ONTARIO
SUPERIOR COURT OF JUSTICE
2013 ONSC 3226
COURT FILE NO.: 07-CV-339990
DATE: May 31, 2013
BETWEEN:
Pegah Construction Ltd.
K. Bannon (Pegah), for the plaintiff
Fax: 416-368-3467
Plaintiff
- and -
Panterra Mansions Joint Venture Corp., 1221456 Ontario Limited, 1746288 Ontario Inc., Lombard General Insurance Company of Canada, Romspen Investment Corporation and Howard Kutner
D. Preger for the defendant SF Partners as receiver for Panterra Mansions
Fax: 416-865-1398
D.M. Steidman for the defendants Romspen and 1746288 Ontario Inc
Fax: 416-360-6868
Defendants
HEARD: May 14, 16, 17, 21 and 22, 2013
Master C. Albert
I. INTRODUCTION
This dispute arises from the now insolvent development project called Jarvis Mansions. Panterra Mansions Joint Venture Corp. (“Panterra”) is the owner and developer of 539 Jarvis Street, Toronto. Panterra contracted with Pegah Construction Ltd. (“Pegah”) to renovate the existing building and build a high rise addition to create a total of 34 condominium units. Firm Capital provided the initial funding and subsequently assigned its mortgage to 1746288 Ontario Inc. (“174”), with Romspen Investment Corporation (“Romspen”) providing additional funding late in the day when the project encountered financial difficulties. Ultimately the mortgagees placed Panterra into receivership and appointed SF Partners Inc. as receiver (the “receiver”).
Several contractors, including Pegah, registered construction liens against the property and the matter came before me by way of reference under the Construction Lien Act.
The rights and priorities of lien claimants and mortgage lenders must be determined for the receiver to distribute funds to lien claimants and mortgagees. These rights and priorities depend on the structure of the relationship between Panterra and Pegah.
Pegah maintains that its role was that of general contractor and that the receiver’s holdback obligation must be calculated as ten percent of the total value of materials and services supplied under its contract with Panterra. Pegah argues substance over form and asks the court to find that Pegah was a general contractor notwithstanding that it was labeled as a construction manager in the contract.
The receiver’s position is that Panterra contracted with Pegah to provide construction management services as Panterra’s agent and not as general contractor. The receiver maintains that its holdback obligation must be calculated on a contract by contract basis with the trade contractors. Romspen and 174 as mortgagees side with the receiver. The receiver argues that form governs and that Pegah is a construction manager as defined in the written contract.
Pursuant to my directions of June 1, 2012 in this reference I ordered a trial of the issue of whether the relationship of Pegah and Panterra is one of owner and general contractor or one of owner and project manager.
II. PRELIMINARY ISSUE: ADMISSIBILITY OF EXTRINSIC EVIDENCE
Trial of the issue began on May 14, 2013. The receiver, Romspen and 174 raised as a preliminary issue the extent to which the court could hear and consider evidence extrinsic to the written contract[^1].
After hearing argument, and applying the decision of the Manitoba Queen’s Bench in Matthews Investments Ltd. v Assiniboine Medical Holdings Ltd.[^2], I determined that in the face of an objection to the admissibility of extrinsic evidence based on the parol evidence rule, the court must determine as a preliminary issue whether extrinsic evidence is admissible in the circumstances of the case before the court.
In ascertaining the meaning of a contract the court will search for an interpretation which, from the whole of the contract, is consistent with the true intent of the parties at the time they entered into the contract. Literal meaning should not be applied where to do so would bring about an unrealistic result or a result which would not be contemplated in the atmosphere in which the contracted was created[^3]. The issue is the extent to which the court may consider evidence beyond the actual contract document as an aid to interpretation.
