Continued on Page 2

IN THIS ISSUE:
Prompt Payment: Where Do
We Go from Here?
Yonni D. Fushman .............................. 1
Limitation Clauses and
Non-Parties
Swift v. Eleven Eleven Architecture. .... 3
Builders Risk Policies:
Scope of the Faulty
Design/Work Exclusion
Ledcor Construction Limited v.
Northbridge Indemnity Insurance
Company ........................................... 6
Appeal Court Finds Owner
Bound by Implied Duty
of Fairness to Bidder
Olympic Construction Ltd. v. Eastern
Regional Integrated Health Authority ....... 7
How Not to Instruct Your
Expert Witness
Bruell Contracting Ltd. v. J. & P. Leveque
Bros. Haulage Ltd. ..................................... 9






Volume 30 Number 6 July/August 2014
GUEST ARTICLE






PROMPT PAYMENT: WHERE DO WE GO
FROM HERE?
Ontarios draft prompt payment legislation (Bill 69) is, for all intents and
purposes, dead. It faced strong headwinds, perhaps stronger than its ad-
vocates expected, when stakeholders who had not been meaningfully
consulted voiced their concerns at two public hearings in March 2014.
Citing those concerns, the Standing Committee on Regulations and
Private Bills ended consideration of Bill 69 on April 2, 2014, following
an announcement on March 28, 2014, that the Ministries of the Attorney
General and Infrastructure (the Ministries) would undertake an inde-
pendent review of the Construction Lien Act.
Based on the Stakeholder Meeting that the Ministries held on April 30,
2014, there are three key questions to be answered before that review is
launched:
1. Scope of Mandate: Should the review focus narrowly on prompt
payment issues, or should the industry take this opportunity to con-
duct a more thorough update of the aging Construction Lien Act
(which is now more than 30 years old)?
2. Leadership: Who should Chair or Co-chair the initiative?
3. Participation: How should the panel of construction experts be com-
prised (i.e., which stakeholders or collection of stakeholders should
be represented, in what numbers, and by whom)?

Yonni D. Fushman
Vice President and Assistant General Counsel
Aecon Group Inc.
Volume 30 Number 6 CONSTRUCTION LAW LETTER

2
In the event that a panel is formed with a mandate to address
prompt payment issues (at a minimum), I would suggest that
the following principles may be helpful in guiding the pan-
els discussions:
1. Remedies versus Terms. Much of the resistance to
Bill 69 was due to its attempt to mandate specific payment
terms that, by implication, would have prohibited many cur-
rently available payment structures (such as P3 availability
payments and milestone payments). The new legislative so-
lution should focus on remedies for breach of payment terms,
not on dictating payment terms themselves. There is simply
too much diversity in the universe of construction con-
tracts to attempt to prescribe one-size-fits-all or even ten-
sizes-fit-all payment terms. Parties should be free to enter
into payment terms that make sense for the project, whether
monthly progress payments, achievement-based milestone
payments, or otherwise. The legislation should focus instead
on providing a legislative safety net to provide remedies,
where those contractual payment terms are breached. Two
potential remedies are addressed below.
a. Interest. The underlying motivation of prompt payment
legislation, expressed repeatedly by the proponents of Bill 69
in their publications and deputations, is to address the cost to
parties (especially those lower on the construction pyramid)
that results when they are compelled to advance funds well
before receiving payments. The most economically efficient
remedy is to shift the cost back to the party best able to con-
trol it, the payer, by way of compelling it to pay interest on
late payments. For simplicity, the amount of interest could be
aligned to the applicable civil procedure legislation for pre-
judgment interest, as s. 13 of Bill 69 suggested.
b. Suspension. The right to down tools in the face of
non-payment is where payment rights, whether in contract or
legislation, get their teeth. However, creation of statutory
suspension rights must be undertaken carefully to avoid de-
stabilizing projects. Any right to suspend must be available
only in the clearest cases where an owner is unambiguously
and unjustifiably in breach of its payment obligations, not
where there is a bona fide dispute as to payment, and not in a
way that enables parties to use the threat of those rights to
create undue leverage.
2. Temper Expectations as to Legislations Ability to
Solve Commercial Issues. It is important in formulating any
legislation on this issue to acknowledge at the outset that
there are limits to legislations ability to address complex
commercial issues. Following are two examples that are
much more likely to create cash flow issues than simple de-
layed payment is, but which are nonetheless poorly suited to
legislative solutions.
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The Right Hon. Madam Justice Beverley M.
McLachlin, Chief Justice of Canada The Hon. Justice
R. Roy McMurtry, former Chief Justice of Ontario
The Hon. Justice Gordon Killeen, formerly of Ontario
Superior Court of Justice Michael A. Atkinson,
President, Canadian Construction Association David
I. Bristow QC, Team Resolution, Toronto John R.
Singleton QC, Singleton Urquhart, Vancouver W.
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Hon. Justice Michael F. Harrington, Court of Appeal
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Note: Readers should not rely solely on the interpretation of a court decision
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CONSTRUCTION LAW LETTER Volume 30 Number 6


