An ounce of prevention is worth a pound of cure, the saying goes.
When it comes to the disruptions being experienced by the construction industry because of COVID-19, many legal experts believe a wave of litigation in the pandemic’s aftermath is inevitable. That means taking strategic legal steps in advance of any disputes arising from resultant delays, reduced productivity, increased costs and lost profits.
“It is imperative that parties across the contractual chain implement proactive identification and management steps,” write Brian Reid, Jason Roth and Geoffrey Stenger of Bennett Jones LLP.
They recommend careful planning, communication and the enforcement and understanding of contractual, legislative and other rights and remedies concerning force majeure, delay and productivity impacts, material claims and insolvency.
Beyond these expected disputes, prime contractors must also be aware of their legal health and safety obligations to keep jobsites safe for workers. Despite a significant drop in new cases in recent weeks across Canada, the COVID-19 virus continues to spread. The construction industry must maintain its vigilance.
Given concerns over such corporate vulnerabilities, Lyndsey Delamont and Myriam Hacault of McCarthy Tetrault offer several proactive steps that should be considered in advance of any litigation-precipitating event.
Of paramount importance is to retain legal counsel for purposes that go beyond a simple review of existing insurance policies.
“Legal counsel can assist in evaluating risk in potential litigation and help create and maintain privilege over sensitive records,” they state.
Delamont and Hacault further encourage the company’s legal team communicate verbally instead of by email.
“Alternatively, make sure legal counsel is involved early in order to increase the likelihood that such communications are privileged.”
This will avoid the creation of what they call “catastrophic emails.”
They also point out that legal advisers can assist in identifying and interviewing key witnesses early on, while the information is still fresh and available. That assistance extends to any retained experts should an internal review be advisable.
It is also vital that every effort be made, and be shown to have been made, to identify and preserve records regarding such matters as added costs and delays.
“These records can aid in your defence and because even inadvertent destruction of evidence can lead to allegations of spoliation,” write Delamont and Hacault.
Another risk associated with the COVID-19 pandemic relates to fraud.
“The shortage of supplies and materials could lead suppliers to break contractual terms related to pricing so they could sell their goods to other customers willing to pay a higher price,” write Neil Keenan, William Abramovicz and Matthew Bedan of Forensic Risk Alliance (FRA).
They explain that construction slowdown and shutdown periods are conditions during which asset and material misappropriation could occur.
Rather than initiating any ad hoc preparations as individual cases come forward, John Craig, Jason Roth, Charlene Hiller and Justin Duguay of Bennett Jones LLP write of the strategic benefits of forming a claims committee in anticipation of any and all legal disputes that may arise.
“This team consists of a company’s in-house legal counsel, contract administrator and projects manager — as well as a claims consultant and outside legal counsel as required. A contemporaneous claims review process also potentially avoids disputes by enabling companies to efficiently address issues as they arise rather than after the fact.”
A legal claims committee, once established, can act in a more consistent and ongoing manner. In fact, the committee is well suited to identify and prepare for disputes in advance and assemble the names of independent experts that might be helpful.
The committee offers the further advantage of examining individual projects for any specific legal and technical vulnerabilities ahead of time.
“This may help a company focus its position in any potential settlement talks,” Craig, Roth, Hiller and Duguay write. “It may also help identify areas where the company can take steps now to mitigate weaknesses.”
Delamont and Hacault conclude that by “proactively and pre-emptively knowing and satisfying their legal obligations,” companies can save time and money while also protecting their business reputations.
John Bleasby is a Coldwater, Ont. based freelance writer. Send comments and Legal Notes column ideas to firstname.lastname@example.org.