In a clear statement of the parol evidence rule Justice Iacobucci, in Eli Lilly, supra, considered Consolidated Bathurst, supra, and concluded that contractual intent of the parties is to be determined from the words used in the contract itself, perhaps considered in light of the surrounding circumstances at the time of entering into the contract but without considering either party’s subjective intention[^4]. He wrote:
“It is unnecessary to consider any extrinsic evidence at all when the document is clear and unambiguous on its face.”
The issue is whether the contract between Panterra and Pegah was clear and unambiguous on its face. The receiver, Romspen and 174 argue that it was. Pegah argues that it was not.
Ambiguous means “unclear because not distinguishing between alternatives; having more than one meaning”.
The issue to be tried in this case is whether the contract between Panterra and Pegah creates the structure of owner and agent, with Pegah as construction manager acting as Panterra’s agent, or whether the contract creates the structure of owner and general contractor, with Pegah as general contractor.
I find that the contract, given its plain and ordinary meaning, could be capable of three possible interpretations:
a. The contract is for construction management services and Pegah is Panterra’s agent for all purposes;
b. The contract is for general contracting services with Pegah in the role of Panterra’s general contractor for all purposes; or
c. The contract is a hybrid one, where Pegah is authorized to act as construction manager and agent of Panterra in relation to some trades and as general contractor in relation to other trades.
- Ambiguity in the wording of the contract is found in section GC 3.1 dealing with contracts with Trade Contractors. Under the section in the contract titled “Definitions”, item 6 defines “Trade Contractor” as “a person, firm or corporation having a direct contract with the Owner to perform the work.” In section GC 3.1 of the contract, under the heading “Trade Contractors” the contract provides:
“3.1 The Construction Manager will, in accordance with the direction of the Owner, arrange for contracts to be entered into between the various Trade Contractors and the Owner/ or between the Trade Contractor and the Construction Manager with the approval of the Owner.”
There is an inherent conflict in this clause on its face. Pursuant to Article A-3 the construction manager, defined in the contract as Pegah, is appointed by Pegah as its agent to act in its name for the purpose of managing the construction. The second part of GC 3.1 is ambiguous and capable of more than one meaning. If it is read together with article A-3 one would have to substitute “Panterra by its agent Pegah” for “Construction Manager” and it would be repetitive of the first part of section GC 3.1, which has already dealt with the situation of contracts between Pegah and Trade Contractors. I find that GC 3.1 is ambiguous because it is capable of more than one meaning when considered in the context of the contract as a whole.
Clause GC 3.1 is a critical clause in this contract because it is at the crux of whether Trade Contractors contract directly with Panterra through Pegah as Panterra’s agent, or whether they contract directly with Pegah as general contractor, not as Panterra’s agent. One possible interpretation is that Panterra and Pegah intended that some of the contracts with trades be direct contracts with the Panterra and some of the contracts with the trades be arranged directly with Pegah.
I am mindful of the caution in Matthews Investments Ltd. v Assiniboine Medical Holdings Ltd. that the court should not strain to create an ambiguity that does not exist. I do not believe that I have strained in this case. In the construction industry there are two basic forms of contract and many hybrids. The two basic forms are (i) construction or project management where the construction manager acts solely as agent of the owner, and (ii) general contracting services where the contractor arranges for and enters into direct contracts with all of the trades. Clause GC 3.1 creates an ambiguity that suggests a hybrid structure without clarifying the rights and obligations of the construction manager in respect of contracts made with trades directly and not as agent of the owner.
In my view extrinsic evidence is required to resolve this ambiguity in the language of the contract. How the parties conducted themselves, including the form of contract entered into with trades, is relevant to determining the nature of the contract as between Panterra and Pegah and whether it was for construction management services, for general contracting services or a hybrid of the two.
Extrinsic evidence is admissible on the trial of the issue of the structure of the relationship of Panterra and Pegah.