3
a. Reasonableness of Deductions and Setoffs. One
of the common payment issues in the industry that
proponents of Bill 69 cited is the practice of holding
back more from a payment than is reasonably nec-
essary to address a deficiency. The challenge from a
legislative perspective, however, is addressing that
issue in a way that is not so onerous as to unduly
shift the risk to the payer of paying more than is
merited while also avoiding a solution that is so
toothless as to be no help at all. It would be reason-
able for legislation to compel payment of undisput-
ed amounts where the disputed portion of the
invoice can be objectively quantified (e.g., failure to
perform a scope item or deficient performance of an
item), but not where the value of the item is un-
quantifiable (e.g., where the payee has caused a de-
lay, the ultimate consequences of which cannot yet
be ascertained), or where the payee fails to comply
with a reasonable condition precedent to payment
(e.g., WSIB clearance certificate, insurance certifi-
cate, statutory declaration, etc.).
b. Changes. Another way that payments can be
stretched is where a contractor performs extra
work outside the contract scope at the request of
the owner (or due to the actions or inactions of the
owner) and the owner refuses to make payment on
that work until negotiation of a final change order.
In that case, the contractor is compelled to perform
potentially millions of dollars of work that it did
not anticipate and may not have been adequately
capitalized to handle, and is forced to further bear
the cash flow strain of deferring compensation
pending prolonged negotiation with the owner.
The challenge with drafting legislation to remedy
that issue is that the situation is rarely as cartoon-
ishly simplistic as a nefarious owner cackling
while refusing to pay for work that is clearly extra
to the contract, in order to wear down the contrac-
tor. More often, there is some degree of legitimate
dispute as to the contractors entitlement to com-
pensation. The challenge is in providing a remedy
to illegitimate nonpayment without compelling
payment where there is a legitimate dispute as to
entitlement. The only reasonable solution appears
to be a narrow one: compel payment for extra work
unless the payer provides notice of a bona fide dis-
pute as to entitlement. Admittedly, such a rule
would be easily circumvented by payers asserting
disputes as to entitlement that appear credible on
their face, but it is difficult to conceive of legislation
finding the balanced and elegant solution that has
as yet eluded the industry.
3. Elimination of Public Sector Right to Bid
Restrictions. It has become a common feature of
procurement for public sector owners, whether in
their bylaws or procurement documents, to bar
contractors who have recent or pending disputes
with the owner from bidding on future projects.
The continuing existence of those restrictions
would cut the knees out from any attempts to cur-
tail late payment as it relates to the public sector,
because a contractor would be required to jeopard-
ize its future business prospects in order to enforce
its newly minted payment remedies. Those re-
strictions, therefore, should be rendered invalid, at
least to the extent that they relate to enforcement of
lien or payment rights. Viewed objectively through
the lens of policy, public sector owners interests
in avoiding litigation should not outweigh the pri-
vate sectors interest in enforcing legitimate rights
in the face of owner breach of contract.
The foregoing is not meant to be an exhaustive ex-
ploration of the many complicated issues relating
to prompt payment, but a starting point for the
hopefully meaningful process that will unfold in
the coming months.
CASE SUMMARY





LIMITATION CLAUSES
AND NON-PARTIES
Swift v. Eleven Eleven Architecture
The recent case of Swift v. Eleven Eleven Architecture
highlights the Alberta courts approach to inter-
preting a limitation of liability clause in circum-
stances where the parties seeking to benefit from
such a clause are not actually signatories to the con-
tract containing the clause. In this case, the court
considered whether it should award remediation
Erin Cutts
Associate
Borden Ladner Gervais LLP
Volume 30 Number 6 CONSTRUCTION LAW LETTER

