employees and contractors may have moved on, and the task
of gathering evidence to prove (or defend) claims becomes much more difficult. </span></p>
<p class="MsoBodyText"><span lang="EN-US">Without documentation, there is a risk
that you are unable to fully support (or defend) a claim and leave yourself
open to being offside contractual requirements. Your record keeping and
document management system should also clearly set out the contractually
required timelines for notices, responses, and other communications for each
project. </span></p>
<h3 class="MsoBodyText" style="text-align: left;"><b><span lang="EN-US">Categories of Documents</span></b></h3>
<p class="MsoBodyText"><span lang="EN-US">The following is a list of the types of
documents that should be categorized, recorded, and organized on all
construction projects. </span></p>
<ul style="text-align: left;"><li><span lang="EN-US"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"></span></span></span><span lang="EN-US">All pre-contract documents,
including quotes, estimates, and plans. </span></li><li><span lang="EN-US"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"></span></span></span><span lang="EN-US">All contract documents, including
change orders, change requests, RFIs, and other indicia that have the
possibility of impacting your scope of work or the price of the contract.</span></li><li><span lang="EN-US"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"></span></span></span><span lang="EN-US">Emails and other forms of
internal communication. If these are not automatically saved to an appropriate
folder or file for each project or sub-task within a project, this could create
substantial additional work in organizing and collecting these records at a
later date.</span></li><li><span lang="EN-US"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"></span></span></span><span lang="EN-US">Minutes and notes from site
meetings, meetings between parties, and notes from calls. Anytime there is
something project related that is discussed over the phone or in person with an
owner, contractor, supplier, or subcontractor, those discussions should be
memorialized in some fashion immediately after the meeting or call. This could
be in a memo to file, an email, or some other form of written documentation. Your
notes or memo should circulated to the other parties who were in attendance that
same day to help create an objective documentary record;</span></li><li><span lang="EN-US"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"></span></span></span><span lang="EN-US">Invoices, purchase orders, and
other documentation demonstrating hard costs that have been incurred.</span></li><li><span lang="EN-US"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"></span></span></span><span lang="EN-US">All schedules including
original and updated schedules, including emails or other correspondence that
reference, modify, or update existing schedules.</span></li><li><span lang="EN-US"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"></span></span></span><span lang="EN-US">Direct and indirect costs on a
project, such as equipment, financing, overhead or loss of
opportunity/disruption to other projects.</span></li><li><span lang="EN-US"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"></span></span></span><span lang="EN-US">All reporting, whether it be a
third party report on progress, internal reporting, or monthly status reports.</span></li><li><span lang="EN-US"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"></span></span></span><span lang="EN-US">Photographs of conditions,
work, or progress.</span></li></ul>
<p class="MsoBodyText"><span lang="EN-US">Not only is the preservation of these
documents essential in case of litigation, but it can provide useful ammunition
to try to resolve a dispute in advance of a complex litigation scenario. Knowing
the types of documents that are important to preserve (and file/organize
throughout a project) will provide you cost savings during the document
production stage.</span></p>
<h3 class="MsoBodyText" style="text-align: left;"><b><span lang="EN-US">General tips on reducing risk BEFORE
litigation arises:</span></b></h3>
<ul style="text-align: left;"><li><span lang="EN-US"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"></span></span></span><span lang="EN-US">Records keeping
processes/naming conventions should be utilized – there should be a clear
policy for how information is collected/stored, used, and disclosed.</span></li><li><span lang="EN-US">Processes should indicate how
records are saved and stored (paper, electronic).</span></li><li><span lang="EN-US"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"></span></span></span><span lang="EN-US">Identify problem areas early
and often.</span></li><li><span lang="EN-US">Record keeping and creation of
records should be done contemporaneously with events. </span></li><li><span lang="EN-US"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"></span></span></span><span lang="EN-US">Record organization should be
contemplated and implemented at the start of every project – not when
litigation is imminent. </span></li><li><span lang="EN-US">Implement dispute resolution
processes that reduce exposure and serve as alternatives to litigation – i.e.
draft and review your contracts with this in mind.</span></li><li><span lang="EN-US">Ensure that you have a handle
on notice periods – this includes contractual notices, as well as statutory
limitations (i.e. filing a claim, registering a lien).</span></li><li><span lang="EN-US"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"></span></span></span><span lang="EN-US">Ensure you have a system in
place to identify, classify, and store privileged records.</span></li></ul><span lang="EN-US">This post is part two of a three part series entitled "Put Your House in Order". The first post,</span> "Put Your House in Order – Pitfalls of Inadequate Privacy Policies", <span lang="EN-US">can be read <a href="https://albertaconstructionlawblog.blogspot.com/2021/08/put-your-house-in-order-pitfalls-of.html">here</a>. </span><br /><span lang="EN-US"> </span>
McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com3tag:blogger.com,1999:blog-5524003903467160079.post-30618555173170897422021-09-08T07:30:00.000-07:002021-09-08T07:56:35.427-07:00To Draft or Not to Draft? The Dangers of Verbal Contracts<p><b> by <a href="https://mross.com/law/People/LawyerProfile/Broynn_Rosser_.cid2637" target="_blank">Broynn Rosser</a></b></p><p></p><p class="MsoBodyText"><span lang="EN-US">Verbal contracts are generally just as valid as
written contracts. However, practically speaking, verbal contracts can be hard
to enforce and unnecessarily complicate disputes between parties. Verbal
contracts in the construction industry can be even more problematic given that
construction related agreements can be inherently more complicated. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">The recent Alberta Provincial Court decision,
<i>Saville Drilling Services Inc v Alpha Construction Inc, </i>2021 ABPC 125<i>
</i>(“<i><span style="mso-bidi-font-weight: bold;"><b>Saville</b></span></i>”) serves as
a cautionary example of the dangers associated with verbal contracts. In <i>Saville,</i>
the Defendant was a general contractor hired by the Town of Fox Creek (the
“<b>Town</b>”) to upgrade the Town’s water treatment plant. After debris was found in
two of the 13 wells, the Town insisted that the Defendant hire its preferred
contractor, the Plaintiff, to blow out the wells containing debris, re-install
the pumps fixing the wiring and damage and add monitoring tubes – the tubes
being an addition, with the cost borne by the Town. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">The Court highlights that all contracts
require an offer, acceptance, and consideration as well as terms that are
certain or can be determined with a “reasonable degree of certainty”. The
Plaintiff, as the party attempting to enforce the verbal contract, must also
establish the three elements of contract certainty in order to prove that a
verbal contract existed. These elements are the parties, subject matter, and
price. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">In <i>Saville</i>, the Court was
ultimately able to infer by the words and conduct of the parties that a verbal
contract existed. However, the Plaintiff was not successful in recovering the
full amount of its claim. To its own detriment, the Plaintiff incorrectly
invoiced and apportioned work to the Defendant which should have been borne by the
Town. The Town was a party to the verbal agreement but not the litigation,
hence the Plaintiff’s inability to recover. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">Essentially, the Plaintiff misinterpreted
the assessment of liability between the Town and the Defendant. This resulted
in the Plaintiff inaccurately billing the Defendant for the tubing work which
should have been apportioned to the Town. The Court in <i>Saville </i>commented
that the proper cost appointment was “simple and reasonably clear”. This
suggests that the Plaintiff may have forgotten or misinterpreted something over
time. Had there been a written contract, perhaps this mistake could have been
avoided. The Court was also tasked with resolving conflicting interpretations
of what constituted a “fair price” to be paid for the services properly
completed by the Plaintiff. Notably, this potentially could have been resolved
among the parties without litigation had the contract been in writing. <o:p></o:p></span></p>
<p class="MsoBodyText" style="break-after: avoid; page-break-after: avoid;"><b><u><span lang="EN-US">Implications<o:p></o:p></span></u></b></p>
<p class="MsoBodyText"><span lang="EN-US">Written contracts, in addition to being
more easily enforceable in court, can more accurately document the essential
elements of an agreement between the parties in ways that fading memories and
conflicting interpretations of events cannot. They also serve as a point of
reference that can be used by parties throughout the contractual relationship. Finally,
they help parties avoid having to resolve their disputes by way of litigation –
or at least simplify the disputes between the parties such that litigation may
be less costly.</span></p>
<p class="MsoBodyText"><span lang="EN-US">Should you have any questions regarding the material covered in the article above, please feel free to reach out to <a href="https://mross.com/law/People/LawyerProfile/Broynn_Rosser_.cid2637" target="_blank">Broynn Rosser</a> or any other member of our <a href="https://mross.com/law/Industry_Groups/Construction" style="background-color: white; color: #118899; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 14.85px; text-decoration-line: none;" target="_blank">Construction Industry Group</a></span></p>McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com1tag:blogger.com,1999:blog-5524003903467160079.post-31272537584003289312021-08-13T07:00:00.001-07:002021-08-13T08:01:04.663-07:00Put Your House in Order – Pitfalls of Inadequate Privacy Policies<p><b>by <a href="https://mross.com/law/People/LawyerProfile/Jennifer_Davis.cid477" target="_blank">Jennifer Davis</a></b></p><p></p><p class="MsoBodyText"><span lang="EN-US">Privacy concerns are often overlooked
when considering an organization’s risks and liabilities. Internal policies and
mechanisms, if not structured properly, can leave an organization open and
vulnerable to breaches ranging from inadvertent disclosure of information to
cyber-attacks and data breaches. <o:p></o:p></span></p>
<p class="MsoBodyText"><b><span lang="EN-US">Overview<o:p></o:p></span></b></p>
<p class="MsoBodyText"><span lang="EN-US">The <i>Personal Information Protection
Act </i>(<i>“<b>PIPA</b></i>”)<i> </i>is Alberta’s guide to the protection of an
individual’s personal information by organizations in the private sector. For the most part, <i>PIPA </i>will apply to
all organizations in Alberta that are not public bodies and do not fall
directly under <i>PIPEDA</i>, the federal legislation that applies in Alberta
in relation to federal works, undertakings or businesses. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">Accordingly, privacy legislation applies
to all Alberta corporations in the construction industry, the majority of which
will fall under <i>PIPA.</i> Organizations are required to protect the personal
information of individuals, which includes customers and employees. <o:p></o:p></span></p>
<p class="MsoBodyText"><i><span lang="EN-US">PIPA</span></i><span lang="EN-US"> was
designed to “govern the collection, use and disclosure of personal information
by organizations in a manner that recognizes both the right of an individual to
have his or her personal information protected and the need of organizations to
collect, use or disclose personal information for purposes that are reasonable”
(<i>PIPA, </i>section 3).<o:p></o:p></span></p>
<p class="MsoBodyText"><b><span lang="EN-US">Personal Information<o:p></o:p></span></b></p>
<p class="MsoBodyText"><i><span lang="EN-US">PIPA</span></i><span lang="EN-US">
defaults to there being no collection, use, or disclosure of personal
information without consent of that individual and even where there is consent,
personal information is only to be collected, used, or disclosed for purposes
that are reasonable.<span style="mso-spacerun: yes;"> </span>While exception
provisions do exist, they are for a limited number of circumstances that are
clearly identified in the legislation.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">One of the easiest ways to safeguard
against potential breaches by an organization is to ensure privacy policies are
robust and updated regularly. An organization does not have an absolute right
of collection, use, and disclosure simply because notice was provided to its
employees. Without express consent or acknowledgment by employees of how their
information will be collected, used, and disclosed, organizations open
themselves up to liability for failure to abide by privacy requirements. <o:p></o:p></span></p>
<p class="MsoBodyText"><u><span lang="EN-US">Takeaway</span></u><span lang="EN-US">:
Your policies should clearly identify what information is being collected, how
it is being used, and under what circumstances that information will be
disclosed. <o:p></o:p></span></p>
<p class="MsoBodyText"><b><span lang="EN-US">Monitoring<o:p></o:p></span></b></p>
<p class="MsoBodyText"><span lang="EN-US">Employee monitoring is a very broad
category, and can include everything from biometric scanning data, to punch
cards, to video surveillance.<span style="mso-spacerun: yes;"> </span>Generally,
regardless of the level of technology, the practical implications of privacy
legislation remain the same: are the measures being taken by the employer
reasonable? <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">An organization implementing any type of
technology that may collect personal information of employees, will still
remain subject to the reasonableness test.<span style="mso-spacerun: yes;"> </span>Practically, this means an organization must demonstrate the use of the
technology was necessary and reasonable in the circumstances and
implementation. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">For example, where surveillance cameras
are set-up on a job site for security purposes, employees should be aware of
the details of the surveillance, its purpose, and what information may be
collected and retained. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US"><u>Takeaway</u>: Organizations do not have a
carte blanche to operate surveillance simply for the sake of surveillance
without reviewing the reasonableness standard and providing appropriate
notice.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></p>
<p class="MsoBodyText"><b><span lang="EN-US">Protection of Information<o:p></o:p></span></b></p>
<p class="MsoBodyText"><span lang="EN-US">Not only does <i>PIPA</i> provide rules for
the use, collection, and disclosure of personal information, but it also
requires organizations to protect personal information and self-report in the
case of unauthorized loss or disclosure where a real risk of significant harm
exists. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">Practically, this means organizations are
tasked not only with ensuring they are on the right side of requirements for
the collection, use, and disclosure of personal information, but they are also
required to protect that information.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">Privacy policies should clearly address
how information is safeguarded, including sensitive and confidential
documentation.<span style="mso-spacerun: yes;"> </span>Without appropriate
safeguards in place and knowing the appropriate procedures to use when sharing
sensitive information both internally and externally, organizations open
themselves up to liability and loss.<o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US"><u>Takeaway</u>: </span><span lang="EN-US">Safeguards must be established to
appropriately protect personal information. <o:p></o:p></span></p>
<p class="MsoBodyText"><b><span lang="EN-US">Protecting the House<o:p></o:p></span></b></p>
<p class="MsoBodyText"><span lang="EN-US">Overall, the risks and liability for
failure to adhere to the privacy legislation falls squarely on the shoulders of
the organization – they bear the burden on proving the reasonableness of their
methods. An organization can be reported and investigated for privacy breaches,
resulting in possible sanctions by the privacy commissioner and opening the
organization up to further damages if a breach is found.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">An organization’s best response to
protecting sensitive business information and minimizing their exposure to
potential breaches of privacy legislation is to be proactive, not reactive:</span></p><p class="MsoBodyText"></p><ul style="text-align: left;"><li><span style="text-align: justify; text-indent: -0.25in;">Develop internal procedures for
handling personal information/employee personal information.</span><span style="text-align: justify; text-indent: -0.25in;"> </span><span style="text-align: justify; text-indent: -0.25in;">Especially with respect to the organization
of records in the event you receive a request for information from a third
party and are required to respond.</span><span style="text-align: justify; text-indent: -0.25in;"> </span><span style="text-align: justify; text-indent: -0.25in;">Organization and pre-planning make this a much less time intensive and
expensive exercise.</span></li><li><span style="text-align: justify; text-indent: -0.25in;">Develop policies that clearly
identify what information is being collected, how it is being used, and under
what circumstances that information will be disclosed.</span></li><li><span style="text-align: justify; text-indent: -0.25in;">Train staff on how to properly
handle personal information and introduce confidentiality agreements.</span></li><li><span style="text-align: justify; text-indent: -0.25in;">Limit the amount of personal
information collected to only what is necessary.</span></li><li><span style="text-align: justify; text-indent: -0.25in;">Establish safeguards for the
protection of personal information.</span></li><li><span style="text-align: justify; text-indent: -0.25in;">Establish procedures for the
review of monitoring technology with an eye to reasonableness of the use of
such technology.</span></li><li><span style="text-align: justify; text-indent: -0.25in;">Review contracts, policies,
procedures, and coverage regularly to ensure liability is minimized, or at
least addressed, in terms of potential cyber-attacks and data breaches.</span></li><li><span style="text-align: justify; text-indent: -0.25in;">Review contracts and ensure
privacy provisions are present, for the protection of personal information and
business records, especially in the case of sensitive business or trade
information that may be susceptible to disclosure.</span></li></ul><p></p><p class="MsoBodyText">Should you have any questions regarding the material covered in the article above, please feel free to reach out to <a href="https://mross.com/law/People/LawyerProfile/Jennifer_Davis.cid477" target="_blank">Jennifer Davis</a> or any other member of our <a href="https://mross.com/law/Industry_Groups/Construction" target="_blank">Construction Industry Group</a>.</p><p></p>McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com1tag:blogger.com,1999:blog-5524003903467160079.post-67228133511060991732021-07-30T08:00:00.000-07:002021-07-30T08:44:50.401-07:00Lien Entitlement: An “Overall Project” Perspective<p><b> by <a href="https://mross.com/law/People/LawyerProfile/Graham_Henderson.cid463" target="_blank">Graham Henderson</a></b></p><p></p><p class="MsoBodyText"><span lang="EN-US">A recent decision of the Alberta Court of
Queen’s Bench provides a reminder that supplying work and materials to a
project does not necessarily result in builders’ lien rights. When assessing
lien rights, the Court will consider contextual information, including details
about the nature of the project. Does the project involve the construction of
something on the lands, or is it a maintenance project? Such a distinction may
dictate whether lien rights exist or not. <o:p></o:p></span></p>
<p class="MsoBodyText"><i><span lang="EN-US"><b><u>Court Decision</u></b><o:p></o:p></span></i></p>
<p class="MsoBodyText"><span lang="EN-US">In <a href="https://www.canlii.org/en/ab/abqb/doc/2021/2021abqb101/2021abqb101.html?searchUrlHash=AAAAAAAAAAEAHDIwMTYgQUJRQiA0MTYgKENhbkxJSSksIHAgNzkAAAABAA8vMjAxNmFicWI0MTYjNzkB&resultIndex=1"><i>Young
EnergyServe Inc. v. LR Ltd., LR Processing Partnership</i></a> (“<b><i>EnergyServe</i></b>”),
the Court assessed whether a Contractor’s builders’ lien was valid.<o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">The Contractor was retained to perform a
turnaround project at a gas processing plant (the “<b>Project</b>”). In this
case, the Project specifically involved cleaning, repairing, and relining the
interior of all tanks and pressure vessels, and the repair or replacement of
worn or faulty piping and pressure valves at the plant (the “<b>Work</b>”).<o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">Prior to commencement of the Project, the
plant was shut down pending regulatory approval. The Work was required in order
for the plant to pass certain inspections, obtain regulatory approval, and
continue to operate efficiently and economically. Following completion of the
Work, the Contractor registered a lien in relation to the Work.<o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">In order to assess the validity of the
lien, the Court analyzed the prerequisites to lien entitlement under Alberta’s <i>Builders’
Lien Act</i>. The Court highlighted the following principles:<o:p></o:p></span></p>
<p></p><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><p></p><p style="text-align: left;"></p><ol style="text-align: left;"><li><span lang="EN-US">Courts will assess a party’s
entitlement to a lien from the perspective of the “overall project”. Simply
put, this means that when assessing the validity of a lien, the Court will not
only consider the nature of the work but will also consider the nature of the
project.<br /><o:p></o:p></span></li><li><span lang="EN-US">In this regard, the Courts have
drawn a distinction between work performed as part of a construction process on
a building site and work performed as maintenance. The former, which is related
to ‘making and constructing’, could entitle a contractor to a builders’ lien.
The latter does not, even if the maintenance is required to remain compliant
with regulations.<o:p></o:p></span></li></ol><p></p><p></p></blockquote><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><p></p><p style="text-align: left;"><span lang="EN-US"><o:p></o:p></span></p><p></p></blockquote><p>
</p><p class="MsoBodyText"><span lang="EN-US">Having regard to these principles, the
Court in <i>EnergyServe</i> considered whether the Work was part of an overall
project to construct something on the lands, as opposed merely being a
maintenance project.<o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">In the result, the Court decided that the
Contractor did not have a valid lien. The Court determined that the Work was
not part of a project to build or expand the plant, and that the Work was
merely in the category of maintenance services.<o:p></o:p></span></p>
<p class="MsoBodyText"><i><span lang="EN-US"><b><u>Implications</u></b></span></i><span lang="EN-US"><o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">Whether you are a contractor who expects
to rely on lien rights for your work, or an owner seeking to remove or prevent
an invalid lien, it is crucial for you to consider the context of the work
underlying the lien. Identical work may be lienable on a construction project
but not on a maintenance project – and some projects may involve both
construction and maintenance, leaving questions as to the scope of lien rights.
The <i>EnergyServe</i> decision demonstrates that, even in the event of a
significant and necessary project involving work on a building or lands, the overall
context of the project may ultimately determine whether valid lien rights exist.
