Both parties were aware of the contractual terms relating to changes, and both chose to ignore them. In these circumstances, the defendant’s argument that the plaintiff’s claim for extras is barred because the contract provisions required that changes be ordered by it in writing fails.

Sub entitled to payment for extra work not ordered in writing

By Paul Sandori

Rich Van Electric Ltd. v. Dhaliwal

Rich Van Electric Ltd.,an electrical subcontractor, supplied material and labour during the construction of a building in Surrey, British Columbia, about seven years ago. Joginder Dhaliwal, doing business as Mainland L Contracting, was the prime contractor and also the principal of the owner, Mainland Developments and Mainland Labour.

Dhaliwal was responsible for the negotiation of the contract and as project manager supervised Rich Van's work. The contract provided that no claim for additional work or charges could be made unless ordered in writing:

The subcontractor shall not be entitled to make any claim for any additional work or for changes unless the same has been ordered in writing.

The project, as built, differed substantially from that described in the drawings available at the time of the execution of the contract. Rich Van claimed that additional work performed and material supplied at the request of Dhaliwal and his company added substantially to the amount due on completion of the project. The difference between the parties' positions on the amount owed to Rich Van for extra work and materials was approximately $66,000.

Credibility of Witnesses

Justice Willcock of the Supreme Court of British Columbia found the two witnesses called on behalf of Rich Van, Gopal and his foreman Lyle Morin, to be ?forthright and honest in their testimony?. Their evidence was consistent with documentary evidence and common sense.

The evidence of Dhaliwal, on the other hand, was not so persuasive. Dhaliwal failed to call evidence that might have supported his case, said the judge. He was ?not hesitant to speculate; in fact, he was insistent on testifying on certain matters with respect to which he was not qualified. Further, the evidence of Mr. Dhaliwal simply does not make sense in certain respects?.

Not only did Mr. Dhaliwal fail to adduce any of the physical evidence that might have supported his case, or call any expert opinion evidence but he also failed to call as a witness a person who he claimed was present during certain important discussions with the representatives of Rich Van.

?In light of these facts,? concluded Justice Willcock, ?I accept the evidence of Mr. Morin and Mr. Gopal where it is inconsistent with the evidence of Mr. Dhaliwal?.

Applicable Law

Dhaliwal?s defence relied on the provision of the contract barring claims for extras or for changes unless they had been ordered in writing. So the key issue to be decided by Justice Willcock was whether, given this provision in the contract, Rich Van could advance any claim for extras.

The effect of a similar clause was considered in Kei-Ron Holdings Ltd. v. Coquihalla Motor Inn Ltd.

In 1993, Kei-Ron Holdings Ltd., the contractor, and the defendant, Coquihalla Motor Inn Ltd., the owner, entered into a CCDC 2 standard fixed price contract for some construction work. Kei-Ron claimed about $80,000 for extras. Coquihalla relied primarily on the terms of the contract, in particular GC11.1.(b)

? no Changes in the Work shall be proceeded with without a written order signed by the Owner and no claim for a change in the Contract Price or change in the Contract Time shall be valid unless so ordered and at the same time valued or agreed to be valued …

For good measure, Article A-2 of the contract also provided that

? all deviations or additions from or to the plans and specifications attached hereto as Addendum B, shall be approved, in advance, in writing and signed by the Owner and Contractor with agreed costs for such deviations and conditions;

Coquihalla also relied on the decision of the Supreme Court of Canada in Hawrish v. Bank of Montreal which affirmed the principle that parol evidence is inadmissible to vary a written agreement in a manner which contradicts or is inconsistent with the written instrument.

Parol Evidence. The courts assume that written contracts contain the terms and provisions that the parties specifically intended, and omit those provisions that the parties did not want. The parol evidence rule is intended to safeguard the terms of the contract. Verbal or even written evidence is not allowed to be given of what the parties discussed before or during the time that the contract was being prepared so as to contradict or vary in any manner what is set out in writing.

After reviewing a number of cases in which claims for extras were allowed despite the presence of similar clauses requiring written approval, Justice Levine of the British Columbia Supreme Court concluded:

Consideration of the plaintiff's claims is not excluded by the terms of the contract. Both parties were aware of the contractual terms relating to changes, and both chose to ignore them ? In these circumstances, the defendant's argument that the plaintiff's claim for extras is barred because the contract provisions required that changes be ordered by it in writing fails.

Legal Principles

Having reviewed a number of precedent cases in addition to Kei-Ron, Justice Willcock found that, while approaching the problem of extras from different angles, all the precedent court decisions shared common underlying principles. In determining liability for the cost of extra work, the courts in these cases asked four questions:

?         First, was the work performed, in fact, extra work i.e. did it fall outside the scope of work originally contemplated by the contract?

?         If so, did the owner give instructions, either express or implied, that the work be done or was the work otherwise authorized by the owner?

?         Next, was the owner informed or necessarily aware that the extra work would increase
the cost?

?         Finally, did the owner waive the contractual provisions requiring changes to be made in writing or willingly ignore these provisions?

Where the plaintiff in the precedent cases was able establish these elements, the defendant was found liable to pay a reasonable amount for the extra work. Justice Willcock adopted that test in his assessment of Rich Van?s claim for extras.

Contractual Defence

The judge accepted the evidence that the work performed did not fall within the scope of work originally contemplated by the contract. Dhaliwal knew of, and authorized, the additional electrical work. He was aware that the extra work would increase the cost of the project.

The conduct of the parties showed an intention to disregard the requirement that changes be approved in writing, decided Justice Willcock. Significant work was completed before the agreement was reduced to writing at all. After the contract was signed both parties recognized the need to address shortcomings in the plans and did so in some cases without work orders.

Written orders, where forthcoming, were sometimes late and were not, even in those cases, regarded as necessary before performing the work. At trial, Dhaliwal agreed that some necessary additional work undertaken without a written order should be paid for.

In the circumstances, the court found that Dhaliwal had waived the provision requiring changes to be made in writing. Rich Van was entitled to payment for the additional materials and labour.

Supreme Court of British Columbia

Willcock, J.

October 8, 2009