4
costs against an architectural firm where a home
had become dangerous to its occupants as
a result of a deficient structural design. In making
this determination, the Court of Appeal had
to consider the scope of the limitation of liability
clause in the architectural design agreement, in-
cluding who was bound by such a clause and who
was entitled to benefit from it.
Background
Eleven Eleven, an architectural firm, entered into
an agreement with one of the plaintiffs for the de-
sign of the Swifts new home on Vancouver
Island (Mr. Swift was a signatory to the contract;
Ms. Swift was not). The design contract contained
a limitation of liability clause that restricted all
contractual and negligence claims by Mr. Swift as
against Eleven Eleven and its officers, directors,
employees, representatives, and consultants to
$500,000.00.
The design contract further contained a provision
requiring Eleven Eleven to retain the services of a
registered professional engineer to certify the struc-
tural soundness of Eleven Elevens design. Pursuant
to the building permit that was granted for the con-
struction, the home design was required to comply
with Part 4 of the 1998 British Columbia Building
Code (Building Code), which contained stringent
seismic design requirements.
At some point during the construction of the pro-
ject, the building contractor raised concerns with the
seismic stability of the home as designed. A second
structural engineer, Mr. Galloway, was retained to
review the original design. He concluded that there
were, in fact, concerns with the seismic stability of
the home as designed and that Eleven Eleven and its
engineer would need to render the designs compli-
ant with Part 4 of the Building Code. As a result of
these recommendations, Eleven Elevens engineer
agreed to redo the design in compliance with Part 4
of the Building Code and later confirmed to Eleven
Eleven that he had completed such redesign.
It subsequently became apparent that there were
significant deficiencies in the seismic design of
the home, and the Swifts filed claims against both
the architects and the engineers, with Mr. Swift
claiming in both tort and breach of contract and
Ms. Swift claiming only in tort. The Swifts
tort claims included a claim for negligent misrep-
resentation on the part of the engineer for failing
to complete the redesign of the home despite his
representations to the contrary.
The trial judge concluded that the engineer was
negligent in that he had failed to comply with
Part 4 of the Building Code and that Eleven Eleven,
to the extent that the work done by its engineer
was non-compliant, had breached its contract
with the Swifts. While the trial judge concluded
that the Swifts had suffered damages of roughly
$1.9 million, he also upheld the limitation of liabil-
ity clause and restricted the Swifts recovery of
such damages to $500,000.00. The trial judge fur-
ther determined that the evidence was sufficient to
establish that Mr. Swift, in executing the design
agreement, was acting both on his own behalf and
on behalf of Ms. Swift as her agent and, as such,
applied the limitation of liability clause to both
Mr. and Ms. Swifts claims.
Finally, the trial judge held that Eleven Eleven
was entitled to indemnification from the engineers;
however, the limitation of liability clause applied
to restrict that indemnity to $500,000.00, even
though the architects had already paid
$1,000,000.00 to the Swifts under the terms
of a settlement agreement.
Ultimately, the Alberta Court of Appeal was
tasked with determining whether one non-party to
the design contract (the engineers) could bind an-
other non-party (Ms. Swift) thus limiting the engi-
neers liability to $500,000.00.
Was Ms. Swift Bound by the Terms
of the Design Contract?
The court considered whether there was enough
evidence to conclude that when Mr. Swift executed
the design contract, he was acting both on his own
behalf and on behalf of Ms. Swift as her agent. The
trial judge had held that the construction of the
new home was a joint project to be undertaken
by Mr. and Ms. Swift as spouses and that
Ms. Swifts signature on the design contract as
witness evidenced her awareness of Mr. Swifts
retention of the architects for the design of their
new home. While the trial judge found that
Ms. Swift had not expressly authorized her hus-
band to sign the design contract on her behalf, he
held that based on the above considerations,
Ms. Swift had impliedly authorized her husband to
execute the design contract on her behalf as her
agent.
CONSTRUCTION LAW LETTER Volume 30 Number 6


5
The Court of Appeal disagreed with the trial
judges findings and held that
1. spouses each have their own legal identity, and, as
such, marriage and/or cohabitation cannot, with-
out more, give rise to an agency relationship;
2. Ms. Swift being on board with the project
cannot equate to authorizing Mr. Swift to bind
her to a contract; and
3. the simple fact that Ms. Swift had knowledge of
the design contract does not establish that she
represented to anyone that Mr. Swift had the au-
thority to legally bind her to the contract.
As such, the Court of Appeal found that Ms. Swift
was not bound by the terms and conditions of the
design contract and was, therefore, not restricted
by the limitation of liability clause.
Are the Engineers Entitled to Benefit
from a Contract that They Are not
a Signatory to?
The limitation of liability clause in the design con-
tract provided that
With respect to the provision of services by the Designer to
the Client under this Agreement, the Client agrees that any and
all claims which the Client has or hereafter may have against the
Designer which arise solely and directly out of the Designers du-
ties and responsibilities pursuant to this Agreement [] whether
such claims sound in contract or in tort, shall be limited to the
amount of $500,000.00 [emphasis added].
The design contract defined both Designer and
Prime Consultant/Engineer as Eleven Eleven.
The Designer, in the quote above, included offic-
ers, directors, employees, representatives, and
consultants.
The Court of Appeal held that the definition of
Designer in the design contract made it clear that
the limitation of liability clause applied to the lia-
bility of Eleven Eleven and those engaged by them
(including the engineer) to carry out the required
services under the design contract.
Despite its finding with respect to the design con-
tract, however, the Court of Appeal concluded that
the limitation of liability clause did not contemplate
the engineers representation that he had complied
with Part 4 of the Building Code (when, in fact, he
had not) and that it would be unreasonable to con-
clude that such negligent misrepresentation was
contemplated as being something that arises solely
and directly [as required by the limitation of liabil-
ity clause] out of Eleven Elevens duties and re-
sponsibilities. The court held that this was
predominantly so where structural defects present
a real and substantial danger to its occupants. In
coming to its conclusion, the Court of Appeal relied
upon the often-cited case Winnipeg Condominium
Corp. No. 36 v. Bird Construction in finding that
[a]part from the logical force of holding contrac-
tors liable for the cost of repair of dangerous
defects, there is also a strong underlying policy jus-
tification for imposing liability in these cases.
Given the courts conclusion respecting negligent
misrepresentation, the court held that
1. Mr. Swift was entitled to recover fully in tort
for the negligent misrepresentation of the engi-
neers (Ms. Swift would have also been entitled
to recover in full in tort for the engineers neg-
ligent design); and
2. Eleven Eleven should be indemnified in full for
the contribution it made to the plaintiffs in the
settlement agreement.
Accordingly, the engineers were ultimately made
responsible for the full $1.9 million in damages
claimed by the plaintiffs.
Conclusion
The court will not imply an agency relationship
between spouses or partners simply because they
are married or cohabitate. Something more than
mere knowledge or acquiescence will be required
to show that one spouse is executing a contract or
any other type of documentation on behalf of an-
other, and the circumstances of each case will re-
quire the court to perform a factual analysis to
determine whether an agency relationship between
two parties in fact exists. It is, therefore, impera-
tive that contracting parties ensure that all parties
involved in a construction project execute the rele-
vant agreements to prevent disagreements over
contractual privity and entitlement to rely upon
contractual terms.
Finally, courts will be far more likely to find in
favour of the plaintiffs in a construction dispute
where structural defects present a real and substan-
tial danger to the occupants of a home or building.
Although in this case, the court was able to inter-
pret the design contract in such a manner that the
Volume 30 Number 6 CONSTRUCTION LAW LETTER

