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Law Column: Provide notice of intention to bring a claim

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October 14, 2016 by John Pratt & Kristen Withers

constructionlawMany construction contracts include a provision requiring parties to the contract to provide reasonable notice of potential claims they might bring for delays, defects in the work or other damages. These provisions often include time limits for giving notice, and may also include substantive requirements as to the form that the notice must take. Failure to meet contractual notice requirements may prevent a party from successfully bringing a claim in court to recover its loss.

In the British Columbia case of Centura Building Systems Ltd. v. Cressey Whistler Project, the contractor, Centura, brought an application for summary trial of a counterclaim by the project owner, Cressey, in respect of delays that Cressey claimed Centura had caused.

The contract at issue in Centura included a notice provision requiring any party claiming damages under the contract to provide written notice of its claim within a reasonable time after the damage was first observed.

Only months after Centura had commenced work, the project fell behind schedule. Throughout the remainder of the project, the parties engaged in numerous discussions regarding the delay and the consequent increasing costs allegedly being incurred by Cressey. Eventually, seven months after the delay had been recognized by the parties and just before Centura had submitted its application for substantial performance, Cressey delivered notice of its intention to recover damages in relation to the delays.

In considering whether or not the notice delivered by Cressey met the contractual requirement to provide notice within a reasonable time, the Court held that the most important issue was the substance of the notice given, as opposed to its form. On that point, the Court made note of the fact that there had been a great deal of communication between Centura and Cressey about the delays and the resulting costs incurred by Cressey, prior to delivery of formal notice. Ultimately, however, the Court declined to make a final decision with respect to the adequacy of the notice on a summary trial application.

Unlike in British Columbia, courts in Ontario have expressed a greater reluctance to disregard the importance of form in the delivery of contractually required notice. In the case of Technicore Underground Inc. v. Toronto (City), the Ontario Court of Appeal was asked to reconsider the dismissal of a multimillion-dollar claim against the City on the basis that the contractor had failed to give notice of its claim as required by the contract.

The notice provision in the contract in Technicore required that the contractor give notice of any claim as soon as reasonably possible, and, in any case, no later than 30 days after the work at issue had been completed. The notice itself was required to identify the specific issue raised by the contractor and the grounds on which it was based, and was to provide all records in support of the claim.

The Court rejected the contractor’s argument that previous communications with the City constituted constructive satisfaction of the substantive requirements of the notice provision and held that the notice provided by the contractor with respect to the majority of its claims failed to satisfactorily include these elements. Moreover, the Court found that a party does not have to show that it has suffered prejudice in order to rely on another party’s failure to adhere to a notice provision in contesting a claim brought by that party.

Despite providing divergent opinions with respect to the importance of form, both Centura and Technicore demonstrate the expectation of courts that parties will comply with any contractual notice provisions when bringing a claim under a contract. Although the courts in British Columbia have proven more amenable to arguments for the acceptance of constructive notice, the risk of dismissal of a claim at an early stage militates in favour of strict adherence to the precise requirements of contractual notice provisions.

In any event, in order to avoid the added expense and difficulty involved in demonstrating that sufficient notice has been given, parties with potential claims are wise to provide adverse parties with formal notice of their concerns; within the contractual time limits, and in the requisite form. 

John Pratt is an associate at BLG practicing in the areas of construction, insurance, tort and commercial litigation. Kristen Withers is an articled student at BLG. This column is provided for general information only and may not be relied upon as legal advice.
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