COURT OF APPEAL FOR ONTARIO
CITATION: Ross-Clair v. Canada (Attorney General), 2016 ONCA 205
DATE: 20160314
DOCKET: C59741
Gillese, Epstein and Roberts JJ.A.
BETWEEN
Ross-Clair, a division of R.O.M. Contractors Inc.
Applicant (Respondent)
and
Attorney General of Canada
Respondent (Appellant)
Jacqueline Dais-Visca, for the appellant
Jeffrey A. Armel and Daniel T. Resnick, for the respondent
Heard: September 25, 2015
On appeal from the order of Justice Thomas R. Lederer of the Superior Court of Justice, dated November 13, 2014, with reasons reported at 2014 ONSC 6551.
Epstein J.A.:
OVERVIEW
[1] This case involves the interpretation of a provision in a construction contract forming part of the process that allowed the contractor to advance a claim for compensation in excess of the contract price.
[2] On July 24, 2007, the respondent, Ross-Clair, a division of R.O.M. Contractors Inc., entered into a contract (the “Contract”) with the appellant, Her Majesty the Queen, as represented by Public Works and Government Services Canada (“PWC”). Under the Contract, Ross-Clair agreed to build management offices at the Millhaven Institution (the “Project”). For ease of reference, I will refer to the two contracting parties as Ross-Clair and PWC. The agreed-upon Contract price was fixed at $7,923,800, excluding taxes. By its terms, the Contract required completion by January 24, 2009.
[3] The Contract provided for a detailed procedure governing the circumstances under which Ross-Clair could claim additional compensation arising out of changes in soil conditions or PWC’s neglect or delay. I will refer to these requests for additional compensation as claims for “extras” – the term normally used in the industry.
[4] Central to this procedure was General Condition (“GC”) 35.4. This clause enabled Ross-Clair to submit a claim for extras to the Project Engineer.[^1] The claim had to be in writing and was expressly required to be supported by information sufficient to allow the Engineer to determine whether it was justified. The Engineer’s written decision or direction in this respect was final and binding, subject only to the provisions of the dispute resolution conditions found in the Contract (the “DRC”). The DRC provided that, if Ross-Clair rejected the Engineer’s decision, it had 15 working days to provide the Engineer with written notice of its dispute. The delivery of this notice would then engage a process ultimately allowing the parties to proceed to binding arbitration.
[5] In the course of working on the Project, Ross-Clair advanced a claim for extras in the amount of $2,204,676 (the “Claim”). PWC took the position that Ross-Clair did not provide a description of the facts and circumstances giving rise to the Claim sufficient to enable the Engineer to determine whether or not it was justified.
[6] Since a decision by the Engineer was the only route to payment for extras, Ross-Clair brought an application under r. 14.05(3)(d) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, for an order compelling PWC to direct the Engineer to consider the Claim and issue a written decision as to whether Ross-Clair was entitled to additional payment. Once the Engineer’s decision was rendered, the parties could, if necessary, proceed to binding arbitration.
[7] The application judge dealt with the amount of the Claim in two parts. He held that Ross-Clair’s claim for $1,437,976 of the $2,204,676 requested (the “$1,437,976 Claim”) met the contractual requirements relevant to advancing a claim for extras and directed the Engineer to make a decision as to whether the $1,437,976 Claim was justified. With respect to the remaining $766,700 (the “$766,700 Claim”), the application judge held that the information Ross-Clair provided was not sufficient to enable the Engineer to determine whether it was justified. The application judge therefore dismissed the application with respect to the $766,700 Claim.
[8] PWC appeals the application judge’s decision with respect to the $1,437,976 Claim.
[9] The interpretation of GC 35.4 – specifically what constituted a written claim sufficient to enable the Engineer to determine whether a claim for extras was “justified” – is the focus of the dispute between the parties and of this appeal.
