A financial safeguard for builders

By Dean G. Giles, Fillmore Riley LLP

Many construction projects proceed without incident. Unfortunately, experience shows that damage can occur during construction, leading to significant repair or replacement costs. Builder’s risk insurance is specifically designed to indemnify against property loss to buildings and structures while they are under construction. 

In the leading case of Commonwealth Construction Company v. Imperial Oil Limited, the Supreme Court of Canada described the function of builder’s risk insurance (also known as course of construction insurance) as follows:

Best to own it!

By Steven Z. Raber, Fillmore Riley LLP

Most talk of “building your brand” properly focuses on marketing issues. Some-times, what gets overlooked are the legal processes available to protect a brand.

Business owners – and their advisors – are good at fulfilling their legal obligations around the registration of corporate names and business names. Where they often fall down is in actually protecting their brands.

It should be noted that the requirement to register under legislation like The Business Names Registration Act or The Corporations Act is not intended to confer rights on the owner. These statutes are intended to protect the public so, if something goes wrong, the public knows who to pursue.

Proceed with caution!

By Steven Z. Raber

It is not uncommon to find dispute resolution clauses in contracts of all kinds. They often lurk towards the end of commercial contracts, or in the “fine print” of consumer agreements. Many folks do not give them much, if any, notice until it’s too late.

A cautionary tale from Alberta's highest court

By Jason E. Roberts, Fillmore Riley LLP

Limitation of liability clauses are often found in con- struction contracts. These clauses generally serve to limit the amount payable as damages by a party in the event of faulty design or workmanship on its part.

However, the recent decision of the Alberta Court of Appeal in Swift v. Tomecek Roney Little & Associates Ltd. signals that parties to construction contracts should exercise caution when relying on limitation of liability clauses.

The facts of the case are reasonably straightforward and, although they involve the construction of a single-family home, there is no reason to suggest that the principles set out by the court would be inapplicable to other types of construction contracts. Mr. and Mrs. Swift owned land on Vancouver Island, on which they planned to build a home. Mr. Swift entered into an agreement with an architectural firm (the “Architects”) to design the home (the “Agreement”). The Agreement contained a limitation of liability clause, which protected the “Architects (referred to in the Agreement as the “Designer”)”:

The duty of good faith in contractual performance

By Dean G. Giles, Fillmore Riley LLP

A 2014 decision of the Supreme Court of Canada dealing with the question of good faith contractual performance, and a more recent lower court decision that applies its reasoning, could have a significant impact on the way in which contracts created as part of the tendering process are interpreted. 

Relief from strict compliance with timelines under builders' liens legislation

By Jason E. Roberts, Fillmore Riley

With limited exceptions, those who are unpaid for the performance of work, provision of services or delivery of materials to a construction project have the right to register a builder’s lien against the legal title of the owner of the land on which the work, services or materials were performed, supplied or delivered. Typically, the lien is registered for the value of the unpaid work, services or materials. Once the lien is proved, the lien claimant may take steps to sell the owner’s interest in the land in order to be paid.

The provincial builders’ liens statutes set out rigid timelines for filing the liens, as well as filing actions to prove the liens, and registering certificates of pending litigation (“CPLs”) against title to the affected land. The rationale for rigid timelines is that the timely administration of the construction lien process provides certainty for lenders who are financing the project, as well as subsequent purchasers of the property, all of whom rely on the accuracy of title information when advancing funds or closing a purchase. For this reason, courts have typically taken a hard line when it comes to compliance with the statutorily imposed timelines. However, two recent decisions from the Alberta courts suggest that strict compliance with these timelines can sometimes be avoided.

Different legal requirements for group terminations when operating in the Canadian North

By Genevieve E. Mushaluk and Jenna R. Seavers, Fillmore Riley LLP

In December 2015, a mass termination of employment took place at the troubled De Beers Canada mine, located in Snap Lake, N.W.T. CEO Kim Truter personally advised 434 employees that they were out of work and that the mine would be closing. Of the 400 permanent employees, about 100 were northerners.

In addition to making difficult business decisions, companies must also navigate employment law to ensure the execution of “group terminations” is in accordance with employment legislation. In the De Beers layoff, which involved the termination of more than 300 employees, the legislation provides that permanent employees were entitled to 16 weeks’ notice of the termination of their employment. Further, pursuant to the legislation, De Beers was required to inform the government of its intention to terminate the employees.