III. TRIAL ISSUE: CONSTRUCTION MANAGER OR GENERAL CONTRACTOR?
Distribution of funds retained by the receiver depends on priorities which, in turn, depends on the structure of the relationship of Panterra and Pegah. If Panterra’s position that Pegah acted as construction manager and agent is correct then its holdback obligation is significantly lower, leaving more funds available for distribution by the receiver to mortgagees Romspen and 174 (“Romspen/174”).
The following diagrams illustrate the difference in the two structures in relation to the contractors who perform the physical construction, referred to in these reasons as “trades”.
Figure 1: General contract structure
Figure 2: Construction management structure
Panterra and Pegah executed a written contract on May 4, 2005. The original contract budget was $6,389,000.00 (the “budget”) plus a construction manager’s fee of $300,000.00 (the “fee”) plus GST. Six weeks later, on June 17, 2005, the parties executed two more documents: (i) an amendment to the contract reducing the budget by $245,000.000 and (ii) an irrevocable direction to the lawyer who would be holding proceeds of the sale of condominium units to pay Pegah $245,000.00 after discharging the Firm Capital mortgage. Reading these documents together, the contract price did not change. Rather, they agreed to defer payment of $245,000.00 of the contract price.
The triable issue of the structure of the relationship of Panterra and Pegah arises because the parties executed a CCA 5 1988 form of contract (the “CCA 5”), designed for use by an owner and construction manager where the construction manager acts as agent of the owner, but modified by the parties to incorporate features that are inconsistent with an agency structure. The contract labels and refers to Panterra as the owner and Pegah as the construction manager.
The parties added and amended three critical clauses:
a. GC 3.1: The parties amended the CCA 5 clause whereby the construction manager arranges for contracts with trade contractors as agent of the owner, and added an alternative option authorizing the construction manager to contract with trades directly and not as agent of the owner.
b. A-16: The parties amended the CCA 5 by adding a new clause whereby the construction manager takes on the risk of cost overruns, calculated as 50 percent up to $150,000.00 over budget and 100 percent of cost overruns above that threshold. In substance this clause increased the budget by $150,000.00 but required Pegah to pay for half of the increase and all costs above the increased budget. Article A-16 also provided that the parties would share cost savings if the project was completed under budget.
c. A-5 and GC–10: The parties amended the CCA 5 clause that provides for the construction manager’s fee to be paid monthly and replaced it with a schedule for percentage payments of the fee based on construction milestones.
The issue is whether the contract, as modified, transformed the structure from one of owner and construction manager to one of owner and general contractor. It is a matter of substance over form.
Project funding was stretched to the limit with no room for cost overruns. That is clear from the contract amendment reducing the construction budget by $245,000.00 to facilitate a mortgage advance. The significance of the transaction is that both Panterra and Pegah knew or ought to have known that there would be no funding available if project costs exceeded the budget. It also suggests that cost savings were unlikely.
It is not in dispute that the parties intended to incorporate incentives into the contract to encourage cost savings and discourage cost overruns. Pegah explains that the reason the CCA 5 form of contract was used was to allow for transparency in costs and flexibility: Panterra wanted the ability to examine and control costs, particularly in light of the funding concerns.
Clause A-16 was added to serve two purposes: (i) as an incentive to Pegah to minimize costs by sharing financially in any cost savings; and (ii) as a disincentive for cost overruns because Pegah was ultimately liable for cost overruns, after sharing the first $150,000.00. In an agency structure all cost savings would flow to the owner, and all cost overruns would be the sole responsibility of the owner. In a general contracting structure cost savings would flow to the general contractor and all cost overruns would be the sole responsibility of the general contractor. In the contract between Panterra and Pegah cost savings were to be shared and cost overruns beyond the increased threshold were the sole responsibility of Pegah.
Panterra argues that as a sophisticated businessman in the construction industry Mr. Mohtashami, president of Pegah, understood the ordinary meaning of the labels used in the contract and the amendments to the CCA 5 did not change the nature of the contract. Panterra points out that the amendment to article GC 3.1 that contemplates Pegah entering into direct contracts with trades requires the approval of the owner, but admits that Panterra is deemed to have approved of all trade contracts that were within budget.
