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Is A Notice Of Intention To Recover Costs A Proper Notice Of Claim Under A Building Contract?

In Ledore Investments Ltd. v. Ellis-Don Construction Ltd., the Ontario Superior Court has recently held that a letter from a contractor to a subcontractor stating that “we intend to recover these costs from you” was a sufficient notice to the subcontractor to satisfy the notice provision of the building contract. Accordingly, the court set aside an arbitrator’s decision holding that the letter was only a notice of intention to claim, not a notice of claim.

This decision highlights the uncertain state of the law with respect to notices and claims under building contracts. That uncertainty is due to the different circumstances in which such a notice may be given and the different approaches to those circumstances taken by different courts.


Articles 15 of the subcontract between Ellis-Don and Ross Steel stated as follows:

“the contractor [Ellis-Don] expressly waives and releases the subcontractor [Ross Steel] from all claims against the subcontractor, including without limitation those that might arise from the negligence or breach of this agreement by the subcontractor, except one or more of the following:

(a) those made in writing prior to the date of the final certificate for payment of the prime contract and still unsettled. (underlining added)

The letter which Ellis-Don then sent to Ross Steel stated that:

– “there are a number of outstanding issues to be resolved between Ellis-Don and Ross Steel regarding Ross Steel’s performance on this project.” The letter recited a number of alleged defaults by the subcontractor causing the delay of the project. The letter asserted that the subcontractor’s slippages had caused “serious impact on the work of Ellis-Don and other subcontractors and affected the overall completion of the project” and “forced Ellis-Don to expend substantial monies to accelerate the work in an effort to recover the schedule. We are currently assessing the financial impact that Ross Steel’s schedule slippages have had on Ellis-Don and we intend to recover these costs from you.” (underlining added)

– Ellis-Don had received an interim assessment of the liquidated damages by the owner for the late completion of the project, and that these damages “are solely attributable to Ross Steel and on account of this we are withholding the release of any further monies to you at this time.”

Arbitrator’s Decision

The following contents of the arbitrator’s decision are taken from the decision of the court reviewing the arbitrator’s award.

The arbitrator acknowledged that there was considerable judicial authority dealing with the sufficiency of notice of claims under building contracts; and that Ellis-Don’s letter to its subcontractor met the requirements, set forth in those cases, for sufficient written notice of a claim under a construction contract.

However, the arbitrator held that those cases did not apply to the present situation. The arbitrator drew a distinction between provisions requiring written notice of a claim, (to which the Doyle decision, and others following it, applied); and provisions requiring the making of a claim in writing, which in his view Article 15 represented. It was the arbitrator’s view that the first line of cases did not apply to Article 15.

The arbitrator accordingly concluded that there was an absence of any legal authority on the point, and he was obliged to interpret and apply Article 15 as a matter of first impression. He held that the wording of the article required “more than simply notice of an intention”, and that “a demand must be made”, or “a right must be asserted with consequences or relief sought”.

The arbitrator held that Ellis-Don’s letter to Ross Steel failed that test. In his view, the language employed by Ellis-Don in its letters was prospective, and pointed “to an intention to make a claim but not to an actual claim“. [Emphasis added] In finding that Ellis-Don had not satisfied the requirements of Article 15.1 (a), the arbitrator found that Ellis-Don’s letter was merely “notice to Ross Steel of an Ellis-Don intention to make a claim”, and “threatened” and “contemplated” claim that was “never quantified nor pursued”. The arbitrator held that a mere “intention to claim is not the same as a claim”, [emphasis added], and that the Ellis-Don’s letters, even when taken together, did not rise to the level of a ‘claim in writing’ that was still unsettled before the date of the final certificate for payment, as required by Article 15.1.

Court’s Decision

A single judge of the Ontario Superior Court set aside the arbitrator’s award for the following reasons:

  1. The cases, and in particular the decision of the British Columbia Court of Appeal in Doyle Construction Co. v. Carling O’Keefe Breweries of Canada Ltd. [1988 CarswellBC 204, indicated that a notice provision will be satisfied if:
  • The complaint goes beyond “grumblings” to display or indicate an “intention to claim”;
  • The claimant gives some particulars as to what the complaint is, so that the other party has an opportunity to consider its position and the possibility of taking corrective measures; and
  • The complaint is timely; e.g. given “in enough time” to permit the other party to take “guarding measures” if it so desires.
  1. Doyle also provided legal authority for the general proposition that provisions requiring claims to be made in writing should be treated as provisions requiring written notice of claims, contrary to the approach taken by the arbitrator. Accordingly, the arbitrator erred in finding that ‘claims made in writing” should not be treated as provisions requiring written notice of a claim.

The court accordingly set aside the arbitrator’s decision.


The decisions of the arbitrator and judge reveal a starkly different approach to notices, and claims under building contracts, and to the effect of decided case law in Canada on these matters. The author understands that this matter is being appealed to the Ontario Court of Appeal where, hopefully, this debate will be clarified.

