environmental seminar: managing environmental issues in construction projects
TRANSCRIPT
Environmental seminar:
Managing environmental issues in
construction projects
Presented by: Karen Groulx
23 April 2015
Dentons Canada LLP
Fact pattern: what should happen
• Shoebox retains Geotech consultant
to prepare soils report, incorporated
into Tender Documents
• Tender Documents provided to
BossCo
• Soils report alerts BossCo about
PAHs and metals
• BossCo incorporates necessary
remediation work into bid
• BossCo – Digger subcontract
accounts for remediation
Shoebox
BossCo
Digger
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Fact pattern: what went wrong - missing information
• Developer must disclose all relevant information about site conditions
• If tender documents exclude information:
• Withheld information may give rise to contractual liability - extras and delays
• Developer/consultant may be liable for negligent misrepresentation
• GC may be held contributorily negligent for failing to inquire or investigate
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What can happen?
Consider 2 cases:
• Brown and Huston Ltd. v York (Borough), 1983 CarswellOnt 743 (ONHC),
confirmed by 1985 OJ No 211 (ONCA)
• Advice Pipelines Ltd. v Mississauga Golf and Country Club Ltd., 1989 CLD 723
(ONHC)
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Brown and Huston Ltd. v York (Borough)
Facts
• Brown successfully tendered to
construct an underground pumping
station for the City.
• Tender docs prepared by Fenco, omitted
soils report and some information about
ground water levels.
• Brown chose construction method that
proved to be inappropriate in light of the
actual ground water level encountered.
• Brown sued City and Fenco for
negligent misrepresentation.
The City of York (owner)
FencoConsultants (consultant)
Geocon(soils)
Peto MacCallum(soils)
Brown and Huston Ltd. (GC)
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Brown and Huston Ltd. v York (Borough)
Held
• Fenco liable for 75%; Brown for
25%.
• Negligent misrepresentation
elements established.
• Brown not aware of the existence of
the water table due to insufficient
information in tender documents.
• Brown contributorily negligent due to
failure to make inquiries at the bid
stage, as required pursuant to
contract with City.
The City of York (owner)
FencoConsultants (consultant)
Geocon(soils)
Peto MacCallum(soils)
Brown and Huston Ltd. (GC)
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Advice Pipeline Ltd. v Mississauga Golf Club Ltd.
Facts
• Plaintiff contracted with Defendant City to construct footbridge abutments
• Incorrect information provided by City to bidders in tender documents
• No mention of existing soils reports
• No mention of conservation authority reports
• Water elevation indicated 15ft of land above water line (actual site conditions –
river flooded)
• According to tender documents Plaintiff concluded that earth berm
sufficient to keep abutments dry
• During construction berm collapsed and Plaintiff forced to rebuild using
other methods
• Plaintiff alleged negligent misrepresentation
• City argued that Plaintiff failed to inquire or investigate
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Advice Pipeline Ltd. v Mississauga Golf Club Ltd.
Held
• Plaintiff awarded full damages
• Plaintiff under no obligation to investigate or verify information provided
by the City
• City made negligent omissions in tender documents
• Tender documents interpreted against the City (as the drafter)
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Lessons from Brown and Advice
• Contractor’s duty to investigate:
• In both cases, contract required GC to satisfy itself by personal examination as
to the local conditions or that it accepted the risk of not doing so.
• Provisions interpreted strictly against the owner.
• Contractor’s duty to inquire:
• In Brown, incorrect information in tender documents should have given rise to
inquiry by contractor.
• In Advice, information about the water level was precise and appeared
accurate and so there was no duty to inquire.
“…there is nothing in the practice of the trade which leads me to conclude that the plaintiff
would investigate the information supplied by the defendant to verify its accuracy.” (para 77)
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Fact Pattern: What likely went wrong
• Shoebox had no knowledge of hydro-carbons and metals in soil
• How does Shoebox protect itself from potential liability?