6
plaintiffs and the architects were permitted to
claim outside the parameters of the limitation of
liability clause, it appears as though overriding
public policy considerations likely helped sway the
court in favour of the plaintiffs and architects in
determining that the engineer was fully liable for
all damages claimed.
Alberta Court of Appeal
Paperny, Martin JJ.A., and Macleod J. (ad hoc)
February 4, 2014
CASE SUMMARY




BUILDERS RISK POLICIES:
SCOPE OF THE FAULTY
DESIGN/WORK EXCLUSION
Ledcor Construction Limited v. Northbridge
Indemnity Insurance Company
What is the scope of the exclusion for making
good faulty workmanship under a builders risk in-
surance policy? If cleaners scratch the windows
during the construction process, does making good
just mean a repeat cleaning, or does it also include
repairs to the windows?
This was the issue that the Alberta Court
of Queens Bench grappled with in Ledcor
Construction Limited v. Northbridge Indemnity
Insurance Company.
Station Lands Ltd. is the owner of the newly con-
structed EPCOR Tower. Ledcor Construction
Limited was the general contractor responsible for
building the new office tower. As the building
neared completion, Ledcor contracted with a clean-
ing company to have the exterior of the building
cleaned to remove accumulated debris. This in-
cluded cleaning the buildings exterior windows.
While cleaning, the cleaners scratched those
windows so badly that they had to be replaced
at considerable cost.
The owner and the general contractor made a claim
under their builders risk insurance policy for the
cost of those replacements. Northbridge Indemnity
Insurance Company denied the claim, applying
an exclusion for the cost of making good faulty
workmanship. The full exclusion stated:
This policy does not insure [] the cost of making good faulty
workmanship, construction materials or design unless physical dam-
age not otherwise excluded by this policy results, in which event this
policy shale [sic] insure such resulting damage.
The owner and the general contractor sued the in-
surance company, arguing that they were not
claiming the cost of making good the cleaning,
but rather were claiming the cost of damage done
as a result of the cleaning.
The court resolved the case in favour of the owner
and the general contractor, relying on the princi-
ples for interpreting insurance policies established
by the Supreme Court of Canada in Progressive
Homes Ltd. v. Lombard General Insurance Co.
of Canada.
The insurance company conceded that but for the
exclusion, the policy as a whole would have ap-
plied to this type of damage. Turning to the exclu-
sion, the court considered two aspects: whether the
cleaning was faulty workmanship, and if it were,
what the cost of making good that cleaning
would be.
On the first question, the court held that the clean-
ing was work: [p]lainly, whether one is build-
ing something or doing something to something
else, work is being done. Concluding that work
and workmanship were, in this context, synony-
mous, the court held that the cleaning was clearly
faulty workmanship.
On the second question, the court considered two
interpretations of the cost of making good:
(1) the cost of redoing the cleaning or (2) the cost
of fixing the exterior of the building. The court
held that both of these interpretations were reason-
able. While some aspects of the policy, such as its
generally broad scope, suggested that the policy
should cover the cost of replacing the windows,
the court was not satisfied that this was conclusive.
As a result, the court found the exclusion to be
Julia Lockhart
Associate
McCarthy Ttrault LLP
Ariel DeJong
Partner
McCarthy Ttrault LLP
CONSTRUCTION LAW LETTER Volume 30 Number 6