<o:p></o:p></span></p><p class="MsoBodyText"><span lang="EN-US">For any further information or questions regarding the post above, please contact <a href="https://mross.com/law/People/LawyerProfile/Graham_Henderson.cid463" target="_blank">Graham Henderson</a> or any other member of the <a href="https://mross.com/law/Industry_Groups/Construction" target="_blank">McLennan Ross Construction Industry Group</a>.</span></p><b></b><p></p>McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com0tag:blogger.com,1999:blog-5524003903467160079.post-59907887394120168392021-06-15T08:30:00.000-07:002021-06-15T08:30:43.494-07:00Pending Registration Lien Frustration<p><b> by <a href="https://mross.com/law/People/LawyerProfile/Corbin_Devlin.cid32" target="_blank">Corbin Devlin</a></b></p><p></p><p class="MsoNormal"><a name="_GoBack"></a><span lang="EN-US">A new land titles registration process is causing grief for all those
involved with builders’ liens.</span></p><p class="MsoNormal"><span lang="EN-US">Effective April
1, 2021 the process for all land titles registrations in Alberta underwent
significant changes as part of Provincial government efforts at Red Tape
Reduction. Section 14.1 of the <a href="https://www.canlii.org/en/ab/laws/stat/rsa-2000-c-l-4/latest/rsa-2000-c-l-4.html?searchUrlHash=AAAAAQAHcGVuZGluZwAAAAAB&offset=14785.599609375#sec56"><i>Land
Titles Act</i></a> creates a “pending registration queue.” Builders’ liens are no
longer registered on the day they are submitted (contrary to past practice). However,
registrations are guaranteed priority based on the date of submission; i.e. a
lien will apparently be accepted for registration based on the date of
submission, even if the lien period expires between submission and
registration.</span></p><p class="MsoNormal"><span lang="EN-US">Searches of
title show any pending registrations. The Registrar no longer provides
confirmation of registration; repeated searches of title are required to
determine when registration is completed. There are various publications from
the <a href="https://www.lawsociety.ab.ca/land-titles-office-pending-registration-queue/">Law
Society of Alberta</a> and <a href="https://alta.registries.gov.ab.ca/SpinII/News/View.aspx?ID=8e076925-1c5f-4284-b627-033e425cbb07">Service
Alberta</a> that provide more detailed background and explanation.</span></p><p class="MsoNormal"><span lang="EN-US">At the time
of writing, there is a lag of about a month between submission and registration
of an instrument in the queue. The implementation of the pending registration
queue is causing unintended problems for lien claimants and those affected by
lien claims alike.</span></p><ul style="margin-top: 0in;" type="disc">
<li class="MsoNormal"><span lang="EN-US">A
lien submitted for registration on time might still be “pending” when the
lien period expires, leaving lien claimants uncertain if their lien will
be accepted for registration. (All those who deal with liens a lot know that
rejections occur unexpectedly from time-to-time, for various reasons.) <br /><br /><o:p></o:p></span></li>
<li class="MsoNormal"><span lang="EN-US">In
place of a notice of rejection, the Registrar may now issue a notice of
deficiency. The lien claimant who receives such a notice has 30 days to
correct the deficiency and resubmit the document to retain their priority
based on the original date of submission. Sounds good, right? But the
Registrar will still reject an instrument submitted for registration if
the “defects are such that they cannot reasonably be corrected.” It
remains to be seen how this will be interpreted by the Registrar. Will an
error in the land description, for example, be considered correctible? We
used to get notices of rejection on the same day the lien was submitted,
allowing time (in most cases) for a statement of lien to be corrected and
resubmitted before the expiry of the lien period. <br /><br /><o:p></o:p></span></li>
<li class="MsoNormal"><span lang="EN-US">These
changes undermine our ability to discharge liens on an expedited basis, as
required to prevent disruptions in project financing. The normal process
to discharge liens quickly is to apply to court pursuant to s. 48 of the <a href="https://www.canlii.org/en/ab/laws/stat/rsa-2000-c-b-7/latest/rsa-2000-c-b-7.html?autocompleteStr=builders&autocompletePos=1">Builders’
Lien Act</a>, often with the consent of the lien claimant, for an order
permitting alternate security to be paid into court. However, there is no
mechanism to discharge a lien while it is in the pending registration
queue. Cautious construction owners and lenders may suspend payment based
on the fact that a lien is submitted, and now the parties have to await
registration to before they can apply to court for an expeditious(?)
discharge. This has the potential to significantly disrupt timely payments
on construction projects (quite contrary to other Alberta government
initiatives to promote <a href="http://albertaconstructionlawblog.blogspot.com/2020/10/a-first-look-at-albertas-proposed.html">prompt
payment</a> in the construction industry).<br /><br /><o:p></o:p></span></li>
<li class="MsoNormal"><span lang="EN-US">The
above are some of the more obvious problems, but the “pending registration
queue” is incompatible with the Builders’ Lien Act in other ways. There
are various procedures and requirements – not to mention legal rights -
triggered by the registration of a lien. For example, section 21 allows
the owner to release the major lien holdback 45 days after a certificate
of substantial performance is issued, provided that no lien has been
registered. But what if a lien is in the queue?</span></li></ul><p class="MsoNormal"><span lang="EN-US">The recent
amendments to the Land Titles Act do not contemplate or integrate with the
Builder’s Lien Act. Differing interpretations of the legislative gaps are bound
to lead to disputes.<o:p></o:p></span></p><p class="MsoNormal"><span lang="EN-US">For questions regarding the information included in the post above, please contact <a href="https://mross.com/law/People/LawyerProfile/Corbin_Devlin.cid32" target="_blank">Corbin Devlin</a> or any other member of our <a href="https://mross.com/law/Industry_Groups/Construction" target="_blank">Construction Industry Group</a>.</span></p><p></p>McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com0tag:blogger.com,1999:blog-5524003903467160079.post-15008057290820774132021-04-27T10:37:00.001-07:002021-04-27T14:09:04.042-07:00Design Defects and Personal Liability: How Can Architects and Engineers Reduce Exposure To Personal Liability?<p><b> by <a href="https://mross.com/law/People/LawyerProfile/Shaun_Chorney_.cid2634" target="_blank">Shaun Chorney, Student-at-Law</a></b></p><p></p><p class="MsoBodyText"><span lang="EN-US">In our previous <a href="http://albertaconstructionlawblog.blogspot.com/2021/03/design-defects-and-personal-liability.html">article</a>, we discussed the general principles involved in determining when architects and
engineers can be held personally liable for mistakes in design. This article
will expand on the theme of personal liability in design by focusing on
specific strategies which can reduce exposure to personal liability.<o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">The most common cause of action which
retains a realistic likelihood of success in a claim against individual design
professionals is the tort of negligent misrepresentation. This article will
focus on reducing exposure to this particular cause of action.<o:p></o:p></span></p>
<p class="MsoBodyText"><b><span lang="EN-US" style="font-size: 14pt; mso-bidi-font-size: 11.0pt;">Strategies to Reduce Exposure to Personal Liability<o:p></o:p></span></b></p>
<p class="MsoBodyText"><span lang="EN-US">There are several strategies that
architects and engineers can implement to reduce personal exposure to liability
for negligent misrepresentation, including the use of reliance disclaimers, qualifying
designs, contractual provisions limiting employee liability, defining the
standard of care, and liability insurance. These strategies are not exhaustive and
are in no particular order.<o:p></o:p></span></p>
<p class="MsoBodyText"><b><i><span lang="EN-US">Reliance Disclaimers<o:p></o:p></span></i></b></p>
<p class="MsoBodyText"><span lang="EN-US">To successfully prove negligent
misrepresentation, one of the elements that a plaintiff must demonstrate is
that they reasonably relied on the representations of the defendant. A reliance
disclaimer seeks to limit liability by constraining the entities that are
permitted to rely on the representations of the representor. Reliance
disclaimers are often included with the design materials. An effective
disclaimer should stipulate that the materials have been prepared for a
specific party, and only that specific party is permitted to rely on the
materials; it should also indicate that all excluded parties assume all risk
associated with the unauthorized use of the design materials. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">Provided that the reliance limitation is
unambiguous, Courts have repeatedly found that these disclaimers are valid and will
defeat the claims of parties that have been excluded from relying on the design
materials. These disclaimers can protect both the design firm and the
individual architects or engineers. <o:p></o:p></span></p>
<p class="MsoBodyText"><b><i><span lang="EN-US">Qualification of Designs<o:p></o:p></span></i></b></p>
<p class="MsoBodyText"><span lang="EN-US">Similar to a reliance disclaimer,
liability exposure can be reduced by qualifying the design. Any undetermined
variables which may affect the design should be identified and stated as such
in the design materials. An example of a commonly unknown variable that can
substantially affect the implementation of a building design is subsurface
conditions. The materials should indicate the evidence and assumptions that the
designs are predicated on; the materials should also indicate that actual
conditions may differ and materially affect the construction of the design. Qualification
of designs can reduce liability exposure for both the design firm and its
employees, and it can protect against the claims of the contracting party and
third-parties. <o:p></o:p></span></p>
<p class="MsoBodyText"><b><i><span lang="EN-US">Limitation of Liability</span></i></b><b><i><span lang="EN-US" style="font-size: 16pt; mso-bidi-font-size: 12.0pt;"><o:p></o:p></span></i></b></p>
<p class="MsoBodyText"><span lang="EN-US">Design firms can use contractual
provisions to shield both the firm and their employees from claims of parties
that the firm has contracted with. The design contracts can include language
that limits the contracting party’s ability to personally sue the design firm’s
employees. These limitations can include restricting liability to a set dollar
amount (such as the dollar value of the contract), excluding liability for
consequential or indirect damages, or expressly restricting all claims against
the individual employees. These provisions can apply to multiple causes of
action, including claims of negligent misrepresentation. They will not shield
the employees from third-party claims but they will limit the claims of the contracting
party receiving the design materials.<o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">Courts have held that contractual clauses
restricting the personal liability of a firm’s employees can be valid,
notwithstanding that the individual employees are not a party to the contract.
In <a href="https://www.canlii.org/en/ca/scc/doc/1992/1992canlii41/1992canlii41.html?autocompleteStr=London%20Drugs%20Ltd.%20v%20Kuehne%20%26%20Nagel%20International%20Ltd&autocompletePos=1"><i>London
Drugs Ltd. v Kuehne & Nagel International Ltd</i></a><i>.</i>, the Supreme
Court of Canada held that employees can be protected by express or implied
limitation clauses so long as the employees were acting in the course of their
employment and were performing the services provided for in the contract
between their employer and the plaintiff when the loss occurred.<o:p></o:p></span></p>
<p class="MsoBodyText"><a name="_Hlk69813397"><b><i><span lang="EN-US">Defining the
Standard of Care</span></i><span lang="EN-US"><o:p></o:p></span></b></a></p>
<p class="MsoBodyText"><span style="mso-bookmark: _Hlk69813397;"><span lang="EN-US">Design
firms can define the standard of care that they and their employees will
exercise in providing design services. This is typically done through a
provision in the contract between the design firm and the contracting party.
Defining the standard of care can reduce uncertainty if the contracting party claims
negligent misrepresentation against the design firm or its employees.<o:p></o:p></span></span></p>
<p class="MsoBodyText"><span style="mso-bookmark: _Hlk69813397;"><span lang="EN-US">When
the standard of care has not been defined, the standard of care will generally
be assessed as the degree to which a reasonable party, in the position of the
alleged negligent party, would have exercised caution and due diligence in
carrying out the work. Multiple variables can affect this analysis and can lead
to unintended results. Defining the standard of care allows design
professionals to more clearly describe the extent of their professional
obligations and can decrease ambiguity in claims of negligent
misrepresentation.</span></span><span lang="EN-US"> <a name="_Hlk69816381">Defining
the standard of care will apply to the claims of the contracting party receiving
the design materials but will not apply to third-party claims.<i><o:p></o:p></i></a></span></p>
<span style="mso-bookmark: _Hlk69816381;"></span>
<p class="MsoBodyText"><b><i><span lang="EN-US">Liability Insurance<o:p></o:p></span></i></b></p>
<p class="MsoBodyText"><span lang="EN-US">Another key consideration for architects
and engineers wishing to reduce their exposure to personal liability is
insurance coverage. Insurance policies can protect design firms and their
employees in the event of a lawsuit. As with all things insurance, liability
coverage will depend on the particulars of the insurance policy and can vary widely.
For risk-conscious design professionals, the acquisition of expansive insurance
coverage is a reliable strategy for reducing exposure to personal liability.<o:p></o:p></span></p><p class="MsoBodyText">For more information on this article or any other construction law matter, please feel free to contact any member of our <a href="https://mross.com/law/Industry_Groups/Construction" target="_blank">Construction Law industry group</a>.</p><b></b><p></p>McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com5tag:blogger.com,1999:blog-5524003903467160079.post-26359976691533251792021-03-03T08:02:00.007-08:002021-03-05T11:26:23.099-08:00Design Defects and Personal Liability: When Can Architects and Engineers Be Held Personally Liable?<p class="MsoBodyText"><b><span lang="EN-US">By <a href="https://mross.com/law/People/LawyerProfile/Shaun_Chorney_.cid2634" target="_blank">Shaun Chorney</a>, </span></b><span lang="EN-US">Student-at-law</span><b><span lang="EN-US"><br /></span></b></p>
<div class="MsoBodyText" style="text-align: left;"><span lang="EN-US">When substantial defects in project
design result in delay, injury, or other damage, the project <a name="_Hlk65453549">architects and engineers </a>are typically held
responsible. This often comes in the form of a claim being advanced by the
project owner or general contractor against the architecture and engineering
firms responsible for designing or approving the design plans. These claims
typically flow through the design contract or the tort of negligent
misrepresentation.</span></div>
<p class="MsoBodyText"><b><span lang="EN-US" style="font-size: 14pt; mso-bidi-font-size: 11.0pt;">Breach of Contract</span><span lang="EN-US"></span></b></p>
<p class="MsoBodyText"><span lang="EN-US">When claims flow through the contract
between the design firm and the party seeking compensation for the design
flaws, the design firm will be held accountable, and the individual employees
responsible for the design defects are frequently shielded from the breach of
contract claims. If a claim for breach of contract is made against an
individual responsible for the design errors, the individual can often point to
the contract to show that the agreement was entered into by the company, not
themselves as an individual. In most cases, this will provide a full defence to
a claim for breach of contract against an individual architect or engineer.</span></p>
<p class="MsoBodyText"><b><span lang="EN-US" style="font-size: 14pt; mso-bidi-font-size: 11.0pt;">Tort Claims</span></b><span lang="EN-US"></span></p>
<p class="MsoBodyText"><span lang="EN-US">The same cannot be said for claims
arising out of tort. In a tort claim alleging negligent misrepresentation, it
is usually more difficult for individual design professionals to escape
liability by hiding behind the company for which they work.</span></p>
<p class="MsoBodyText"><span lang="EN-US">In the case of <a href="https://www.canlii.org/en/ca/scc/doc/1992/1992canlii41/1992canlii41.html?autocompleteStr=London%20Drugs%20Ltd.%20v%20Kuehne%20%26%20Nagel%20International%20Ltd&autocompletePos=1"><i>London
Drugs Ltd. v Kuehne & Nagel International Ltd</i></a><i>. </i>(“<i><b>London
Drugs</b></i>”), the Supreme Court of Canada confirmed that an <a name="_Hlk65453213">employee acting in the course of his or her employment can
be held personally liable for breaching a duty of care </a>owed to a client or
customer of the employer. In the 2017 Ontario Court of Appeal decision of <a href="https://www.canlii.org/en/on/onca/doc/2017/2017onca1017/2017onca1017.html?autocompleteStr=Sataur%20v%20Starbucks%20Coffee%20Canada%20Inc&autocompletePos=1"><i>Sataur
v Starbucks Coffee Canada Inc</i></a><i>.</i>, the Court reaffirmed and
commented on the decision of <i>London Drugs</i>: <br /></span></p>
<p class="Quote1"><i><span lang="EN-US"></span></i></p><blockquote>The motion judge held that the claim against
the individual defendants did not disclose a reasonable cause of action because
“the general rule remains that employees are not liable for what they do within
the scope of their authority and on behalf of their corporation”. Respectfully,
the general rule is the opposite. As Justice McLachlin said succinctly in <i>London
Drugs</i>… “It has always been accepted that a plaintiff has the right to sue
the person who was negligent, regardless of whether the employee was working
for someone else or not.” Put in the negative, there is no general rule in
Canada that an employee acting in the course of her employment cannot be sued
personally for breaching a duty of care owed to a customer.”</blockquote><p></p>
<p class="MsoBodyText"><b><span lang="EN-US" style="font-size: 14pt; mso-bidi-font-size: 11.0pt;">Negligent Design</span><span lang="EN-US"></span></b></p>
<p class="MsoBodyText"><span lang="EN-US">The personal liability of engineers who
drafted faulty design drawings in a highway construction project was discussed
in the case of <a href="https://www.canlii.org/en/ca/scc/doc/1993/1993canlii67/1993canlii67.html?autocompleteStr=Edgeworth%20Construction%20Ltd.%20v.%20N.D.%20Lea%20%26%20Associates%20Ltd&autocompletePos=1"><i>Edgeworth
Construction Ltd. v. N.D. Lea & Associates Ltd</i></a>. (“<i><b>Edgeworth</b></i>”).
In this case, both the engineering firm and the individual engineers were sued
in tort by the contractor responsible for constructing the project; there was
no contractual relationship between the engineering firm and the contractor. </span></p>
<p class="MsoBodyText"><span lang="EN-US">The Supreme Court of Canada held that the
engineering firm which drafted the faulty design plans was liable for negligent
misrepresentation, even though there was no contractual relationship between
the engineering firm and the contractor. However, the Court determined that the
individual engineers were not personally liable. In coming to this conclusion,
the Court held that to find the individual engineers personally liable, there
must have been something “more” than the single fact that the engineers affixed
their seals to the plans:</span></p>
<p class="Quote1"><span lang="EN-US"></span></p><blockquote>“The only basis upon which they are sued is
the fact that each of them affixed his seal to the design documents. In my
view, this is insufficient to establish a duty of care between the individual
engineers and Edgeworth. The seal attests that a qualified engineer prepared
the drawing.<span style="mso-spacerun: yes;"> </span>It is not a guarantee of
accuracy. The affixation of a seal, without more, is insufficient to found
liability for negligent misrepresentation.”</blockquote><p></p>
<p class="MsoBodyText"><b><span lang="EN-US" style="font-size: 14pt; mso-bidi-font-size: 11.0pt;">Interpretation of <i>Edgeworth</i></span><span lang="EN-US"></span></b></p>
<p class="MsoBodyText"><span lang="EN-US">It is not precisely clear what
constitutes something “more”, such that it warrants personal liability; this
determination has been the subject of litigation in several cases. In <a href="https://www.canlii.org/en/bc/bcsc/doc/1999/1999canlii5428/1999canlii5428.html?searchUrlHash=AAAAAQBaVGhlcmUgaXMgbm8gcXVlc3Rpb24gdGhhdCBhbGwgdGhyZWUgb2YgdGhlIHBlcnNvbmFsIGRlZmVuZGFudHMgaGFkIGEgZGVncmVlIG9mIGV4cGVyaWVuY2UgAAAAAAE&resultIndex=1"><i>Strata
Plan No. VR 1720 (Owners ) v Bart Developments Ltd</i></a><i>. </i>(“<b><i>Bart</i></b>”),
three individual engineers were personally sued for errors contained in their building
condition survey. The engineers argued that the contract was between the plaintiffs
and their employer, so they should not owe an individual duty of care to the plaintiffs.
The Court dismissed this argument, holding that the individual engineers did indeed
owe a duty of care to the plaintiffs in creating the survey: </span></p>
<p class="Quote1"><span lang="EN-US"></span></p><blockquote><p class="Quote1"><span lang="EN-US">“While it is true that the plaintiffs did not
engage CSA (the engineering firm) because they intended to rely on the skill of
any individual they could identify by name, it is equally true that CSA held
itself out as a firm of “consulting engineers”, with “engineers, architects and
technologists ...[who] focus their interests exclusively upon resolving” the
very problem, building deficiencies, the plaintiffs contracted with CSA to
address.”</span></p>
<p class="Quote1"><span lang="EN-US">“There is no question that all three of the
personal defendants had a degree of experience and technical skill nor that
each was actively involved in the survey and preparation or presentation of the
report to the plaintiffs. The personal defendants must have known the
plaintiffs would rely on their report. <b>The extent of their involvement
distinguishes them from the engineers in [<i>Edgeworth</i>], who merely affixed
a seal “without more”.”</b></span></p></blockquote><p class="Quote1"><span lang="EN-US"><b></b></span></p>
<p class="MsoBodyText"><i><span lang="EN-US">Bart </span></i><span lang="EN-US">suggests
that individual design professionals may have increased exposure to personal
liability when their employer markets itself on the basis of the expertise of
its design staff; especially when those individual design professionals are
actively working with the plaintiff.</span></p>
<p class="MsoBodyText"><span lang="EN-US">In my next blog article, I will be
addressing other factors and strategies which can limit personal liability for
mistakes in design. <br /></span></p>
McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com4tag:blogger.com,1999:blog-5524003903467160079.post-64115237769250875452020-12-23T13:38:00.003-08:002020-12-23T14:01:13.862-08:00Bill 37 Prompt Payment Legislation: The Unclear Adjudication Process<p><b> by <a href="https://mross.com/law/People/LawyerProfile/Kathleen_Garbutt.cid403" target="_blank">Kathleen Garbutt</a></b></p><p></p><p class="MsoBodyText"><span lang="EN-US">The Alberta Government has promised to
enact the new <i>Prompt Payment Amendment Act</i>, often referred to as “<b><i>Bill 37</i></b>”, in
July 2021. One of the major changes introduced in <i>Bill 37</i> is the implementation
of an adjudication system to resolve payment disputes. <o:p></o:p></span></p>
<p class="MsoBodyText"><b><i><span lang="EN-US">What We Know<o:p></o:p></span></i></b></p>
<p class="MsoBodyText"><span lang="EN-US">The current version of <i>Bill 37</i> lacks
detail with respect to what the adjudication process will look like. Here is
what we know. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">The Minister of Service Alberta will
appoint “Authorized Nominating Authorities” who will be able to assign third
party adjudicators to disputes. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">Although the adjudications are intended
to be a final and binding process, the parties to the adjudication process will
still have the option to register a builders’ lien and enforce the lien through
the Court process.<o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">Parties to a contract may refer matters
to adjudication “respecting any prescribed matter”. There is no information yet
with respect to what will be included in the list of “prescribed matters”. Adjudications
will be conducted in accordance with the procedures set out in the Regulation
or as established by the Authorized Nominating Authority.<o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">The Adjudication process is not mandatory;
however, either party (owner or subcontractor) may refer a dispute to
adjudication. Once a matter is referred to adjudication, the adjudicator’s
decision is final and binding. The adjudicator’s decision is subject to
judicial review or appeal only in limited circumstances such as where the
adjudicator made a mistake of law or did not follow the procedures for
adjudication. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">Where a contract contains a dispute
resolution clause that provides for adjudication this clause will apply only to
the extent it does not conflict with the Regulations which govern the <i>Bill 37</i>
adjudication process. Where there is a conflict between a contract and the
Regulations, the Regulations will apply. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US"><i>Bill 37</i> has received royal assent and
proclamation is expected in the summer of 2021. <o:p></o:p></span></p>
<p class="MsoBodyText"><b><i><span lang="EN-US">What We Are Still Learning<o:p></o:p></span></i></b></p>
<p class="MsoBodyText"><span lang="EN-US">The Regulation with respect to the
adjudication process has not yet been released. Without this information it is
impossible to know exactly what the adjudication process will look like.