• Shoebox provides BossCo opportunity to inspect site and satisfy itself as
to conditions
• Opportunity to inspect must be reasonable
• Must provide access to conduct necessary testing
• Parties use CCDC2 contract provisions addressing unknown site
conditions
• General Conditions may be amended by Supplementary Conditions
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It is all about Risk Allocation
• A contract which fails to provide equitable risk sharing may lead to
additional disputes
“There is no doubt that this contract, drawn as it was to protect taxpayers,
attempted to limit the liability of the City to such an extent that one would expect
that not even the ordered rotation of the seasons could be reasonably anticipated
by the contractor. The problem with contracts such as these is that they are so
rigid and so restricting that the parties tend to amend them by their actions during
the course of the contract.”
Colautti Construction Ltd. v Ottawa (City) (1984), 46 OR (2d) 236 (CA) at 242
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The importance of construction contracts
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• Given the importance of construction contracts, it is surprising that the
parties often place so little time and emphasis on these important
documents which can serve to limit the source of most of their liability
exposure.
Standard Construction Risks
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• errors and/or omissions in the contract documents - scope of
work issues
• geotechnical and other unanticipated site conditions
• changes in contract scope
• delays/scheduling issues
• deficient work
• insolvent contractors and/or subcontractors
• adverse weather conditions
• force majeure events
• negligent construction and/or design work
Unanticipated/Unknown Site Conditions
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• When is it appropriate for risk to be shared?
• Who has best knowledge of project site?
• What studies have been performed?
• What information is available at the time of contract formation?
• Does the contractor have an obligation and/or opportunity to inspect?
• What is the nature of project?
• Typically, the contractor will allocate risk of design errors to the owner,
who retained the architect and therefore is in a better position to
address and minimize these losses.
Unanticipated/Unknown Site Conditions
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CCDC 2-2008 – GC 6.4 – Concealed or Unknown Conditions
• If either party discovers “subsurface or otherwise concealed
conditions” that existed prior to the commencement of the work
or physical conditions that are materially different than what
would be expected and are not contemplated by the Contract
Documents:
• Obligation to give notice to the other party before the conditions are disturbed
and within five working days.
• If there are conditions that differ materially and impact cost or
time, a Change Order or Change Directive will be issued.
• If there is no material difference, the Consultant will provide a
report explaining same.
Unanticipated/Unknown Site Conditions
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Alternative Language seen in Customized Contracts
• Inspection of site
• Review of contract documents, geotechnical and other reports
• Opportunity to ask questions at pre-construction meetings
• Contractor assumes responsibility for all risk associated with
unanticipated conditions
When Problem Discovered: What does the contract say?
• General Conditions of CCDC2 Stipulated Price Contract
• GC9.2: Toxic and Hazardous Substances9.2.2: Prior to the Contractor commencing the Work, the Owner shall:
.1 take all reasonable steps to determine whether Toxic or Hazardous Substances are present at the Place of the
Work; and
.2 provide the Consultant and the Contractor with a written list of any such substances that are known to exist and
their locations.
9.2.4: Unless the Contract expressly provides otherwise, the Owner shall be responsible for taking all
necessary steps, in accordance with applicable legislation in force at the Place of the Work, to dispose
of, store or otherwise render harmless, Toxic or Hazardous Substances which are present at the Place
of the Work prior to the Contractor commencing the Work.
9.2.7: If the Owner and the Contractor agree or if the expert referred to in paragraph 9.2.6 determines
that the Toxic or Hazardous substances were not brought onto the Place of Work by the Contractor,
the Owner shall promptly, at the Owner's own expense:
(1) take all steps as required under paragraph 9.2.4;
(2) reimburse the Contractor for the cost all of steps taken pursuant to 9.2.5
(3) extend the Contract Time for such reasonable time as the Consultant may recommend in consultation with the
Contractor and the expert referred to in 9.2.6. and reimburse the Contractor for reasonable costs incurred as a result
of the delay.