7
ambiguous, and applied an interpretive presump-
tion endorsed by the Supreme Court to construe
the contract against the interest of the insurer (con-
tra proferentem). The court held that the damage
caused by the cleaners was not excluded from the
builders risk policy.
This decision considerably narrows the application
of the faulty design/work exclusion in builders
risk policies. Policyholders are reminded that they
should seek advice from an insurance coverage
lawyer when their claims are denied by an insurer.
Alberta Court of Queens Bench
Clackson J.
October 7, 2013
CASE SUMMARY









APPEAL COURT FINDS
OWNER BOUND BY
IMPLIED DUTY OF
FAIRNESS TO BIDDER
Olympic Construction Ltd. v. Eastern Regional
Integrated Health Authority [Olympic]
1

In 2009, Eastern Regional Integrated Health
Authority invited bids for the construction of an
extension to the Janeway Hospital in St. Johns,
Newfoundland. The bid documents called for a
mandatory site meeting on June 11, with the bid
closing date on June 29 of that year.
Only Redwood Construction Limited attended that
meeting. The owner, Eastern, then approached
Olympic Construction Limited and another con-
tractor, and suggested that they bid on the project.
Olympic wrote to the owner, requesting an exten-
sion of the bid closing and another site meeting
so that it could be a compliant bidder. Eastern
agreed, and issued Addendum #5 that set up a site
meeting for June 22. The word mandatory that
characterized the first site meeting did not appear
in Addendum #5.
Olympic attended the second meeting, and so did
Redwood, but no other contractor.
Once the bids were submitted, Olympics bid
price was the lowest. However, Redwood then
wrote to the owner, claiming that Olympic should
be disqualified because it did not attend the man-
datory meeting on June 11. Eastern apparently
agreed and awarded the contract to Redwood.
Olympic sued.
The Trial
At trial, Eastern admitted that but for Redwoods
letter, the award would have gone to Olympic. Its
bid was rejected because the June 11 meeting was
mandatory, and since Olympic did not attend that
meeting, its bid was non-compliant.
The central issue at trial was, in the words of
Justice Dymond, whether the second site meeting
[of June 22, 2009] was intended [by Eastern]
to be a substitute for the mandatory site meeting
of June 11. Justice Dymond saw three possible
answers:
1. There was one mandatory meeting set for
June 11; if you did not attend that meeting your
bid would not comply.
2. There were two meetings; if you attended either
of them, you would be in compliance with the
bid documents.
3. The second site meeting replaced the first site
meeting; as such, all contractors would have to
attend that meeting or be unable to bid.
The trial judge decided on the second answer. He
also found that the three possible interpretations of
the site meeting requirements proved that the bid
documents were ambiguous. To resolve this ambi-
guity and to determine whether Contract A had
been breached, he decided to look at the context
and the circumstances surrounding the preparation
of the bid documents to determine the intent of
the parties.
It was clear that Eastern intended to have a valid
second site visit. Eastern certainly benefitted from
a meeting that allowed more contractors to bid.
Paul Sandori
Revay and Associates Limited
Founding Editor, Construction Law Letter
Volume 30 Number 6 CONSTRUCTION LAW LETTER

