Court cases over the past several decades have impressed upon the construction industry that an independent consultant contracted under agreement by both parties has an authority that even the courts are reluctant to challenge.
In a detailed review of recent case law in both Ontario and Alberta, Rob Kennaley and Effi Sidiropoulos of Kennaley Construction Law, emphasize the impartiality and objectivity of the consultant is critical. This is particularly important when it comes to payment obligations between a project owner and the contractor that must be authorized by that consultant. In fact, in the absence of evidence showing fraud, bad faith or neglect of duty, it is unlikely that a court will overturn a consultant’s approval of work due for payment.
Kennaley and Sidiropoulos cite the recent Ontario case between Pentad Construction Inc. and 2022988 Ontario Inc. It was claimed, based on a report given by an engineer approved and authorized by both parties, that the contractor had been over-billing for earthworks. Payments for such earthworks were to become due and payable upon certification by the authorized engineer. The contractor disagreed with the engineer, suspended further earthwork and preserved a lien on the project.
Justice Boswell of the Ontario Superior Court of Ontario ruled in favour of the engineer’s report, relying in part, on a 1959 Ontario Court of Appeal decision. Payment certifications made by the engineer were contracted and intended to be binding.
“Ontario’s lower courts have similarly held that where a payment certifier is contractually appointed, deference should be given to his or her determination of whether or not the contract has been substantially performed,” say Kennaley and Sidiropoulos.
They further refer to an Ontario lower court ruling made years earlier that said, “It would be an improper step for the court on summary applications to merely substitute its view for that of an expert who was selected by the parties under the contract to perform this important task. A showing of significant error, legal or factual, is required to warrant the relief sought in this case.”
Similarly, in Alberta, Kennaley and Sidiropoulos reference a ruling issued by Justice Antonio of the Alberta Queen’s Bench.
“The consultant had access to the work site and the expertise to evaluate the work he saw. He was regularly involved with the parties, the work, the contract, and the parties’ interactions under the contract. He has expertise in relevant areas. The parties chose this person, equipped with these advantages, to make decisions about the state of completion of the work and any resulting contractual obligations. This court lacks those advantages. Therefore, as a matter of contractual interpretation, precedent, academic rationale, and practicality, this court will defer to the consultant’s determinations on questions of fact, unless they reveal significant errors.”
There are several lessons to be gained from the outlooks of courts in both Ontario and Alberta, say Kennaley and Sidiropoulos.
Of primary importance in their view is that, “if the parties have contractually agreed that a consultant’s certification or approval is a condition precedent to payment, well-established case law holds that the consultant’s determinations in that regard will only be interfered with if fraud, bad faith or wilful disregard of duty can be found.”
They do point out, however, that it remains to be seen if appellate courts will maintain similar deference to consultants as the interpreter of contract documents.
Nevertheless, they suggest not only should both parties choose any contracted and independent consultants with care, but that owners should, “avoid taking steps to direct the consultant, as doing so could invalidate the consultant’s decisions.”
At the same time, conditions under which the contractor can dispute a consultant’s findings should also be considered. And should a contractor feel that a consultant is overstepping their authority or failing to act impartially and objectively, they should document such actions.
“Doing so may be the only way of truly disputing a consultant’s findings in many circumstances.”
John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to firstname.lastname@example.org.