Construction Industry Labour Challenges

See Guy Dixon’s very interesting article, “Construction industry battles biases to attract workers” in the Globe and Mail. Dixon discusses the challenge the construction industry faces in attracting workers despite the availability of secure employment with good earning potential and benefits.

It will be interesting to see how the market – with efforts from industry and government – deals with this problem over the next decade. I suspect that even better pay and benefits will be part of the solution but what will that do to construction costs (and downstream prices for consumers)?

The Ontario “Construction Lien Amendment Act” Passes

On December 5, 2017, the Ontario Legislature passed Bill 142 – the “Construction Lien Amendment Act” which will dramatically change and modernize the Ontario Construction Lien Act (to be re-named the Construction Act) – legislation that has stood in place in this Province with little in the way of change for decades.

Those involved in the construction industry that will be affected by this new legislation – from owners to lenders to contractors to suppliers – have different and varied interests and so it’s no surprise, really, that there will likely be little consensus as to what changes will represent an improvement to the current regime and which ones will prove problematic. From conversations I’ve had and seminars I’ve attended, though, it seems that there is fairly widespread agreement that 1) some of the changes are overdue and 2) the learning curve for both industry players and their lawyers is going to be relatively steep as the changes take effect.

It’s expected that the amended legislation will roll out and come into force sometime in 2018.

Construction deficiencies at Guelph area gas station result in criminal charges against vendor

It’s not too often that construction deficiencies result in criminal charges being laid but that seems to be what is happening with respect to a gas station North of Guelph, Ontario, CTV News Kitchener reports. Typically, this sort of matter will be pursued and resolved through civil litigation without criminal proceedings even coming onto the radar. Unfortunately, the report (and others I found online) don’t give enough information to cast some light on the reason that, in this case, the conduct of the vendor was considered by police to give rise to potential criminal responsibility.

Elliot Lake, Ontario – Algo Centre Mall collapse – Inquiry Report Released on October 15, 2014

The Report of The Honourable Paul R. Bélanger, Commissioner of the Elliot Lake Inquiry, was released today, October 15, 2014. Click here to access the Report.

Out of this tragedy come a number of significant recommendations (see pages 31-36 of the Executive Summary) and it will be interesting to see whether those recommendations are implemented by the Ontario Government in a meaningful and identifiable way in the future.

Toronto’s condo construction boom

CBC News ran a story on October 13, 2014 entitled, “Fears that shoddy Toronto condos could become future slums“.  The piece outlines concerns that the Toronto condo construction boom of the last few years is resulting in numerous poorly constructed condo buildings that will require major repairs prematurely.

Having practiced construction law in Vancouver in the early-to-mid 2000s, I see a worrisome number of parallels between the development of the “leaky condo crisis” in BC beginning in the mid-to-late 1990s and what seems to be unfolding in Toronto. There are a lot of different theories about what gave rise to BC’s leaky condos but some of the more (I think) accepted factors amongst those “in the know” are: a building boom leading to rapid, “slap it together” construction, climate inappropriate designs, inadequate building code requirements, and a weak/flawed inspection regime. Of concern, these seem to be the same general problems now being identified in Toronto.

Only time will tell whether the current fears about Toronto’s condominium construction market are real or overstated but this is certainly not a potential problem that should be ignored or prematurely dismissed. For those interested, I would suggest that the 1998 report “The Renewal of Trust in Residential Construction” authored by the “Commission of Inquiry into the Quality of Condominium Construction in British Columbia” is an interesting read for some background.

Leaky condos still a problem and aren’t going away for the foreseeable future

The headline is a little bit dramatic but, nonetheless, an article published on May 25, 2014 in the Vancouver Sun, written by Derrick Penner, called, Leaky condo crisis rears its head again in B.C. – Buildings that weren’t fixed earlier now face even costlier repairs is an interesting read and touches on a number of the things addressed in a few of my earlier posts.

Aging condos – bright days ahead for glazing trades?

Patty Winsa’s article Degrading condo windows expected to trigger major wave of replacements in thestar.com, published March 20, 2014, discusses the potential (and sobering) costs associated with large scale glazing (glass) replacement on high-rise condo buildings as window systems approach their expected 30-35 year lifespan.

Failure and replacement isn’t imminent for many condos but if the replacement costs approach what University of Waterloo professor Dr. John Straube predicts, this is a future problem and cost that condominium corporations are going to want to get well out in front of.

Scanning the downtown skylines of Vancouver, Calgary, Toronto, and Montreal (and so on) gives one an appreciation for the prospective magnitude of the amount of money at stake.

Potentially helpful new tools in creating and presenting evidence in delay claims

The Daily Commercial News published a short article today, written by Peter Kenter, about Expect Delaysservices and technology being offered by Systech International (with an office in Mississauga, Ontario) for the collection and presentation of evidence pertaining to the impacts of delay to construction projects.  The service and technology described are 1) visualization presentations and 2) a smartphone Site Diary App.

While, as a construction litigator, I’m certainly intrigued by the concept of, “…high-level computer-animated sequence, fully narrated, showing exactly how delays affected the staging and construction of a project” as described by the article, realistically, such a presentation is, I would expect, likely cost-prohibitive in all but the largest delay claims.

By contrast, the “Site Diary App” is, conceptually at least (I have no idea whether Systech’s app is good or not, how much it costs, whether it can be purchased as a stand-alone product or is only available bundled with other products, etc), something that might have a much broader appeal and utility.  Click here for a link to Systech’s promo/informational video for the app.