[10] PWC submits that, on a proper interpretation of GC 35.4, the $1,437,976 Claim lacked information sufficient to enable the Engineer to determine whether it was justified. Ross-Clair contends that the application judge’s conclusion demonstrates neither an extricable error in law nor palpable and overriding error.
[11] I would allow the appeal. For the reasons that follow, I have concluded that the application judge fell into error in interpreting GC 35.4. Specifically, he interpreted the provision in isolation without regard to related provisions in the Contract. In my view, when GC 35.4 is properly interpreted, the information Ross-Clair provided in support of the $1,437,976 Claim did not meet the provision’s requirements as the information was not sufficient to enable the Engineer to determine whether or not the $1,437,976 Claim was justified.
BACKGROUND FACTS
The Relevant Contractual Provisions
[12] The Contract contained interrelated provisions that established a procedure under which Ross-Clair could seek payment for extras relating to changes in soil conditions, or neglect or delay by PWC. As the application judge noted, these provisions may be considered to be a “Code” that governed the rights and obligations relating to a claim for extras.
[13] GC 35 formed the central part of this Code. For the purposes of my analysis, it is necessary to set out GC 35 in its entirety:
GC 35 (1994-01-10) Changes in Soil Conditions and Neglect or Delay by Her Majesty
35.1 Subject to GC 35.2 no payment, other than a payment that is expressly stipulated in the contract, shall be made by Her Majesty to the contractor for any extra expense or any loss or damage incurred or sustained by the contractor.
35.2 If the contractor incurs or sustains any extra expense or any loss or damage that is directly attributable to
35.2.1 a substantial difference between the information relating to soil conditions at the work site that is contained in the Plans and Specifications or other documents supplied to the contractor for use in preparing the contractor’s tender or a reasonable assumption of fact based thereon made by the contractor, and the actual soil conditions encountered by the contractor at the work site during the performance of the contract, or
35.2.2 any neglect or delay that occurs after the date of the contract on the part of Her Majesty in providing any information or in doing any act that the contract either expressly requires Her Majesty to do or that would ordinarily be done by an owner in accordance with the usage of the trade,
the contractor shall, within ten (10) days of the date the actual soil conditions described in GC 35.2.1 were encountered or the neglect or delay described in GC 35.2.2 occurred, give the Engineer written notice of intention to claim for that extra expense or that loss or damage.
35.3 When the contractor has given a notice referred to in GC 35.2, the contractor shall give the Engineer a written claim for extra expense or loss or damage within thirty (30) days of the date that a Final Certificate of Completion referred to in GC 44.1 is issued and not afterwards.
35.4 A written claim referred to in GC 35.3 shall contain a sufficient description of the facts and circumstances of the occurrence that is the subject of the claim to enable the Engineer to determine whether or not the claim is justified and the contractor shall supply such further and other information for that purpose as the Engineer requires from time to time.
35.5 If the Engineer determines that a claim referred to in GC 35.3 is justified, Her Majesty shall make an extra payment to the contractor in an amount that is calculated in accordance with GC 47 to GC 50.
35.6 If, in the opinion of the Engineer, an occurrence described in GC 35.2.1 results in a savings of expenditure by the contractor in performing the contract, the amount set out in the Articles of Agreement shall, subject to GC 35.7, be reduced by an amount that is equal to the saving.
35.7 The amount of the saving referred to in GC 35.6 shall be determined in accordance with GC 47 to GC 50.
35.8 If the contractor fails to give a notice referred to in GC 35.2 and a claim referred to in GC 35.3 within the times stipulated, an extra payment shall not be made to the contractor in respect of the occurrence.
[14] As can be seen, the provisions contain two main requirements – time and the provision of information in support of a claim for extras.
The Claim
[15] The Claim emerged and was discussed in a series of letters between Ross-Clair and PWC, and Ross-Clair and the Engineer. As can be seen from the following summary, the nature of what was being discussed by the parties is at times unclear. Ross-Clair appears to have treated the correspondence as involving both a request for an extension of time and a claim for compensation for extras, whereas PWC often refers solely to the request for a non-compensable extension of time.