8
The second meeting was mandatory for only those
potential bidders who did not attend the first meet-
ing. If Redwood had not attended the second meet-
ing, it would not have been disqualified because it
had attended the first meeting. Olympic relied on
its understanding of the validity of the June 22
meeting and submitted a bid. Redwood complained
about the process only after the two meetings had
been completed, bids submitted, accepted, and then
opened in a public forum.
Trial Decision
Justice Dymond found Olympic would not have
bothered to spend time and money engaging in a
bid process unless it had known that it would have
been a compliant bidder, and Easterns subsequent
acceptance and opening of Olympics bid, along
with Redwoods, showed that Eastern regarded
Olympics bid as compliant with Contract A,
the bid contract.
The judge concluded: If the bid process is to have
any integrity at all, good faith by owners has to
start to mean something. There is no good faith,
he added, in a bid process that encourages bidders
to spend money on a bid process only to be denied
the fruits of their bids at the end of the day.
He awarded Olympic damages for its loss of profit
and prejudgment interest.
The Appeal
Eastern appealed. It alleged (1) that the trial judge
erred in law by looking beyond the actual written
contract to determine the intention of the parties,
and (2) that, in any event, no breach of the bid con-
tract had occurred: Addendum #5 did not rescind
the clause in the bid documents that made the first
site meeting mandatory.
The reasons for judgment of a unanimous
Newfoundland and Labrador Court of Appeal were
delivered by Justice Hoegg.
For many years, he said, the law has permitted
courts in certain situations to receive evidence
extrinsic to contract documents themselves
in order to assist in the interpretation of a contract
or some other written instrument. One such situa-
tion is where ambiguity is found in the contract
at issue.
As the term is used in the law of contracts, ambi-
guity implies that the parties knew fundamentally
what they were contracting for or about but did not
express it clearly when they put their intentions
and agreement into writing.
Justice Cromwell, speaking for the Supreme Court
of Canada in Tercon Contractors Ltd. v. B.C.
(Transportation and Highways) [Tercon],
discussed an exclusion of liability clause and
commented:
The key principle of contractual interpretation here is that the words
of one provision must not be read in isolation but should be consid-
ered in harmony with the rest of the contract and in light of its pur-
poses and commercial context.
The trial judge in the Tercon case had decided that
the exclusion clause in the bid documents, however
strongly worded, did not excuse the Province of
British Columbia from liability to Tercon, a compli-
ant bidder. The Supreme Court agreed. It deter-
mined that the owner had breached the express
provisions of its Contract A with Tercon as well as
its implied duty to treat all bidders fairly.
Appeal Decision
In the case before the Court of Appeal, Justice
Hoegg interpreted the words in light of its pur-
poses and commercial context in the quote
above to mean that the purposes and commercial
context of any bid contract at issue should inform
the interpretation of that contract in appropriate
circumstances.
Olympic had submitted a bid to Eastern, which
Eastern accepted and opened. Accordingly,
Olympic and Eastern entered into Contract A.
The terms of Contract A are found in the bid
documents, including all of the Addenda.
The wording of the two contractual provisions re-
specting site meetings could admit of more than one
meaning and thus did not clearly express the inten-
tions and agreement of the parties to Contract A.
Accordingly, the trial judge was entitled to consider
evidence respecting the circumstances surrounding
Olympics Contract A with Eastern, which were
extrinsic to the bid documents themselves.
Eastern summarily rejected Olympics bid after
Eastern had essentially invited, if not encouraged,
Olympic to bid, and after Eastern had issued an
Addendum in order to ensure that Olympics bid
could be compliant. The rejection came after
Eastern had secured the advantage of a competitive
bid process.
CONSTRUCTION LAW LETTER Volume 30 Number 6


9
Olympic relied on Addendum #5 as forming part
of the bid contract and went to the effort and ex-
pense of submitting a bid, stated Justice Hoegg.
This put Olympic into a Contract A with Eastern.
Had Addendum #5 not been incorporated into the
bid contract, Olympic would not have bothered to
bid because the mandatory site meeting had already
passed by the time Olympic was approached about
the project. In these circumstances, concluded the
judge, Easterns rejection of Olympics bid was a
breach of its duty of fairness to Olympic:
The duty of fairness animates the law of public tendering, and to
condone Easterns behaviour in this case would allow Eastern, as the
owner in control of the tendering process and in a position to define
the parameters for compliant bids and bidders, to make the rules and
then break them.
Public bid law respecting the implied duty of fair-
ness, founded in both policy and presumed inten-
tion, is now settled law. Therefore, decided Justice
Hoegg, the trial judge did not err in finding that
Eastern breached its Contract A with Olympic.
Award of Damages
The breach of Contract A proved expensive to
Eastern. It could not show that the trial judge erred
in awarding damages to Olympic for its loss of
profits calculated at 13 per cent of its bid and
amounting to $684,713 (plus HST). Accordingly,
the Court of Appeal did not disturb the award.
To a construction industry observer, the decision
will, no doubt, seem eminently reasonable and ful-
ly justified. The award of the construction contract
to Redwood was unfair to Olympic. But had
Eastern awarded the contract to Olympic, would
not Redwoodthe only bidder to attend the man-
datory site meeting on June 11have a good case
to sue Eastern for breach of Contract A? Would
Redwood not be entitled to its loss of profit?
Newfoundland and Labrador Supreme Court
Court of Appeal
Rowe, White, and Hoegg JJ.A.
April 9, 2014
______________________
1
The trial decision in this case was summarized
in Construction Law Letter vol. 30, no. 1.