However, Ontario has already implemented legislation similar to <i>Bill 37</i> which
includes an adjudication process. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">In Ontario adjudications are conducted
through the Ontario Dispute Adjudication for Construction Contracts. Unlike the
proposed process in Alberta, the adjudicator’s decision in Ontario is an
interim decision and therefore not binding on the parties.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">Also in contrast to Ontario, Alberta has
provided for the appointment of multiple nominating authorities and these may
include private entities. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">In Ontario parties to a construction
contact may apply for adjudication with respect to the following categories of
disputes:<o:p></o:p></span></p>
<p class="MsoBodyText" style="margin-bottom: 0in; margin-left: 1.0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 1in; mso-hyphenate: none; mso-list: l0 level1 lfo1; text-indent: -0.25in;"></p><ol style="text-align: left;"><li><span lang="EN-US">The valuation of services or
materials provided under the contract;<o:p></o:p></span></li><li><span lang="EN-US">Payment under the contract,
including in respect of a change order, whether approved or not, or a proposed
change order;<o:p></o:p></span></li><li><span lang="EN-US">Disputes that are the subject
of a notice of non-payment (i.e. disputed invoices);<o:p></o:p></span></li><li><span lang="EN-US">Payment of a holdback;<o:p></o:p></span></li><li><span lang="EN-US">Non-payment of holdback; and<o:p></o:p></span></li><li><span lang="EN-US">Any other matter that the
parties to the adjudication agree to, or that may be prescribed.<o:p></o:p></span></li></ol><!--[if !supportLists]--><p></p>
<p class="MsoBodyText"><span lang="EN-US">Likely, the “prescribed matters” that can
be referred to an adjudicator in Alberta will be of a similar nature. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">Although the adjudication process in
Ontario has been in place for a while now, industry experience with the process
is still quite limited, as there appears to be a strong tendency to seek a
negotiated resolution prior to adjudication.<span style="mso-spacerun: yes;"> </span>Perhaps this is an indication that the legislation is meeting the
objective of promoting early resolution, albeit not directly through the
adjudication process. <o:p></o:p></span></p>
<p class="MsoBodyText"><b><i><span lang="EN-US">What’s Next?<o:p></o:p></span></i></b></p>
<p class="MsoBodyText"><span lang="EN-US">This is a new concept and we are still
learning about the benefits and consequences of this scheme. It appears that
the goal of the adjudication process is to provide a quick and cost-effective
means for parties to resolve disputes without the need to resort to the
Courts.<span style="mso-spacerun: yes;"> </span>Although this is an attractive
concept, the final and binding nature of this process can leave parties who are
unhappy with the outcome of an adjudication with little recourse. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">We will continue to monitor the
development of <i>Bill 37</i> and provide updates.<o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">To review <i>Bill 37</i> <a href="https://www.assembly.ab.ca/assembly-business/bills/bill?billinfoid=11872&from=bills" target="_blank">click here</a>.<o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">To review our previous articles on <i>Bill 37 </i>follow the links below<i>:</i> </span></p><p class="MsoBodyText"></p><ul style="text-align: left;"><li><span lang="EN-US"><a href="https://albertaconstructionlawblog.blogspot.com/2020/11/pay-what-you-owe-proposed-changes-to.html" target="_blank">Pay What You Owe – Proposed Changes to the Builders’ Lien Act Regarding Prompt Payment</a></span></li><li><a href="https://albertaconstructionlawblog.blogspot.com/2020/10/a-first-look-at-albertas-proposed.html" target="_blank">A First Look at Alberta’s Proposed Prompt Payment Legislation</a></li><li><span lang="EN-US"><a href="https://albertaconstructionlawblog.blogspot.com/2020/10/bill-37-proposed-prompt-payment.html" target="_blank">Bill 37: Proposed Prompt Payment Legislation</a></span></li></ul><p></p>McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com0tag:blogger.com,1999:blog-5524003903467160079.post-11463376659631345592020-11-12T10:00:00.000-08:002020-11-12T10:36:56.921-08:00Pay What You Owe – Proposed Changes to the Builders’ Lien Act Regarding Prompt Payment<p><b> by </b><b><a href="https://mross.com/law/People/LawyerProfile/Corbin_Devlin.cid32" target="_blank">Corbin Devlin</a></b><b> & </b><b><a href="https://mross.com/law/People/LawyerProfile/Moe_Denny.cid2177" target="_blank">Moe Denny</a></b></p><p></p><p class="MsoBodyText"><span lang="EN-US">On October 21, 2020 </span><span lang="EN-US" style="mso-bidi-font-size: 11.0pt;">the Province introduced </span><span lang="EN-US"><a href="https://www.assembly.ab.ca/assembly-business/bills/bill?billinfoid=11872&from=bills" target="_blank"><span style="background: white; color: #004f84; mso-bidi-font-size: 11.0pt;">Bill 37: The <i>Builders’ Lien (Prompt Payment)
Amendment Act, 2020</i></span></a></span><span lang="EN-US" style="mso-bidi-font-size: 11.0pt;"> (“<b>Bill 37</b>”), which contained a number of significant changes
to <i>Builders’ Lien Act</i>, RSA 2000, c B-7, renamed under Bill 37 to the
<i>Prompt Payment and Construction Lien Act</i> (the “<b>Act</b>”). Upon
reading Bill 37 many at our office were left scratching their heads as
the Bill contains a number of loose ends, which is why we weren’t surprised to
hear that the Province released further amendments to the Bill on November 4,
2020. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US" style="mso-bidi-font-size: 11.0pt;">The
purpose of this article is to review the prompt payment provisions of Bill 37;
we will discuss the adjudication and other provisions separately.<o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">Bill
37</span><span lang="EN-US" style="mso-bidi-font-size: 11.0pt;"> initially
appeared to leave Contractors at significant risk of having to pay
Subcontractors prior to receiving corresponding payment from the Owner. Amendments
have addressed this initial concern. As amended on November 4, 2020, Bill 37
now largely mirrors the similar legislation already in force in Ontario. Though
still not in effect, the proposed changes will have significant implications
for construction businesses, one of the most significant changes being the
introduction of the concept of “proper invoices” and prompt payment provisions.<o:p></o:p></span></p>
<p class="MsoBodyText"><b><i><span lang="EN-US" style="mso-bidi-font-size: 11.0pt;">Proper
Invoices<o:p></o:p></span></i></b></p>
<p class="MsoBodyText"><span lang="EN-US">Bill 37</span><span lang="EN-US">
introduces the requirement of a “proper invoice”, which is a critical first
step in the prompt payment process. A proper invoice is: “a written bill or
other request for payment for the work done or materials furnished in respect
of an improvement under a contract or a subcontract.” According to section 32.1(1)
of Bill 37 a proper invoice must contain: <o:p></o:p></span></p>
<p class="MsoBodyText" style="margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 0.5in; mso-list: l0 level1 lfo1; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN-US"><span style="mso-list: Ignore;">1.<span style="font: 7pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US">the Contractor’s name and
business address;<o:p></o:p></span></p>
<p class="MsoBodyText" style="margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 0.5in; mso-list: l0 level1 lfo1; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN-US"><span style="mso-list: Ignore;">2.<span style="font: 7pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US">the date of the proper invoice
and the period during which the work was done or materials were furnished;<o:p></o:p></span></p>
<p class="MsoBodyText" style="margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 0.5in; mso-list: l0 level1 lfo1; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN-US"><span style="mso-list: Ignore;">3.<span style="font: 7pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US">information identifying the
authority, whether in a written or verbal contract or otherwise, under which
the work was done or materials were furnished;<o:p></o:p></span></p>
<p class="MsoBodyText" style="margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 0.5in; mso-list: l0 level1 lfo1; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN-US"><span style="mso-list: Ignore;">4.<span style="font: 7pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US">a description of the work done
or materials furnished;<o:p></o:p></span></p>
<p class="MsoBodyText" style="margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 0.5in; mso-list: l0 level1 lfo1; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN-US"><span style="mso-list: Ignore;">5.<span style="font: 7pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US">the amount requested for
payment and the corresponding payment terms broken down for the work done or
materials furnished;<o:p></o:p></span></p>
<p class="MsoBodyText" style="margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 0.5in; mso-list: l0 level1 lfo1; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN-US"><span style="mso-list: Ignore;">6.<span style="font: 7pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US">the name, title and contact
information of the person to whom the payment is to be sent;<o:p></o:p></span></p>
<p class="MsoBodyText" style="margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 0.5in; mso-list: l0 level1 lfo1; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN-US"><span style="mso-list: Ignore;">7.<span style="font: 7pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US">a statement indicating that the
invoice provided is intended to constitute a proper invoice; and<o:p></o:p></span></p>
<p class="MsoBodyText" style="margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 0.5in; mso-list: l0 level1 lfo1; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN-US"><span style="mso-list: Ignore;">8.<span style="font: 7pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US">any other information that may
be prescribed. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">Proper invoices must be given to an Owner
at least every 31 days, unless the contract includes a provision for the
testing and commissioning of work or material. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">It should also be noted that the prompt
payment clock begins on delivery of the proper invoice. <o:p></o:p></span></p>
<p class="MsoBodyText"><b><i><span lang="EN-US">Payment by Owner <o:p></o:p></span></i></b></p>
<p class="MsoBodyText"><span lang="EN-US">According to section 32.2 of Bill 37,
upon receipt of a proper invoice, Owners must pay Contractors the amount
payable under a proper invoice within 28 days, unless within 14 days of receipt
of the proper invoice the Owner provides a Notice of Dispute in the prescribed
manner (specifying the amount not being paid and detailing all reasons for
non-payment). Any amounts not identified in the Notice of Dispute must be paid
within the 28 calendar day period. If a Notice of Dispute is not provided, the
amount claimed in the proper invoice must be paid in full.<o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">Though not specified under Bill 37,
the requirement that a Notice of Dispute detail “all reasons for Non-Payment”,
suggests that an Owner may not be able to contest proper invoices by relying on
reasons not specified in the Notice of Dispute. It will remain to be seen
whether it will be permissible to rely on reasons for Non-Payment that are not contemplated
at the time of submitting the notice.<o:p></o:p></span></p>
<p class="MsoBodyText"><b><i><span lang="EN-US">Payment by Contractors<o:p></o:p></span></i></b></p>
<p class="MsoBodyText"><span lang="EN-US">Where a Contractor receives a Notice of Dispute
from the Owner, the Contractor can deliver a corresponding Notice of Non-Payment
in the prescribed form to any Subcontractors affected by the dispute –
otherwise the Contractor is obligated to pay its Subcontractors within 35 days
of the issuance of the proper invoice. Where the Owner does not pay, the Contractor,
when issuing the Notice of Non-Payment to its Subcontractors, must provide an
undertaking to refer the matter to adjudication no later than 21 days after
giving Notice of Non-Payment to the Subcontractor.<o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">On the other hand, if a Contractor
receives a partial payment from an Owner they will have three options: (1) the
Contractor may pay on a proportionate basis the amount received within 7 days
and deliver a Notice of Non-payment in the prescribed manner; (2) pay on a
proportionate basis the amount received within 7 days and pay the Subcontractor
the balance within 35 days (even if not received from the Owner); or (3),
deliver a Notice of Non-Payment to the Subcontractors for the entire amount. <o:p></o:p></span></p>
<p class="MsoBodyText"><b><i><span lang="EN-US">Payment by Subcontractor<o:p></o:p></span></i></b></p>
<p class="MsoBodyText"><span lang="EN-US">The concept of prompt payment applies to all
tiers, from Owner to Subcontractors. A Subcontractor who after providing a
proper invoice receives full payment from a Contractor is in turn required to
pay its Subcontractors within 7 days of receipt of the payment. If the
Subcontractor chooses not to pay, it must deliver a Notice of Non-Payment
within 42 days of the date the proper invoice was given by the Contractor to
the Owner. <o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">If the Subcontractor has received a Notice
of Non-Payment from the Contractor, it must within 7 days of receiving the notice
from the Contractor deliver its own Notice of Non-Payment to its Subcontractors,
and must provide an undertaking to refer the matter to adjudication no later
than 21 days after giving Notice of Non-Payment to the subcontractor. If it
does not, it must pay its Subcontractors within 42 days of the proper invoice being
given by the Contractor to the Owner. <o:p></o:p></span></p>
<p class="MsoBodyText"><b><i><span lang="EN-US">Additional Considerations<o:p></o:p></span></i></b></p>
<p class="MsoBodyText"><span lang="EN-US">Considering the above, it is important that
proper invoices be accurate; nevertheless, revisions can be made to proper
invoices if:<o:p></o:p></span></p>
<p class="MsoBodyText" style="margin-bottom: 0in; margin-left: 38.55pt; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 38.55pt; mso-list: l1 level1 lfo2; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN-US"><span style="mso-list: Ignore;">1.<span style="font: 7pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US">the parties to the proper
invoice agree to a revision;<o:p></o:p></span></p>
<p class="MsoBodyText" style="margin-bottom: 0in; margin-left: 38.55pt; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 38.55pt; mso-list: l1 level1 lfo2; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN-US"><span style="mso-list: Ignore;">2.<span style="font: 7pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US">the date of the proper invoice
is not changed; and <o:p></o:p></span></p>
<p class="MsoBodyText" style="margin-bottom: 0in; margin-left: 38.55pt; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 38.55pt; mso-list: l1 level1 lfo2; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN-US"><span style="mso-list: Ignore;">3.<span style="font: 7pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US">the proper invoice continues to
meet the requirements (noted above).<o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">Lastly, proper invoices must be properly served
on the corresponding party. To constitute proper service, the proper invoice
must be served in any manner permitted by the Act or the <i>Alberta
Rules of Court</i>, Alta Reg 124/2010 (“<b>Rules</b>”). Some manners of
service permitted by the Rules include personal service, registered
mail, and electronic methods. <o:p></o:p></span></p>
<p class="MsoBodyText"><b><i><span lang="EN-US">Are You Ready for the Change?<o:p></o:p></span></i></b></p>
<p class="MsoBodyText"><span lang="EN-US">If passed, Bill 37 and the
corresponding prompt payment provisions will take effect on proclamation, and
are sure to bring a cultural shift to the construction industry in Alberta,
with cash flowing more quickly from owners, to contractors to subcontractors,
and so on.<o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">In light of the significant changes proposed,
members of the construction industry should review Bill 37 to ensure
they understand the requirements of preparing and delivering “proper invoices”,
payment, or notices within the appropriate time periods.<o:p></o:p></span></p>
<p class="MsoBodyText"><span lang="EN-US">Additionally, to prepare for the likely
passing of Bill 37, members of the industry should consult legal counsel
for guidance on revising contacts and updating project management and documents
management systems. <o:p></o:p></span></p><p class="MsoBodyText">Please feel free to contact <a href="https://mross.com/law/People/LawyerProfile/Moe_Denny.cid2177" target="_blank">Moe Denny</a>, <a href="https://mross.com/law/People/LawyerProfile/Corbin_Devlin.cid32" target="_blank">Corbin Devlin</a>, or any member of our <a href="https://mross.com/law/Industry_Groups/Construction" target="_blank">Construction Industry Group</a> in regards to the information above or any other construction law matter.</p><br /><p></p>McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com1tag:blogger.com,1999:blog-5524003903467160079.post-38789483011741498052020-10-26T09:47:00.006-07:002020-10-26T10:54:33.094-07:00A First Look at Alberta’s Proposed Prompt Payment Legislation<p>By <a href="https://www.mross.com/law/People/LawyerProfile/Graham_Henderson.cid463" target="_blank">Graham Henderson</a></p><p>Last week the Government of Alberta introduced Bill 37, which proposes new rules relating to issues such as builders’ liens, payment terms, invoicing, and dispute resolution in the construction industry. Below, we highlight the key changes that are proposed in Bill 37. <br /><br /><b>Payment & Invoicing </b><br /><br />Bill 37 is intended to implement a regime providing prompt payment for construction work performed in Alberta. In this regard, Bill 37 introduces new deadlines for payment of invoices and new restrictions on payment terms in construction contracts. The key changes relating to payment and invoicing are as follows: </p><ol style="text-align: left;"><li>Owners, contractors and subcontractors will be required to pay “proper invoices” within 28 days after receipt. </li><li>Bill 37 defines a “proper invoice” for the construction industry, and sets out the minimum requirements for the content of a proper invoice. </li><ul><li>For example, under Bill 37, proper invoices will need to include specific information such as (i) a description of the work or materials provided, (ii) the period of time during which the work or materials were provided, and (iii) the authority (whether in a written or verbal contract or otherwise) for the work or materials to be provided.</li></ul><li>Construction contracts will be prohibited from including ‘pay-when-paid’ clauses (clauses stating that a person is not obligated to pay a subcontractor until after that person receives payment). </li><li>Construction contracts will be prohibited from requiring certification from a person or approval from an owner before a proper invoice can be issued. However, prior certification or approval will be permitted in contracts for testing and commissioning. </li><li>With respect to the mandatory 10% holdback currently required under the <i>Builders’ Lien Act</i>, Bill 37 expands on existing provisions regarding progressive release of the holdback over the course of a project (under current rules, a progressive release is permitted through certificates of substantial performance) by providing an additional mechanism for progressively releasing the holdback. </li><ul><li>Pursuant to the new mechanism, a progressive release of the holdback will be allowed when specific requirements are met. For example, such requirements include that (i) the contract price would need to exceed a certain amount (that amount is not yet prescribed by the Government of Alberta), and (ii) the construction contract would need to include certain terms expressly permitting the progressive release of the holdback. <br /></li></ul></ol><p><b>Disputes & Adjudication </b><br /><br />Bill 37 provides new rules relating to dispute resolution, including a new dispute adjudication regime. The key changes relating to dispute resolution are as follows: </p><ol style="text-align: left;"><li>Owners, contractors and subcontractors have 14 days to issue a notice disputing a proper invoice.</li><li>With respect to partially disputed invoices, Bill 37 will require owners, contractors and subcontractors to release payment of the undisputed portion of a proper invoice. </li><li>Bill 37 will establish a new dispute adjudication system intended to provide an alternative to resolving disputes through the Courts. Some details of the adjudication system are as follows: </li><ul><li>A party to a contract or subcontract may refer a dispute to adjudication. </li><li>A party may only refer to adjudication a dispute with the other party to their contract or subcontract. Therefore, entities involved in a project but not contracted with each other will be unable to adjudicate with each other (for example, a subcontractor and the owner’s consultant will be unable to adjudicate). </li><li>The adjudication procedures in Bill 37 override any contrary adjudication procedures in a construction contract. </li><li>An adjudication must be performed by a qualified adjudicator, appointed by a Nominating Authority that will be established by the Minister of Service Alberta. </li><li>The determination of a matter by an adjudicator is final and binding on the parties, except that it may be reviewed by the Court on certain grounds through an Application for judicial review.</li></ul></ol><div style="margin-left: 40px; text-align: left;">4. Further rules for the dispute adjudication system, such as the
procedures for conducting an adjudication, will be provided in
regulations established by the Government of Alberta and in procedures
established by the Nominating Authority. </div><div><div><p><b>Builders’ Liens </b><br /><br />Bill 37 mostly leaves the current builders’ lien procedures unchanged. However, Bill 37 does modify lien deadlines and the minimum amount of a lien claim: <br /></p><ol style="text-align: left;"><li>The deadline for registering liens for the concrete industry is extended from 45 days to 90 days. Oil and gas well projects will also have a deadline of 90 days, which is consistent with the current rules in Alberta. </li><li>The deadline for registering liens for the rest of the construction industry is extended from 45 days to 60 days. </li><li>The minimum dollar value of a lien claim is increased from $300 to $700. </li></ol><p><b>Other Information and Changes </b><br /><br />In addition to the changes outlined above, the following information and changes are noteworthy: <br /></p><ol style="text-align: left;"><li>Alberta’s <i>Builders’ Lien Act</i> will be renamed to the <i>Prompt Payment and Construction Lien Act</i>. </li><li>Bill 37 expands the availability of information requests relating to a construction project. Specifically, additional people involved with a project (not just the lienholder, as is the case under Alberta’s current rules) will be allowed to request information such as statements of accounts, contracts and mortgage terms. </li><li>The new rules proposed in Bill 37 will not apply retroactively. They will only apply to contracts entered into after the rules come into force. </li><li>The proposed changes do not apply to projects that would not have been governed by the <i>Builders’ Lien Act</i>. </li></ol><p>If Bill 37 passes, then the next step will be for the Government of Alberta to develop regulations associated with Bill 37. Service Alberta currently intends to bring the new rules into force in July 2021. <br /><br />McLennan Ross LLP will update you when any developments occur and when the new rules come into force. In the meantime, McLennan Ross LLP will be providing additional articles, information and analysis on the changes proposed in Bill 37.</p><p><b>Previous Posts regarding Bill 37: </b></p><div class="post-title entry-title" itemprop="name" style="text-align: left;"><a href="https://albertaconstructionlawblog.blogspot.com/2020/10/bill-37-proposed-prompt-payment.html">Bill 37: Proposed Prompt Payment Legislation</a> - <span style="font-weight: normal;">October 22nd, 2020<br /></span></div><div class="post-title entry-title" itemprop="name" style="text-align: left;"><div class="post-title entry-title" itemprop="name" style="text-align: left;"><span style="font-weight: normal;"><a href="http://albertaconstructionlawblog.blogspot.com/2019/09/trends-in-prompt-payment-legislation.html">UPDATED: Trends in Prompt Payment Legislation</a> - September 4th, 2019</span><br /></div><span style="font-weight: normal;"> </span></div></div></div>McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com1tag:blogger.com,1999:blog-5524003903467160079.post-36972490010705483522020-10-22T10:54:00.006-07:002020-10-27T05:18:01.028-07:00Bill 37: Proposed Prompt Payment Legislation<p><i>Editors note: As this topic evolves, our team will continue to
provide updates and commentary. Our most recent article pertaining to
this subject can be found <a href="https://albertaconstructionlawblog.blogspot.com/2020/10/a-first-look-at-albertas-proposed.html">here</a><b>. </b></i><b><br /></b></p><p><b> By <a href="https://www.mross.com/law/People/LawyerProfile/Graham_Henderson.cid463" target="_blank">Graham Henderson</a> and <a href="https://mross.com/law/People/LawyerProfile/Corbin_Devlin.cid32" target="_blank">Corbin Devlin</a></b></p><p>
</p><p class="MsoNormal"><span lang="EN-US" style="mso-ansi-language: EN-US;">The Alberta
Government has introduced <a href="https://docs.assembly.ab.ca/LADDAR_files/docs/bills/bill/legislature_30/session_2/20200225_bill-037.pdf">Bill
37</a>, which proposes wide-ranging changes to the Alberta <i>Builders’ Lien Act</i>.