[16] In a letter from Ross-Clair to the Engineer dated December 5, 2008,[^2] Ross-Clair provided notice of the $1,437,976 Claim[^3]:
Due to delays by the Institution in the start of construction for Building "E", we hereby request Project time extension as per our revised Schedule, dated December 1, 2008, which indicates completion date of September 14, [2]009. The Schedule is based on a tentative start date for Building "E" of December 15, 2008.
The original Schedule was based on the Tender/Contract documents, which did not tie-in, start of construction for Building "E" to completion of "E" Yards.
As a result of the delays and extension of the Schedule there will be additional cost incurred, which will be quantified and forwarded for your review in due course.
[17] The Engineer responded to Ross-Clair in a letter dated December 16, 2008, stating that "there [was] insufficient evidence to suggest that all of [the] delay [was] the direct cause of the Institution". The Engineer therefore requested additional details to support the $1,437,976 Claim.
[18] On December 22, 2008, a meeting of representatives of Ross-Clair, PWC and the Engineer was held to discuss, among other things, Ross-Clair’s request for an extension of time to complete the Project, and associated costs. The report of the meeting discloses that the representative for PWC requested a detailed breakdown of the projected costs and the impact on the Project, in order to examine the $1,437,976 Claim. Ross-Clair agreed to respond to this request by January 10, 2009.
[19] On February 27, 2009, PWC wrote to Ross-Clair expressing concern about the default in Ross-Clair’s obligation to complete the Project by January 25, 2009 and reminding Ross-Clair of its promise to submit a request for an extension of time.
[20] Ross-Clair replied to the February 27, 2009 letter on March 2, 2009. Referring to its letter of December 18, 2008 as a request for an extension of time to complete the Project, Ross-Clair then outlined the basis for that request. Ross-Clair also indicated that the March 2 letter was to respond to PWC’s request for additional information in relation to the extension of time, and to provide PWC with additional cost information. The March 2 letter contained a description of circumstances that, according to Ross-Clair, caused delay in completing Buildings “A”, “E” and “J”. In particular, Ross-Clair cited “delays due to site conditions, weather conditions, alterations to the [C]ontract and disruptions to the original sequence of construction” as necessitating the December 18, 2008 request for an extension of time. Attached to the letter was a document entitled “Additional Costs Summary” that listed various subcontractors and the costs attributed to their work. These costs totalled $1,437,976.
[21] Other than the Additional Costs Summary, the letter of March 2 did not contain any other supporting documentation.
[22] In letters dated April 7, 2009 and April 20, 2009, PWC wrote to Ross-Clair requesting further documentation in support of Ross-Clair’s request for an extension of time to complete the Project. The April 7, 2009 letter noted that the extension would be treated as non-compensable “until the supporting documentation necessary to validate the [$1,437,976 Claim was] received and the costs associated with [Ross-Clair’s $1,437,976 Claim could] be fully explored.” The Engineer also wrote to Ross-Clair on May 29, 2009, expressing its concerns as to the extension of time and requiring Ross-Clair to submit a detailed plan of action.
[23] On October 6, 2009, PWC responded to Ross-Clair’s request for an extension of time and compensation, as follows:
… [PWC’s] priority at present is to achieve completion as quickly as possible, and our preference would be to deal with your claim [(the $1,437,976 Claim)], once you have finalized it and provided supporting documentation, after completion is achieved.
It was not until March 2, 2009, that Ross[-]Clair set out its impact cost claim for $1.437 million, although no indication was provided as to what time period this cost claim related nor what assumptions were embedded in it.
Since December, 2008, all parties have been working towards the Target Date, but there has been no agreement reached with regards to the causes for the delays, and [PWC] has advised that it disputes Ross[-]Clair's entitlement to compensation during the delay period.