  1. Is there a difference between notices of occurrences, notices of claims, and claims under building contracts? The arbitrator said yes, and the judge said no:
    1. The arbitrator says that the waiver clause requires the contractor to give notice of a claim; that a claim involves a present statement of a claim that contains the proper elements of a claim; and that a statement of intention to make a claim is not a notice of a claim.
    2. The court says that a claim under a building contract is no different than a notice of occurrence or a notice of a claim; and that a statement of an intention to make a claim is sufficient under either a notice requirement or a claim requirement.

It is interesting to note that the Ontario Court of Appeal just recently dealt with a claim procedure under a contract. In Ross-Clair v. Canada (Attorney General), 2016 CarswellOnt 3854, 2016 ONCA 205, 265 A.C.W.S. (3d) 289, the Ontario Court of Appeal held that the claim was invalid because sufficient particulars of it were not provided. The claim provision in that case related to claims to be filed at the end of the project, and not during the project, similar to the situation in the Ellis-Don case. The Court of Appeal applied very strict requirements for the particulars of a valid claim, requirements would not seem applicable at all to a notice. It does not seem likely that a court would hold a contractor to such a high standard of particulars in a notice situation.

That decision was reviewed by me in an article dated July 10, 2016 on my www.constructionlawcanada website.

  1. Do the prior cases decide this issue? Do they deal with the same clause in the contract?

Before reviewing the cases referred to in the Ellis-Don case, it is well to remember that notice and claims provisions appear in various parts of a building contract. Thus, in the CCDC-2 Stipulated Price Contract, the main notice/claims provisions are as follows:

6.4.1. Changed conditions. Notice in Writing is required of “such conditions” and in no event later than five working days after the first observance of the occurrence.

6.5.4 Delay. No extension of the time for performance may be granted unless a “Notice in Writing” is given within 10 days of the commencement of the delay.

6.6.1. Increase or decrease in (credit against) the cost of the work. If the owner or contractor “intends to make a claim” the claimant must give “timely Notice in Writing” and submit, within a reasonable time, a “detailed account claimed and the grounds upon which the claim is made.”

7.1.2 and 7.2. Default. The notice must be in writing. No period of time is specified in which to give notice.

8.2.2. Claims. Notice of dispute must be in writing and given within 15 working days of the receipt of the Consultant’s findings. The responding party has 10 working days to send a reply. and Waiver of claims. “Claims” arising prior to the date of Substantial Completion, are waived and released unless “Notice in Writing of claim” is given prior to the fifth or sixth day after the expiry of the applicable lien period.

12.3.3 Warranty. The owner shall promptly give contractor Notice in Writing of defects and deficiencies.

The first three notices apply during the course of the project. The claims provision applies to the dispute resolution procedures. The waiver and warranty provisions apply at the end of the project. Thus, these provisions apply in different circumstances and may be seen to have different purposes.

The following are the cases referred to in the Ellis-Don decision of the court:

  • Doyle Construction Co. v. Carling O’Keefe Breweries of Canada Ltd.

The plaintiff’s claim was dismissed on several grounds, one of which was that, under the claims procedures of the contract, GC 22.2, “Claims under this General Condition shall be made in writing to the party liable within reasonable time after the first observance of such damage” and the procedures required that there be notice of “any wrongful act or neglect” of the person against whom the claim is made. So, the notice provision in Doyle related to notice during the project, not a notice at the end of the project. In addition, the plaintiff’s claim in Doyle was dismissed because no notice of wrongful act or neglect was identified in any notice. The Doyle case seems very different than the Ellis-Don case on both accounts. Also the judges’ remarks in Doyle on the notice issue may arguably be obiter dicta. In fact, the Doyle judgments appear to be a strong endorsement of the need for the contractor to give effective notice of its claim. In that case the court found that the contractor did give a notice of intent to claim, but that was not sufficient. Justice Locke said:

“The grumblings of this contractor, recorded though they may be in site minutes, display no intention to claim until December 1983. Even then, no claim was actually advanced, but intent was indicated. But no details were given: an owner would be hard put to know exactly what it is to meet, and hence what it is to do. The purpose of the notice is to give the owner an opportunity of considering his position and perhaps taking corrective measures, and he is prejudiced by not being able to do it.” (underlining added)

Northland Kaska Corp. v. Yukon Territory, 2001 CarswellBC 1477.