I’ve seen some really poor site diaries over the years and so the prospect of a tool with the objective of making the process of keeping a good site diary easier and better is of real interest.  Most litigators will agree (I think) that – without discounting the value of retrospective opinion evidence of experts on the causes and impacts of delays after they have occurred – the best factual evidence regarding the issues arising during a construction project will normally come from documents/records created contemporaneously with the events to which they relate.  If this app can, at a reasonable cost and in a robust, user-friendly way, assist in creating that evidence, I expect that it will become a useful and common tool in the construction industry.

If any of my readers has any experience with this app (or knows someone who does), and is willing to spend a few minutes to give me a call or send me an e-mail, I’d be interested to hear early thoughts and reviews on it.

Globe and Mail Interview: EllisDon CEO Geoff Smith: Building a different construction company

Today’s online Globe and Mail posted a short but interesting article summarizing an interview of EllisDon’s President, Geoff Smith by the Globe & Mail’s Gordon Pitts.  Read the article here.

The most interesting observation Smith makes, from my perspective is, “General contractors are not builders – we are leaders and managers and it is all about information. We manage the process of other people doing the building. If you control that information and make the process efficient, you are ahead of the game.”  Not an earth-shattering revelation by any stretch but, for those of us for whom “general contractor” still tends to invoke an image of a big guy smoking a cigarette out of his Ford F-350 caked in mud – Smith’s comment is enlightening.  Today’s general contractors are blurring the lines between “contractor” and “construction manager” and “project manager” and it is an industry becoming increasingly sophisticated. A good little read.

 

An “Interest”ing Decision – A contractual interest claim gone wrong

What an awful Blog post title. My apologies.

The Decision of Madame Justice Pierce in 1188710 Ontario Ltd. v. Gartner, 2012 ONSC 6110 (CanLII) is a good reminder of how judges trying to do perceived justice between parties sometimes finds the law bent (or worse – disregarded) in favour of perceived justice.

The facts of the case aren’t particularly remarkable – contractor does work, owner takes issue with various things and doesn’t pay all invoices, contractor liens, lawsuit follows.  Same old story.  Sometimes the contractor comes out on top and sometimes it is the owner that prevails.  In this case, Pierce J. interpreted the agreement between the contractor and the owners and the evidence that was presented at trial almost entirely in favour the contractor.

The two aspects of the Decision that prompted me to write this short post are:

  1. Pierce J. found a contractual entitlement to interest and awarded the contractor interest at 5.5% per annum; and
  2. Pierce J. declared that the contractor has a lien against the Defendants’ property for an amount that includes the interest that she found to be owing.

Contractual Interest

If Pierce J. had just addressed the issue of interest as one of damages (the contractor’s losses based on interest the contractor had to pay on its line of credit or to its own suppliers) rather than as interest and if the contractor had presented better evidence on this point, I don’t think there would be an issue.  However, because Pierce J. expressly found that there was no agreement as to interest (see paras 37 & 40), I think she should have been foreclosed from awarding contractual interest.  Nonetheless, she (wrongly in my view) reasoned that a contractual obligation to pay invoices within a specified time implied an agreement to pay interest if payment was not made within that time (see para 44).  If Pierce J. were right on this, it would effectively mean that every contract that obliges a party to pay contains an implied agreement to pay interest if payment isn’t made.  I don’t think that this is the law and I don’t think this accords with longstanding jurisprudence that parties should, as a general rule, be held to their bargains – if the contractor had wanted to negotiate a contractual entitlement and rate of interest, he could easily have done so.

The next part is that there seemed to be some very loose (it seems to have been given just in oral testimony at trial) evidence that the contractor had suffered some sort of losses based on having to dip into his line of credit and charges from his own suppliers as a result of the owner not paying all of his invoices (see para 100, for example).  It was this evidence that Pierce J. used to determine the rate of “interest” that the contractor should be entitled to (5 browse around here.5% was the contractor’s rate on his line of credit…so Pierce J. somehow made that the contractual rate of interest “agreed to” between the contractor and the owner).  I wouldn’t be so offended by this had Pierce J. just characterised the amount payable as damages rather than interest.  However, even then, the problem would be that she found as a fact that, “Unfortunately, there is no evidence about how much [the contractor] had to draw on his line of credit for this project, or how much interest he paid.”  In effect, she awarded damages in the absence of any evidence of the proven quantum of those damages.

I think that there should have been found to be no agreement as to interest and so only pre-judgment interest payable to the contractor pursuant to the Courts of Justice Act.  Further, should Pierce J. have been inclined to find a breach of an obligation to pay on the part of the owner, she could have still found damages to have resulted from the breach but she should have then found (on the evidence described by the Decision) that the contractor did not adduce sufficient evidence to support his claim and then awarded no damages on the basis that quantum had not been proven.  Instead we are left with, in my view, a bad Decision (on this point) that could come back to haunt other litigants arguing this sort of contractual interest dispute.

Lien for Interest

On the second point, section 14(2) of the Construction Lien Act expressly says that, “No person is entitled to a lien for any interest on the amount owed to the person in respect of the services or materials that have been supplied by the person, but nothing in this subsection affects any right that the person may otherwise have to recover that interest.”  As such, Pierce J. erred in law by including the interest she awarded the contractor in the declared amount of the lien she declared the contractor to have over the owner’s lands.  The interest should have been included in the money judgment but should not have been included in the value of the lien.