The Act is proposed to be renamed the <i>Prompt Payment and Construction Lien Act</i>.
</span></p>
<p class="MsoNormal"><span lang="EN-US" style="mso-ansi-language: EN-US;">The
amendments are focused on addressing payment timelines in the construction
industry. If passed, the changes will impact a wide variety of topics, such as
lien registration deadlines, pay-when-paid clauses, and holdback rules.
As mentioned in the <a href="http://albertaconstructionlawblog.blogspot.com/2019/09/trends-in-prompt-payment-legislation.html">Alberta
Construction Law Blog</a>, this proposed reform follows the example of other
Canadian jurisdictions. However, the Bill is custom tailored to Alberta,
based on priorities identified in recent consultations by Service Alberta, as
well as existing features of the <i>Builders’ Lien Act </i>that are unique to Alberta.</span></p>
<p class="MsoNormal"><span lang="EN-US" style="mso-ansi-language: EN-US;">More
information on Bill 37 is outlined in the <a href="https://www.alberta.ca/release.cfm?xID=74519FEC5460B-DA01-9F9C-F0CD6BBF1B5F40E5">press
release</a> issued by the Alberta Government.</span></p>
<p class="MsoNormal"><span lang="EN-US" style="mso-ansi-language: EN-US;">McLennan
Ross LLP will be providing further details and commentary on Bill 37 in the
near future.</span></p><p class="MsoNormal"><span lang="EN-US" style="mso-ansi-language: EN-US;"> </span></p>
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<![endif]--></p>McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com0tag:blogger.com,1999:blog-5524003903467160079.post-46281331132998516622020-05-14T12:10:00.003-07:002021-01-26T11:19:38.504-08:00Builders'/Mechanics and Miners Liens for Unpaid Contractors and Vendors in Alberta and the Northwest Territories <b>By <a href="https://www.mross.com/law/People/LawyerProfile/Christopher_Buchanan.cid2282" target="_blank">Christopher Buchanan</a> and <a href="https://www.mross.com/law/People/LawyerProfile/Graham_Henderson.cid463" target="_blank">Graham Henderson</a></b><br />
<br />
During this time of economic uncertainty, it has become increasingly important for companies across Alberta and the Northwest Territories to remain informed about methods for safeguarding their claims for payment. One such method is through the use of statutory liens. Contractors, subcontractors, suppliers and labourers who have not been paid for their work or materials may be able to register liens against the property where they supplied the work or materials may be able to register liens against the property where they supplied the work or materials. Liens secure the unpaid party's claim against the property and may ultimately result in a forced sale of the property to have the debt paid.<br />
<br />
<div class="MsoBodyText">
<span style="mso-ansi-language: EN-CA;">Based on questions we have received from a number of clients, we have prepared a brief primer on Builders' Liens including mineral liens (under Alberta's <i>Builders' Lien Act</i>) in Alberta, and Mechanics Liens (under NWT's <i>Mechanics Lien Act</i>) and Miners Liens (under NWT's <i>Miners Lien Act</i>) in Northwest Territories. </span><br />
<span style="mso-ansi-language: EN-CA;"><br /></span>
<span style="mso-ansi-language: EN-CA;"><b>ALBERTA</b></span><br />
<br />
<span style="mso-ansi-language: EN-CA;"><b>Builders' Liens: Overview</b></span><br />
<br />
<span style="mso-ansi-language: EN-CA;">Builders' Liens<b> </b>are created by the <i>Builders' Lien Act</i>. This type of lien is available to persons who have not been paid for their supply of work or materials in respect of an improvement associated with lands or the recovery of minerals. The value of a Builders' Lien is limited to the price of the unpaid work or materials. </span><br />
<span style="mso-ansi-language: EN-CA;"><br /></span>
<span style="mso-ansi-language: EN-CA;">"Work" includes the performance of services. For example, a supplier of rental equipment for a construction project is often providing a
“service” that entitles the supplier to register a lien. However, there has
been extensive judicial consideration of the question of whether or not any
particular activity allows for lien registration. The answer to that question
will ultimately depend on the nature of the activity and the manner in which
the activity relates to the lands.</span>
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<span style="mso-ansi-language: EN-CA;"><br /></span>
<br />
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<span lang="EN-US" style="mso-bidi-font-weight: bold;">Builders’
Liens must be registered within 45 days (or 90 days in the case of work or
materials supplied to an oil or gas well site) from the date the last work or
materials were supplied or the contract for the work or materials was abandoned.</span></div>
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<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">Builders’ Liens expire 180 days after
being registered, unless the lienholder has commenced an action to realize the
claim of lien and a Certificate of <i style="mso-bidi-font-style: normal;">Lis
Pendens </i>is registered with the Land Titles Office.</span></div>
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<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">A registered Builders’ Lien secures the
unpaid party’s claim against the property to which the lien is attached. If funds
are paid to the lienholder or the court to satisfy the debt, then the Builders
Lien may be cancelled. If the court orders the sale of lands to which a lien is
attached, then the proceeds from the sale would be distributed among all creditors
with claims registered against the lands, in order of priority.</span></div>
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<br /></div>
<div class="MsoBodyText">
<b><span lang="EN-US">Surface Liens</span></b></div>
<div class="MsoBodyText">
<br /></div>
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<span lang="EN-US" style="mso-bidi-font-weight: bold;">A Builders’
Lien attaches to the “owner’s” interest in the lands. The definition of an
“owner” under Alberta’s <i style="mso-bidi-font-style: normal;">Builders’ Lien
Act</i> is broader than the common sense meaning of “owner”; as a result, in
some cases liens may be registered against interests other than those of the
actual registered land owner. For example, a lien may be registered against a
tenant’s interest if the work is done for the tenant.</span><br />
<span lang="EN-US" style="mso-bidi-font-weight: bold;"><br /></span></div>
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<span lang="EN-US" style="mso-bidi-font-weight: bold;">A
Builders’ Lien associated with work or materials supplied in respect of the
surface of the lands (as opposed to work or materials supplied in respect of
minerals – discussed below) must be registered with the Land Titles Office.</span><span lang="EN-US"></span></div>
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<br /></div>
<div class="MsoBodyText">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-US">Recovery
of Minerals</span></b><span lang="EN-US"></span><br />
<b style="mso-bidi-font-weight: normal;"><span lang="EN-US"><br /></span></b></div>
<div class="MsoBodyText">
<span lang="EN-US" style="mso-bidi-font-weight: bold;">When a person
supplies work or materials in relation to an improvement associated with the
recovery of minerals, then a Builders’ Lien may be registered in respect of those
minerals. In such a case, the Builders’ Lien would attach to an interest in the
minerals.</span></div>
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<br /></div>
<div class="MsoBodyText">
<span lang="EN-US" style="mso-bidi-font-weight: bold;">If the minerals
are privately owned, then the Builders’ Lien must be registered as usual, at
the Land Titles Office. If the minerals are owned by the Crown, which is the
case with most minerals in Alberta, then the Builders’ Lien must be registered
with the Minister of Energy, as opposed to at the Land Titles Office. The same
deadlines apply to the Builders’ Liens, regardless of whether they are
registered with the Minister of Energy or the Land Titles Office.</span></div>
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<br /></div>
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<span lang="EN-US" style="mso-bidi-font-weight: bold;">A
Builders’ Lien in respect of minerals also attaches to the minerals after they
are severed from the land.</span></div>
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<br /></div>
<div class="MsoBodyText">
<span lang="EN-US" style="mso-bidi-font-weight: bold;">Notably,
it is possible for the supply of work or materials to entitle a lien claimant
to register liens against interests in both lands and minerals (for example,
where the project relates to an improvement to the surface and the recovery of
minerals).</span></div>
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<br /></div>
<div class="MsoBodyText">
<b>NORTHWEST TERRITORIES</b></div>
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</span></div>
<div class="MsoBodyText">
<b><span lang="EN-US">Mechanics Liens</span></b></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">Mechanics Liens are created by the <i>Mechanics
Lien Act</i>. This type of lien is available to contractors, subcontractors,
and labourers who have not been paid for work done, materials or machinery supplied,
or labour performed in connection with the owner’s building or land. Mechanics
Liens attach to the estate and the owner’s interest in the building and land. They
are registered against the title of the owner’s property at the Land Titles
Office. An “owner” includes a tenant with a leasehold interest in the land.</span></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">The value of the Mechanics Lien is
limited to the value of the unpaid work, materials, machinery, or 30 days of
wages. Subcontractors may register Mechanics Liens against the owner’s property
when they have not been paid by the general contractor or another subcontractor.
</span></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">Mechanics Liens must be registered within
45 days after the last day that the work/labour was performed or the
materials/machinery were supplied, or 45 days after the contract was terminated
or abandoned.</span></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">While the Mechanics Lien is in place, the
owner cannot remove property or machinery from the property if it would
prejudice the lienholder’s claim.</span></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">Mechanics Liens expire 45 days after
being registered, unless the lienholder commences court proceedings to realize
the claim of lien and a certificate of proceedings is registered with the Land
Titles Office.</span></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">If the funds are paid to the lienholder
or the court to satisfy the debt, then the Mechanics Lien may be cancelled. If
the court orders the land or machinery to be sold, then the proceeds from the
sale would be distributed among all creditors with claims registered against
the lands, in order of priority.</span></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<b><span lang="EN-US">Miners Liens</span></b></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">Miners Liens are similar to Mechanics
Liens in some respects, but different in others. The key difference is that
Miners Liens attach to the production from a mine, meaning that the value of
the ore produced and sold forms part of the security. </span></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">Miners Liens are also available to
contractors, subcontractors, and labourers who have not been paid by an owner or
contractor for work done, materials supplied, or labour performed. The work or
materials must be connected to the operation of a mine. </span></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">Miners Liens cast a wider net than
Mechanics Lien. Not only does a Miners Lien attach to the owner’s interest in
the land and the mine, it also attaches to the owner’s interest the minerals or
ores produce from the mine, as well as the chattels, equipment, and machinery
used in connection with the mine or land. </span></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">Another difference is that the underlying
title for mining properties is usually held by the Crown, with the owner
holding a leasehold interest in the surface and subsurface minerals. For that
reason, leases for mines are registered with the NWT Mining Recorder rather
than the Land Titles Office. Miner Liens can be registered against the owner’s
mining leases through the Mining Recorder. <span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">Miners Liens must be registered within 6
months after the last day that the work/labour was performed or the materials
were supplied. After the lien is filed, the lienholder has 90 days to both
commence a court action to realize on their claim and register a <i>lis pendens</i>
with the Mining Recorder.</span></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<b><span lang="EN-US">Choosing Between Miners Liens and
Mechanics Liens</span></b></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">Mechanics Liens are appropriate for
claims involving commercial or residential properties that are registered with
the Land Titles Office. Most claims will use Mechanics Liens.</span></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">Miners Liens are appropriate when the
owner is operating an oil sands mine or a traditional mine. </span></div>
<div class="MsoBodyText">
<span lang="EN-US">Selecting the right type of lien is
critical due to the significant differences in filing deadlines and the
expiration dates.</span></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-US">CONCLUSION</span></b></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">Registering liens can sometimes be a
complicated process, as there are specific restrictions, deadlines and
procedural requirements. For that reason, we recommend consulting legal counsel
to ensure that lien rights are properly protected. </span></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">For more information on registering liens
in both Alberta and the Northwest Territories, please contact a member of our
<a href="https://www.mross.com/law/Industry_Groups/Construction" target="_blank">Construction Team</a>.</span></div>
<br />
<br /></div>
McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.comtag:blogger.com,1999:blog-5524003903467160079.post-37776956621230346602020-05-12T13:20:00.000-07:002020-05-19T10:49:34.648-07:00How Close is Close Enough – Alberta Court Deems Equipment Lessor’s Lien Valid Even Though Equipment Was Never On Site<b>by <a href="https://mross.com/law/People/LawyerProfile/Corbin_Devlin.cid32" target="_blank">Corbin Devlin</a> and <a href="https://mross.com/law/People/LawyerProfile/Moe_Denny.cid2177" target="_blank">Moe Denny</a></b><br />
<br />
<br />
<div class="MsoBodyText">
<span style="mso-ansi-language: EN-CA;">A recent Alberta
Court of Queen’s Bench decision provides an example where services may be
performed on one site yet give rise to lien rights on another site. <i>Northern
Dynasty Ventures Inc v Japan Canada Oil Sands Limited</i> considers the
validity of builder’s lien claims brought by a lessor of equipment. The
decision arises from an appeal of a Master’s Order declaring the lien of a
lessor of equipment valid. <o:p></o:p></span></div>
<div class="MsoBodyText">
<span style="mso-ansi-language: EN-CA;"><br /></span></div>
<div class="MsoBodyText">
<span style="mso-ansi-language: EN-CA;">By way of
background, the Defendant is the operator of an oil sands project near Fort
McMurray, Alberta (the “<b>Project</b>”) and entered into a Master Agreement
with Highway Rock Products Ltd. (the “<b>Contractor</b>”). In turn, Northern
Dynasty Ventures Inc (“<b>NDV</b>”) and Tyalta Industries Inc. (“<b>Tyalta</b>”)
were subcontractors to the Contractor. NDV entered into an agreement with the
Contractor granting the Contractor an exclusive license to remove sand and
gravel from a gravel pit located approximately 30 kilometers away from the
Project site (the “Gravel Pit”), accessible by road at a driving distance of 89
kilometers. Tyalta rented to the Contractor equipment used to crush and screen
sand and gravel at the Gravel Pit. All of the gravel was provided to the
Defendant for its use in connection with the Project. <o:p></o:p></span></div>
<div class="MsoBodyText">
<span style="mso-ansi-language: EN-CA;"><br /></span></div>
<div class="MsoBodyText">
<span style="mso-ansi-language: EN-CA;">Tyalta registered a
lien against the Project site. The Defendant sought to have the lien discharged
on the basis that it was invalid, particularly because the Project was not the
location – or even near the location – where the rental equipment was used. Determining
the validity of Tyalta’s lien required the Court to interpret section 6(4) of
the <i>Builders' Lien Act</i> (the “<b><i>Act</i></b>”), which provides: <o:p></o:p></span></div>
<blockquote class="tr_bq">
<span style="mso-ansi-language: EN-CA;">6(4) For the purposes of
this Act, a person who rents equipment to an owner, contractor or subcontractor
is, while the equipment is on the contract site or in the <u>immediate vicinity</u>
of the <u>contract site</u>, deemed to have performed a service and has a lien
for reasonable and just rental of the equipment while it is used or is
reasonably required to be available for the <u>purpose of the work</u>.</span></blockquote>
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<span style="mso-ansi-language: EN-CA;">In coming to its
decision, the Court answers three questions: (1) where is the contract site;
(2) what is the meaning of immediate vicinity; and (3) is there a common
purpose between the sites. <o:p></o:p></span></div>
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<span style="mso-ansi-language: EN-CA;"><br /></span></div>
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<span style="mso-ansi-language: EN-CA;">Ultimately, the
Court found that the Project was the “contract site.” However, after
considering the context of the matter, the Court determined that
notwithstanding the distance, the Gravel Pit was within the “immediate vicinity”
of the contract site, stating:<o:p></o:p></span></div>
<blockquote class="tr_bq">
<span style="mso-ansi-language: EN-CA;">I find on the facts of
this specific case that the gravel pit and the [Project] site are in the
immediate vicinity of each other. Thus, as the rental equipment was at all
relevant times located at the gravel pit, the rental equipment was in the
immediate vicinity of the contract site... The gravel was not obtained out of
country, out of province, or even in central or southern Alberta. Given the
nature of gravel pits, <u>immediate vicinity must be considered in context</u>.</span></blockquote>
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<span style="mso-ansi-language: EN-CA;">When assessing the
purpose of the work, the Court found that the work performed at the Gravel Pit using
Tyalta’ rental equipment resulted in gravel that was required for the Project.
This gravel was not available at the Project and had to be transported from the
Gravel Pit. Thus, the Court determined that the two sites clearly had a common
purpose, the construction of the Project, and the work performed at the Gravel
Pit was an integral part of the overall Project. <o:p></o:p></span></div>
<div class="MsoBodyText">
<span style="mso-ansi-language: EN-CA;"><br /></span></div>
<div class="MsoBodyText">
<span style="mso-ansi-language: EN-CA;">In summary, though
equipment may not be used at a contract site, a lessor of equipment may have a
valid lien against the contract site so long as their equipment was integral to
the contract site and used somewhere within the immediate vicinity, which
depending on the context may even be a 89 kilometre drive away. <o:p></o:p></span></div>
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<span style="mso-ansi-language: EN-CA;"><br /></span></div>
<div class="MsoBodyText">
Read the full
decision <a href="https://www.canlii.org/en/ab/abqb/doc/2020/2020abqb275/2020abqb275.html?autocompleteStr=Northern%20Dynasty%20Ventures%20Inc%20v%20Japan%20Canada%20Oil%20Sands%20Limited&autocompletePos=2" target="_blank">here</a>.</div>
<br />McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com1tag:blogger.com,1999:blog-5524003903467160079.post-20119426399813656912020-05-08T13:55:00.003-07:002020-05-08T13:59:46.606-07:00Writing a Scope of Work, Badly<!--[if gte mso 9]><xml>
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</xml><![endif]--><span style="font-family: inherit;"><span lang="EN-US" style="mso-ansi-language: EN-US;"><b>By</b> <a href="https://www.mross.com/law/People/LawyerProfile/Corbin_Devlin.cid32" target="_blank">Corbin Devlin</a></span></span><br />
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal">
<span style="font-family: inherit;"><span lang="EN-US" style="mso-ansi-language: EN-US;">The scope
of work is the most critical piece of a construction contract.
Disagreement over scope of work is the most common cause of construction
disputes. A proper, careful and detailed scope of work not only avoids
disputes, it protects the owner from costly changes. Unfortunately, this
critical piece of the contract often does not get the attention it requires.</span></span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal">
<span style="font-family: inherit;"><span lang="EN-US" style="mso-ansi-language: EN-US;">We see many
examples of this. They are often avoidable. For example, some
contracts simply fail to list some or all of the specifications and drawings,
or they refer to the wrong version. Too frequently, scope of work
documents are referenced with insufficient clarity, or sometimes they are even
described as “attached” but then they are not actually attached. Bid
qualifications may be incorporated by reference, in conflict with other
contract documents, or with ambiguity as to the extent of the
qualifications. We have seen design development documents incorporated by
reference, along with (inconsistent) specifications and drawings, without any
provisions to clarify which one takes precedence. And of course, project
specifications and drawings may simply be incomplete as at the contract date.
</span></span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal">
<b><span style="font-family: inherit;"><span lang="EN-US" style="mso-ansi-language: EN-US;">Use the
Right Form of Contract</span></span></b></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal">
<span style="font-family: inherit;"><span lang="EN-US" style="mso-ansi-language: EN-US;">It is often
the case that work is contracted while the design remains incomplete,
particularly on complex industrial projects. This is not in itself a
problem. Contract based on incomplete design carries certain risks.
What is required is clarity as to the baseline scope of work, and contract
provisions that clearly indicate what happens when completed design changes the
construction cost (and schedule). </span></span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal">
<span style="font-family: inherit;"><span lang="EN-US" style="mso-ansi-language: EN-US;">Particular
forms of contract exist for this purpose; industrial construction owners have
sophisticated contract forms that address the allocation of such risks.
Design-Build and EPC (Engineering, Procurement and Construction) contracts are
intended for use where the design is incomplete – or where the design is not even
started. But contracts intended for use in a traditional Design-Bid-Build
scenario (i.e. where the designer completes the design documents before the
owner seeks bids for construction), such as CCDC 2, respond poorly to
situations where the design is incomplete at the contract date. Change
orders are guaranteed – and disputes over scope of work are quite likely.</span></span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal">
<span style="font-family: inherit;"><span lang="EN-US" style="mso-ansi-language: EN-US;">In
particular, it is risky if a stipulated price contract provides no clear
baseline for determining what constitutes a change in scope. If the
contract does not specify what scope the contract price is based on, how are
the parties to agree what constitutes a change when the construction drawings
and specifications are issued?</span></span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal">
<b><span style="font-family: inherit;"><span lang="EN-US" style="mso-ansi-language: EN-US;">Careful
What You Incorporate</span></span></b></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal">
<span style="font-family: inherit;"><span lang="EN-US" style="mso-ansi-language: EN-US;">Incorporating
bid documents to define the scope of work is not uncommon. But in our
experience, it is an imprudent shortcut. Bid documents may include
information that is out of date by the time of contracting. They may
contain bid clarifications that pertain to other bidders. They may contain
qualifications that are at odds with other express contract terms.