Lack of coordination, late start-up, poor scheduling, and inadequate resourcing by Ross[-]Clair are all factors which in our view have contributed to the delays experienced to date. As well, certain delay factors, such as weather, would not ordinarily be compensable in any event. A more in depth analysis of the delays on the Project will need to be completed in order for the parties to be in any position to allocate responsibility for the delay.
In terms of compensation issues, Ross[-]Clair has provided no indication of what assumptions are behind the $1.437 million claim for additional compensation. These assumptions, together with all relevant supporting documents, must be provided before we can assess this aspect of your claim. You will need to also provide information indicating your efforts and those of your subcontractors aimed at mitigating impact costs.
We would draw your attention to GC 51 of the Contract…. In order for us to assess your impact cost claim we require that you produce all your cost estimates including your original tendering estimating sheets, and all records including general ledgers and books of account, and all other supporting documents relevant to your impact cost claim.
Once we have received additional information from you relating to the assumptions and factual background to your claim, we would suggest that we meet to discuss it, after which the Engineer will determine whether any portion of the claim is justified. Once the Engineer makes that determination, Ross[-]Clair can consider the processes available under the [C]ontract for resolving disputes. [Emphasis added.]
[24] In this letter, PWC extended the time to complete the Project to September 14, 2009. This extension was granted without compensation and without prejudice to “[PWC’s] right to contest [Ross-Clair’s] entitlement to any time extension or compensation from [PWC] related to such an extension”.
The Correspondence Continues
[25] On March 31, 2011, Ross-Clair wrote to PWC further to its “Delay Claim of March 2, [2]009”, submitting a claim for extras incurred as a result of delays in ongoing work in Building “E” as well as additional work carried out under change orders from September 14, 2009 to April 20, 2010. This correspondence contained no breakdown of the costs being claimed. It said only that “[t]he additional cost incurred [was] in the amount of $766,700.00, for a Total Revised Claim of $2,204,676.00” and offered to provide additional information as required in support of its Claim. This additional amount formed the basis of the $766,700 Claim.
[26] PWC wrote to Ross-Clair on April 20, 2011 and advised:
Your letter dated April 2, 2011[^4] requesting additional funds for the delay claim did not contain a sufficient level of detail. [PWC] has not received sufficient supporting documents or information that would allow it to determine if the [Claim] is justified, or if the compensation sought is fair and reasonable. Please provide documentation to substantiate each of your costs on the original [$1,437,976 Claim] and the additional [$766,700 Claim] that you have referenced in your letter of April 2, 2011, with proof that the delays responsible for these additional costs were caused by [PWC]. Until this is received [PWC] will not be able to assess your entitlement to any additional compensation.
[27] Ross-Clair’s work on the Project was certified by the Engineer as complete on February 10, 2012. Ross-Clair was not granted any further extension to the Contract.
[28] The record contains only one further communication from Ross-Clair in support of the Claim. On May 28, 2013, Ross-Clair provided PWC with a report called “Analysis of Delays and Additional Costs" (the "Knowles Report").
THE APPLICATION JUDGE’S REASONS
Ross-Clair’s Compliance with its Notice Obligation under GC 35.2
[29] The application judge’s analysis started with whether the December 5, 2008 letter from Ross-Clair to the Engineer constituted notice in accordance with GC 35.2.[^5] The application judge noted that counsel for PWC acknowledged that Ross-Clair had complied with the notice requirement.[^6]
Ross-Clair’s Compliance with its Obligations under GC 35.3 and GC 35.4
[30] The application judge then turned to Ross-Clair’s obligations under GC 35.3 and GC 35.4, which, for convenience, I will reproduce again here:
35.3 When the contractor has given a notice referred to in GC 35.2, the contractor shall give the Engineer a written claim for extra expense or loss or damage within thirty (30) days of the date that a Final Certificate of Completion referred to in GC 44.1 is issued and not afterwards.
35.4 A written claim referred to in GC 35.3 shall contain a sufficient description of the facts and circumstances of the occurrence that is the subject of the claim to enable the Engineer to determine whether or not the claim is justified and the contractor shall supply such further and other information for that purpose as the Engineer requires from time to time.