CASE SUMMARY





HOW NOT TO INSTRUCT
YOUR EXPERT WITNESS
Bruell Contracting Ltd. v. J. & P. Leveque Bros.
Haulage Ltd.
The Ontario Ministry of Transportation (MTO)
decided to rehabilitate a stretch of Highway 575,
a provincial secondary highway connecting the
communities of Verner and Field, just north of
Lake Nipissing. It awarded the contract for that
work to J. & P. Leveque Bros. Haulage Limited
(Leveque) on June 19, 2007. Leveque and its
sub-contractor Bruell Contracting Limited
(Bruell) constructed a so-called double lift sur-
face treatment. As it turned out, they ended up do-
ing so twice. It took a 17-day trial with 19
witnesses to determine whose fault that was.
Ten days after the completion of the initial double
lift surface treatment placement, which had been
done during the last week of September, the sur-
face treatment began to exhibit visible signs of de-
terioration. A month later, the MTO issued a Work
Directive requiring the surface treatment to be re-
moved. Leveque removed the initial surface treat-
ment by November, and once again placed another
double lift surface treatment commencing the fol-
lowing June 23. This extra work of removing and
replacing was performed under protest.
The Contract
One of the potential causes for the failure of the
surface treatment was an incompatibility of the ag-
gregate chosen by the general contractor and the
binder chosen by the subcontractor. To determine
who would be responsible for such incompatibil-
ity, the court had to determine what type of con-
tract the parties entered into.
Markus Rotterdam
Director of Research, Glaholt LLP
Editor, Construction Law Letter
Volume 30 Number 6 CONSTRUCTION LAW LETTER

10
Leveque argued that its contract was a method
specification contract and that it supplied material
fit for the purpose of this contract because these
requirements were prescribed by the specifica-
tions. Both the aggregate source selected by
Leveque and the binder selected by Bruell were
tested by the MTO and passed all the tests re-
quired by the contract. Leveque further submitted
that the designer of the prescribed system, not the
contractor, should be responsible for the design's
performance. Finally, Leveque argued that ac-
cording to its warranty, it was responsible for the
proper performance of the work only to the extent
that the design and specifications permitted such
performance.
The MTO argued that the contract was not a pure
method specification contract as submitted by
Leveque, but rather a mixed specification contract
incorporating many performance-based elements.
The MTO submitted that Leveque could choose
any aggregate source it wished in order to create a
satisfactory product as per their contractual War-
ranty and that it failed to meet its contractual obli-
gations when it did not take reasonable steps to
ensure that the aggregate it selected and used was
suitable for the project.
The Cause of the Failure
In the end, the court held that it did not really mat-
ter who was responsible for incompatibility, since
incompatibility was not the sole, or even the pri-
mary, cause of the deterioration that occurred one
month after the work had been initially done.
When MTO elected to opt for surface treatment on
Highway 575, it rejected a previously approved hot
mix design, without additional review by an engi-
neer and without input or modification from its
own consultant.
Subsequent to the award to Leveque, the MTO
demonstrated that Leveque had to solely manage
the very tight schedule, even with obstacles created
by the MTO, such as the delay of the pre-
construction meeting. Even as it was obviously
recognized that late season work was not optimal
for placing surface treatment, the court held that
the MTO showed a complete lack of cooperation
and was pompously oblivious or completely
unconcerned.
The evidence was clear that, in the circumstances,
the initial double surface treatment was quite well
constructed by the contractors, and the main cause
of the deterioration was the MTOs decision to al-
low highway loading of extremely heaving truck-
ing too soon after construction, before the curing
was finished. Significant rainfalls accelerated the
deterioration. In the end, what caused the project to
fail was what the court described as a perfect
storm created from the design using excessive
binder application rates for such heavy commercial
traffic, coupled by the rainfall with the cool tem-
peratures inhibiting curing.
The Experts
The parties called numerous experts on develop-
ment of road and pavement rehabilitation, surface
treatments, pavement and materials engineering,
forensic evaluations of pavement structures, con-
struction materials, quality assurance and quality
control, and pavement condition evaluations in
Ontario and across North America relative to all
these subjects.
Despite eventually not being determinative of the
case, one of the principal issues upon which expert
evidence was received was whether the contract
was (1) a method specification without any re-
quirement of performance guarantees as was ar-
gued by Leveque, or (2) a mixed specification
incorporating many performance-based elements
as was submitted by the MTO.
In deciding the issue, the court was faced with
dramatically clashing expert evidence. While the
MTOs expert was admittedly extremely experi-
enced and qualified, the court eventually attached
almost no weight to any of the opinions proffered
by him.
In determining whether an experts evidence will
be helpful, a court will, as a matter of common
sense, look to the question of the experts inde-
pendence or objectivity, since a biased expert is
unlikely to provide useful assistance. While courts
have recognized and accepted that experts are
called by one party in an adversarial proceeding
and are generally paid by that party to prepare a
report and to testify, courts insist that expert wit-
nesses render opinions that are the product of their
expertise and experience and, importantly, their
independent analysis and assessment. In other
words, courts rely on expert witnesses to approach
their tasks with objectivity and integrity: Carmen
Alfano Family Trust v. Piersanti. To the extent that
CONSTRUCTION LAW LETTER Volume 30 Number 6


