Deference to the Project Consultant

By Corbin Devlin

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.

The Court’s Decision

In ASC(AB) Facility Inc v Man-Shield (Alta) Construction, 2019 ABCA 379, 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.

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…”

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.”

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. 

Practical Implications

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.

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.

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.

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.

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. 

The ASC 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.