Disputes over scope of work are much less frequent when the contract restates
the scope of work and supersedes the bid documents, rather than incorporating
them.</span></span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal">
<b><span style="font-family: inherit;"><span lang="EN-US" style="mso-ansi-language: EN-US;">Use
Industry Standards and Best Practices</span></span></b></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal">
<span style="font-family: inherit;"><span lang="EN-US" style="mso-ansi-language: EN-US;">Use of
standard trade definitions (e.g. <a href="https://www.tradedefinitions.com/">Alberta
Construction Trade Definitions</a>) and standard construction specifications
(e.g. <a href="https://nrc.canada.ca/en/certifications-evaluations-standards/canadian-national-master-construction-specification">National
Master Construction Specification</a>) represents the best practice for clearly
defining scope of work. Trade definitions specify which trade is
responsible for what; they are a complete list of inclusions and exclusions
pertaining to scopes of work. Standard construction specifications
provide templates to consistently organize, format and write project
specifications. </span></span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal">
<b><span style="font-family: inherit;"><span lang="EN-US" style="mso-ansi-language: EN-US;">Keep Out of
Court</span></span></b></div>
<b><span style="font-family: inherit;">
</span></b><br />
<div class="MsoNormal">
<span style="font-family: inherit;"><span lang="EN-US" style="mso-ansi-language: EN-US;">Of course,
many construction owners and contractors do an excellent job of properly
defining the scope of work. Those contracts don’t cross our desk (as
construction litigators) too often, because disagreements are less
frequent. Lawyers don’t usually get involved in writing construction specifications;
there are professionals specifically (better) trained for this (e.g. <a href="https://csc-dcc.ca/">Construction Specifications Canada</a>). But
some of us are frequently involved in resolving disputes when specifications
are not clear. We tend to see a disproportionate number of contracts with
poorly defined scopes of work, because the ensuing disputes come to us for
litigation or arbitration. </span></span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal">
<span style="font-family: inherit;"><span lang="EN-US" style="mso-ansi-language: EN-US;">Some gaps
or ambiguities in the scope of work are inevitable given the complex and
changing nature of construction work. On the other hand, many gaps or
ambiguities are avoidable with careful attention to setting out the scope of
work in detail at the outset. </span></span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal">
<span style="font-family: inherit;"><span lang="EN-US" style="mso-ansi-language: EN-US;">Ensure the
contract includes a clear and complete scope of work to avoid dispute as to
what constitutes a change. Or, if appropriate, ensure that the right form
of contract is used to address the fact that design is incomplete when the
contract is made.</span></span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal">
<br /></div>
McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com1tag:blogger.com,1999:blog-5524003903467160079.post-85624630280740562852020-04-28T08:53:00.003-07:002021-01-26T11:20:57.676-08:00Alberta Court of Queen’s Bench – Dissatisfied Customer’s Obligations to a Contractor<b>By <a href="https://www.mross.com/law/People/LawyerProfile/Moe_Denny.cid2177" target="_blank">Moe Denny</a></b><br />
<br />
In a recent decision, <i>Cubbon Building Centre Ltd v Gabrysh, 2020 ABQB </i>219, the Alberta Court of Queen’s Bench answers the question:<i> can a home renovation contractor’s workmanship be so deficient that the customer is relieved of any obligation to pay</i>? In this decision, the Honourable Justice Mah clarifies the risk to owners who fail to allow a contractor the ability to remedy defects on a project and subsequently terminate or repudiate an agreement. <br />
<br />
The action arises as a result of the defendant’s failure to pay in full for the supplies provided and work performed by the plaintiff. The defendant alleged that the work performed was so substandard that he was required to dismantle it and have it all redone by another contractor, and also alleged breaches of the <i>Fair Trading Act</i> (now the <i>Consumer Protection Act</i>) so as to nullify any contract with the plaintiff. <br />
<br />
In its review of the law the Court provides that a fundamental breach entitling the innocent party to repudiate the contract must be a breach that goes to the root of the contract and therefore deprives the contracting party of substantially the entire benefit of the very thing for which it contracted. <br />
<br />
Ultimately, the plaintiff was successful in their action, with the Court finding that there was no fundamental breach of contract on the plaintiff’s part and therefore the defendant was not entitled to repudiate the contract, or purport to terminate it as he did. Relying on <i>1314058 Alberta Ltd v Albers</i>, 2019 ABQB 9, which outlines the law relating to fundamental breach in the context of residential renovation, the Court held: <br />
<br />
<blockquote class="tr_bq">
There is no doubt that Cubbon’s product did not meet Mr. Gabrysh’s expectations. However, he did not afford them the opportunity to make good. Moreover, he undid their work. Tearing something down does not mean that it was not done in the first place. Mr. Gabrysh’s actions do not relieve him from liability for Cubbon’s services and materials. </blockquote>
<br />
Further to the above, when considering the alleged breach of the <i>Fair Trade Act</i> by the plaintiff, the Court found there was no evidence of overcharging or misrepresentation and dispensed with the defendant’s allegations accordingly. <br />
<br />
The key take-aways from this decision are: <br />
<ul>
<li>a contractor’s workmanship not meeting the owner’s standards, does not necessarily relieve the owner from liability for materials and services provided; </li>
<li>contractors should be given the opportunity to address concerns prior to hiring a replacement contractor; </li>
<li>tearing down a product that does not meet the owner’s standards does not mean that it was not done in first place; and </li>
<li>dissatisfaction in a contractor’s work does not necessarily amount to a fundamental breach.</li>
</ul>
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By <a href="https://www.mross.com/law/People/LawyerProfile/Richard_Wong.cid1974" target="_blank">Richard Wong</a> and <a href="https://www.mross.com/law/People/LawyerProfile/Corbin_Devlin.cid32" target="_blank">Corbin Devlin </a><br />
<br />
Effective January 6, 2020, the Government of Alberta rolled out the Vendor Performance Management (VPM) Program to support the delivery of quality infrastructure projects on time, on budget and within scope, all while utilizing resources more efficiently. In essence, the VPM Program is designed to hold vendors accountable to poor performance or unacceptable behaviour, while providing incentives to improve performance and minimize the need for corrective measures. It does so by using vendor past performance information to acquire goods, services or construction, improve transparency, promote innovation, and ensure best value for tax-payers. <br />
<b><br />VPM Program Ratings and Evaluations </b><br />
<br />
The VPM Program applies to a person, business or entity that has contracted with Alberta Infrastructure to provide goods or services. Contracts at or above $100,000 are subject to the VPM Program and are identified during the procurement planning stage. However, contracts may be opted out of the VPM Program, prior to the commencement of the procurement process, where the contract is deemed low risk. <br />
<br />
Through performance evaluations, those subject to the VPM Program are provided an “Overall Vendor Performance Rating,” which will be used for future procurement. Inadequate performance will result in corrective measures and may result in possible suspension of bidding privileges if performance does not improve. <br />
<br />
The Overall Vendor Performance Rating is calculated using a three-year rolling average of evaluations consisting of key performance indicators. The key evaluation indices are quality, management, schedule, cost and safety, and can be found in the VPM Program, published by Alberta Infrastructure <a href="https://open.alberta.ca/dataset/193e6a38-3cbb-4818-9a7b-61d02bb70c61/resource/c8b81f13-e51a-4ce0-aa6e-f83dad6c14de/download/infra-vendor-performance-management-program-2019.pdf." target="_blank">here</a>.<br />
<br />
Evaluation criteria and the scoring guide for contractors can be found <a href="https://www.alberta.ca/assets/documents/infra-vpm-contractor-performance-evaluation.pdf" target="_blank">here</a>. <br />
<br />
Evaluation criteria and the scoring guide for consultants can be found <a href="https://www.alberta.ca/assets/documents/infra-vpm-consultant-performance-evaluation.pdf" target="_blank">here.</a> <br />
<br />
Vendor performance is to be evaluated every six months and at the end of the contract term, subject to the following: <br />
<ol>
<li>For contracts where the first key milestone or deliverable is provided after a period longer than six months, the first evaluation may be completed within two months of receipt of the first deliverable or completion of the first key milestone; and </li>
<li>For contracts that conclude at or before six months, one interim and a final evaluation must be completed. </li>
</ol>
An adjustment of 5% to 10% will be applied to the procurement evaluation final score, allowing past performance history to have an impact on selection of a vendor in the procurement process. <br />
<br />
For the purposes of evaluation, a partnership or non-incorporated joint venture will be treated as a vendor in its own right, that is, the non-incorporated joint venture or partnership will be evaluated as if it were a single vendor with one set of vendor performance scores assigned for the contract. Those scores will then be assigned to each constituent vendor and will form part of its Overall Vendor Performance Rating. If a member of a joint venture is subject to a suspension, the joint venture’s proposal, tender or bid will not be considered. <br />
<br />
In the case of an acquisition of one company or entity by another company or entity, the Overall Vendor Performance Rating of the acquiring company or entity becomes the Overall Vendor Performance Rating of the resulting single company or entity. <br />
<br />
In the case of an amalgamation of two (or more) companies or entities, the average of the amalgamating companies’ or entities’ Overall Vendor Performance Ratings are used as the Overall Vendor Performance Rating for the resulting amalgamated company or entity. <br />
<br />
<b>Expected Outcomes of the VPM Program </b><br />
<br />
Although the VPM Program is still in its early stages, the expected outcomes of the program include: <br />
<ol>
<li>Facilitating ongoing, regular communication with vendors, ensuring clarity of expectations and quality performance; </li>
<li>Providing incentives to vendors to improve their performance; </li>
<li>Minimizing the need for corrective measures due to poor performance; </li>
<li>Enabling better decision making on bidder selection through a centralized repository containing vendor past performance information; </li>
<li>Holding vendors accountable for poor performance or unacceptable behaviour; and </li>
<li>Enabling Alberta Infrastructure to provide objective vendor references. </li>
</ol>
<br />
<b>Review of VPM Program Results </b><br />
<br />
Vendors have the right to request a review of evaluation results within 10 days of receiving the results. The score under review will not be considered as part of the vendor’s Overall Vendor Performance Rating until a final decision is issued by the Vendor Performance Committee. A Vendor Performance Committee consisting of senior leadership at Alberta Infrastructure will evaluate the vendor’s request for a review. Best efforts shall be made to issue a decision within 30 days of Alberta Infrastructure receiving an accepted request for review. The decision will indicate that the evaluation results be upheld or adjusted. <br />
<br />
<b>Implication of Results </b><br />
<br />
The corrective measure and suspension process is triggered by inadequate evaluation results. An initial warning letter will be issued if the vendor receives an interim performance evaluation result of 2.5 or below, following which the vendor will be required to meet with Alberta Infrastructure to discuss and submit a corrective action plan. Bidding privileges may be suspended if, after completing the corrective action plan, the vendor receives less than 2.5 on a consecutive performance evaluation on the same contract. <br />
<br />
Suspension of bidding privileges range from 18 months to 3 years. A first suspension, resulting from inadequate performance, will result in an 18 month suspension. A second or subsequent suspension of the same vendor will result in a 3 year suspension. Suspension of bidding privileges may be applied to any beneficial ownership that is affiliated with the vendor; and/or any related person of the vendor. <br />
<br />
Additionally, Alberta Infrastructure will provide a performance-based reference, upon request, for a vendor’s completed contracted work, if the vendor’s contract was subject to the VPM Program. <br />
<br />
<b>More to Come </b><br />
<br />
Considering this, vendors engaged with Alberta Infrastructure should be familiar with the VPM Program and confirm whether or not they are subject to same. The VPM Program was implemented to provide security that tax-payers are getting what they pay for, while non-compliant vendors are sanctioned for poor performance. At this stage, however, it is too early to determine how vendors have been affected by the VPM Program. We will update you as more information becomes available and as vendors subject to the VPM Program become more engaged in the procurement and review process.
McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com0tag:blogger.com,1999:blog-5524003903467160079.post-90707340833586851462019-12-16T06:57:00.000-08:002020-01-03T12:20:24.235-08:00Deference to the Project Consultant<!--[if gte mso 9]><xml>
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<w:LsdException Locked="false" Priority="1" SemiHidden="true"
UnhideWhenUsed="true" Name="Default Paragraph Font"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Body Text"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Body Text Indent"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="List Continue"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="List Continue 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="List Continue 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="List Continue 4"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="List Continue 5"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Message Header"/>
<w:LsdException Locked="false" Priority="11" QFormat="true" Name="Subtitle"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Salutation"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Date"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Body Text First Indent"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Body Text First Indent 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Note Heading"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Body Text 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Body Text 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Body Text Indent 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Body Text Indent 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Block Text"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Hyperlink"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="FollowedHyperlink"/>
<w:LsdException Locked="false" Priority="22" QFormat="true" Name="Strong"/>
<w:LsdException Locked="false" Priority="20" QFormat="true" Name="Emphasis"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Document Map"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Plain Text"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="E-mail Signature"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Top of Form"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Bottom of Form"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Normal (Web)"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Acronym"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Address"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Cite"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Code"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Definition"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Keyboard"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Preformatted"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Sample"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Typewriter"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="HTML Variable"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Normal Table"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="annotation subject"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="No List"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Outline List 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Outline List 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Outline List 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Simple 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Simple 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Simple 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Classic 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Classic 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Classic 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Classic 4"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Colorful 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Colorful 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Colorful 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Columns 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Columns 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Columns 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Columns 4"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Columns 5"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Grid 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Grid 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Grid 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Grid 4"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Grid 5"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Grid 6"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Grid 7"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Grid 8"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table List 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table List 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table List 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table List 4"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table List 5"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table List 6"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table List 7"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table List 8"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table 3D effects 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table 3D effects 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table 3D effects 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Contemporary"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Elegant"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Professional"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Subtle 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Subtle 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Web 1"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Web 2"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Web 3"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Balloon Text"/>
<w:LsdException Locked="false" Priority="39" Name="Table Grid"/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
Name="Table Theme"/>
<w:LsdException Locked="false" SemiHidden="true" Name="Placeholder Text"/>
<w:LsdException Locked="false" Priority="1" QFormat="true" Name="No Spacing"/>
<w:LsdException Locked="false" Priority="60" Name="Light Shading"/>
<w:LsdException Locked="false" Priority="61" Name="Light List"/>
<w:LsdException Locked="false" Priority="62" Name="Light Grid"/>
<w:LsdException Locked="false" Priority="63" Name="Medium Shading 1"/>
<w:LsdException Locked="false" Priority="64" Name="Medium Shading 2"/>
<w:LsdException Locked="false" Priority="65" Name="Medium List 1"/>
<w:LsdException Locked="false" Priority="66" Name="Medium List 2"/>
<w:LsdException Locked="false" Priority="67" Name="Medium Grid 1"/>
<w:LsdException Locked="false" Priority="68" Name="Medium Grid 2"/>
<w:LsdException Locked="false" Priority="69" Name="Medium Grid 3"/>
<w:LsdException Locked="false" Priority="70" Name="Dark List"/>
<w:LsdException Locked="false" Priority="71" Name="Colorful Shading"/>
<w:LsdException Locked="false" Priority="72" Name="Colorful List"/>
<w:LsdException Locked="false" Priority="73" Name="Colorful Grid"/>
<w:LsdException Locked="false" Priority="60" Name="Light Shading Accent 1"/>
<w:LsdException Locked="false" Priority="61" Name="Light List Accent 1"/>
<w:LsdException Locked="false" Priority="62" Name="Light Grid Accent 1"/>
<w:LsdException Locked="false" Priority="63" Name="Medium Shading 1 Accent 1"/>
<w:LsdException Locked="false" Priority="64" Name="Medium Shading 2 Accent 1"/>
<w:LsdException Locked="false" Priority="65" Name="Medium List 1 Accent 1"/>
<w:LsdException Locked="false" SemiHidden="true" Name="Revision"/>
<w:LsdException Locked="false" Priority="34" QFormat="true"
Name="List Paragraph"/>
<w:LsdException Locked="false" Priority="29" QFormat="true" Name="Quote"/>
<w:LsdException Locked="false" Priority="30" QFormat="true"
Name="Intense Quote"/>
<w:LsdException Locked="false" Priority="66" Name="Medium List 2 Accent 1"/>
<w:LsdException Locked="false" Priority="67" Name="Medium Grid 1 Accent 1"/>
<w:LsdException Locked="false" Priority="68" Name="Medium Grid 2 Accent 1"/>
<w:LsdException Locked="false" Priority="69" Name="Medium Grid 3 Accent 1"/>
<w:LsdException Locked="false" Priority="70" Name="Dark List Accent 1"/>
<w:LsdException Locked="false" Priority="71" Name="Colorful Shading Accent 1"/>
<w:LsdException Locked="false" Priority="72" Name="Colorful List Accent 1"/>
<w:LsdException Locked="false" Priority="73" Name="Colorful Grid Accent 1"/>
<w:LsdException Locked="false" Priority="60" Name="Light Shading Accent 2"/>
<w:LsdException Locked="false" Priority="61" Name="Light List Accent 2"/>
<w:LsdException Locked="false" Priority="62" Name="Light Grid Accent 2"/>
<w:LsdException Locked="false" Priority="63" Name="Medium Shading 1 Accent 2"/>
<w:LsdException Locked="false" Priority="64" Name="Medium Shading 2 Accent 2"/>
<w:LsdException Locked="false" Priority="65" Name="Medium List 1 Accent 2"/>
<w:LsdException Locked="false" Priority="66" Name="Medium List 2 Accent 2"/>
<w:LsdException Locked="false" Priority="67" Name="Medium Grid 1 Accent 2"/>
<w:LsdException Locked="false" Priority="68" Name="Medium Grid 2 Accent 2"/>
<w:LsdException Locked="false" Priority="69" Name="Medium Grid 3 Accent 2"/>
<w:LsdException Locked="false" Priority="70" Name="Dark List Accent 2"/>
<w:LsdException Locked="false" Priority="71" Name="Colorful Shading Accent 2"/>
<w:LsdException Locked="false" Priority="72" Name="Colorful List Accent 2"/>
<w:LsdException Locked="false" Priority="73" Name="Colorful Grid Accent 2"/>
<w:LsdException Locked="false" Priority="60" Name="Light Shading Accent 3"/>
<w:LsdException Locked="false" Priority="61" Name="Light List Accent 3"/>
<w:LsdException Locked="false" Priority="62" Name="Light Grid Accent 3"/>
<w:LsdException Locked="false" Priority="63" Name="Medium Shading 1 Accent 3"/>
<w:LsdException Locked="false" Priority="64" Name="Medium Shading 2 Accent 3"/>
<w:LsdException Locked="false" Priority="65" Name="Medium List 1 Accent 3"/>
<w:LsdException Locked="false" Priority="66" Name="Medium List 2 Accent 3"/>
<w:LsdException Locked="false" Priority="67" Name="Medium Grid 1 Accent 3"/>
<w:LsdException Locked="false" Priority="68" Name="Medium Grid 2 Accent 3"/>
<w:LsdException Locked="false" Priority="69" Name="Medium Grid 3 Accent 3"/>
<w:LsdException Locked="false" Priority="70" Name="Dark List Accent 3"/>
<w:LsdException Locked="false" Priority="71" Name="Colorful Shading Accent 3"/>
<w:LsdException Locked="false" Priority="72" Name="Colorful List Accent 3"/>
<w:LsdException Locked="false" Priority="73" Name="Colorful Grid Accent 3"/>
<w:LsdException Locked="false" Priority="60" Name="Light Shading Accent 4"/>
<w:LsdException Locked="false" Priority="61" Name="Light List Accent 4"/>
<w:LsdException Locked="false" Priority="62" Name="Light Grid Accent 4"/>
<w:LsdException Locked="false" Priority="63" Name="Medium Shading 1 Accent 4"/>
<w:LsdException Locked="false" Priority="64" Name="Medium Shading 2 Accent 4"/>
<w:LsdException Locked="false" Priority="65" Name="Medium List 1 Accent 4"/>
<w:LsdException Locked="false" Priority="66" Name="Medium List 2 Accent 4"/>
<w:LsdException Locked="false" Priority="67" Name="Medium Grid 1 Accent 4"/>
<w:LsdException Locked="false" Priority="68" Name="Medium Grid 2 Accent 4"/>
<w:LsdException Locked="false" Priority="69" Name="Medium Grid 3 Accent 4"/>
<w:LsdException Locked="false" Priority="70" Name="Dark List Accent 4"/>
<w:LsdException Locked="false" Priority="71" Name="Colorful Shading Accent 4"/>
<w:LsdException Locked="false" Priority="72" Name="Colorful List Accent 4"/>
<w:LsdException Locked="false" Priority="73" Name="Colorful Grid Accent 4"/>
<w:LsdException Locked="false" Priority="60" Name="Light Shading Accent 5"/>
<w:LsdException Locked="false" Priority="61" Name="Light List Accent 5"/>
<w:LsdException Locked="false" Priority="62" Name="Light Grid Accent 5"/>
<w:LsdException Locked="false" Priority="63" Name="Medium Shading 1 Accent 5"/>
<w:LsdException Locked="false" Priority="64" Name="Medium Shading 2 Accent 5"/>
<w:LsdException Locked="false" Priority="65" Name="Medium List 1 Accent 5"/>
<w:LsdException Locked="false" Priority="66" Name="Medium List 2 Accent 5"/>
<w:LsdException Locked="false" Priority="67" Name="Medium Grid 1 Accent 5"/>
<w:LsdException Locked="false" Priority="68" Name="Medium Grid 2 Accent 5"/>
<w:LsdException Locked="false" Priority="69" Name="Medium Grid 3 Accent 5"/>
<w:LsdException Locked="false" Priority="70" Name="Dark List Accent 5"/>
<w:LsdException Locked="false" Priority="71" Name="Colorful Shading Accent 5"/>
<w:LsdException Locked="false" Priority="72" Name="Colorful List Accent 5"/>