This was a changed conditions case, not a waiver-at-the-end-of-the-project case, as in Ellis-Don. Under the changed conditions provision, GC 35 of the contract, the contractor was required to give the owner “written notice…as soon as practicable and in any event no later than five Days following the occurrence thereof and shall give MCL subsequent written notice of the termination of any such lease.” Under GC 14, the claims provision, the contractor was required to submit a “Notice of a Claim … writing ….within seven Days after the Contractor first becomes aware of the events or circumstances giving rise to such Claim. As soon as practicable thereafter the Contractor shall submit full details of such Claim in order to permit MCL to review and evaluate it.” In holding that the contractor had not satisfied these requirements of the contract, and after quoting the words of Justice Locke referred to above, the court said:

“it is my opinion that any notice of a change in soil conditions must be unequivocal in stating the contractor’s intention that: (1) it has encountered what it considers to be a substantial difference in soil conditions than that indicated in the pre-tender information, or a reasonable assumption as to soil conditions based upon the pre-tender information, as the case may be; and (2) that it intends to make a claim under GC35.2 for any extra expense, loss or damage resulting therefrom. This does not mean that the written notice must be overly detailed, as the extent of the change in soil conditions nor the full impact upon the contractor’s planned schedule and budget might not yet be fully appreciated. However, the notice should contain such particulars so as to enable the owner to appreciate the contractor’s concerns, to consider its position, and to make an informed decision as to how to proceed. Timeliness and certainty of the notice is essential. The contractor may always withdraw its claim if it circumstances warrant, but it should not deprive the owner the opportunity to assess its options in light of the likelihood that contractor will make a claim for extra compensation under GC35.2.” (underlining added)

Bemar Construction (Ontario) Inc. v. Mississauga (City), 2004 CarswellOnt 222 (affirmed in the Ontario Court of Appeal)

Bemar was a delay claim. The contractor, Bemar, sent a letter to the owner stating that it was giving “formal notice that the completion date for said project will be extended accordingly” but did not give notice of any delay claim for damages or compensation. Quoting Justice Locke in Doyle, the court dismissed the delay claim for failure to give proper notice of it.

Technicore Underground Inc. v. Toronto (City), 2011 CarswellOnt 14960

This was an increase-in costs and a claims procedure case. GC 3.14.03 of the contract required the contractor to giveoral notice ….of any situation which may lead to a claim for additional payment immediately upon becoming aware of the situation and shall provide written notice to the Contract Administrator of such situation or of any express intent to claim such payment, within seven days of the commencement of any part of the work which may be affected by the situation or will form part of the claim.” Then, the contractor was required to “submit detailed claims as soon as reasonably possible and in any event no later than 30 Days after the completion of the work affected by the situation.” The detailed claim was required to: identify the items in respect of which the claim arose; state the grounds, contractual or otherwise, upon which the claim is made; and include the Records supporting such claim. The court referred to the Doyle and Bemar decisions and held that the contractor’s claim was limited to those items for which it had given notice during the contract, and could not include claims for which it gave notice three years later.

In all of these cases, the court dismissed the contractor’s claim because of a failure to give proper notice. Two of the cases involved claims procedures, one involved a delay claim and two involved changed condition claims. None were a waiver-at the end-of the contract case, such as Ellis-Don. All of these cases involved specific contractual provisions that influenced the court’s treatment of the notice/claim issue.

Not only do the claims in these cases arise in different circumstances, it is not obvious that they give rise to the three principles that the judge in Ellis-Don stated that they give rise to.

If the Ellis-Don case is appealed to the Ontario Court of Appeal, it is hoped that issues like the following will be considered:

  1. Should the same kind or detail of notice or claim be required for notices arising during the project – such as for delay, changed conditions, increase or decrease in the cost of the project – as opposed to claims in the dispute resolution process or at the end of the project through the waiver/release clause? Should the notice requirements during the project be less onerous than those at the end of the project or in the dispute resolution process, because during the project the parties are busy building the project, and do not have full knowledge of the consequences of the delay, changes or defaults?

Is the arbitrator’s approach more suitable to the waiver-at-the-end-of-the-project situation, which is the situation in Ellis-Don, and the judge’s approach more suitable to the notices given during the course of the project?

  1. Should a “notice of claim” be the same as a “claim”? What degree of “notice” is required for a “notice” or a “notice of claim” or a “claim”? Is it too complicated to have different standards applicable to these three situations? Or were the expressions – “claim” and “notice of claim” and “notice” –intended to be different, and an “notice” or “notice of claim” intended to be a less detailed document, just like, under the Rules of Civil Procedure, a Notice of Claim is less detailed than a Statement of Claim.
  1. What is the fair balance between burdening the claimant with filing a detailed claim and notice, and providing the respondent with reasonable notice of the claim and its repercussions? Should the amount, or lack, of detail that Ellis-Don put in its letter to its subcontractor be more or less important than its use of the word “intention”? And dealing, for instance, with notices in the dispute resolution procedures, is there a good reason to require a claimant in that procedure to provide as much information in its notice of claim as a Statement of Claim in a civil action, especially when the claim may go through a mediation and arbitration process when those details will be dealt with in the dispute resolution process?

See Heintzman and Goldsmith on Canadian Building Contracts, 5th ed., chapter 6, part 9(d), chapter 7, part 5 and chapter 9, part 4.

Ledore Investments Ltd. v. Ellis-Don Construction Ltd., 2016 CarswellOnt 13567, 2016 ONSC 5441

Building contract – claim and notice of claim – waiver of claims at time of completion

Thomas G. Heintzman O.C., Q.C., FCIArb                                   December 3,2016

This article contains Mr. Heintzman’s personal views and does not constitute legal advice. For legal advice, legal counsel should be consulted.