If factors outside of a contractors’ control delay their work, the job costs will increase. As a result, they may be entitled to compensation. To preserve their rights, they must read their contracts and pay particular attention to what it says they must do if they are delayed or incur additional costs.
All standard form contracts used in Canada contain provisions requiring parties to give each other notice of certain events as a precondition to claiming compensation for additional costs arising from those events or notice of their intention to claim additional compensation.
The common Canadian Construction Documents Committee’s CCDC 2 – 2020 contract between owners and contractors, for example, provides that “no extension shall be made for delay unless notice in writing of the cause of delay is given to the consultant not later than 10 working days after the commencement of the delay.” The corresponding subcontract, the Canadian Construction Association’s CCA 1 – 2021, contains the same language requiring notice to the general contractor within seven days. Similar notice provisions are common in the context of authorization of extras.
The treatment of such clauses by the courts varies throughout Canada. Courts in some provinces require strict compliance with notice provisions; others deem it sufficient if the other party had notice that a claim was forthcoming, even if the precise requirements of the clause in question were not followed.
The basis for the strict compliance cases is a 1982 decision by the Supreme Court of Canada, Corpex (1977) Inc. v. Canada, in which the court explained the underlying idea of such contract clauses. The contractor giving notice is relatively certain of being compensated for additional costs if it complies with the clause, and the owner who receives the notice knows that the contractor will probably not drop its claim and can consider its position. However, once the work is done, a contractor cannot claim the benefits of a clause providing for additional payment for extras if it did not, in turn, comply with that same clause by giving notice of its intention to claim such extras.
Ontario’s highest court, the Court of Appeal, has consistently interpreted Corpex strictly. In a series of cases starting a decade ago and still going strong today, with the latest decision on point released in 2022, the court has held that where a party fails to strictly adhere to the terms of the clause, it will lose its ability to make a claim for which the notice should have been given.
In its latest decision on point, the court disallowed a claim in the context of the pandemic. A contractor had written letters to the owner complaining that the owner should declare an emergency and direct them to implement additional or overriding procedures concerning the project. Still, as required by the contract, it never served formal notice that it would seek additional compensation. That, the court held, was fatal to the claim.
In addition to clauses simply requiring that notice be given, some contracts specify the contents of that notice. A clause may provide, for example, that “a written claim shall contain a sufficient description of the facts and circumstances of the occurrence that is the subject of the claim to enable the consultant to determine whether or not the claim is justified, and the contractor shall supply such further and other information for that purpose, as the consultant requires from time to time.” Here, too, the Ontario Court of Appeal has required strict compliance, and a notice that was too vague for the consultant to determine the validity of the claim was held to be insufficient, and the claim was barred.
Alberta’s highest court seems to align with the Ontario Court of Appeal’s strict compliance approach. However, some later trial courts have demonstrated that judges are sometimes disinclined to insist on strict compliance where it would be “unconscionable” to defeat a claim where the opposing party had actual knowledge of the claim, if not formal notice. Manitoba courts have also recently adopted a strict compliance test.
British Columbia courts, in contrast, have adopted a more factual and contextually based approach to interpreting notice clauses in delay claims. In B.C., the Courts tend to look beyond the contractual clauses to determine a claim and consider evidence like meeting minutes to determine if the owner received what has become known in the literature as “constructive notice.”
As the most recent decision on point in that province states, “whether a notice provision […] has been satisfied is a question of substance and not form, and even where the technical requirements have not been met, a ‘notice defence’ will be rejected where the purpose of the notice has been achieved through less formal means.” In other words, if the owner knew that a claim was coming, then failure to strictly adhere to the notice provision is a mere technicality that does not bar a claim. Constructive notice also seems to be sufficient in New Brunswick.
In jurisdictions like Ontario, Alberta, and Manitoba, it is therefore crucial that parties follow the strict letter of the contract when claiming additional compensation for things like delays or extras. Merely complaining about the matter in meetings or letters is likely not sufficient. If the notice clause requires a written notice to be given within seven days of the event triggering the claim, it is, therefore, not only prudent, but essential to give such notice in writing in that time frame, ideally expressly stating something to the effect that “this letter will serve as notice under clause ‘x’ of the contract that the contractor intends to claim….” If the contract also requires that the notice be substantiated, then failing to do so will equally bar any claim.
The above practice is advisable regardless of location in Canada. Even in those provinces and territories that generally deem constructive notice sufficient, a claim that complies with the process prescribed in the parties’ written agreement will preclude any argument that the owner or general contractor did not have actual notice.
Brendan Bowles is certified as a Specialist in Construction Law by the Law Society of Ontario and was the recipient of the Ontario Bar Association’s 2021 Award of Excellence in Construction Law. He is a partner with the firm Glaholt Bowles LLP and has specialized in construction law since his graduation from Queen’s University Faculty of Law in 1998. He acts regularly for a variety of clients in the adjudication, mediation and arbitration of construction disputes, and has also litigated at all levels of Ontario courts, up to and including the Court of Appeal. He has significant experience in various types of construction claim cases, including construction liens, construction deficiencies, contract disputes, delay claims and professional negligence. Bowles is a frequent speaker and writer on construction law topics, most notably as the author of Conduct of Lien, Trust and Adjudication Proceedings (Thomson Reuters: 2022).