Notice of Delay: Simon says, “I am making a claim.”

January 8, 2018

Contrary to the perception that lawyers thrive in loopholes, when a dispute arises, the concepts of fair and reasonable are consistent.  It is on that basis that most parties are able to work through disputes without commencing litigation.  It is also why people get worked up when the issue raised is whether there was formal notice under the contract, or when Simon says, “I am making a claim.”

By reputation, “notice of delay” remains shrouded as if it were a rule to be followed only for the rule’s own sake.  After all, everyone knows when a job is behind schedule.  The concern over the notice requirements for claims of contractor delay are rooted in contract: for example GC 6.5 of CCDC 2 or GC 8 in the standard front end documents set by the Newfoundland and Labrador Department of Municipal Affairs and Environment expressly oblige contractors to give notice in writing within days after the commencement of the delay.

Intuitively, the notice requirement is daunting to most: in addition to compounding an already stressful situation, putting the other side on formal notice could burn bridges. After all, when someone is pushing you because you are behind, they already know that you have been delayed.  The argument is: ‘we know you have not met your schedule; we didn’t know that you were going to charge us for that.’

Embar Construction Ltd. v. Newfoundland 

Understanding when delay is “actionable” (or can sustain litigation and result in damage awards) is the first step in rationalizing the process; the 1995 decision of Embar Construction Ltd. v. Newfoundland (Minister of Works, Services and Transportation) explains that:

In most such projects, delays are a common occurrence and … it is not enough to show that there had been delay, but that there was in this case “actionable” delay. … [I]t must be clearly demonstrated that the delay was caused by the act of the owner or another contractor and, most importantly, … that the delay resulted in additional costs or expenses being incurred by the claimant attributable to that delay … [and] … that the contractor’s forces could not have worked efficiently elsewhere on the project.  …  In other words, not only must it be demonstrated that a delay occurred which was the fault of the owner or another contractor, unavoidable loss or damage must be demonstrated to have been the result thereof. 1

The Court in Embar explains prompt notice under the contract as a common sense requirement on the basis that the claimant could not proceed and damages could not be avoided:

… It is obviously equally important that any such claim for delay be brought to the attention of the other party immediately in order that a resolution may be at least attempted in an expeditious manner; this is the very reason for the time limitation. … One can fairly say that experienced contracting parties would either make or expect to have made against them any such claims as soon as they occur and with sufficient detail to place on the record that the claim is a valid one.2

Corpex (1977) Inc. v. Canada

The Embar approach is consistent with the Supreme Court of Canada decision in Corpex (1977) Inc. v. Canada, which 35 years ago ruled that the notice requirement benefits both the contractor and the owner but that benefit is denied when notice is not given.  Notice initiates a process for the contractor to respond to its frustration and delay, and for the owner to explore alternatives in how the work can proceed with minimal delay and have opportunity to verify or challenge circumstances before claims are fully developed.  The presumption is that, if there is an issue, everyone impacted should have an opportunity to address it head-on and should not be prejudiced if no one speaks up.3

While generally referenced in relation to who bears the risk for change in conditions, Corpex is still followed re notice obligations. Current case law confirms that the argument can still be particularly effective in efforts to strike down delay claims at a preliminary stage without the need of a full trial [4] or as a full answer to a delay claim.[5]

Know Your Contract

Notice is more than a game of “Simon Says” and lack of notice does not always bar a delay claim if the court can find that there was actual or constructive notice.  Whether the contractual obligation to provide notice has been met can be very fact-specific: the issue is in understanding what the contract actually provides and what evidence is made available.  For example, minutes of meetings (especially where detailed and circulated for review and correction) can demonstrate if a party has adequately communicated concerns.  Details that seem monotonous, like repeated issues around access to the site, structures, utilities under or above-ground, or about other forces or outstanding decisions from the owner, can be taken as a contractor (a) carefully listing concerns, (b) asking for action and (c) indicating a clear intention to claim or demand the appropriate remedy.   A Court can consider this to be notice, but it cannot make that determination until it sees the witnesses and evaluates all of the evidence to gain an appreciation of the relevant circumstances – a notice letter is generally a more efficient tool.  Rather than gamble on how strictly a contract might be read or actions might be interpreted, best practice is to follow the contractual provisions and clearly explain in writing the cause for concern, how it needs to be addressed and what will result, especially as relates to costs.

Formal notice can ratchet-up an already tense situation, but it can also help provide a road map for what needs to be done to diffuse issues.  Even when damages cannot be predicted with any degree of accuracy, experienced parties usually know when increased costs are likely and, in most cases, the simple fact that costs are increasing can be as significant as the exact figures.  Often, an external resource can prepare the notice on your behalf, or can help you find the words to better prepare the notice yourself.   Early legal advice can be a valuable investment, especially where specific terms are part of the issue.  While it may seem like an exercise in navigating loopholes, formal notice usually makes sense as an opportunity to mitigate delay and keep increasing costs in check.  It is not always obvious, but more people are looking for a resolution than for litigation.

Richard is a partner at the St. John’s office, practising in commercial litigation with a focus in construction. He serves as the Construction Law Section Chair of the Canadian Bar Association (NL Branch) and is co-chair of Cox & Palmer’s Construction Law Group. 

This article is designed to provide a general overview of its topic. It does not cover every issue or exception and is not intended to form a legal opinion in relation to any specific set of facts. Neither Cox & Palmer, nor its partners, associates or staff shall be liable for any loss or damage arising out of the use of this information or the application of concepts set out therein. Individuals are advised to obtain legal advice when it comes to their specific circumstances.

1   [1995] N.J. No. 108 at paragraphs 15-16

2   [1995] N.J. No. 108 at paragraphs 25-26

3   [1982] S.C.J. No. 91

4   For example Limen Structures Ltd. v Brookfield Multiplex Construction Canada Limited, 2016 ONSC 5107

5   Such as in Construction Cogerex ltée c. Dawalibi Investissements inc., 2017 QCCS 1817

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