“Group termination” refers to a situation in which an employer will be terminating numerous employees working in a single location, either simultaneously or within a short timeframe. In most provinces, when an employer plans to terminate 50 or more employees in a span of four weeks or less, employment legislation requires that the employer be mindful of specific group termination legal obligations. One of the requirements is that the employer must provide notification to the government.

Group terminations are covered in both federal and provincial employment legislation. The general requirements are largely similar for employers operating federally and within most of the Canadian provinces; however, different rules come into play when dealing with the northern provinces and/or territories, specifically Yukon, Northwest Territories and Nunavut.

SOMETIMES IT DOESN'T PAY TO "SHOP AROUND"

By Steven Z. Raber, Fillmore Riley LLP

The Ecklands, an Ontario couple, wanted to build a new house. They had a sense of what they wanted in their new home and looked for a builder. That led them to Oakcraft, a builder of custom homes in their area.

Employers must avoid discrimination during their hiring process

By Dayna M. Seinfeld, Fillmore Riley LLP

It is often said that human rights law sets out a “minimum floor” of rights and obligations that becomes part of every employment relationship. This minimum floor does not depend on the existence of an employment agreement. Rather, these rights and obligations are engaged at the hiring stage, from the time an employment advertisement is posted or a pre-hiring process is started. Every employer needs to be aware of what their human rights obligations are each time they embark on the process of hiring a new employee.

Failure to take reasonable safety precautions and provide adequate training can result in hefty fines

By Kirk A. Vilks, Fillmore Riley LLP

In the Q4 2013 edition of Piling Canada, James Wishart wrote about the Ontario Court of Appeal decision in R. v. Metron Construction Corp. (Metron). In that case, the Ontario Court of Appeal handed out fines to corporate defendants for criminal negligence that were large enough to potentially bankrupt the companies. It was held that that the courts should not take companies’ financial situation into account when determining fines for criminal negligence. More recently, Canadian courts have continued to follow this approach by awarding large fines without consideration of the financial implications for the companies

In 2013, the Ontario Court of Justice convicted Sunrise Propane Energy Group Inc. for multiple regulatory offences under the Ontario Environmental Protection Act (EPA) and Occupational Health and Safety Act (OHSA). The judgement – R. v. Sunrise Propane Energy, 2016 CarswellOnt 3399 – pertained to an incident that caused propane explosions in Toronto in 2008 that killed a young worker and caused a fire.

There were a series of explosions that caused extensive damage to surrounding properties and injuries to neighbours. Some surrounding homes were left uninhabitable for over a year. Approximately 12,000 residents had to evacuate the area within a 1.6-kilometre radius. Local businesses were forced to close, and one nearby car dealership was completely destroyed. At the time of the explosion, there were two employees on site; one was able to escape with minor injuries, but the other was killed.

Supreme Court of Canada rules in favour of proactive reporting

By Anthony R. Foderaro

The Supreme Court of Canada has recently held that an obligee under a labour and material

Being unprepared or unknowledgeable can cost your company thousands of dollars or more

By Paul K. Grower, Fillmore Riley LLP

On July 1, 2017, Canada will be “celebrating” the third anniversary of Canada’s Anti-Spam Legislation – generally known as CASL (pronounced “castle”).

Whether a celebration is warranted is questionable. While the legislation was purportedly designed

 By Dean G. Giles,Fillmore Riley LLP

Contracts used in the construction and engineering fields often contain so-called “exclusion of liability” or “limitation of liability” clauses that purport to reduce a party’s exposure to certain claims that may arise in connection with a project. Clauses of this sort are a means by which parties to the contract seek to minimize risk and protect themselves from what might otherwise be a ruinous damages award should something go wrong and litigation ensue.

In some instances, the clause in question may operate to cap a party’s exposure at a specific monetary amount, while others seek to exempt a party from liability for certaintypes of losses. A common example, often found in construction contracts, is a provision stating that the contractor “shall not be liable loss of earnings or other consequential damages howsoever caused,” or containing words to that effect.

