In 2019, Knox Presbyterian Church near Ottawa engaged OakWood Builders for a design-build arrangement described by architectural services firm IDEA as, “a historically appropriate addition/renovation to one of Manotick Square’s most important buildings.”
The plan, priced at $774,500, called for the construction of an addition to the west face of the building to incorporate barrier-free access to the facility, additional congregation space and a classroom, as well as the renovation of existing aged portions of the building.
“Given the historical nature of the building, a significant amount of research into the history of the church and detailed planning with the City of Ottawa was conducted to ensure that the character of the original building and subsequent addition were maintained,” IDEA wrote on their website.
Knox and Oakwood executed two agreements covering the project. One was the Oakwood General Construction Contract and other a CCDC14 Design-Build Stipulated Price Contract.
As often happens with older buildings, surprises can arise, leading to disagreements concerning responsibility for additional costs. In this case, a buried power line was discovered on the second day of excavation. Work on the project was paused until Hydro One completed relocation and repair of the power line.
Oakwood requested an additional $180,000 be added to their contract. Knox disagreed. How to resolve the issue became the focus of their dispute.
“The owner (Knox) argued that the dispute should be governed by the arbitration clause in GC 8.1 of the CCDC 14 contract,” writes Paul Conrod of Construct Legal, “while the contractor argued that the dispute should be governed by the dispute section of its construction contract which provided for resolution through the courts.”
The Ontario Superior Court, under Justice Corthorn, found “no conflict within the contract documents” that favour the Oakwood contract.
“The respondent (Oakwood) has not satisfied me that, for the purpose of identifying the applicable dispute resolution method, such a conflict exists. The fact that the contract price of $774,500 appears both in the (Oakwood) Construction Contract and the CCDC contract does not give rise to a conflict between the two contracts regarding the method by which to resolve disputes involving the contract price.”
Justice Corthorn then focussed on the dispute resolution clauses covered in the CDCC 14 contract.
“The language of GC 8.1 of the CCDC Contract is much broader and much more general than the language of Section 36 of the (Oakwood) construction contract,” the justice wrote, and was capable of dealing with the buried Hydro One line.
“The impact, or potential impact, of the discovery of a concealed or unknown condition on the project site is specifically addressed in the CCDC contract,” he continued. “I find that GC 8.1 is intended to apply to the types of disputes which arose between the parties following the unexpected discovery of the buried Hydro One power line.”
As a result, Justice Corthorn ruled in favour of Knox, and directed the parties to arbitration in accordance with GC 8.1 if unable to resolve the disputes through negotiation or mediation. Whether Hydro One is a party to any arbitration, “is an issue for the arbitrator to determine.”
In cases when two contracts cover one single project, Conrod suggests, “parties should carefully consider the order of priority of the various contract documents as they are listed in any precedence or priority clause in the contract.”
And when drafting and negotiating such construction contracts, he adds, “parties should carefully consider the process and scope of the dispute resolution provisions in the contract. Courts and arbitrators will interpret and enforce the provisions as drafted in the contract.”
Mahmoud Abuwasel, managing partner of global law firm Wasel & Wasel, calls Knox vs. Oakwood, “a landmark case that highlights the importance of clearly defined arbitration agreements and the proper interpretation of construction contracts,” that provides valuable insights for future construction disputes.
“The ruling underscores the necessity of adhering to agreed-upon dispute resolution processes and the critical role of comprehensive contractual frameworks in managing complex construction projects.”
John Bleasby is a freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com.
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