<w:LsdException Locked="false" Priority="73" Name="Colorful Grid Accent 5"/>
<w:LsdException Locked="false" Priority="60" Name="Light Shading Accent 6"/>
<w:LsdException Locked="false" Priority="61" Name="Light List Accent 6"/>
<w:LsdException Locked="false" Priority="62" Name="Light Grid Accent 6"/>
<w:LsdException Locked="false" Priority="63" Name="Medium Shading 1 Accent 6"/>
<w:LsdException Locked="false" Priority="64" Name="Medium Shading 2 Accent 6"/>
<w:LsdException Locked="false" Priority="65" Name="Medium List 1 Accent 6"/>
<w:LsdException Locked="false" Priority="66" Name="Medium List 2 Accent 6"/>
<w:LsdException Locked="false" Priority="67" Name="Medium Grid 1 Accent 6"/>
<w:LsdException Locked="false" Priority="68" Name="Medium Grid 2 Accent 6"/>
<w:LsdException Locked="false" Priority="69" Name="Medium Grid 3 Accent 6"/>
<w:LsdException Locked="false" Priority="70" Name="Dark List Accent 6"/>
<w:LsdException Locked="false" Priority="71" Name="Colorful Shading Accent 6"/>
<w:LsdException Locked="false" Priority="72" Name="Colorful List Accent 6"/>
<w:LsdException Locked="false" Priority="73" Name="Colorful Grid Accent 6"/>
<w:LsdException Locked="false" Priority="19" QFormat="true"
Name="Subtle Emphasis"/>
<w:LsdException Locked="false" Priority="21" QFormat="true"
Name="Intense Emphasis"/>
<w:LsdException Locked="false" Priority="31" QFormat="true"
Name="Subtle Reference"/>
<w:LsdException Locked="false" Priority="32" QFormat="true"
Name="Intense Reference"/>
<w:LsdException Locked="false" Priority="33" QFormat="true" Name="Book Title"/>
<w:LsdException Locked="false" Priority="37" SemiHidden="true"
UnhideWhenUsed="true" Name="Bibliography"/>
<w:LsdException Locked="false" Priority="39" SemiHidden="true"
UnhideWhenUsed="true" QFormat="true" Name="TOC Heading"/>
<w:LsdException Locked="false" Priority="41" Name="Plain Table 1"/>
<w:LsdException Locked="false" Priority="42" Name="Plain Table 2"/>
<w:LsdException Locked="false" Priority="43" Name="Plain Table 3"/>
<w:LsdException Locked="false" Priority="44" Name="Plain Table 4"/>
<w:LsdException Locked="false" Priority="45" Name="Plain Table 5"/>
<w:LsdException Locked="false" Priority="40" Name="Grid Table Light"/>
<w:LsdException Locked="false" Priority="46" Name="Grid Table 1 Light"/>
<w:LsdException Locked="false" Priority="47" Name="Grid Table 2"/>
<w:LsdException Locked="false" Priority="48" Name="Grid Table 3"/>
<w:LsdException Locked="false" Priority="49" Name="Grid Table 4"/>
<w:LsdException Locked="false" Priority="50" Name="Grid Table 5 Dark"/>
<w:LsdException Locked="false" Priority="51" Name="Grid Table 6 Colorful"/>
<w:LsdException Locked="false" Priority="52" Name="Grid Table 7 Colorful"/>
<w:LsdException Locked="false" Priority="46"
Name="Grid Table 1 Light Accent 1"/>
<w:LsdException Locked="false" Priority="47" Name="Grid Table 2 Accent 1"/>
<w:LsdException Locked="false" Priority="48" Name="Grid Table 3 Accent 1"/>
<w:LsdException Locked="false" Priority="49" Name="Grid Table 4 Accent 1"/>
<w:LsdException Locked="false" Priority="50" Name="Grid Table 5 Dark Accent 1"/>
<w:LsdException Locked="false" Priority="51"
Name="Grid Table 6 Colorful Accent 1"/>
<w:LsdException Locked="false" Priority="52"
Name="Grid Table 7 Colorful Accent 1"/>
<w:LsdException Locked="false" Priority="46"
Name="Grid Table 1 Light Accent 2"/>
<w:LsdException Locked="false" Priority="47" Name="Grid Table 2 Accent 2"/>
<w:LsdException Locked="false" Priority="48" Name="Grid Table 3 Accent 2"/>
<w:LsdException Locked="false" Priority="49" Name="Grid Table 4 Accent 2"/>
<w:LsdException Locked="false" Priority="50" Name="Grid Table 5 Dark Accent 2"/>
<w:LsdException Locked="false" Priority="51"
Name="Grid Table 6 Colorful Accent 2"/>
<w:LsdException Locked="false" Priority="52"
Name="Grid Table 7 Colorful Accent 2"/>
<w:LsdException Locked="false" Priority="46"
Name="Grid Table 1 Light Accent 3"/>
<w:LsdException Locked="false" Priority="47" Name="Grid Table 2 Accent 3"/>
<w:LsdException Locked="false" Priority="48" Name="Grid Table 3 Accent 3"/>
<w:LsdException Locked="false" Priority="49" Name="Grid Table 4 Accent 3"/>
<w:LsdException Locked="false" Priority="50" Name="Grid Table 5 Dark Accent 3"/>
<w:LsdException Locked="false" Priority="51"
Name="Grid Table 6 Colorful Accent 3"/>
<w:LsdException Locked="false" Priority="52"
Name="Grid Table 7 Colorful Accent 3"/>
<w:LsdException Locked="false" Priority="46"
Name="Grid Table 1 Light Accent 4"/>
<w:LsdException Locked="false" Priority="47" Name="Grid Table 2 Accent 4"/>
<w:LsdException Locked="false" Priority="48" Name="Grid Table 3 Accent 4"/>
<w:LsdException Locked="false" Priority="49" Name="Grid Table 4 Accent 4"/>
<w:LsdException Locked="false" Priority="50" Name="Grid Table 5 Dark Accent 4"/>
<w:LsdException Locked="false" Priority="51"
Name="Grid Table 6 Colorful Accent 4"/>
<w:LsdException Locked="false" Priority="52"
Name="Grid Table 7 Colorful Accent 4"/>
<w:LsdException Locked="false" Priority="46"
Name="Grid Table 1 Light Accent 5"/>
<w:LsdException Locked="false" Priority="47" Name="Grid Table 2 Accent 5"/>
<w:LsdException Locked="false" Priority="48" Name="Grid Table 3 Accent 5"/>
<w:LsdException Locked="false" Priority="49" Name="Grid Table 4 Accent 5"/>
<w:LsdException Locked="false" Priority="50" Name="Grid Table 5 Dark Accent 5"/>
<w:LsdException Locked="false" Priority="51"
Name="Grid Table 6 Colorful Accent 5"/>
<w:LsdException Locked="false" Priority="52"
Name="Grid Table 7 Colorful Accent 5"/>
<w:LsdException Locked="false" Priority="46"
Name="Grid Table 1 Light Accent 6"/>
<w:LsdException Locked="false" Priority="47" Name="Grid Table 2 Accent 6"/>
<w:LsdException Locked="false" Priority="48" Name="Grid Table 3 Accent 6"/>
<w:LsdException Locked="false" Priority="49" Name="Grid Table 4 Accent 6"/>
<w:LsdException Locked="false" Priority="50" Name="Grid Table 5 Dark Accent 6"/>
<w:LsdException Locked="false" Priority="51"
Name="Grid Table 6 Colorful Accent 6"/>
<w:LsdException Locked="false" Priority="52"
Name="Grid Table 7 Colorful Accent 6"/>
<w:LsdException Locked="false" Priority="46" Name="List Table 1 Light"/>
<w:LsdException Locked="false" Priority="47" Name="List Table 2"/>
<w:LsdException Locked="false" Priority="48" Name="List Table 3"/>
<w:LsdException Locked="false" Priority="49" Name="List Table 4"/>
<w:LsdException Locked="false" Priority="50" Name="List Table 5 Dark"/>
<w:LsdException Locked="false" Priority="51" Name="List Table 6 Colorful"/>
<w:LsdException Locked="false" Priority="52" Name="List Table 7 Colorful"/>
<w:LsdException Locked="false" Priority="46"
Name="List Table 1 Light Accent 1"/>
<w:LsdException Locked="false" Priority="47" Name="List Table 2 Accent 1"/>
<w:LsdException Locked="false" Priority="48" Name="List Table 3 Accent 1"/>
<w:LsdException Locked="false" Priority="49" Name="List Table 4 Accent 1"/>
<w:LsdException Locked="false" Priority="50" Name="List Table 5 Dark Accent 1"/>
<w:LsdException Locked="false" Priority="51"
Name="List Table 6 Colorful Accent 1"/>
<w:LsdException Locked="false" Priority="52"
Name="List Table 7 Colorful Accent 1"/>
<w:LsdException Locked="false" Priority="46"
Name="List Table 1 Light Accent 2"/>
<w:LsdException Locked="false" Priority="47" Name="List Table 2 Accent 2"/>
<w:LsdException Locked="false" Priority="48" Name="List Table 3 Accent 2"/>
<w:LsdException Locked="false" Priority="49" Name="List Table 4 Accent 2"/>
<w:LsdException Locked="false" Priority="50" Name="List Table 5 Dark Accent 2"/>
<w:LsdException Locked="false" Priority="51"
Name="List Table 6 Colorful Accent 2"/>
<w:LsdException Locked="false" Priority="52"
Name="List Table 7 Colorful Accent 2"/>
<w:LsdException Locked="false" Priority="46"
Name="List Table 1 Light Accent 3"/>
<w:LsdException Locked="false" Priority="47" Name="List Table 2 Accent 3"/>
<w:LsdException Locked="false" Priority="48" Name="List Table 3 Accent 3"/>
<w:LsdException Locked="false" Priority="49" Name="List Table 4 Accent 3"/>
<w:LsdException Locked="false" Priority="50" Name="List Table 5 Dark Accent 3"/>
<w:LsdException Locked="false" Priority="51"
Name="List Table 6 Colorful Accent 3"/>
<w:LsdException Locked="false" Priority="52"
Name="List Table 7 Colorful Accent 3"/>
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</xml><![endif]--><span lang="EN-US" style="mso-ansi-language: EN-US;"><b>By <a href="https://mross.com/law/People/LawyerProfile/Corbin_Devlin.cid32" target="_blank">Corbin Devlin</a></b></span><br />
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-ansi-language: EN-US;">A recent
decision of the Alberta Court of Appeal serves as a stark reminder that the
Consultant appointed in a CCDC contract wields considerable authority to
determine the rights of the parties.</span></div>
<div class="MsoNormal">
<br /></div>
<span style="font-size: large;"><b><span lang="EN-US" style="mso-ansi-language: EN-US;">The Court’s
Decision</span></b></span><br />
<br />
<h4 class="MsoNormal">
<b><span lang="EN-US" style="mso-ansi-language: EN-US;"></span></b></h4>
<div class="MsoNormal">
<span lang="EN-US" style="mso-ansi-language: EN-US;">In <i><a href="https://www.canlii.org/en/ab/abca/doc/2019/2019abca379/2019abca379.html?autocompleteStr=asc%20man-shield&autocompletePos=2" target="_blank">ASC(AB) Facility Inc v Man-Shield (Alta) Construction, </a></i><a href="https://www.canlii.org/en/ab/abca/doc/2019/2019abca379/2019abca379.html?autocompleteStr=asc%20man-shield&autocompletePos=2" target="_blank">2019 ABCA 379</a>, the Court considered a dispute regarding the amounts owing for work performed
pursuant to a CCDC2 fixed price contract. The Consultant determined that
the Contractor did not perform some of its work to contractual requirements and
that the Owner could deduct the value of that work from amounts otherwise owing
to the Contractor. The Contractor sued for the contract value, asking the
Court to find that Consultant erred in deducting various deficiency costs when
certifying the final payment due to the Contractor.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-ansi-language: EN-US;">In the
summary trial decision in 2018, Justice Antonio stated: “…CCDC2 makes it clear
that the Consultant was empowered to make decisions, in real time or as close
to it as possible, in order to keep the project moving. The Consultant had access
to the work site and the expertise to evaluate the work he saw. He was
regularly involved with the parties, the work, the contract, and the parties’
interactions under the contract. He has expertise in relevant areas. The
parties chose this person, equipped with these advantages, to make decisions
about the state of completion of the work and any resulting contractual
obligations. This Court lacks those advantages. Therefore, as a matter of
contractual interpretation, precedent, academic rationale, and practicality,
this Court will defer to the Consultant’s determinations on questions of fact,
unless they reveal significant errors. The same will apply to the
Consultant’s interpretation of the contract…”</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-ansi-language: EN-US;">The
Contractor appealed this summary trial decision. The appeal decision was
issued in October 2019. The Court of Appeal agreed with the summary trial
judge, ruling that deference to the Consultant’s decisions is appropriate
“absent demonstrable and significant error or compelling evidence to the contrary.”</span><br />
<br />
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<![endif]-->In the result, there was insufficient evidence for the Court to determine the value of various alleged deficiencies (this was only a summary trial, without live witnesses). So, the Court directed a full trial of certain issues. But the Contractor lost the argument that the Court should disregard the Consultant’s valuation of deficiencies.<span lang="EN-US" style="mso-ansi-language: EN-US;">
</span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<h4 class="MsoNormal">
<span lang="EN-US" style="font-size: large; mso-ansi-language: EN-US;">Practical
Implications</span></h4>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-ansi-language: EN-US;">Considering
these comments, it is imperative to ensure at the outset that the Consultant
appointed in a CCDC contract is appropriate to fulfill the important role of
neutral decision-maker under the contract. </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-ansi-language: EN-US;">It is often
a fallacy that “the parties” choose the Consultant; although the contract is
(in theory) a negotiated agreement, in many cases the Contractor has no input
on the designation of the Consultant by the Owner. Sometimes, this is due
to inequality of bargaining power; other times, this is due to the Contractor
(actually, both parties) paying insufficient attention to this important
element of the contract.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-ansi-language: EN-US;">Pursuant to
the CCDC contracts, the Owner pays the Consultant. In most cases,
Consultants are professionals with reputational concerns, and they properly
fulfill their role as neutral decision-maker, regardless of who pays them.
But we have also seen cases in which the Consultant shows significant bias
in favour of the party who is paying their fee accounts. </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-ansi-language: EN-US;">We have
also seen circumstances in which the project Consultant is lacking necessary
experience or qualifications to properly fulfill the role. Remarkably, we
have also seen several cases in which the Consultant is named in the contract, but not actually engaged and paid by the Owner to properly fulfill the
role. Such unfortunate circumstances often lead to a departure from the
contractual payment certification process, leaving the parties in unpredictable
territory when a payment dispute arises.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-ansi-language: EN-US;">Such
circumstances tend to present a greater risk to the Contractor than the
Owner. But it is a risk to both parties that legal disputes are more
likely to ensue if the project Consultant is not suitable or properly supported
to perform the role. </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-ansi-language: EN-US;">The <i>ASC</i>
case serves as a reminder to take due care in the selection of the Consultant -
and to heed the decisions and interpretations made by the Consultant during the
course of the project.</span></div>
McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com0tag:blogger.com,1999:blog-5524003903467160079.post-45024976482521625522019-09-04T14:24:00.002-07:002020-10-27T05:17:21.153-07:00UPDATED: Trends in Prompt Payment Legislation <p><i>Editors note: As this topic evolves, our team will continue to provide updates and commentary. Our most recent article pertaining to this subject can be found <a href="https://albertaconstructionlawblog.blogspot.com/2020/10/a-first-look-at-albertas-proposed.html">here</a><b>. </b></i><b><br /></b></p><p><b>By <a href="https://mross.com/law/People/LawyerProfile/Richard_Wong.cid1974" target="_blank">Richard Wong</a> and <a href="https://mross.com/law/People/LawyerProfile/Corbin_Devlin.cid32" target="_blank">Corbin Devlin</a></b><br />
<br />
There is a trend across Canada in establishing regimes to provide prompt payment to contractors and subcontractors for construction work performed and a regime to resolve disputes over the non-payment of that construction work. Recently, Bill C-97, <i>Budget Implementation Act, 2019 No. 1</i>, which includes the <i>Federal Prompt Payment for Construction Work Act</i>, received Royal Assent. This legislated a new regime related to Federal real property or Federal immovables in Canada, and for those contractors or subcontractors who undertake that work for the Federal Crown (or pursuant to a contract a service provider has with the Federal Crown). <i>The Federal Prompt Payment for Construction Work Act</i> will come into force upon a day fixed by order of the Governor in Council.<br />
<br />
The <i>Federal Prompt Payment for Construction Work Act </i>is modeled (although different in several respects) after the Ontario regime, which made technical amendments to the Ontario <i>Construction Act</i>. British Columbia, Saskatchewan, Manitoba ,Quebec, Nova Scotia and New Brunswick have also taken steps towards implementing prompt payment regimes. Public consultation with interested parties and development of regulations will assist in tailoring final legislation that will hopefully address the needs of the industry in each province. <br />
<br />
Alberta, however, has not (yet) followed this trend. Although Alberta Infrastructure has been implementing prompt payment clauses in its various contracts since 2016, no significant steps in Alberta have been taken towards a prompt payment regime in comparison to the other noted provinces. With that said, various Alberta industry associations have discussed their interest in implementing a prompt payment regime. <b>Update December 2019:</b> We are informed that Service Alberta has commenced an engagement for a review of the Builders Lien Act, with a view to implementing prompt payment rules for Alberta.<br />
<br />
This does not mean that Albertans are not affected by prompt payment legislation. Once in force, those involved in Alberta projects within Federal jurisdiction will be subject to the <i>Federal Prompt Payment for Construction Work Act</i>. This covers any construction projects situated on federal government lands, generally administered by either Public Services and Procurement Canada or Defence Construction Canada.<br />
<br />
The regulations of the <i>Federal Prompt Payment for Construction Work Act</i> are in the process of being developed, subject to input from the public, and will expand upon the general guiding provisions. For example, delivery of a “proper invoice” to the Crown (or service provider), triggers payment to be paid to the contractor within 28 days; triggering payment of the contractor to pay subcontractors within 35 days; and subcontractors to pay sub-subcontractors within 42 days. This chain of triggering events continues in increments of seven days.<br />
<br />
There are also deadlines triggered that require formal notice of a description of the work and reasons for a party who refused to pay all or part of an invoice. In particular, the Crown (or service provider) has 21 days to provide a contractor with formal notice of non-payment; a contractor has 28 days to provide subcontractors with formal notice of non-payment, and so on. Similar to the payment increments, the chain for formal notice of non-payment continues in increments of seven days.<br />
<br />
Where payment is not received within the legislated timelines, the contractor or subcontractor is entitled to seek a determination from an adjudicator. Unless the parties agree otherwise, the adjudicator’s determination is binding on the parties. There is a 21 day timeline to provide notice of adjudication from the later of the date a certificate of completion is received by the contractor or from the date payment is required.<br />
<br />
Considering this, contractors and suppliers engaged on Alberta projects within Federal jurisdiction should be aware of the new Federal prompt payment regime. We will update you when the <i>Federal Prompt Payment for Construction Work Act</i> comes into force and when any developments occur with respect to a Provincial prompt payment regime in Alberta.</p>McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com12tag:blogger.com,1999:blog-5524003903467160079.post-18655429456662434822019-08-21T08:29:00.000-07:002020-01-03T12:19:54.782-08:00Contract Strategy<div class="MsoBodyText" style="margin-top: 12.0pt; mso-hyphenate: none; text-align: justify;">
<span lang="EN-US"><b>By <a href="https://mross.com/law/People/LawyerProfile/Corbin_Devlin.cid32" target="_blank">Corbin Devlin</a></b></span><br />
<span lang="EN-US"><b> </b> </span><br />
<span lang="EN-US">Selecting the right construction contract model for a
particular project can be the difference between harmony and discord among
project participants, and the difference between the financial success and
failure of the project. Too often, we see litigation arise because of different
expectations or understandings as to risk allocation, which is primarily a
factor of contract strategy.</span></div>
<div class="MsoBodyText" style="margin-top: 12.0pt; mso-hyphenate: none; text-align: justify;">
<span lang="EN-US"><span style="mso-spacerun: yes;"></span></span></div>
<div class="MsoBodyText" style="margin-top: 12.0pt; mso-hyphenate: none; text-align: justify;">
<span style="font-size: large;"><b><span lang="EN-US">Contract Models</span></b></span></div>
<div class="MsoBodyText" style="margin-top: 12.0pt; mso-hyphenate: none; text-align: justify;">
<span lang="EN-US"><span style="mso-spacerun: yes;"></span></span></div>
<div class="MsoBodyText" style="margin-top: 12.0pt; mso-hyphenate: none; text-align: justify;">
<span lang="EN-US">What does contract strategy mean? It is the selection
(and perhaps customization) of the contract model or models to be employed on a
particular construction project. For example:</span><span lang="EN-US"> </span></div>
<ol>
<li><span lang="EN-US">The
Design-Bid-Build model, often described as the “traditional” model of
construction, involves an owner contracting with one or more professionals for
project design, followed by a competitive process to engage a general
contractor, and then a separate contract between owner and general contractor. </span></li>
<li><span lang="EN-US"></span><span lang="EN-US"><span style="mso-tab-count: 1;"></span>The
Design-Build model, on the other hand, involves the owner contracting a single
entity (Design-Builder) to complete design, procure the necessary services and
materials, and complete construction. </span></li>
<li><span lang="EN-US"> </span><span lang="EN-US">The Construction
Management model involves the owner contracting a construction manager to
handle construction management activities (and often procurement) on the
owner’s behalf. Construction Management is further broken down into
“construction manager as agent” and “construction manager at risk” contracting
models.</span></li>
<li><span lang="EN-US"> </span><span lang="EN-US">Integrated
Project Delivery (such as <a href="http://www.ccdc.org/document/ccdc30/" target="_blank">CCDC 30</a>) is an
alternative contract model in which the owner contracts with other project
participants (for both design and construction) in a collaborative team with
shared risks and rewards.</span><span lang="EN-US"><span style="mso-spacerun: yes;"></span></span><span lang="EN-US"> </span></li>
</ol>
<span lang="EN-US">These are several of the most common contract models,
but there are numerous potential variations on each of these models. In
addition to industry standard forms, there are of course infinite variations
possible when owners or contractors introduce custom contracts, or unique
supplemental conditions to the standard forms. In addition to the question of
contract strategy as between owner and contractor, there is a similar (but usually
more constrained) question of contract strategy for contractors and
construction managers in their contracts with trade contractors. Whether we are
talking about a prime contract or a subcontract, it is worthwhile noting that
the contract pricing mechanism (i.e. stipulated price vs unit rate vs cost plus
fee, etc.) is an important part of the contract model, but the question of
contract strategy is much broader than just the selection of the pricing
mechanism. </span><br />
<div class="MsoBodyText" style="margin-top: 12.0pt; mso-hyphenate: none; text-align: justify;">
<span lang="EN-US"><span style="mso-spacerun: yes;"></span></span></div>
<div class="MsoBodyText" style="margin-top: 12.0pt; mso-hyphenate: none; text-align: justify;">
<span style="font-size: large;"><b><span lang="EN-US">Risk Allocation</span></b></span></div>
<div class="MsoBodyText" style="margin-top: 12.0pt; mso-hyphenate: none; text-align: justify;">
<span lang="EN-US"><span style="mso-spacerun: yes;"></span></span></div>
<div class="MsoBodyText" style="margin-top: 12.0pt; mso-hyphenate: none; text-align: justify;">
<span lang="EN-US">The allocation of responsibilities and risks varies
significantly among the different contract models. For example, in a
Design-Bid-Build model where the contractor is engaged on a stipulated price
basis, the owner is generally contracting to obtain a completed project within
the allocated time, for the agreed price. But the owner carries risks
associated with accurately defining project scope and specifications, and
associated with potential gaps or changes in design. With a Design-Build model,
the owner carries relatively less risk associated with the definition of
project scope or incomplete design, but the owner gives up a degree of
certainty as to project price and schedule. Key factors which affect the
selection of the right contract model include complexity of the project, the
capabilities of each project participant, the owner’s objectives and
priorities, project constraints (time, budget, etc.) and particular project
risks.</span></div>
<div class="MsoBodyText" style="margin-top: 12.0pt; mso-hyphenate: none; text-align: justify;">
<span lang="EN-US"><span style="mso-spacerun: yes;"></span></span></div>
<div class="MsoBodyText" style="margin-top: 12.0pt; mso-hyphenate: none; text-align: justify;">
<span style="font-size: large;"><b><span lang="EN-US">Often Overlooked</span></b></span></div>
<div class="MsoBodyText" style="margin-top: 12.0pt; mso-hyphenate: none; text-align: justify;">
<span lang="EN-US"><span style="mso-spacerun: yes;"></span></span></div>
<div class="MsoBodyText" style="margin-top: 12.0pt; mso-hyphenate: none; text-align: justify;">
<span lang="EN-US">Too often contract strategy is not given the
consideration it deserves. An owner or contractor may use a form of contract
recommended to them, or employed successfully on some past project, without
thinking about the particular risk profile of the current project and the
relative advantages of different contract models. We have seen many cases where
disputes arise due to a fundamental difference of expectations, or a
misunderstanding by one of the parties, regarding the contractual allocation of
risks. This may result from a front-end failure to consider the suitability of
the chosen contract model to the project at hand, or a simple misunderstanding
of the risk allocation inherent in the chosen contract model.</span></div>
<div class="MsoBodyText" style="margin-top: 12.0pt; mso-hyphenate: none; text-align: justify;">
<span lang="EN-US"><span style="mso-spacerun: yes;"></span></span></div>
<div class="MsoBodyText" style="margin-top: 12.0pt; mso-hyphenate: none; text-align: justify;">
<span style="font-size: large;"><b><span lang="EN-US">Resources</span></b></span></div>
<div class="MsoBodyText" style="margin-top: 12.0pt; mso-hyphenate: none; text-align: justify;">
<span lang="EN-US"><span style="mso-spacerun: yes;"></span></span></div>