Consequential damages are those that arise from the nature of the innocent party’s business and include such things as lost profits, lost customers and loss of reputation. This is in contrast to so-called “direct damages,” which are those that, without taking into account the particular circumstances of the party suffering the loss, one would reasonably expect to flow from a breach of contract. Still other clauses may limit a party’s exposure to damages caused by negligent acts.

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Be sure you know what you’re getting, and when

By James C. Wishart, Fillmore Riley LLP

For better or worse, the readers of Piling Canada are likely familiar with pay-when-paid clauses. Usually found in subcontracts between general contractors and subcontractors or suppliers, pay-when-paid clauses are intended to postpone the general contractor’s obligation to pay its subcontractors or suppliers until the general contractor has been paid by the owner for the relevant work. Even some industry standard contract documents, such as the CCA 1 – 2008 (Stipulated Price Subcontract), include pay-when-paid clauses.

The question that we most frequently get about pay-when-paid clauses is: what happens if the owner doesn’t pay the general contractor – does the subcontractor or supplier still have a right to be paid for its work or has it waived that right by accepting the pay-when-paid clause? In A&B Mechanical Ltd. v. Canotech Consultants Ltd. et al, 2013 MBQB 287, the Manitoba Court of Queen’s Bench considered a pay-when-paid clause and answered that question.

How vacating liens just doubled in price

By Sven T. Hombach, Fillmore Riley LLP

Construction liens are an unfortunate reality of virtually every large construction project, and many smaller ones as well. Designed to ensure that building trades are protected from non-payment, they have a history in Canada that dates back more than 100 years. Site owners who have ever had to deal with an insolvent contractor are well familiar with paying twice - once to the contractor, and once more to the unpaid trades who filed liens. However, in light of a recent Manitoba Court of Appeal decision, contractors are now facing that issue as well, at least on a temporary basis.

While the rules of construction liens are complex, the concept is very simple – unpaid contractors or trades can claim a lien against the underlying land. Since the land has value, the party who claims the lien will ultimately get paid, either because the owner has to remove the lien and pay out the party who filed it, or because the land is sold and the party who filed the lien is paid out of the proceeds of sale.

A third option exists

By Kirk A. Vilks, Fillmore Riley

In the Q3 2014 edition of Piling Canada, Sven Hombach wrote an article titled, “Paying Once, Paying Twice.” The article discussed a decision by the Manitoba Court of Appeal in Olson (Stuart) Dominion Construction Ltd. v. Structal Heavy Steel. That decision has now been reviewed and upheld by the Supreme Court of Canada in Stuart Olson Dominion Construction Ltd. v. Structal Heavy Steel. While the Supreme Court upheld the Manitoba Court of Appeal’s decision, they also provided some additional comments that will help guide contractors who wish to avoid providing double security for a subcontractor’s lien.

The decision deals with the remedies in builders’ lien legislation. Each province has their own such legislation, but the effect of the various statutes is similar. Builders’ lien legislation provides two remedies to trades to ensure they are paid for their services: statutory liens and statutory trusts. A lien creates an encumbrance on the land. To remove the lien, money can be paid or security can be provided by the owner or general contractor. The security provided is usually in the form of a lien bond. The payment or security stands in place of the land, so that the land itself is no longer encumbered while the merits of the lien claim are decided. Under either scenario, the purpose is to ensure the subcontractor gets paid, either from the value in the land or from the value of the security posted to discharge the lien.

In addition to the lien remedy, builders’ lien legislation provides for a statutory trust. The legislation provides that subcontractors, workers employed by the contractor, and other beneficiaries are to be paid before an owner or general contractor can use trust funds for their own use. All funds received by the general contractor for the general contract are trust funds held for subcontractors, the Workers Compensation Board, employees of the contractor and the owner for any counterclaim related to the performance of the contract. If a general contractor uses funds that are held in trust for a subtrade for his or her own purposes, the result can be stiff fines or jail time for breaching the trust.

Olson (Stuart) Dominion Construction Ltd. v. Structal Heavy Steel involved a lien claim by a steel subcontractor totalling approximately $15.5 million to construct the roof of Winnipeg’s new football stadium. The general contractor deposited a lien bond into court for the full amount of the lien claim to discharge the lien. The subcontractor then demanded payment under the trust provisions of the statute. The contractor sought a declaration from the court that the lien bond satisfied its trust obligations under the builders’ lien legislation.