[31] The application judge expressed what he saw as the core of the dispute as follows:
The question to be posed is whether what is required is notice of the claim or proof of it? The answer lies somewhere between the two. There has to be more than notice but less than the proof an arbitrator would require. Notice, that is advice of an intention to make a claim, is provided through the provision of [GC] 35.2. This is the requirement for notice within 10 days of the actual soil conditions being encountered or the delay having occurred. This is the provision that [PWC] conceded has been complied with. On the other hand, there has to be enough information for the Engineer to be able to decide if the claim is justified. This need not be proof of the claim. The idea that proof is not necessary is demonstrated by the recognition that more information could be required and confirmed by the negotiations and mediation the process calls for before any disagreement goes to binding arbitration.
[32] The application judge relied on this court’s decision in Technicore Underground Inc. v. Toronto (City), 2012 ONCA 597, 354 D.L.R. (4th) 516, for the proposition that providing notification of a claim for extras in accordance with the terms of the parties’ agreement is a condition precedent to the consideration of such a claim and ultimately access to the dispute resolution process. The application judge, referring to GC 35.8, observed that if he were to find that Ross-Clair had failed to give the Engineer a written claim, as stipulated by GC 35.4, within 30 days of the date when the Final Certificate of Completion was issued, Ross-Clair would not be entitled to any extra payment in respect of the Claim.
[33] The application judge observed that GC 35.4 did not expressly demand a “detailed claim”, as had been the case in Technicore. Rather, GC 35.4 required only a written claim that contained “a sufficient description of the facts and circumstances of the occurrence ... to enable the Engineer to determine whether or not the claim [was] justified.”
[34] Against this background, the application judge set out his conclusion in relation to the $1,437,976 Claim as follows:
To my mind, the notice provided by the letter of December 5, 2008, in company with the letter of March 2, 2009 (particularly the “Additional Cost Summary” it enclosed), is enough to comply with this requirement. I say this understanding that the Engineer, receiving this notice, is not a stranger to the project but an active participant in reviewing its progress.
[35] In relation to the $766,700 Claim, the application judge found that the letter of March 31, 2011 did nothing more than increase the amount of the [$1,437,976 Claim] by $766,700. The letter contained no description of the facts or circumstances explaining the increase. There was nothing on which the Engineer could base a decision. According to Technicore, the Knowles Report, which provided details of this additional amount claimed, could not be considered as, contrary to GC 35.3, it was delivered later than 30 days after the issuance of the Final Certificate of Completion.
[36] The application judge therefore held that the $1,437,976 Claim complied with GC 35.4 but that the $766,700 Claim did not.
The Engineer’s Compliance with its Obligation to Render a Decision
[37] The application judge went on to note that, under the Contract, the Engineer had to render a decision on a properly supported claim for extras. He therefore considered whether such a decision had been made in relation to the $1,437,976 Claim.
[38] The application judge observed that, in its letter of October 6, 2009, PWC provided Ross-Clair with a preliminary response to Ross-Clair’s request for additional compensation and an extension of time to complete the Project. In that letter, PWC denied responsibility for any delay and took the position that a more in-depth analysis of the delays in the Project would be needed in order to be in any position to allocate responsibility. PWC expressed concern that Ross-Clair had provided no indication of the assumptions behind the $1,437,976 Claim and made it clear that such assumptions, together with all relevant supporting documents and information about efforts taken to mitigate impact costs, had to be provided so that the $1,437,976 Claim could be assessed.
[39] The application judge concluded that the October 6, 2009 letter did not constitute a decision and that the Engineer was required to make one in relation to the $1,437,976 Claim:
… A decision should have been made. It may be that [PWC] blames Ross-Clair for not complying with its request for more information. Maybe Ross-Clair did not appreciate the impact of the terms of the [C]ontract and delayed doing what it was asked to do. Be that as it may, the requisite notice for the [$1,437,976 Claim] was made. A decision is required.