<div class="MsoBodyText" style="margin-top: 12.0pt; mso-hyphenate: none; text-align: justify;">
<span lang="EN-US">There are resources available to assist owners and
contractors alike with selecting the right contract model for their project. For
example:</span></div>
<div class="MsoBodyText" style="margin-top: 12.0pt; mso-hyphenate: none; text-align: justify;">
<span lang="EN-US"><span style="mso-spacerun: yes;"></span></span></div>
<ol>
<li><span lang="EN-US"><span style="mso-tab-count: 1;"></span><a href="http://www.ccdc.org/document/ccdc10/" target="_blank">CCDC 10</a> provides a good discussion of the suite of
CCDC contracts and some of the key risk allocation issues under each one. This
document is valuable both as a primer on the subject of contract strategy and
as a guide for selecting among the alternative forms offered by CCDC.</span></li>
<li><span lang="EN-US">For a
more advanced discussion of contract strategy considerations and best
practices, the Construction Owners Association of Alberta has published a
<a href="https://www.coaa.ab.ca/library/contracting-strategy-best-practice/" target="_blank">Contracting Strategy Best Practice</a>, including
useful tools such as a work process flow diagram for developing a project
contract strategy. </span></li>
</ol>
<div class="MsoBodyText" style="margin-top: 12.0pt; mso-hyphenate: none; text-align: justify;">
<span lang="EN-US"><span style="mso-spacerun: yes;"></span>Although the COAA Contracting Strategy Best Practice is
targeted at owners on major industrial projects, both owners and contractors on
any substantial construction project can benefit from this resource. I had the
pleasure of participating in the development of this guide for a short time as
a member of the COAA Contract Strategy Committee. I am thankful to the other
committee members, all of them experienced contract management professionals
for major construction owners and contractors, for allowing me to learn more
than I was able to contribute. For better or worse, lawyers are rarely engaged
in a project before the contract model has been chosen.</span></div>
<div class="MsoBodyText">
<br /></div>
McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com1tag:blogger.com,1999:blog-5524003903467160079.post-15685048573876580992019-07-03T13:27:00.000-07:002020-01-03T12:21:09.539-08:00The Path to an Appeal of an Arbitration Award May Not Be So Straightforward<b>By <a href="https://mross.com/law/People/LawyerProfile/Sarah_Levine.cid493" target="_blank">Sarah Levine</a> and <a href="https://mross.com/law/People/LawyerProfile/Corbin_Devlin.cid32" target="_blank">Corbin Devlin</a> </b><br />
<br />
It is a relatively straight forward and well understood concept that at the outset of parties entering into a contract for services, they may choose to have any dispute that arises to be dealt with by alternative dispute resolution (“<b>ADR</b>”), such as an arbitration process, and include a clause in their agreement to that effect. What is perhaps not so straightforward is what recourse a party may have in the event it does not agree with the arbitral award rendered. The type of appeal that may be brought from the decision of an Arbitrator is often very limited, depending on what your Arbitration Agreement says and how that wording interacts with the <i>Arbitration Act</i> of Alberta (the “<b>Act</b>”).<br />
<br />
<span style="font-size: large;"><b>Standard Arbitration Language</b></span><br />
<br />
The standard form construction contracts provide for both multi-stage alternative dispute resolution and mandatory arbitration, and the standard CCDC language used with respect to arbitral awards provides that: “the final award is final and binding on the parties”. This begs the question – <i>what if we take issue with the Arbitrator’s award?</i> At first glance this language would appear to preclude any right of appeal. But even with this restrictive language there is arguably some room for appeal to the courts.<br />
<br />
Whether or not a party can appeal is largely dependent on the basis for the appeal: in other words, is it on a question of law, fact, or mixed fact and law. The distinction is important, because the Act permits an appeal an arbitral award on a question of law if the agreement is silent on that point - but only with leave of the court. On the other hand, if the agreement states the parties may appeal an arbitral award on the basis of a question of law, fact, or mixed fact and law, they can do so without seeking leave.<br />
<br />
There is a lack of clarity in the Alberta case law as to whether an Arbitration Agreement requires explicit language setting out the parties’ appeal rights pursuant to the Act, and what that language must look like. Consequently, aside from the standard form contracts, we see many different provisions purporting to limit – or expand – the parties’ right to appeal.<br />
<br />
<span style="font-size: large;"><b>The Arbitration Act</b></span><br />
<br />
It is helpful to appreciate the wording of the Act, which must be read in tandem with the parties’ agreement in order to determine what a party’s appeal rights are. The Act provides as follows:<br />
<blockquote class="tr_bq">
Appeal of award<br />
<br />
44(1) <u>If the arbitration agreement so provides, a party may appeal an award to the court on a question of law, on a question of fact or on a question of mixed law and fact.</u><br />
<br />
(2) <u>If the arbitration agreement does not provide that the parties may appeal an award to the court on a question of law</u>, a party may, <u>with the permission of the court</u>, appeal an award to the court on a question of law.<br />
<br />
(2.1) The court shall grant the permission referred to in subsection (2) only if it is satisfied that<br />
<br />
(a) the importance to the parties of the matters at stake in the arbitration justifies an appeal, and<br />
(b) the determination of the question of law at issue will significantly affect the rights of the parties.<br />
<br />
(3) Notwithstanding subsections (1) and (2), <u>a party may not appeal an award to the court on a question of law that the parties expressly referred to the arbitral tribunal for decision</u>.</blockquote>
<br />
<span style="font-size: large;"><b>The State of the Law in Alberta </b></span><br />
<br />
There is a line of case law in Alberta, stemming from a 1998 decision of the Court of Queen’s Bench in <a href="https://www.canlii.org/en/ab/abqb/doc/1998/1998abqb289/1998abqb289.html?autocompleteStr=seneviratne&autocompletePos=2,%20" target="_blank">Seneviratne v. Seneviratne</a>, 1998 ABQB 289 (<i>Seneviratne</i>) that requires the grounds upon which an appeal of an arbitral award can be brought to be stated in the Arbitration Agreement. In that case, the Arbitration Agreement stated that the parties had the right to appeal “in accordance with s. 44 of the Act”. The court in <i>Seneviratne</i> held that this was not specific enough to permit a party to appeal without leave. The court held that s. 44(1) requires the parties to identify the right of appeal as being either on a question of law, fact, or mixed fact and law. A broad reference to the appeal section, section 44, of the Act is insufficient to create a general right of appeal.<br />
<br />
One of the main thrusts of the court’s reasoning in coming to this conclusion, and one that many of the subsequent cases that follow the <i>Seneviratne</i> case hearken back to, is one of the foundational principles underlying the arbitration process and its legislation. That foundational principle is the concept of autonomy (i.e. if the parties have agreed to have their disputes resolved by arbitration, the courts will generally respect that decision and stay out) as reflected in the limits to appeal contained in the Act. The courts have emphasized that parties who deliberately agree at the outset of their contractual relationship to be governed by an ADR process in the event of a dispute, rather than the regular litigation process, should be held to that, and that unless it is explicitly set out in their agreement that they intend to involve the courts, and how/on what grounds, then “the ability to appeal is severely limited”. This principle is followed in several Alberta cases, such as <a href="https://www.canlii.org/en/ab/abqb/doc/2011/2011abqb393/2011abqb393.html?autocompleteStr=arnason%20v%20arnason&autocompletePos=1" target="_blank">Arnason v. Arnason</a>, 2011 ABQB 393 and <a href="https://www.canlii.org/en/ab/abqb/doc/2009/2009abqb237/2009abqb237.html?autocompleteStr=Heredity%20Homes%20(St.%20Albert)%20Ltd.%20v.%20Scanga%20&autocompletePos=1" target="_blank">Heredity Homes (St. Albert) Ltd. v. Scanga</a>, 2009 ABQB 237.<br />
<br />
<span style="font-size: large;"><b>Takeaways </b></span><br />
<br />
The takeaway from these cases and the specific wording of the Act is that parties entering into contracts and contemplating ADR as a process for dispute resolution should also turn their minds to the requisite language with respect to appeal rights of any arbitral award issued, in order to ensure that the wording is specific enough to reflect their wishes. For example, the parties may expressly agree to have their disputes resolved by arbitration, but may nevertheless agree that the arbitral decision is subject to appeal to the courts on questions of law, on questions of fact, on questions of mixed law and fact, or all of these grounds. Addressing this question may seem like a tall order at the outset of a contractual relationship, given that at that point no dispute has even occurred, let alone the issuance of an arbitration award and the contemplation of an appeal of one, but it will certainly do the parties well to deal with that at the outset, rather than receiving a nasty surprise about the limits of your arbitral appeal rights when that time comes.<br />
<br />
Without more, the standard CCDC language (“the final award is final and binding on the parties”), in the context of the Alberta <i>Arbitration Act</i>, only permits an appeal of an arbitral award on a question of law, and then only with leave of the court. This is a severely limited right of appeal, because construction disputes generally relate to questions of fact, or questions of mixed law and fact. Most construction disputes relate to issues of contract interpretation, which the courts consider to be questions of mixed law and fact. This very limited scope of appeal is in keeping with the principle of autonomy referenced above.McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com0tag:blogger.com,1999:blog-5524003903467160079.post-73658248358648242902019-06-20T10:06:00.000-07:002020-01-03T12:22:06.842-08:00Red Flags That Your Lien Rights May Be Worthless<b>By <a href="https://mross.com/law/People/LawyerProfile/Corbin_Devlin.cid32" target="_blank">Corbin Devlin</a></b><br />
<br />
In some circumstances, builders’ lien rights are worthless. Contractors are well advised to look out for these circumstances before entering a contract, and seek alternate security for payment if necessary.<br />
<blockquote class="tr_bq">
<b>Public highway projects</b> – Public highways are exempt from liens pursuant to the express provisions of <i>Alberta’s Builders’ Lien Act</i>. (Fortunately, the <i>Public Works Act</i> provides a measure of alternate protection, provided the project qualifies as a public work.)<br />
<br />
<b>Irrigation district lands</b> – For historical reasons, lands held by an irrigation district are also immune to liens, per the express provisions of the <i>Act</i>.<br />
<br />
<b>Provincial government lands</b> – By operation of the <i>Interpretation Act</i>, lands held by the Crown in right of the Province are not lienable. (However, subsidiary interests in Crown lands, such as a private lease of Crown mineral rights, may be liened.) <br />
<br />
<b>Federal government lands</b> – Lands held by the federal government are not subject to provincial lien legislation, by operation of federal/provincial division of powers.<br />
<br />
<b>Crown agency lands </b>- The federal/provincial immunity to liens extends to lands held by Crown agencies. What constitutes a Crown agency depends on the degree of control exercised over the agency by the Crown; legal advice may be required to determine if a particular agency is immune to lien claims.<br />
<br />
<b>Municipal reserves</b> – Municipal governments are not generally immune to liens. However, municipal reserves, school reserves, environmental reserves, conservation reserves, and public utility lots are immune to liens pursuant to the <i>Municipal Government Act</i>.<br />
<br />
<b>Areas of federal jurisdiction (e.g. airports)</b> – Pursuant to the doctrine of federal paramountcy, provincial legislation (such as the <i>Builders’ Lien Act</i>) may be inoperative where it conflicts with federal legislation in respect of a subject that is within exclusive federal authority. Airports are an obvious example of a matter within exclusive federal authority. However, that is not to say that all liens relating to airport development projects are invalid. This is a complex area of law, and legal advice is recommended to determine if lien rights exist in respect of any project that may be within federal jurisdiction.<br />
<br />
<b>Developers without a legal interest in the lands</b> – Some recent cases have highlighted the fact that lien rights do not exist if the party requesting the work does not have a legal interest in the lands, such as where a developer contracts to begin construction but fails to complete an agreement to purchase the project lands, for example <i><a href="https://www.canlii.org/en/ab/abqb/doc/2018/2018abqb617/2018abqb617.html" target="_blank">Georgetown Townhouse GP Ltd v Crystal Waters Plumbing Company Inc</a>.</i> Particularly in the case of new developments, trade contractors may want to make inquiries to determine if the developer actually owns the project lands.<br />
<br />
<b>No equity</b> – As a very practical matter, lien rights may exist but may prove worthless if there is no equity in the project lands (i.e. if the lands are fully encumbered, such as by a prior registered mortgage that equals or exceeds the land value).</blockquote>
This is not an exhaustive list, but it represents the most frequent circumstances we encounter. Advance consideration as to the existence or adequacy of lien rights can sometimes prevent a total failure of payment. <br />
<br />
It is worth noting there may be certain provisions of the <i>Builders’ Lien Act</i> that apply even if the project lands are not subject to lien rights; e.g. trust provisions.McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com0tag:blogger.com,1999:blog-5524003903467160079.post-69987591158020846862019-06-11T10:07:00.000-07:002020-01-03T12:51:25.223-08:00Municipal Reserve Lands – Validity of Lien Disputed Post-Payment of Security<b><span style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="font-family: "times new roman" , "serif"; font-size: 11pt;">By <a href="https://mross.com/law/People/LawyerProfile/Richard_Wong.cid1974" target="_blank">Richard Wong</a> and <a href="https://mross.com/law/People/LawyerProfile/Corbin_Devlin.cid32" target="_blank">Corbin Devlin</a></span></span></b><br />
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<b><span style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="font-family: "times new roman" , "serif"; font-size: 11pt;"></span></span></b><span lang="EN-US">Have you wondered whether you can dispute
the validity of a lien after alternate security has been paid into Court?<span style="mso-spacerun: yes;"> </span>The Court of Queen’s Bench recently confirmed
that municipal and/or school reserve lands are not lienable.<span style="mso-spacerun: yes;"> </span>The liens at issue were determined to be
invalid after security was posted into Court for payment of the liens.</span><b style="mso-bidi-font-weight: normal;"><span lang="EN-US"> </span></b></div>
<br />
<div class="MsoBodyText">
<b><span lang="EN-US" style="font-size: large;">Determination
of Validity, Post-Security</span></b></div>
<div class="MsoBodyText">
<span lang="EN-US"><br />The Court in <a href="http://canlii.ca/t/j001m"><i style="mso-bidi-font-style: normal;">Golden Triangle Construction Management Inc v Nuwest Interior Systems
Inc</i>, 2019 ABQB 292</a>, was tasked with determining whether, after a contractor
has caused liens to be discharged by posting alternate security, the contractor
has abandoned its ability to later challenge the validity of those liens.</span></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">Four liens were registered by
subcontractors against lands designated as “Municipal and School Reserve” and
“Municipal Reserve".<span style="mso-spacerun: yes;"> </span>Pursuant to section
48 of the <i style="mso-bidi-font-style: normal;">Builders’ Lien Act</i>, the
general contractor, Golden Triangle, posted security for payment of the liens which
were then discharged from title.</span></div>
<div class="MsoBodyText">
<span lang="EN-US"><br /></span></div>
<div class="MsoBodyText">
<span lang="EN-US">Section 48 of the <i style="mso-bidi-font-style: normal;">Builders’ Lien Act </i>states the Court may order that the registration
of a lien be removed from the title to the land concerned where security is
given, or payment is made, into court for the amount of the claim.<span style="mso-spacerun: yes;"> </span>Where this is the case, the money or security
stands in the place of the land.<span style="mso-spacerun: yes;"> </span>But
what does “stands in the place of the land” mean?</span></div>
<div class="MsoBodyText">
<span lang="EN-US"><br /></span></div>
<div class="MsoBodyText">
<span lang="EN-US">The Court, like many of us, found the
wording of the legislation to be ambiguous.<span style="mso-spacerun: yes;"> </span>“Stands in the place of the land” was narrowed down to mean one of two
things:</span></div>
<div class="MsoBodyText" style="margin: 12pt 0in 0in 0.5in; text-align: justify; text-indent: -0.25in;">
<span lang="EN-US"><span style="mso-list: Ignore;">1.<span style="font-size-adjust: none; font-stretch: normal; font: 7pt/normal "times new roman";">
</span></span></span><span lang="EN-US">Once the lien is discharged
from title, the Court can consider the nature of the land (in this case, being
a municipal reserve) in evaluating the validity of the lien; or</span></div>
<div class="MsoBodyText" style="margin: 12pt 0in 0in 0.5in; text-align: justify; text-indent: -0.25in;">
<span lang="EN-US"><span style="mso-list: Ignore;">2.<span style="font-size-adjust: none; font-stretch: normal; font: 7pt/normal "times new roman";">
</span></span></span><span lang="EN-US">The security held by the Court
was to be treated as if it were proceeds from the sale of the land.</span></div>
<br />
<span lang="EN-US">The Court ultimately found the former
interpretation to be more appropriate, as it better aligns with fairness to the
parties and upholds the objective of the <i style="mso-bidi-font-style: normal;">Builders’
Lien Act</i> – protecting those supplying labour and materials, and limiting the
liability of owners.<span style="mso-spacerun: yes;"> </span>This interpretation
clarifies that an owner or contractor can post security without abandoning any argument
with respect to the validity of the lien. This allows for the speedy clearing
of title upon posting alternate security and resumption of progress payments.</span><br />
<span lang="EN-US"></span><br />
<div class="MsoBodyText">
<span lang="EN-US"></span></div>
<div class="MsoBodyText">
<span style="font-size: large;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-US">Municipal/School
Reserves Are Not Lienable </span></b></span></div>
<h3 class="MsoBodyText">
</h3>
<div class="MsoBodyText">
<br />
<span lang="EN-US">After finding that the validity of the
liens could be determined even after the liens were discharged from title, the
Court confirmed the Alberta Court of Appeal’s decision in <a href="http://canlii.ca/t/2drdk"><i style="mso-bidi-font-style: normal;">McFarlane Oil Co v Sturgeon (Municipal District No. 90),</i> 1990 ABCA</a>
72.<span style="mso-spacerun: yes;"> </span><i style="mso-bidi-font-style: normal;">McFarlane
</i>held that liens registered against reserve lands are unenforceable as the <i style="mso-bidi-font-style: normal;">Planning Act</i> takes away the Court’s
power to grant an order for sale of such lands.</span></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">The purpose of the <i style="mso-bidi-font-style: normal;">Planning Act</i> is to provide orderly planning and to maintain and
improve the quality of the physical environment, without infringing on the
rights of individuals except to the extent that is necessary for the greater
public interest.<span style="mso-spacerun: yes;"> </span>Although the <i style="mso-bidi-font-style: normal;">Planning Act</i> will permit the sale of
municipal reserve lands, the general scheme of the statute with respect to reserve
lands shields the lands from a Court ordered forced sale.<span style="mso-spacerun: yes;"> </span>A statutory procedure is in place governing the
disposal of reserve lands and the purposes for which the proceeds will be
employed. The <i>Planning Act</i> was replaced in 1994 by Part 17 of the <i>Municipal Government Act</i>, but the principles stated in the <i>McFarlane</i> decision remain valid.</span></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">In comparison, the <i style="mso-bidi-font-style: normal;">Builders’ Lien Act </i>creates a charge on land as security for
services rendered or materials furnished.<span style="mso-spacerun: yes;">
</span>This, in effect, creates an interest in the land which can be sold and
vested by the Court, unless alternate security is<span style="font-family: inherit;"> paid into Court. Where
payment is made into Court, </span></span><span style="font-family: inherit;"><span lang="EN" style="mso-ansi-language: EN;">security
other than the lands exist to satisfy potential claims.</span><span lang="EN" style="font-size: 11pt;"> </span></span></div>
<div class="MsoBodyText">
<br /></div>
<div class="MsoBodyText">
<span lang="EN-US">Considering
this, the Court confirmed that the validity of a lien can be assessed,
notwithstanding security or payment is made to discharge the lien. The Court
then determined that Nuwest’s lien was invalid because, as determined by the
Court of Appeal in <i style="mso-bidi-font-style: normal;">McFarlane</i>,
municipal reserve lands are not lienable.<span style="mso-spacerun: yes;"> </span>The security posted by Golden Triangle was ordered to be returned to
them.</span></div>
<div class="MsoBodyText">
<span style="font-size: small;"><span style="font-family: inherit;"><br /></span></span></div>
<div class="MsoBodyText">
<span lang="EN-US">Considering the
significant number of school construction and renovation projects in
Alberta,<span style="mso-spacerun: yes;"> </span>it is noteworthy that some but not
all schools are built on municipal reserve lands; i.e. some school projects may
be lienable and some may not.<span style="mso-spacerun: yes;"> </span>Perhaps
future case will consider if an agreement for sale of lands from a municipality
to a school board is an interest in land that can be liened.</span></div>
McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com0tag:blogger.com,1999:blog-5524003903467160079.post-84482780292072768372019-01-04T14:20:00.000-08:002020-01-03T12:24:39.250-08:00Lien Rights – When the Developer Doesn’t Have an Interest in the Land<div class="MsoNormal">
<b>Lien Rights –When the Developer Doesn’t Have an Interest
in the Land</b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In an earlier article, we warned of the risk of loss of lien
rights if a transfer of land occurs during construction. A 2018 court decision
reminds us that there is also a risk of loss of lien rights if the party
contracting the work doesn’t have a legal interest (ownership) in the land,
such as when (for example) an expected transfer of land doesn’t go
through. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-size: large;"><b>The Recent Example</b></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In <i>Georgetown Townhouse GP Ltd</i> v <i>Crystal Waters
Plumbing Company Inc</i>, <a href="https://www.canlii.org/en/ab/abqb/doc/2018/2018abqb617/2018abqb617.html">2018
ABQB 617</a>, the developer/owner Georgetown agreed to sell 48 lots to
ReidBuilt Homes. The contract between Georgetown and Reidbuilt allowed
ReidBuilt to occupy the lands and begin construction. However, the lands
would be transferred by Georgetown only upon sale of the lots to individual
homebuyers. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
When ReidBuilt came into financial problems, many trades
registered liens against the lots in question. The problem is, the trades
were working for ReidBuilt but the lands were owned by Georgetown. On a
court application to determine if the liens (against the lands owned by
Georgetown) were valid, Master Prowse determined that Georgetown was not
“sufficiently involved” in the construction process to make Georgetown an
“owner” as defined in the Builders’ Lien Act (BLA). The liens were all
invalid.</div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><b>That Quirky Legislation</b></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN" style="mso-ansi-language: EN;">This issue arises
in large part because the BLA has a unique definition of “owner,” and it is
only the interest of an “owner” as defined that is subject to claims of
lien. <a href="https://www.canlii.org/en/ab/laws/stat/rsa-2000-c-b-7/latest/rsa-2000-c-b-7.html#sec1_smooth">Section
1</a>(j) of the <a href="https://www.canlii.org/en/ab/laws/stat/rsa-2000-c-b-7/latest/rsa-2000-c-b-7.html">BLA</a>
defines an owner as follows:</span></div>
<div class="MsoNormal" style="margin-left: .5in;">
<span lang="EN" style="mso-ansi-language: EN;">“owner” means a person having an estate or interest in land at whose
request, express or implied, and</span></div>
<div class="MsoNormal" style="margin-left: .5in;">
<span lang="EN" style="mso-ansi-language: EN;">(i) on whose credit,</span></div>
<div class="MsoNormal" style="margin-left: .5in;">
<span lang="EN" style="mso-ansi-language: EN;">(ii) on whose behalf,</span></div>
<div class="MsoNormal" style="margin-left: .5in;">
<span lang="EN" style="mso-ansi-language: EN;">(iii) with whose privity and consent, or</span></div>
<div class="MsoNormal" style="margin-left: .5in;">
<span lang="EN" style="mso-ansi-language: EN;">(iv) for whose direct benefit,</span></div>
<div class="MsoNormal" style="margin-left: .5in;">
<span lang="EN" style="mso-ansi-language: EN;">work is done on or material is furnished for an improvement to the land and
includes all persons claiming under the owner whose rights are acquired after
the commencement of the work or the furnishing of the material.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
There is now a substantial body of case law around the
question what it means to expressly or impliedly request the work.
