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This Week in Construction Law: November 8 – 12, 2021

In Federal news, the Minister of Northern Affairs announced the grant of a subsidy for C-FER Technologies, a not-for-profit subsidiary of Alberta Innovates, in order to upgrade one of its Edmonton facilities for testing hydrogen fuel infrastructure, equipment, and technologies. Alberta’s low-cost natural gas reserves are believed to be critical to the establishment of a cleaner-burning hydrogen fuel technology.

In Ontario, Ari Feldman spoke at the ULI Toronto ESG Symposium and warned fellow developers that there is no longer any grace period to plan sustainable projects to meet carbon-reduction goals. It takes eight years to plan, finance, permit, and build a major structure, per Feldman, and more stringent energy efficiency regulations likely to be in place in 2030 must be accommodated in today’s planning.

In Ontario, the provincial government has proposed amendments to the Far North Act to refocus it on enabling the development of all-season roads, electrical transmission projects and mineral development. According to the government, the revised Act will “enhance provisions that encourage collaboration between Ontario and First Nations on land-use planning and promote economic development opportunities.”

In Alberta, the CBC reports that residential, commercial, and industrial construction are all at the highest levels seen in years, but a tight provincial labour market and global supply chain headaches have combined with stronger construction demand to produce unexpected project delays and cost uncertainty. According to industry sources, new homes typically completed in 5 months now require 7-9 months, and common construction materials such as glass and aluminum have increased in price by 50% and 33%, respectively.

In British Columbia, the Attorney General has promised the British Columbia Construction Association that the provincial government intends to move forward with “prompt payment” legislation, now projected to be tabled in the fall of 2022. This legislation is part of a national industry movement focusing on passage of federal and provincial legislation promoting reliable cash flow between entities involved in major Canadian construction projects. The movement began with a national working group in 2015 and culminated in the 2019 passage of the Federal Prompt Payment for Construction Work Act, since followed by similar legislation which has passed – or appears likely to pass imminently – in every major province. The British Columbia Construction Association estimates that late payment to contractors costs the B.C. construction industry $4 billion per year in risk premiums, interest charges, and legal fees.

In British Columbia, WorkSafe BC has levied fines totalling $156,000 on companies and individual supervisors associated with the death of a worker who fell from a bridge during its construction. The worker was not wearing fall protection gear and the job site did not have guardrails installed.

In commentary this week, William Hampton analyzes Canadian Pacific Railway Company v Kelly Panteluk Construction Ltd., a 2020 decision of the Saskatchewan Court of Appeal that clarifies elements of procedure and application of the statutory holdback and trust provisions of The Builders’ Lien Act, and appears likely to serve as a baseline for Saskatchewan’s incoming prompt payment regime.

In this week’s jurisprudence, the Ontario Court of Appeal has dismissed an appeal by Elite Construction Inc., affirming summary judgment in favour of the defendant, the Government of Canada (Elite Construction Inc. v. Canada (Attorney General), 2021 ONCA 803).

The government awarded ECI a contract to construct a new 96-cell unit and related infrastructure inside a federal maximum security facility. After completion of the project, ECI sought damages of approximately $4.6 million in respect of extra work allegedly required outside the contract’s original scope. The Government of Canada responded that ECI had failed to provide proper contractual notice of claim for additional compensation, bringing those claims months, and in some cases years, after the extra work was performed.

The trial court agreed with the Government of Canada, and observed that the “grumblings of a contractor” are not sufficient to constitute notice of an amendment to a lump-sum contract, the terms of which with respect to notice must be complied with meticulously on large-scale construction projects.

Also in this week’s jurisprudence, the Alberta Court of Queen’s Bench has decided cross applications in the matter of PME Inc v Enerkem Alberta Biofuels LP (Enerkem Alberta Biofuels GP Inc), 2021 ABQB 889. PME sought partial summary judgment on a series of contracts with Enerkem, which in turn applied under s. 48(1) and s. 18(3) of the Builders’ Lien Act for (i) a declaration that Enerkem’s maximum liability under liens filed by PME was less than PME’s claimed lien amount, and (ii) a discharge of the liens.

At the heart of the dispute, PME had claimed liens larger than what it was contractually entitled to, justifying its expanded claims on the basis that there had been novation of the contracts in question. Consequently, PME argued that (i) equity demanded a proportionately larger lien than what the contract allowed, and (ii) especially in light of a constellation of recent appellate contract jurisprudence, e.g. C M Callow Inc v Zollinger, 2020 SCC 45, an application was no longer an appropriate forum to reduce a claimed lien amount: a full trial was required.

In deciding against PME, the Court wrote that:

…the protection and the remedies under the Builders’ Lien Act are not unlimited. Though it may seem ironic, once you need equity to reach the amount sought in a construction dispute, you are almost always outside the protection of the Builders’ Lien Act.

The weight of authority is against inflating the lien fund by using equitable principles, implied terms, or a novation that conflicts with the written terms of a construction contract.

There were a series of express contracts governing the relation between the parties. The contracts were neither frustrated nor rescinded. For the purposes of setting the lien fund there is no power for the Court simply to substitute a new contract, or another form of obligation for the contract that was in fact performed.

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