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When Problem Discovered: What do the specs say?
Specifications: Site Work, Demolition and Removal (sample):
• Section 3.3 - DISPOSAL OF CONTAMINATED EARTH
Scope of Work
.1 In the event of contaminated soil being found, the scope of work for the above item shall include all
work required to load contaminated earth and transport it to a licensed land facility, in accordance
OPSS180 and applicable Provincial Regulations
.2 Tested positive contaminated soils must be removed offsite and disposed at an approved landfill.
Basis of payment
.1 Contractor to provide 3 quotes to the Consultant for disposal of contaminated soil to an approved
facility. Payment will be made under the Inspection and Testing cash allowance and only the consultant
can award the disposal Work to the appropriate sub-contractor.
• Section 3.4 GEOTECHNICAL & ENVIRONMENTAL TESTING
Scope of Work
.1 Geotechnical, soils, granular, asphalt and concrete and environmental (soils contamination and
groundwater) testing shall be carried out by the geotechnical, consultant selected by the Consultant.
.2 Any on-site soils encountered by the Contractor that are suspected as being contaminated shall be
brought to the attention of the Consultant for testing, prior to its removal from the site.
Basis of Payment
.1 Contractor to provide 3 quotes for Geotechnical and Environmental Testing Work to Consultant. The
Consultant shall determine the approved quotation.
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When Problem Discovered: Provide Written Notice
• Failure to provide notice of delay or claims for extras may preclude GC
from recovering additional compensation
• Technicore Underground Inc. v Toronto (City), 2012 ONCA 597
• The City of Toronto (the “City”) entered into a contract with Clearway
Construction Inc. (“Clearway”) to construct a water main.
• Clearway subcontracted the underground tunneling to Technicore Underground
Inc. (“Technicore”).
• Large water main burst, flooding the tunnel and delaying the project.
• Technicore claimed against Clearway for damages arising from the flood, and
Clearway claimed against the City for indemnity and its own costs.
• Held: Clearway claim barred due to the operation of a contractual notice
provision requiring claims to be filed “no later than 30 days after completion of
the work affected by the situation.”
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…Provide Written Notice
• Waiver of Written Notice provision nearly impossible to establish
• Saskatchewan River Bungalows Ltd. v Maritime Life Assurance Co.,
[1994] 2 SCR 490:
• The Party alleging waiver must furnish evidence that the party allegedly waiving
the contractual term: (a) had full knowledge of its rights, and (b) demonstrated
an unequivocal and conscious intention to abandon them.
• Evidence of a conscious intention to abandon the notice requirement:
Colautti Construction Ltd. v Ottawa (City of), 1984 CanLII 1969 (ONCA)
• The contractor billed the owner for extras and the owner paid them, despite the
absence of written authorization as required under the contract.
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Limiting Liability
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Sample Clause
• The Contractor declares that in tendering for the work, and in entering into this
Contract, he has either investigated for himself the character of the Work to be
done and all local conditions, including the location of any utility which can be
determined from the records or other information available at the office of any
person, partnership, corporation, including a municipal corporation and any
board or commission thereof having jurisdiction or control over the utility, that
might affect this tender or his acceptance of the Work, or that, not having so
investigated, and accept as hereinafter provided, he is willing to assume and
does hereby assume, all risk of conditions now existing or existing in the course
of the Work which might or could make the Work, or any items thereof more
expensive in character, or onerous to fulfill, than was contemplated or known
when the tender was made or the Contract signed.
Exclusion Clause
• Developer protection from delay
• Wide scope exclusion clause
• Example from Perini Pacific Ltd. v Greater Vancouver Sewage and Drainage
District (No 2), [1967] SCR 189:
“…the Contractor shall have no claim or right of action against the Corporation
(respondent) for damages, costs, expenses, loss of profits or otherwise
howsoever… by reason of any delay in fulfillment of the contract… whether or
not such delay may have resulted from anything done or not done by the
Corporation…”
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