In my opinion, if the court finds that the amendment to article GC 3.1 creates a structure akin to owner and general contractor then the requirement to secure the approval of the owner does not change that structure to one of agency. There are many reasons why an owner may contract for approval rights over trades working on its project. One reason might be to ensure that trades with whom the owner has had a prior negative experience are not hired. Failure to secure Panterra’s written approval for each trade contract would not change the structure from one of direct contracts with trades to one of agency with the contract rights and obligations vis-a-vis the trades attaching to Panterra in place of Pegah. In any event, I find that the contract did not require that Panterra’s approval be written. Mr. Rosen, as project architect, consultant and principal of the owner, was on site regularly and knew or ought to have known what trades were working on the project. There is no evidence of any occasion where Mr. Rosen challenged or refuted Pegah’s hiring of a trade directly without obtaining Panterra’s written approval.
Pegah argues that labels used in the contract do not determine meaning. Context does. In Communities Economic Development Fund v Canadian Pickles Corp. the issue before the court was whether a party to a document titled a “guarantee” was liable to the lender as a guarantor where the underlying debt to the borrower was invalid. The court considered whether the agreement signed by the guarantor was a guarantee or an indemnity and concluded that the label of “guarantee” used by the parties was not determinative. Rather, the correct interpretation of the contract and the intention of the parties govern.
The receiver relies on Adams v McLean & Dickey Ltd., citing Winkler, C.J.O. in Salah v Timothy’s Coffees of the World Inc. for the following propositions:
a. a contract must be construed as a whole, giving meaning to all its terms;
b. the court must consider the objective evidence of the “factual matrix” or context underlying the negotiation of the contract, but must not consider the subjective intention of the parties;
c. the court should avoid an interpretation that renders one or more of its terms ineffective or leads to a commercial absurdity; and
d. extrinsic evidence may be relied up to clear up an ambiguity.
Counsel for Romspen/174 argues that the intention of the parties must be ascertained objectively from the evidence without regard to the subjective intention of the parties. On that basis Romspen/174 asks the court to disregard evidence of Mr. Mohtashami’s belief as to his company’s relationship with Panterra. I agree and have disregarded subjective evidence of intention of all witnesses. My findings as to the parties’ intentions are based on the written contract and their conduct as they performed the contract.
Applying these principles to the present case, Pegah argues that the use of the label “construction manager” in the written contract is not determinative of the structure of the relationship of Panterra and Pegah. Rather, the court must interpret the written contract by considering the contract in its entirety and objective evidence of intention.
Both the receiver and Romspen/174 argue that industry standard is not germane to determining the meaning of a negotiated contractual provision and the court should not perform linguistic acrobatics: Veracap Corporoate Finance Limited v Carefoot. In that case the contract provided for an overly generous fee provision that was challenged as not making business commonsense. The court concluded that it would not interfere with autonomous bargains that do not “conform to some external notion of economic fairness”. The court noted that business commonsense may be considered where a “detailed semantic and syntactical analysis of the words in a commercial contract…yield to a conclusion that flouts business common sense”, citing The Antaois Compania Neviera S.A. v Salen Rederierna A.B.
Applying Antaois Compania, supra, to the present case the issue is whether a detailed semantic and syntactical analysis of the contract yields to a conclusion that flouts industry standards. The receiver and Romspen/174 argue it does not lead to such a conclusion and on that basis industry standards should not be considered.
I find that the words used in the contract between Panterra and Pegah, given their ordinary meaning, contain an inherent ambiguity in terms of the structure of the relationship created by the contract.
The parties used the label “construction manager” in the contract and defined that party as an agent. Given their ordinary and meanings “construction manager” and “agent” would have certain characteristics. Ascertaining whether the label is used by the parties in its ordinary meaning, or whether the rights and obligations imposed by the rest of the contract create a different structure, is the key issue. The label used by the parties is not determinative: Communities Economic Development Fund v Canadian Pickles Corp., supra.
