FAQ.18

Question:

In issues where the contractor differs in opinion from the consultant as to the interpretation of an aspect of the work under the contract documents, and where the consultant has the authority to, and has made clear their findings and interpretation, can the contractor continue to dispute the issue and call for dispute resolution measures?

Answer:

The answer depends on whether the contract is plain vanilla CCDC 2 or if there are pertinent supplementary conditions. The comments below assume a plain vanilla CCDC 2 and that the contract documents were not in error or lacking in coordination. It should be noted that architects are not lawyers; consult legal counsel and your client if this situation arises.

This response should be read with a copy of the CCDC 2 document at hand. From a quick look at CCDC 2 GC 2.2, the consultant’s interpretations are not binding.

2.2.11 gives the consultant the authority to reject work which “…does not conform to the requirements of the Contract Documents”.

The consultant could use this to withhold payment where the contractor proceeds with work contrary to the consultant’s interpretation. The danger is that the Work could come to a screeching halt.

Under GC 7.1, 7.1.2 may give the owner the right to terminate the contract “…if the Contractor neglects to perform the Work properly…” or fails “…to comply with the requirements of the Contract to a substantial degree…”.

This is something that the owner’s lawyers would have to evaluate based on the specifics of the situation.

If the owner would even consider starting to move in the direction of terminating the contractor then a call to the bonding company from the owner’s lawyer may cause them to bring pressure to bear on the contractor to change his confrontational approach. The owner would have to be prepared for the costs and delay involved in proceeding with another contractor.

In GC 8.1, 8.1.1 indicates that the option of requesting dispute resolution is open to the contractor on any and every issue.

8.1.3 allows the consultant to give instructions to the contractor that are necessary for the proper performance of the Work where a dispute is not resolved promptly.

The consultant should only issue a Supplementary Instruction (i.e. no-cost change) in response to questions of interpretation unless they feel that there is a definite change to the contract. The wording of the instruction should state that the instruction is issued in accordance with GC 8.1.3 in order to put the contractor in a position of having to “act immediately according to the instructions”. Failure of the contractor to do so would be a breach of the contract. To issue a Change Directive just to get the contractor moving loses the battle because it presupposes that there is a change to contract time or value.

GC 8.3 The contractor is likely to be in breach of 8.3.3

 CCDC 2 relies on CCDC 40-2018 Rules for Mediation and Arbitration of Construction Industry Disputes for the resolution of disputes.

12. Costs of Mediation

12.1 Shared Costs – “Unless the Parties have agreed otherwise, the Mediator’s fees and reimbursable expenses shall be shared equally by the Parties and paid in accordance with the terms of the Mediator Services Agreement.”

22 Costs

22.2 “Unless otherwise ordered by the Arbitrator, each Party shall bear its own legal costs, including its experts’ costs and shall share equally the Arbitrator’s fees, expenses and other ancillary costs of the arbitration..”

22.3 “The Arbitrator: (a) may decide which Party shall bear the costs of legal fees and legal expenses of the successful Party, if they were claimed during the arbitration,(b) may apportion those costs if the Arbitrator considers it just and reasonable to do so, and (c) in either event, shall specify the amounts of those costs or the manner of determining those costs.”

Based on the above excerpts from CCDC 40, if the contractor’s disputes are clearly bogus, pushing for arbitration as soon as possible would put him in the position of having arbitrator order the contractor to pay the costs out of his own pocket. That may cause a change in his behaviour. The owner would still have to split the costs of the mediation which preceded the arbitration, but if the contractor lost at arbitration and had to pay the owner’s costs, it should be a deterrent to proceeding with other bogus disputes.

All that aside, the owner should be advised to review the situation with their lawyer and maybe have the lawyer send a letter putting the contractor on notice that it appears that the contractor is not acting in good faith and that the client would seek to recover any delays or damages caused by the contractor’s actions.

If the owner gives in to the bullying, it will just get worse. There is a cost to taking a stand, but there is also an escalating cost to giving in.

Above all, the consultant needs to remain impartial and not to favour the owner because of the contractor’s posturing. This does not mean the consultant cannot require the contractor to follow the letter of the contract with respect to all submissions and applications. The working relationship has already deteriorated, so little further damage may be done. The contractors not acting in good faith should learn that there are consequences to their actions. The consultants have to make sure they remain impartial in their dealings with the owner and contractor and comply with all the timelines and notices required by the contract.

The consultant should approach the owner about extra fees to deal with the situation, especially if the consultant was not involved in any prequalification process, did not recommend the contractor be on the bidders list, or the contractor was included at the explicit request of the owner.

Since this answer was composed, the adjudication provisions of the Construction Act have come into force. Any dispute over payment, including the failure of the consultant to issue a change order may be taken to adjudication. It is too early to know what impact adjudication will have on the whole of the dispute resolution process.

References:

CCDC 2-2020 Stipulated Price Contract

CCDC 40-2018 Rules for Mediation and Arbitration of Construction Industry Disputes