ANALYSIS
[40] I would frame the issues raised on this appeal as follows:
(i) What is the standard of review?
(ii) Did the $1,437,976 Claim meet the requirements of GC 35.4?
Issue One: What is the Standard of Review?
[41] The parties disagree on the applicable standard of review.
[42] In oral argument, counsel for PWC submitted that the Contract was a standard form contract. Counsel acknowledged that the Contract was unlike a typical standard form contract, in that the process through which the parties agreed upon the terms of their bargain allowed for selection from among PWC’s array of standard clauses. The individual clauses themselves, however, were in a standard form used in all such contracts with the federal government. The meaning of GC 35.4 had been raised in prior case law, and it can be assumed that its interpretation would have precedential value. These characteristics support a standard of review of correctness, in line with recent appellate decisions in Vallieres v. Vozniak, 2014 ABCA 290, 580 A.R. 326; Precision Plating Ltd. v. Axa Pacific Insurance Company, 2015 BCCA 277, 387 D.L.R. (4th) 281, leave to appeal refused 2016 CarswellBC 64 (S.C.C.); Ledcor Construction Limited v. Northbridge Indemnity Insurance Co., 2015 ABCA 121, 386 D.L.R. (4th) 482, leave to appeal granted [2015] S.C.C.A. No. 188; and MacDonald v. Chicago Title Insurance Co. of Canada, 2015 ONCA 842, 127 O.R. (3d) 663.
[43] PWC contends that a correctness standard is appropriate for another reason. PWC argues that the application judge committed an extricable error of law by interpreting GC 35.4 without regard to other relevant provisions in the Contract.
[44] Ross-Clair argues that, given that the Contract allowed for some degree of negotiation, the deferential standard of review confirmed by the Supreme Court in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, applies.
[45] In my view, the decision is reviewable on a standard of correctness.
[46] I do not come to this conclusion based on a finding as to the nature of the Contract. Although it may be appropriate to regard the Contract as a standard form agreement, the interpretation of which is subject to review on a correctness standard, it is difficult to arrive at a definitive resolution of that question on this record. There is scant evidence of the circumstances surrounding the formation of the Contract, particularly any aspects that may have been negotiated. There is also scant evidence of the extent to which the terms in the Contract are used in other agreements with the Government of Canada. Moreover, the fact that in a previous decision, the court was required to interpret a very similar contractual provision does not provide a basis for a conclusion that the interpretive exercise in this case would have the potential precedential value that influenced the decisions in Vallieres, Precision Plating, Ledcor,and Chicago Title.
[47] My view rests on PWC’s alternative argument. For reasons I will now explain, I agree that, in interpreting the Contract, the application judge erred by failing to construe the Contract as a whole. Accordingly, it falls to this court to properly interpret and apply GC 35.4.
The Application Judge Erred in Interpreting GC 35.4 in Isolation
[48] One of the fundamental principles of contractual interpretation is that the contract must be construed as a whole: Sattva, at para. 64. In Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010] 1 S.C.R. 69, at para. 64, the Supreme Court expressed this contractual interpretation imperative as follows: “the words of one provision must not be read in isolation but should be considered in harmony with the rest of the contract and in light of its purposes and commercial context.” A proper interpretation of GC 35.4 had to involve a consideration of the other provisions in the Contract, specifically those comprising the Code.
[49] As can be seen from the excerpt from the reasons set out above at para. 31, the application judge identified his interpretive task as having to determine whether GC 35.4 required “notice of the claim or proof of it”. He found the answer lay “somewhere between the two.” He observed that, unlike the agreement in Technicore, the Contract did not contain the phrase “detailed claim” or list specific requirements for the contents of a claim for extras. Based on these observations, the application judge concluded that more information than that contained in the letters of December 5, 2008 and March 2, 2009 was not required under GC 35.4.