Context is important. Justice Blair, writing for the Court of Appeal, made the following observation in Ventas Inc. v Sunrise Senior Living Real Estate Investment Trust:
“Contracts are not made in a vacuum, and there is no dispute that the surrounding circumstances in which a contract is negotiated are relevant considerations in interpreting contracts. As this court noted in Kentucky Fried Chicken, supra, “[w]hile the task of interpretation must begin with the words of the document and their ordinary meaning, the general context that gave birth to the document, or its “factual matrix” will also provide the court with useful assistance.”
The parties negotiated and deliberately added a clause to shift the risk of runaway project costs from Panterra to Pegah with a guaranteed a maximum price (the budget plus $150,000.00 over budget to be shared). Panterra had no risk of cost overruns above the increased threshold. Pegah took on 100 percent of that risk.
The parties negotiated and deliberately inserted a clause into the contract whereby Pegah could contract with trades directly and not as Panterra’s agent.
In fact, Pegah contracted directly with all but one trade. The only trade that contracted directly with Panterra was KML Building Solutions. That contract was executed on August 5, 2005, three months after the Pegah contract, for the price of $590,000.00 for additional steel structural support after the original budget had been fixed. This work was not part of Pegah’s budget. There is no evidence of any trade contract for work performed in respect of items in the Pegah budget where the trade executed a contract directly with Panterra or with Pegah as agent for Panterra.
I find that the contract creates a hybrid structure. It defines a construction manager as an agent and creates an agency relationship, but there is no evidence of a single instance where Pegah arranged for a trade contract as Panterra’s agent. The contract also contemplates that Pegah, still labelled the construction manager, may act independently and not as Panterra’s agent to enter into direct contracts with trades. That is, in fact, how the parties conducted themselves in performing the contract.
Pegah relies on Centrum Renovations & Repair Inc. v Ditta for factors considered by the court when asked to determine whether the structure was one of general contracting or construction management. The receiver and Romspen/174 distinguish Centrum because in that case there was no written contract and the court considered the conduct of the parties to determine the nature of their relationship.
In my view the factors considered by the court in Centrum are relevant for the purpose of considering whether Panterra and Pegah incorporated these factors into their written contract.
The criteria indicative of a general contract structure considered by the court in Centrum, expressed in terms of the case before me, are:
a. Whether the contract contemplates that Pegah negotiate and contract directly with trades in the manner of a general contractor;
b. Whether trades submit quotes to Pegah, not to Panterra, in the vast majority of cases;
c. Whether trades seek payment from Pegah directly; and
d. Whether Pegah pays trades directly for work performed on the project.
In Centrum the court was of the view that the last two factors alone, if met, are sufficient to find that the structure is one of general contractor and owner.
Aside from the factors in Centrum for distinguishing between a construction management and a general contracting structure, a helpful discussion of differences between the two structures is found in an article published by David Bristow, Q. C., titled “An Overview of Three Commonly Used Construction Contracts – Stipulated Price Contract, Construction Management and Design Build”. Mr. Bristow explains factors to consider when selecting one of three standard form contracts published by the Canadian Construction Documents Committee (“CCDC”). Only two of the three forms of contract are relevant to the present case: the CCDC 2 and the CCA 5.
Regarding the CCA 5 construction management contract, Mr. Bristow describes the following distinguishing features:
“The management contractor does not actually perform the construction; rather, it is the construction manager’s role to administer the trade contracts. The construction manager…provides the administrative work necessary to perform the contract. The owner is responsible for contracting with each of the trade contractors in regards to the actual construction work... The construction manager’s role includes assisting the owner in solidifying the various trade contractors (that is, the subcontracts). The owner is in fact the contractor, while the construction manager is typically an agent of the owner and does not have any direct liability with respect to the trade contractors and materials.”