Like the Manitoba Court of Appeal, the Supreme Court of Canada made it clear that liens and statutory trusts are separate and distinct remedies. If a contractor files a lien bond to vacate a sub-contractor’s lien, that will discharge the lien, but not satisfy the contractor’s trust obligations under the legislation. The contractor will still need to hold funds they receive from the owner under the contract in trust for the sub-contractor. The implication here is that the contractor will need to provide double security; both the lien bond and monies received from the owner held in trust.

After the Court of Appeal’s decision, many were left thinking that the contractor had two options: either provide double security or choose not to vacate the lien. The Supreme Court explained that contractors have another option: if a contractor wants to avoid posting double security but still wants to vacate the lien, he or she can pay money into court to vacate the lien rather than posting a lien bond.

46. There may be circumstances where a contractor will choose to maintain double security where there are lien and trust claims for the same work, services, or materials, by acquiring a lien bond while still holding trust funds. However, a contractor can avoid double security by paying cash into court pursuant to s. 55(2) instead of depositing a lien bond.

Money paid into court will remove the lien and still be considered to be held in trust for the subcontractor. Therefore, paying money into court rather than a lien bond satisfies both the lien and trust obligations.

Payment of the trust funds into court to vacate a lien, for the amount of the lien claim implicated by the trust claim, does not constitute an appropriation or conversion of the trust funds. The contractor is doing exactly what the Act requires – ensuring the monies are held in trust for the beneficiary.

If the contractor pays funds into court and the lien claim later fails, the monies paid into court will be returned to the contractor, but will still be held in trust for the subcontractor.

These funds remain impressed with the trust; should the lien claim fail while the trust claim is outstanding, the cash would continue to be trust funds when returned to the owner, contractor, or subcontractor. So long as the trust funds themselves are deposited with the court, the funds are secure and the trust has not been breached.

The takeaway for contractors is that there are three options when a subcontractor places a lien on property. First, they could allow the lien to remain on the property, second, remove the lien with a lien bond while simultaneously holding funds paid for the contract in trust, or third, pay money into court to remove the lien. The circumstances will dictate which option the contractor selects, and unfortunately, there may be times when none of the options appear to be a desirable option for the contractor. Subcontractors will know this and use it to leverage a more favourable settlement in litigation with the contractor. Even with the additional option given to contractors by the Supreme Court of Canada, the remedies offered by builders’ lien legislation remain powerful tools that, in the hands of savvy subcontractors, can be used to apply tremendous pressure on general contractors. 

 Kirk A. Vilks is an associate with Fillmore Riley LLP who practises primarily in the area of civil litigation, with a focus on construction and insurance litigation. You may reach him at 204-957-8358 or This email address is being protected from spambots. You need JavaScript enabled to view it..

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Avoiding Pitfalls and new challenges of overcoming labour shortages

By Sofia Mirza, Fillmore Riley LLP

As an immigration laywer. I can't tell you how many times I've heard new clients say. "I wish I had known that before." Or, "If I had just consulted you before I files the application. this mess could have been avoided.

Some examples of complications that may occur when a step is missed in the work authorization process include lengthy delays in the hiring process, officers rejecting appli-cations and interruptions in the work term of a valuable foreign national employee.

When private becomes public

By Keith A. Senden, Fillmore Riley LLP

As social media becomes increasingly present in the workplace, employees and employers alike must educate themselves on the implications of social media use both in the workplace and outside of the workplace.

The line that divides an individual’s private life is blurred by society’s overwhelming use of social media. Platforms such as Instagram, Facebook, Snapchat and Twitter serve as revolutionary ways to communicate ideas, thoughts and files; however, users should remain conscious of the implications of posting certain content on their own time and during work hours.

What employers need to know to prevent their workplaces from going to pot

By Jenna R. Seavers, Fillmore Riley LLP

With the imminent legalization of marijuana, some employers in the construction industry worry their workplace cultures – and safety in particular – will go to pot, so to speak. Before the legalization takes effect, it is important employers get all the facts about the law and learn how they can create policies that will help maintain a safe workplace.