[50] It is clear that in coming to this conclusion, the application judge looked no further than the words in GC 35.4 itself. He did not take into account the relationship between that provision and the other related parts of the Code.
[51] In order to understand the impact of related provisions in the Code on the interpretation of GC 35.4, it is helpful to summarize how, according to this Code, a claim for extras is intended to function.
[52] I start with GC 35.4 and then turn to how it fits into the Code.
[53] It is important to bear in mind that a claim contemplated by GC 35.3 and GC 35.4 has several components. First, there is a form requirement – it must be in writing. Second, there is a sufficiency requirement – it must contain a sufficient description of the facts and circumstances to enable the Engineer to make a decision as to whether the claim is justified. Finally, there is a time requirement – the claim must be given to the Engineer within 30 days of the date that a Final Certificate of Completion is issued.
[54] I now turn to certain aspects of the process by which a contractor seeks payment for extras. The contractor must give written notice under GC 35.2. This notice must be followed by a written claim under GC 35.3 and GC 35.4. However, while the contractor must give notice within ten days of the occurrence giving rise to the claim for extras, the contractor has time to submit the actual claim. In fact, GC 35.4 itself provides an opportunity for the Engineer to request further information in support of the Claim and the contractor to respond to any such request. As previously noted, GC 35.4 expressly allows this process to continue beyond the date when the work is certified as being complete.
[55] If the Engineer determines the claim is justified, GC 35.5 mandates that PWC “shall” make an extra payment to the contractor in an amount calculated in accordance with GC 47 to GC 50.
[56] The nature of the information required by GC 49 to 50 provides additional context for the interpretation of GC 35.4. GC 49 deals with how costs are determined, prior to undertaking work. GC 49.2 provides that, in order to facilitate approval of a change, the contractor must submit a cost breakdown identifying, at a minimum, the costs of labour, plant, and material; each subcontract amount; and the amount of the percentage mark-up. GC 50 contemplates the submission of equally, if not more, detailed information in circumstances where it was not possible to predetermine the price of a change.
[57] In summary, the Code contemplates a process for dealing with a contractor’s claim for extras in which the Engineer has control sufficient that it can fulfill its obligation to determine whether a claim is justified. The Engineer receives the claim. The Engineer decides whether the information provided within the prescribed time frame is sufficient to determine if the claim is justified. If so, the Engineer decides the amount, if any, to be paid to the contractor – again, subject to arbitration. The Engineer fulfills this important role in the context of a Code that, in my view, depends on a highly specific informational component.
[58] It is apparent that the application judge, in interpreting the information required by GC 35.4, did not take into account the context of the rest of the Contract, particularly that provided by the Code. Rather, his approach to the interpretive exercise was as Doherty J.A. described in Glimmer Resources Inc. v. Exall Resources Ltd. (1999), 1999 CanLII 1102 (ON CA), 119 O.A.C. 78 (C.A.), at para. 17 – he gave meaning to the word “claim” by looking at it under an “interpretative microscope in isolation”. This constitutes an extricable error of law.
Issue Two: Did the $1,437,976 Claim meet the requirements of GC 35.4?
[59] For the reasons that follow, I conclude that the application judge’s determination that the $1,437,976 Claim met the requirements of GC 35.4 cannot stand. It follows that his direction that the Engineer make a decision in respect of the $1,437,976, Claim similarly cannot stand.
GC 35.4 Requires More than what was Contained in the Letters
[60] As stated in Sattva, at para. 57, the interpretation of a written contractual provision is “grounded in the text and read in light of the entire contract”. This court can look to the surrounding circumstances in interpreting the contract, but they must never be allowed to overwhelm the words of the agreement: Sattva, at para. 57.
[61] The language used in GC 35.4, interpreted in the context of the rest of the Code, leads me to conclude that even though the word “detailed” is not included in GC 35.4, the requirement that a contractor submit a claim in writing sufficient to enable the Engineer to determine whether the claim is justified cannot be interpreted in a manner other than that it must be supported by detailed information. Without detailed information, it is difficult to see how the Engineer would be able to make a decision as to the validity of a claim. In my view, such a decision requires “proof” that the claim is justified.