- Mr. Bristow explains exposure to risk in a construction management contract as follows:
“…It is the owner, not the construction manager, who must ultimately carry the risk of the construction project, despite the fact the construction manager is often responsible for scheduling and controlling the project’s cost…the contractual liability for each sub-contractor remains with the owner. Under the construction management structure, the construction manager’s exposure to liability is considerably less than that of …a contractor under the CCDC 2-1994 Stipulated Price Contract.”
- Referring to the CCA 5 form of contract Mr. Bristow further explains:
“It is not meant to encompass those situations where the construction manager acts as an independent contractor and contracts with trade contractors on his own account. Further, it is also not meant to address those cases where the construction manager guarantees the owner a maximum price or fixed completion date.”
A review of the unamended form of the CCA 5 discloses that it has no provision for a construction manager to take on the risk of cost overruns. In fact, such a provision would contradict the agency relationship created by article A-3(b). Nor does it provide for a construction budget.
The following chart summarizes the factors described in the previous paragraphs that distinguish a construction management structure from a general contracting structure:
General Contractor (“GC”)
Construction Manager (“CM”)
Panterra and Pegah
GC hires and contracts directly with trades.
Owner hires trades with CM acting as owner’s agent.
Contract permits Pegah to contract with trades directly and also to arrange contracts between Panterra and trades. Pegah actually contracts with all trades directly except one. Pegah does not act as agent on any trade contracts.
GC is liable to pay trades. Owner’s liability to trades is limited to statutory holdback.
CM is not liable to pay trades. Owner is contractually liable to pay trades.
Article 3.1 of contract: Pegah is liable to pay trades where direct contract. Trades look to Pegah, not Panterra, for payment.
Fixed budget. Extras must be approved by owner. GC is liable for costs overruns. Owner’s risk is limited to contract price plus approved extras.
Owner, not CM, is liable for costs over budget.
Pegah is 100% liable for cost overruns beyond $150,000 over budget and 50% of cost overruns up to $150,000 over budget. Panterra has no risk beyond $150,000 over budget.
Fixed price. GC enjoys 100 % of benefit of cost savings.
Owner enjoys 100 % of benefit of cost savings.
Article A-16: Panterra and Pegah share equally in cost savings below budget.
CCDC-2 form of contract
CCA 5 1988 form of contract
Parties used the CCA 5 form of contract as a base and modified it to incorporate elements of the CCDC 2 structure.
The contract in the present case contemplates and permits Pegah to enter into contracts directly with trades. Pursuant to article 3.1 Pegah’s role was to negotiate the contracts with the trades, receive quotes, select the trades, and then arrange for contracts to be entered into in one of two ways: (i) between the trade and the owner, or (ii) between the trade and Pegah.
If the parties conduct themselves in accordance with the first part of article 3.1 then they are in a construction management structure with Pegah acting as Panterra’s agent in respect of contracts entered into between Panterrah and the trades. If the parties conduct themselves in accordance with the second part of article 3.1 (which the parties had expressly negotiated and added to the preprinted form of contract) then they are in a general contracting structure with Pegah entering into contracts directly with trades.
The distinction is significant in terms of risk: where Pegah acts as agent for Panterra the owner takes on all of the risk under the contracts with trades, including liability for the full contract price; where Pegah enters into contracts directly with trades, Pegah takes on all of the risk including the risk for payment of trade accounts, and the owner’s risk is limited to the ten percent holdback obligation under the Construction Lien Act.
Article 3.1 is ambiguous because it contemplates two structures simultaneously. The evidence shows that all trade contracts for items included in the contract budget were entered into directly between Pegah and the trades. Not a single contract with a trade was entered into with Pegah as agent for the owner. The one contract where Panterra entered into a direct trade contract was for an item that was added later, outside the budget.
