The 2021 decision of the Ontario Superior Court of Justice in Elite Construction Inc. v. Canada (Elite v Canada), emerged as one of a number increasing cases which address of the importance of complying with contractual notice provisions in constructions. Increasingly, courts in Ontario and across Canada are taking a strict approach to the contractual requirements for giving notice of claim. In Elite v Canada, the court provided insight on parties’ conduct and what might constitute “notice” in writing.
Factual Background
The Federal government (Canada) awarded the plaintiff, Elite Construction Inc. (Elite), a CA$16.9 million contract (the Contract) in 2011 through a public tender process to construct the expansion at a correctional facility in Kingston, Ontario (the Project). The work continued past the scheduled completion date and, in addition to the payment for the original scope of work, Elite was paid an additional CA$1.3 million for 27 change orders issued throughout the course of the Project.
In May 2016, Elite delivered an expert report to Canada seeking CA$4.2 million in additional compensation it was entitled to as a result of the delays occasioned on the Project and additional work. On June 29, 2016, Elite commenced an action, adding a claim for an additional CA$500,000 in aggravated, exemplary and punitive damages. Canada brought a motion for summary judgment (the Motion).
In the Motion, Canada submitted that Elite was barred from bringing its action as it did not comply with the notice provisions in the Contract for additional compensation based on delays and/or completion of extra work. Elite argued that it provided the notice under the Contract via Contemplated Change of Notice (CCN) summaries, various emails to the engineering firm, NORR, responsible for design phase services, letters, requests for extension of time, submission of its expert report and its counsel’s letters. In the alternative, Elite argued that Canada waived strict compliance of the contract through its delayed conduct throughout the Project.
Analysis
The Contract contained several provisions regarding Elite’s obligations to notify Canada of any conditions which exist that are beyond its control and that have delayed the completion of the Project, the manner of notification and the timing of such notification.[1] GC 6.5.4 provides as follows:
If the Contractor incurs or sustains any extra expense or any loss or damage that is directly attributable to any neglect or delay that occurs after the date of the Contract on the part of Canada […], the Contractor shall give Canada written notice of intention to claim for that expense or loss or damage within ten working days of the date the neglect or delay first occurred. [emphasis added]
Further, GC 6.5.2 required that any request for an extension of time be accompanied by written consent of the bonding company.
The court found that Elite’s first extension of time request did not comply with the contract as it was not accompanied by the written consent of the bonding company. Elite’s second extension of time request did not comply with the contract either, as requests for extension of time can only be made before the date first fixed for completion of the work in accordance with GC 6.5.1.
In relation to Elite’s additional compensation request related to neglect or delay on Canada’s part, the Court considered whether Elite gave Canada notice under GC 6.5.4. The Court followed the line of reasoning in Corpex[2] and Doyle Construction[3], where the courts held that the notice provision can bar a contractor who fails to give notice from making a claim even though the notice provision does not contain a “failing which” clause. In other terms “compliance with a notice provision is a condition precedent to maintaining a claim in the courts”. In Technicore[4], the Court of Appeal for Ontario added that failure to provide notice with the prescribed time served as a bar to the contractor’s action, and that the owner need not prove prejudice.
The Court noted that Elite did not provide Canada with proper notice under the contract, finding that each of the documents that Elite relies on to show that it gave proper notice through conduct are problematic for the following reasons:
- CCN summaries do not qualify as notices under the contract as they only predict how much longer certain work would take to complete, whereas GC 6.5.4 requires the contractor to have already incurred or sustained an extra expense.
- Notice was never submitted within 10 days of any change order. The logical time for Elite to have filed a GC 6.5.4 notice would have been within 10 days of Canada’s issuance of a change order.
- Elite never issued a notice of dispute within 15 days of any change order.
- Emails to NORR that the change order process is untimely do not constitute notices because they do not necessarily refer to Canada’s delay or neglect.
- None of the documents relied on for notice that Elite submitted contained reference to the notice provision in the contract.
Elite argued that Canada cannot rely on the terms of the contract as it has waived strict compliance with the contract through its dilatory conduct. Elite relied on Colautti Construction[5] where an owner, through its conduct, can vary the terms of the contract if it can be shown that a pattern of conduct indicates that the parties did not intend to be bound by a given provision. The Court noted that the present case falls in line with Technicore, and is distinguishable from Colautti Construction where waiver was found. The court in Technicore stated:
[66] Colautti Construction is a very different case from the present one. In Colautti Construction, the plaintiff contractor entered into a contract with the defendant city for the construction of a sanitary sewer. The contract stipulated that written authorization was required for additional charges. Nonetheless, at various different times over the course of the project, the contractor billed the city for significant extra charges and the city paid them, despite the absence of written authorization. This court held that the parties had varied the terms of the contract by their conduct and the city could not rely on the strict provisions of the contract to escape liability for further additional costs.[6]
In the instant case, the court noted that Canada had never paid Elite for work that was not in the contract or a change order. Canada also never paid Elite on the basis that the work continued beyond the original completion date. Accordingly, the court was not satisfied that Canada’s conduct constituted a waiver of the notice provision by not complying with the “time is of the essence” provision when it approved change orders and time extensions, permitting Elite to do additional work without a change order. The court found that the delays on their own, despite the time is of the essence provision, were not enough to waive Elite’s notice obligations especially given that the contract contained a no waiver provision.
Conclusion
The court in Elite v Canada reminds us that “the grumblings of a contractor are not sufficient to constitute notice”[7]: Contractors should ensure they comply with the applicable notice provisions and explicitly indicate their intentions in a timely manner. Unless there is significant evidence that the owner is waiving its rights, or otherwise varying the terms of the contract through its conduct, the starting assumption should be that the contractor will be held to the standard of strict compliance as it relates to notice.
For more information on this topic, please reach out to the authors Karen Groulx, Dragana Bukejlovic and Ekin Cinar[8].
[1] GC 6.5.1, 6.5.2, 6.5.3 and 6.5.8. The contract provided that the
[2] Corpex (1977) v The Queen in Right of Canada, 1982 CanLII 213 (SCC).
[3] Doyle Construction Co. v Carling O’Keefe Breweries of Canada Ltd., 1988 CanLII 2844 (BC CA), 27 B.C.L.R. (2d) 89 (C.A.) at para 21.
[4] Technicore Underground Inc. v Toronto (City), 2012 ONCA 597 at paras 28 and 47.
[5] Colautti Construction Ltd. v Ottawa (City of), 1984 CanLII 1969 (ON CA).
[6] Technicore at para 66.
[7] Northland Kaska Corp. v R., 2001 BCSC 929, at para. 61.
[8] With special thanks to Nick Chai-Tang, Integrated Practice Curriculum Student for his assistance with this article.
