required that all non-essential businesses, including construction
projects (with certain limited exceptions), suspend
operations for the duration of the emergency.
Does the Emergency Order qualify as a “stop work order
issued by a court or other public authority?” On its face, the
Emergency Order appears to fit within the meaning of GC
6.5.2, but there is little in the way of case law or legislation to
provide guidance on this point. The term “stop work order”
is not a defined term in the CCDC-2, nor is it defined by
Ontario’s Construction Act. The concept of a “stop work order”
appears in a number of Ontario statutes, such as the Building
Code Act, 1992, the Public Lands Act and the Occupational
Health and Safety Act to name a few examples. In those cases,
a “stop work order” is essentially an order issued by a public
official that a project be shut down until it is brought into
compliance with the act under which the order was made. In
other words, under a typical “stop work order,” the owner is
told the requirements to have the order lifted.
The Emergency Order, by contrast, is completely out of
the owner’s hands. No amount of accommodations for social
distancing or the provision of personal protective equipment
to workers will enable owners to get their projects up and
running again. The duration of the Emergency Order is at the
sole discretion of the provincial government. If contractors
attempt to recoup delay costs under GC 6.5.2, owners will
surely ask why they should be responsible for costs incurred
as a result of an Emergency Order that was imposed in
response to conditions the owners did not create.
From an owner’s standpoint, it makes sense to characterize
COVID-19-related delays as a force majeure event.
However, that too is fraught with legal risk. GC 6.5.3 provides
several examples of force majeure events such as
“abnormally adverse weather conditions,” which physically
restrict a contractor’s ability to access a project. While the
COVID-19 pandemic may be characterized as an “Act of
God,” in Ontario, it is the Emergency Order, rather than the
virus itself, that has temporarily caused construction to shut
down. Indeed, if it were not for the Emergency Order, many
contractors would have continued work on their projects
with minimal interruption.
Before contractors commit to a characterization of their
claim, they should understand the potential consequences of
each contractual avenue for recouping their losses and consider
obtaining legal advice.
Notice periods
In Ontario, as of the time of this writing, the provincial government
had suspended limitation periods set out in any
“statute, regulation, rule, by-law or order of the Government
of Ontario.” Importantly, this suspension has little or no bearing
on notice periods set out in construction contracts. Over
the last decade, Ontario courts have been fairly rigid in their
interpretation of notice provisions in construction contracts
and have required strict compliance with notice provisions
even in the absence of evidence that late submission of a
claim caused any prejudice to the owner. The primary purpose
of requiring contractors to provide timely notice of
delay damages is to give owners an opportunity to mitigate
the damages before the claim has fully crystalized. Despite
some recent case law suggesting that Ontario may be open
to a more lenient, contextual approach to giving notice, it
is essential that during this period of uncertainty contractors
protect their legal rights by scrupulously observing the
notice periods set out in their contracts.
At the start of the pandemic, many contractors immediately
sent notice letters to owners advising that they were
anticipating project delays and would likely incur unexpected
costs as a result of the delay. Generalized letters of
this nature may not be good enough for claiming a change
in contract price within the required notice period. Courts
have held that general letters indicating an intention to make
a claim are not necessarily claims in writing required by a
contract. In other instances, courts have upheld contractual
requirements for delivery of details of claims by agreed-upon
deadlines. Contractors making claims for changes to the
contract price as a result of COVID-19-related delays should
ensure that their claims include the amount of detail and
form as required by their particular contracts, and set out
the grounds upon which the claim is based. If only an earlier
general claim notice letter was given, contractors should
remember to send a follow-up notice setting out the further
details of their claims once they are known.
Conclusion
The construction industry may grapple with the fallout from
COVID-19 for months (possibly years) as construction claims
are advanced and slowly churn their way through negotiated
settlement, mediation, arbitration and the civil court
system. The duration and severity of the COVID-19 pandemic
is beyond anyone’s control. However, what can be controlled
is how parties use the information that is already at their
disposal. Read construction contracts, keep accurate and
detailed records of delay costs and mitigation efforts, adhere
to all contractual notice obligations and maintain open lines
of communication with owners, consultants, subcontractors
and suppliers. Through vigilance and preparation, parties
will be as prepared as possible to limit their damages and
successfully complete their projects.
LEGAL
The primary purpose of
requiring contractors to
provide timely notice of delay
damages is to give owners an
opportunity to mitigate the
damages before the claim has
fully crystalized.
68 Q2 2020 www.pilingcanada.ca
/www.pilingcanada.ca