Pegah provided a price guarantee assuming all of the risk of cost overruns beyond the agreed upon budget (as increased by the shared $150,000.00). This contractual obligation, together with the contractual authority to enter into direct contracts with trades, are contractual provisions that are consistent with a general contract structure and inconsistent with a construction management structure.
The receiver argues that there is no reason why a construction manager cannot take on risk and retain the role of construction manager. No cases or authorities were provided wherein a project manager took on the risk of the project budget and payment of trade contracts and was found by the court to have remained the owner’s agent. No cases were provided where a construction manager who took on the risk of cost overruns and payment to trades was not treated as a general contractor for purposes of holdback, priority, obligation to pay trades and liability to an owner for cost overruns.
I agree with the court in Centrum, supra, that the liability for payment to the trades is sufficient to determine the structure of the relationship between Panterra and Pegah.
I find that the contract between Panterra and Pegah contemplates a general contracting structure. While it is not necessary to go beyond the contract to make this finding, the parties’ conduct in performing the contract is consistent with a general contracting structure.
Contra Proferentem
I asked the parties to address the principle of contra proferentem and whether it might assist the court to interpret the written contract executed by Panterra and Pegah.
The contra proferentem principle of interpretation of contracts, simply stated, is that where there is ambiguity in the wording of a written contract it should be interpreted against the interests of the party who set the terms of the contract, usually the drafter of the contract. Ambiguity is a condition precedent to its application. A contract is ambiguous if a contractual provision is reasonably capable of more than one interpretation[^16]. As already noted, I found that GC 3.1 of the contract is ambiguous.
The principle is generally reserved for situations where one person dictates the terms of the contract to the other, leaving the non-drafting party with no meaningful opportunity to negotiate and modify the contract wording[^17]. One example is a car rental contract where the consumer is presented with the rental car company’s standard form of contract and has no meaningful opportunity to amend its onerous terms. In Ironside v Smith, supra, the court concluded that where the parties to a written contract have real, meaningful negotiations, it is inappropriate to invoke the contra proferentem principle of interpretation in the face of ambiguity in the contract.
In Canadian National Railway Co. v Royal and Sun Alliance Insurance Co. of Canada[^18], the court considered the principle of contra proferentem and determined that it applies, if at all, “when all other rules of construction fail”. In other words, it is a rule of last resort.
Reconciling the decisions of the Alberta Court of Appeal in Ironside v Smith, supra, and the Supreme Court of Canada in CNR v Royal, supra, the applicable law is that the principle of contra proferentem applies only if other rules of construction are inadequate. The court must consider whether one party dictated the terms of the contract to the other, or whether two sophisticated parties negotiated its terms.
The evidence in the present case is clear: Ali Mohtashami on behalf of Pegah and Sheldon Rosen on behalf of Panterra, the individuals who negotiated and executed the written contract in this case, are both sophisticated and experienced individuals who have worked in the construction and development industry for many years. Mr. Rosen is a professional architect. Mr. Mohtashami is a trained engineer with a Masters degree in Business Administration.
I conclude from these authorities and the facts of the case before me that it is not necessary to resort to the principle of contra proferentem.
IV. CONCLUSION
Mr. Rosen and Mr. Mohtashami are both sophisticated businessmen. Both of them have many years of experience in the industry. They negotiated a deal that was a hybrid between a general contract structure and a project management structure. In committing their agreement to writing they modified the CCA 5 form of contract. Their modifications introduced elements of risk and responsibility that are consistent with a general contract structure and inconsistent with a construction management structure.
I find that the structure of the contract is in substance one of owner and general contractor. The critical features of a general contract of risk for cost overruns and liability to trades for payment are present, and the critical features of a construction management structure have been diluted so extensively as to render the label “construction manager” incapable of bearing its ordinary meaning.
For these reasons, on the trial issue before the court, I find that Panterra and Pegah contracted as owner and general contractor.
Original signed by “Master C. Albert”_
Master C. Albert .
Released: May 31, 2013