11
they do not, they are not properly qualified to give
expert opinions: Bank of Montreal v. Citak.
Justice Nadeau summarized the law as follows:
When courts have discussed the need for the independence of expert
witnesses, they often have said that experts should not become advo-
cates for the party or the positions of the party by whom they have
been retained. It is not helpful to a court to have an expert simply
parrot the position of the retaining client. Courts require more. The
critical distinction is that the expert opinion should always be the re-
sult of the expert's independent analysis and conclusion. While the
opinion may support the clients position, it should not be influenced
as to form or content by the exigencies of the litigation or by pressure
from the client. An experts report or evidence should not be a plat-
form from which to argue the clients case. As the trial judge in this
case pointed out, the fundamental principle in cases involving quali-
fications of experts is that the expert, although retained by the clients,
assists the court.
In this case, the evidence showed that the opinion
presented by the MTOs expert was actually
an opinion prepared and developed by the MTO.
Leveque was able to show that some conclusions
in the experts report had been taken verbatim
from the instruction letter to the experts and that
the MTO had requested certain deletions from the
report. The MTO also instructed their experts not
to contact certain other clients in the course of their
investigation. During discoveries, correspondence
came to light in which the MTO told the expert
that further information provided about weather ...
will not change your opinion about the weather.
The MTOs expert opined that there was a stand-
ard industry practice at the time of the original
work being done, which required contractors to
conduct aggregate-binder compatibility testing.
Such testing being industry standard, the argument
went, the contractor had to conduct the testing,
even though it was not specified in the contract.
The evidence showed that the industry standard
argument was actually an argument that originated
inside the MTO and was based on a call to one
other road contractor who told the MTO that it was
their own standard to do so. Three other experts
suggested that there was no such industry-wide
standard.
Based on this evidence, the court came to the con-
clusion that the MTOs expert was committed to
advancing the theory of the case of his client,
thereby assuming the role of an advocate and
preferred what it considered to be the thoughtful,
independent, fair, objective and non-partisan
expert opinion evidence presented by the other
experts.
In the end, partially as a result of attaching no
weight to the MTOs expert evidence, the court
found that there was no liability upon Leveque and
Bruell and that the MTO was solely responsible
and liable for their breach of contract. The MTO
was ordered to pay approximately $3 million to
Leveque and Bruell in damages and interest.
Costs
In supplementary reasons released on November 22,
2013, the court dealt with costs of the proceedings.
While the court had stayed just clear of awarding
punitive damages against the MTO in its substan-
tive reasons, it saw fit to impose costs sanctions on
the MTO, based on the MTOs conduct throughout
the trial. With respect to the evidence proffered by
the MTO, the court found that the MTO had pur-
posely failed to conduct an objective investigation
of the causation issue before reacting as it did
against the contractors. Instead, the MTO manufac-
tured an industry standard defence, and Justice
Nadeau found that he had an obligation to rebuke,
rather than appear to condone, that defence.
The MTO was ordered to pay to Leveque its costs
of the action as claimed on a full indemnity scale,
fixed in the amount of $863,013.07. The MTO had
to pay to Bruell its costs of the actions as claimed
on a mixed partial and substantial indemnity scale,
fixed in the amount of $435,983.70. Finally, the
MTO had to pay to AECOM its costs of these ac-
tions on a partial indemnity scale, fixed in the
amount of $370,638.16.
Ontario Superior Court of Justice
July 25, 2013
Nadeau J.
CITATIONS
Bank of Montreal v. Citak, [2001] O.J. No. 1096,
[2001] O.T.C. 192 (Ont. Sup. Ct. (Comm. List)).
Bruell Contracting Ltd. v. J. & P. Leveque Bros. Haulage Ltd.,
[2013] O.J. No. 3538, 2013 ONSC 1985.
Carmen Alfano Family Trust v. Piersanti,
[2012] O.J. No. 2042, 2012 ONCA 297.
Volume 30 Number 6 CONSTRUCTION LAW LETTER

12
J & P Leveque Bros. Haulage Ltd. v. Ontario,
[2013] O.J. No. 5314, 2013 ONSC 6676.
Construction Lien Act, R.S.O. 1990, c. C.30.
Ledcor Construction Limited v. Northbridge Indemnity
Insurance Company, [2013] A.J. No. 1088,
2013 ABQB 585.
Olympic Construction Ltd. v. Eastern Regional Integrated
Health Authority, [2013] N.J. No. 22, 2013 NLTD(G) 4
(N.L.S.C.T.D.).
Olympic Construction Ltd. v. Eastern Regional Integrated
Health Authority, [2014] N.J. No. 105, 2014 NLCA 20.
Progressive Homes Ltd. v. Lombard General Insurance Co.
of Canada, [2010] S.C.J. No. 33, 2010 SCC 33.
Swift v. Eleven Eleven Architecture Inc., [2014] A.J. No. 96,
2014 ABCA 49.
Tercon Contractors Ltd. v. British Columbia (Transportation
and Highways), [2010] S.C.J. No. 4, 2010 SCC 4.
Winnipeg Condominium Corporation No. 36 v. Bird
Construction Co., [1995] S.C.J. No. 2, [1995] 1 S.C.R. 85.


















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