[62] It follows that in order to allow the Engineer to determine the validity of the $1,437,976 Claim, more was required than the contents of the December 5, 2008 and March 2, 2009 letters. I say this even taking into consideration the application judge’s implicit finding that the Engineer was intimately familiar with the Project.
[63] The two letters provided little if any support for the $1,437,976 Claim. Among other things, the letters failed to include information relating to the nature and extent of PWC’s responsibility for the delay, to address whether compensation had already been paid on account of the extra expense or to explain whether the extra expense contained in the $1,437,976 Claim fell within the classes of expenses compensable under GC 35.5 and GC 49 or GC 50, and, if so, in what amount.
[64] Moreover, the two letters were inconsistent and therefore confusing in terms of the location where the extra work was said to be required. The letter of December 5, 2008 referred to “delays by the Institution in the start of construction for Building ‘E’” in “completion of ‘E’ yards”. The letter of March 2, 2009 mentioned Building “J” and revisions to concrete foundations due to soil conditions and consequent additional time required to complete related masonry work. The March letter went on to speak to Building “A” as having been impacted by revisions to concrete foundations. Finally, in the March 2, 2009 letter, Ross-Clair returned to “Building E” and the start of construction having been tied into the completion of “E” Yards. The Additional Costs Summary included with this letter provided skeletal information listing the amounts attributed to various sub-contractors but no breakdown identifying, for example, the costs of labour, plant, and material or the amount of the percentage mark-up.
[65] That the Engineer and PWC repeatedly asked Ross-Clair to provide more information to enable a determination to be made as to whether either part of the Claim was justified further solidifies my conclusion that the $1,437,976 Claim did not meet the requirements of GC 35.4. There is nothing in the record that suggests that Ross-Clair provided any information in response to these requests prior to the delivery of the Knowles Report. The Knowles Report was delivered on May 28, 2013, over one year and three months after the Final Certificate of Completion was issued. By then, it was too late.
[66] In conclusion, the information contained in the letters was lacking in specificity, confusing in terms of identifying the parts of the Project affected by the delay and accompanied by virtually no information in support of the extra work done and the costs associated with any such work. In my view, therefore, the application judge erred in ordering the Engineer to render a decision in relation to the $1,437,976 Claim.
[67] For completeness, I add that I see no evidence that supports Ross-Clair’s submission that either PWC or the Engineer acted in bad faith in the course of their requests for further information.
DISPOSITION
[68] Accordingly, for the foregoing reasons, I would allow the appeal and set aside the order of the application judge. I would dismiss the application and declare that Ross-Clair’s claim for extra payment is barred by operation of the Contract. I would award PWC its costs of the appeal in the agreed-upon amount of $15,000, inclusive of disbursements and applicable taxes.
Released: March 14, 2016 (EEG)
“Gloria Epstein J.A.”
“I agree E.E. Gillese J.A.”
“I agree L.B. Roberts J.A.”
[^1]: As noted by the application judge, initially, there was confusion as to who should be taken to be the Engineer (PWC or NORR Limited). For the purposes of the decision below, counsel for PWC accepted that the Engineer was NORR Limited. [^2]: As a result of the confusion as to who was the Engineer, Ross-Clair sent another letter, identical in substance to the letter of December 5, 2008, to PWC on December 18, 2008. [^3]: While this letter notified Ross-Clair of the existence of the claim, no information was provided as to quantum. Ross-Clair did not inform PWC of the amount, $1,437,976, until a letter dated March 2, 2009. [^4]: As noted by the application judge, there is no letter dated April 2, 2011 in the record. [^5]: At times, the application judge confuses the terms “notice” under GC 35.2 and “claim” under GC 35.3 and 35.4. [^6]: Counsel for the appellant initially challenged this concession on appeal, but ultimately resiled from that position and accepted the concession.