Mere knowledge by the registered owner that the work is being done is not
sufficient. Rather, the courts have decided the registered owner must be <u>actively
involved</u> in the building process for lien rights to exist.</div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><b>What is Sufficient Involvement to Trigger Lien Rights?</b></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In the Georgetown case, the lien claimants argued that the
registered owner Georgetown expressly or impliedly requested the work based on
the following facts:</div>
<div class="MsoNormal">
<span lang="EN" style="mso-ansi-language: EN;">- Georgetown had
the right to approve the style and colours of the homes to be constructed. </span></div>
<div class="MsoNormal">
<span lang="EN" style="mso-ansi-language: EN;">- ReidBuilt was
required to obtain Georgetown’s approval for the plans for the house before
applying for a building permit. </span></div>
<div class="MsoNormal">
<span lang="EN" style="mso-ansi-language: EN;">- ReidBuilt was
to provide utility servicing within the lot boundaries but only with
contractors approved by Georgetown, and the work was to be supervised by
Georgetown’s engineers. </span></div>
<div class="MsoNormal">
<span lang="EN" style="mso-ansi-language: EN;">- ReidBuilt was
required to keep the lots with an orderly and tidy appearance to the
satisfaction of Georgetown.</span></div>
<div class="MsoNormal">
<span lang="EN" style="mso-ansi-language: EN;">- Georgetown was
to provide marketing support to ReidBuilt for the sale of homes on the lots.</span></div>
<div class="MsoNormal">
<span lang="EN" style="mso-ansi-language: EN;">- Georgetown’s
approval was required for ReidBuilt’s onsite signage and advertising.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN" style="mso-ansi-language: EN;">However, despite
all of these obligations, there was no evidence that Georgetown <u>in fact</u> gave
any of the approvals, or participated in any of the ways contemplated in the
agreement between Georgetown and ReidBuilt, aside from Georgetown setting up
and maintaining a website that referred to ReidBuilt as the builder for the
subdivision. The court concluded that </span>Georgetown’s contractual
authority over the development is a <u>relevant</u> factor to consider, but not
as significant as what in fact happened. With no evidence of Georgetown’s
active involvement in the building process, the liens were invalid.</div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><b>Not An Isolated Case</b></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Similar situations have led to similar conclusions by the
court in the past. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN" style="mso-ansi-language: EN;">In <i>Stealth
Enterprises Ltd. </i>v<i> Hoffman Dorchik</i>, <a href="https://www.canlii.org/en/ab/abqb/doc/2000/2000abqb311/2000abqb311.html">2000
ABQB 311 (CanLII)</a>, S & U Homes Ltd. was the registered owner of an
apartment building. They made an agreement to sell the building to the
developer (632766 Alberta Ltd.) who intended to convert it into condominiums.
632766 refinished four of the apartment suites into show suites and spent other
money on refreshing the lobby, before the land transfer was completed. The deal
collapsed and an unpaid contractor (hired by 632766) registered a lien against
S&U’s title. The only evidence of active participation by S &U
related to some directions regarding cleaning the apartments for rental.
The court determined the lien was not valid. </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN" style="mso-ansi-language: EN;">In <i>E. Gruben’s
Transport Ltd. </i>v <i>Alberta Surplus Sales Ltd.</i>, <a href="https://www.canlii.org/en/ab/abqb/doc/2010/2010abqb244/2010abqb244.html">2010
ABQB 244 (CanLII)</a>, the landowner Alberta Surplus Sales agreed to sell 150
acres of land to 1327923 Alberta Ltd. Alberta Surplus allowed 1327923 to
move ahead with development (road construction) prior to closing the
deal. The roadbuilding subcontractor (E. Gruben’s Transport) liened the
lands when the deal fell through (and consequently Gruben’s didn’t get
paid). The court determined that Alberta Surplus Sales “had no direct or
indirect involvement in arranging for the road work to be done;” so the lien
was not valid. </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN" style="mso-ansi-language: EN;">Finally, in <i>Acera
Developments Inc. </i>v<i> Sterling Homes Ltd.</i>, <a href="https://www.canlii.org/en/ab/abca/doc/2010/2010abca198/2010abca198.html">2010
ABCA 198 (CanLII)</a>, the issue went to the Alberta Court of Appeal. Acera
was the developer/landowner who agreed to sell the land to Sterling and allowed
Sterling to build on the land prior to completion of the purchase and
subdivision of the land. When subdivision approval of the land was
refused, and Sterling did not get paid, Sterling registered a builders’ lien.
Acera's architectural and construction guidelines required that Acera approve
the construction plans, elevations, finished grades, finishing materials and
colours, final grade slips, setbacks, foundation designs, auxiliary buildings
and fencing, and landscaping. All such plans were in fact approved prior to
construction. Further, the construction was inspected by Acera as work
progressed. In these circumstances, the court sided with the lien
claimant – the lien was valid because there was sufficient evidence of Acera’s
active involvement in the work.</span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><b>Three Categories of Similar Cases</b></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
As Master Prowse states in the Georgetown case: “There are
three common categories of cases where this issue arises:</div>
<div class="MsoNormal">
(i) a landlord
(registered owner of land) disavows liens placed on its land by unpaid
contractors of a tenant,</div>
<div class="MsoNormal">
(ii) a purchaser
who agrees to buy land upon which a building is to be built, and later takes a
transfer of the land after the structure has been built, disavows liens
subsequently placed on his/her land by unpaid contractors of the builder,</div>
<div class="MsoNormal">
(iii) a developer/vendor
(registered owner of land) who agrees to sell land, and allows the purchaser to
build on the land prior to completion of the sale, disavows liens placed on its
land by unpaid contractors of the purchaser.”</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The present article deals with category (iii – contracting
with purchaser of lands before completion of the sale of the lands). We
have addressed the other two categories in prior articles: (i – <a href="http://albertaconstructionlawblog.blogspot.com/2016/09/lien-pitfall-liening-wrong-interest.html">landlord
and tenant</a>) and (ii – <a href="http://albertaconstructionlawblog.blogspot.com/2017/02/lien-pitfall-transfers-of-land.html">vendor
and purchaser</a>).</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-size: large;"><b>Room For Mischief</b></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Contractors should be very attentive to these risks.
Most of the time, these situations arise innocently enough when a developer
becomes insolvent. But we have also seen developers deliberately arrange
their affairs to protect the project from claims of lien (i.e. isolating the
registered owner of the lands from any active involvement in the work).
In either case, contractors should be alert to situations where their statutory
lien rights may be compromised.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In the present context, this means making some investigation
if the party who is contracting the work has a legal interest in the
lands. If the party contracting the work has no legal interest in the
lands, further inquiry is required to determine if the party who actually owns
the lands is actively participating in (requesting) the work. Keep in
mind, the registered owner’s right to actively participate in the work is not
sufficient; there must be active participation by the registered owner in
fact. If these inquiries suggest that lien rights may not exist, the
prudent contractor will mitigate risk in some other fashion, such as requiring
other security for payment from the party contracting the work.</div>
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<![endif]-->McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com0tag:blogger.com,1999:blog-5524003903467160079.post-74302410274636923542018-12-17T13:14:00.000-08:002020-01-03T12:26:03.218-08:00Certificate of Substantial Performance Limits Lien Rights Even Without Posting<a href="https://mross.com/law/People/LawyerProfile/Corbin_Devlin.cid32" target="_blank"><b>By Corbin Devlin </b></a><br />
<br />
It has always been my view that a Certificate of Substantial Performance (CSP) must be properly posted to be valid, but the Court of Appeal has recently determined otherwise.<br />
<span style="font-size: large;"></span><br />
<h3>
<span style="font-size: large;">
The CSP and The Builders’ Lien Act</span> </h3>
<br />
The Builders Lien Act (BLA) of Alberta requires a lien to be registered within 45 days of completion or abandonment of the contract for which the lien is claimed (90 days in the case of an oil or gas well site), failing which it expires. But lien claimants must also be aware that there is a deadline triggered by the issuance of a CSP relating to their contract or subcontract.<br />
<br />
45 (or 90) days after the CSP is issued, the owner may safely release the “major lien fund” (i.e. 10% of the value of the work actually done and materials actually furnished under the contract at the date of issue of the certificate of substantial performance, plus any additional amounts owing on the contract), provided no liens are registered. All that remains as security for lien claims registered after the owner releases the major lien fund in accordance with the legislation is the “minor lien fund” (i.e. 10% of the value of the work actually done and materials actually furnished on or after the date of issue of the certificate of substantial performance). This can drastically reduce the security available to lien claimants pursuant to the Builders’ Lien Act.<br />
<br />
Prudent lien claimants will take note of the issuance of a CSP, and consider if the financial circumstances of the project require them to register a lien within 45 (or 90) days from that event to protect themselves.<br />
<br />
<b><span style="font-size: large;">Posting Requirement</span></b><br />
<br />
The BLA expressly requires the person issuing a CSP to post a signed copy of it in a conspicuous place on the job site within 3 days from the date of issuing the certificate so that persons working or furnishing materials have a reasonable opportunity of seeing the certificate. And there is a penalty for non-compliance: “Where the person issuing a certificate of substantial performance fails to comply with this section, that person issuing the certificate is liable for legal and other costs and damages incurred by and resulting to a person by reason of the non-compliance.”<br />
<br />
<b><span style="font-size: large;">Discrepancy Between Issuance and Posting</span></b><br />
<br />
The problem is that the BLA does not say that the CSP takes effect from the date it is posted. It says that it takes effect from the date it is “issued.” We now know (the Court of Appeal has made it clear) that posting and issuance are not the same thing. “Posting” is defined in the legislation (i.e. a conspicuous place on the job site). “Issuance” is not.<br />
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In the recent case <a href="https://www.canlii.org/en/ab/abca/doc/2018/2018abca381/2018abca381.html" target="_blank"><i>H20 Plumbing & Heating Ltd v. Maximum Tank Truck Services Ltd</i>, 2018 ABCA 381</a>, the contractor issued a CSP, and the subcontractor registered a lien more than 46 days later. There was conflicting evidence if and when the CSP was posted in accordance with the requirements of the Builders’ Lien Act. The Court of Appeal held that the uncertain evidence regarding the date of posting was not material because the time for the owner to withhold the major lien fund runs from the date of issuance of the CSP. The Builders’ Lien Act is quite clear: for the purpose of determining the relevant timelines under the Act (for the owner to retain the major lien fund), only the date of issuance matters, not the date of posting.<br />
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This decision invites more questions. Is a CSP “issued” as soon as it is signed by the contractor? Can a CSP be backdated? The concept of issuance has been considered by the courts to include “some communication” of the document [<a href="https://www.canlii.org/en/bc/bcsc/doc/2008/2008bcsc1880/2008bcsc1880.html" target="_blank">Alterra Property Group Ltd v. Doka Canada Ltd, 2008 BCSC 1880</a>] But this still begs the question, communication to whom? It seems that a CSP may be validly issued once it is communicated from the contractor to the owner. But what about communication to the subcontractors who are most affected by the document?<br />
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It should be a significant concern to subcontractors that they may lose the right to attach the major lien fund without getting any notice of the issuance of a CSP. If a CSP is issued but never posted, lien rights may be lost with the passage of 45 (or 90) days, without any notice to them at all. The subcontractor awaiting payment of a significant receivable may end up with grossly insufficient security (i.e. a share of the minor lien fund, at most) despite following the requirements of the BLA to the letter.<br />
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<b><span style="font-size: large;">Alternate Remedies</span></b><br />
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The only direct remedy for the lien claimant who suffers a loss due to failure to register a lien on time – because a CSP was “issued” but not properly “posted” - is to make a civil claim against the party who failed to properly post the CSP. But that is an empty remedy if the party who failed to post the CSP is also insolvent, a fairly common scenario in lien cases. This point was not lost on the Court of Appeal, but the court concludes: “This potential unfairness is insufficient to override the express wording of the Alberta BLA...”<br />
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(In some circumstances, the subcontractor adversely who loses out on attaching the major lien fund may also find some protection in the trust provisions of the BLA, but these provisions are extremely narrow. Reference our <a href="http://albertaconstructionlawblog.blogspot.com/2018/08/statutory-trust-for-benefit-of.html" target="_blank">prior article</a> on this topic for more information. )<br />
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<b><span style="font-size: large;">Looking Forward</span></b><br />
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Did the legislators really mean for lien rights to be affected by the (undefined) date of issuance? There appears to be no good reason the CSP takes effect as of the date of “issuance” instead of the date of “posting.” Given the acknowledged unfairness to subcontractors, this discrepancy begs for correction by the legislature.<br />
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Meanwhile, prudent subcontractors will consider the financial status (ability to pay) of the parties above them in the chain of contracts, and seek additional security for payment, or otherwise mitigate their risk, where appropriate. Lien rights are a valuable safety net in many cases but, once again, we see that they are no guarantee of payment.McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com1tag:blogger.com,1999:blog-5524003903467160079.post-91106820325678772772018-10-23T09:27:00.001-07:002020-10-20T08:38:08.577-07:00Lien Holdbacks and Deficiency HoldbacksBy <a href="https://mross.com/law/People/LawyerProfile/Corbin_Devlin.cid32" target="_blank">Corbin Devlin</a><br />
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A frequently-asked question is, can the Alberta builders’ lien holdback be used for the correction of deficiencies? The short answer is, the holdback can be used for correction of deficiencies, only after the statutory purpose of the holdback is expired. The Builders’ Lien Act does not contemplate using the statutory holdback for anything other than security for payment to lien claimants. But the Builders’ Lien Act does not dictate what happens to the statutory holdback after the lien holdback period expires. Read on for further explanation…<br />
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<b><span style="font-size: large;">Legitimate Setoff</span></b><br />
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The first thing to consider is whether there is a legitimate right to set off a claim or hold back funds otherwise payable – ignoring for the moment any issues arising under the Builders’ Lien Act. A construction deficiency does not automatically give rise to a right to deduct an estimated repair cost from amounts otherwise payable. One must consider the payment provisions and other related provisions of the contract. Some contracts expressly allow for rights of setoff, or the right to hold back an amount on account of construction deficiencies. On the other hand, common law rights of setoff may allow for an owner to retain funds on account of deficiencies, even where the contract is silent. <br />
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A fulsome discussion of the principles of setoff is beyond the scope of this article. For our present purposes, we assume that there is a legitimate right to retain a deficiency holdback (i.e. claim a setoff), per contract or common law. The question is, how does this relate to builders’ lien holdback requirements?<br />
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<b><span style="font-size: large;">As Between Owner and Contractor</span></b><br />
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There’s two statutory restrictions on payment of the builders’ lien holdback: 1) the owner is required to maintain the holdback until the lien period is expired (ss. 18 and 23 of the Act); and 2) the Act expressly states that the lien fund “shall not, as against a lienholder, be applied to the completion of the contract or for any purpose other than the satisfaction of liens.” One might read these requirements and conclude that the lien holdback is simply not available for the completion of deficiencies. However, this is only partly correct, and there is some flexibility inherent in the legislation. <br />
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The legislation specifies when the holdback must be retained, but it does not specify when the holdback must be released. If the statutory requirements to retain the holdback are expired, then the owner may pay out the holdback. Whether (and when) the owner must pay out the holdback is a question of contract interpretation. Standard form contracts typically specify when the holdback is to be paid to the contractor. But express or implied contract terms may also permit the owner to hold back funds or set off the costs of unfinished work or deficiencies against payment amounts otherwise due to the contractor.<br />
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In other words, once the lien period is expired, if no liens are registered, the owner is permitted, but not required, by statute to release the holdback. At that point, the owner may use the holdback for the completion of the work or correction of deficiencies, if permitted by contract, because the owner is no longer required by statute to continue retaining those funds.<br />
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<b><span style="font-size: large;">As Between Contractor and Subcontractors</span></b><br />
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The lien legislation in Alberta does not impose any obligation to retain a lien holdback on anyone other than the owner. However, as a matter of contract requirements and industry practice, a general contractor will often retain a holdback from a subcontractor (and so on down the line) to mirror the owner’s retention of funds from the contractor.<br />
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Therefore, whether a contractor can use holdback funds to correct deficiencies by a subcontractor is entirely a matter of contract interpretation. <br />
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<h4>
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Examples</span></h4>
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If a contractor or subcontractor has performed deficient work, and the lien period has expired without the registration of any liens, the owner’s lien holdback may be applied (set off) against the cost of the deficiencies - if expressly or impliedly permitted by the contract. <br />
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If a contractor (or subcontractor) has performed deficient work, and liens are registered or may become registered (i.e. because the lien period is not yet expired), the owner (or contractor) should not use the lien holdback for the completion of the work or correction of deficiencies – even if the contract would permit it. The lien holdback may soon be required to be paid into court to discharge liens against the project (for example, if the subcontractor becomes insolvent, resulting in sub-subcontractor lien claims). The owner (or contractor) who has used the statutory lien holdback to account for the cost of repairing deficiencies, while liens are registered or may be registered, may end up short of funds for completion of the work or for the discharge of liens (i.e. risk of shortfall). If a deficiency holdback is permitted by the contract, it should therefore be a separate/additional holdback from the statutory lien holdback, so long as liens are registered or may become registered. Then, when the liens are discharged (or the lien period expires without lien registration), the statutory lien holdback can be released separately from the deficiency holdback.<br />
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<b><span style="font-size: large;">Summary</span></b><br />
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In essence, if liens are claimed or may be claimed (i.e. before the lien period is expired), the lien holdback should be considered as reserved for a single purpose; security for payment to lien claimants. However, once that purpose runs out due the expiry of lien rights (assuming no liens are registered), the lien holdback is just another sum payable under the contract, and express or implied rights of setoff may be exercised and taken into account to determine the actual amount payable. In other words, the owner or contractor may employ the lien holdback to offset legitimate deficiency costs, only after the statute allows the lien holdback to be released. <br />
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Some contracts expressly contemplate a deficiency holdback that is separate and additional to the lien holdback. If the contract expressly addresses the issue, those agreed terms will prevail, unless they somehow conflict with the lien legislation. Much more frequently, there is no express right to a deficiency holdback set out in the contract. Such a right may nevertheless exist, based on the common law right of setoff.<br />
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The statutory trust provisions, if applicable, may also impact on these issues. The limited trust provisions under the Alberta Builders’ Lien Act are discussed in another <a href="http://albertaconstructionlawblog.blogspot.com/2018/08/ ">recent article</a> on this blog.<br />
<br />McLennan Ross LLPhttp://www.blogger.com/profile/17030264125089486790noreply@blogger.com0