It’s useful to remember that before she was appointed to the Supreme Court of Canada in 1989 and developed a reputation in legal circles for her Charter decisions, Chief Justice Beverley McLachlin researched and wrote in the area of construction law.

Revisiting these past interests, McLachlin CJC wrote an article for an ADR newsletter not too long ago which has also recently reappeared in the US law journal Faulkner Law Review: “Judging the ‘Vanishing Trial’ in the Construction Industry” (2011) 2 Faulkner L Rev 315.

In her reflective piece McLachlin CJC begins by recounting the benefits of alternative dispute mechanisms and the reasons why commercial parties are increasingly abandoning courts in favour of ADR processes, including: (i) the technical and legal complexity of matters being disputed and the consequent desirability of adjudicators with special expertise, (ii) speedier resolution, (iii) preservation of business relationships, (iv) flexibility in processes and outcomes, and (v) confidentiality. Acknowledging the benefits often realized through ADR, as well as the overarching goal of justice systems to facilitate justice, she concludes that: “ADR is here to stay, and that is a good thing.” A further benefit of ADR processes that is often omitted from accounts of its benefits is the fact that it is good for taxpayers because they reduce the burden on courts’ resources.

But she goes on to cite a body of literature which has cautioned of the broader implications of the wholesale relocation of dispute resolution from public courtrooms to private settings and the loss of the “collateral benefits” of resolving disputes by trial, and notes a number of things that ADR generally can’t or doesn’t or won’t do, namely:

  • In terms of broader public interests:

    • Allowing opportunities for intervention by persons not party to lawsuits,
    • Allowing the discovery and publication of important facts,
    • Aiding/facilitating the structural transformation of public and private institutions,
    • Satisfying public interests by providing checks on government power, and
    • Catharsis in dealing with events of public importance.
  • And in terms of the practical concerns of the process of law-making:
    • The continued development of operative legal principles and “norm-setting”,
    • The interpretation of laws so standards for behavior are set, known and enforced, and
    • The furnishing of rules and precedents to guide bargaining outside the courts and the settlement of future disputes.

Primarily concerned with the nature of ADR settlements as either completely confidential or, if they are not secret, as “little more than an announcement of how much money changed hands”, McLachlin CJC expresses concern for a future world where the development of law is stunted by a lack of “reasoned and transparent” adjudication or any record of such. Formal ADR processes themselves, which still depend heavily on knowledge of the state of the law, would eventually suffer themselves as a result of dwindling authorities, and in a nightmare scenario bargaining power would tend to pass from parties with the best legal position and (back to) parties able to muster the most threat. This vision echoes the Hobbesian nightmare.

I myself have pointed out the benefits of ADR processes like mediation in the past (www.adambaker.net/mediation-is-good-business/), and, like McLachlin CJC, I think it is hard to deny them and would personally recommend ADR to any client if was apparent that it was in their best interests. But I am also inclined to agree that there is a downside and share her concern for the long term development of the common law.

Benefits of Alternative Dispute Resolution and its use in the construction industry

I won’t rehearse in detail the relative costs and benefits of alternative dispute resolution here, as they are now well known and have been discussed at length by other, more learned writers and practitioners. Some good American blogs on the subject include Ron White’s The Critical Path which is focused on ADR in the context of construction disputes, and Victoria Pynchon’s Negotiation Law Blog, which deals with negotiation and mediation more broadly (both are professional mediators). Another site worth a spot in your RSS feed is Virginia attorney Christopher Hill’s Construction Law Musings, which deals with construction issues generally but which frequently includes posts on ADR.

Suffice it to say that ADR has become widely used in the construction industry in Canada and the United States. It has yet to become as popular in Newfoundland and Labrador but ADR generally is still gaining traction as a method of settling commercial disputes (arbitration in this province is still predominantly labour arbitration). But it is gaining ground and sophisticated commercial contracts, including construction contracts, will include provisions for arbitration or other ADR.

And because of ADR it is possible that the courts may be losing touch with the evolving commercial practices and customs of the construction industry, since they have less contact with it.

A Construction Court?

While it is generally understood that as a matter of public policy encouraging parties to settle their differences out of court is a good thing, one silver lining to a construction industry with a litigious culture was that judges got well-acquainted with the issues and developed a body of jurisprudence understood to be responsive to the issues.

In the United Kingdom, the Queen’s Bench division of the High Court of England and Wales actually has a specialized sub-division called the Technology and Construction Court, which deals primarily with, as one might expect, disputes in the context of technology and construction. As an aside, decisions from the TCC can be found at BAILII here. Construction litigators in Newfoundland and Labrador or elsewhere in Canada might find it worthwhile to pay attention to judicial reasons from the Construction Court.

So, the TCC is a division of the High Court and has all the powers of a court, but also has the advantage of specialization, often touted as an advantage of ADR vehicles, and tends to render decisions of very good quality.

Canada already has some specialized courts. For example, the Tax Court of Canada, and the provincial superior court divisions which have been created to deal with family law matters (in Newfoundland and Labrador the Supreme Court – Family Division).

Can and should Canada have a specialized construction court? The answer may well be no, given that Canada does not have a centralized court system comparable to that of England and Wales – the provincial superior courts will generally have jurisdiction in construction disputes – and any particular province may not have enough construction (and technology) disputes to warrant the creation of a separate division (this said, some provinces, and I am thinking of Alberta and British Columbia, where many of our decisions come from these days, very well might).

But given that sophisticated arbitrations may often involve a level of time, expense and preparation comparable to litigation, if the expertise element were also a non-issue then parties might well want to litigate from the outset.

So, Newfoundland and Labrador Supreme Court – Technology and Construction Division?

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Case Brief: Tercon Contractors v British Columbia

by Adam Baker on February 4, 2011

Tercon Contractors Ltd. v British Columbia (Transportation and Highways), 2006 BCSC 499, revd 2007 BCCA 592, revd 2010 SCC 4, [2010] 1 SCR 69, online: LexUM http://scc.lexum.umontreal.ca/en/2010/2010scc4/2010scc4.html

This case, similar the earlier case of M.J.B., considered the effect of an exclusion clause in the context of an acceptance of a non-compliant bid. The exclusion clause in this case was more broadly worded than the privilege clause in M.J.B.

Facts

In 2000, the British Columbia Ministry of Transportation and Highways (the “Ministry”) issued a request for expression of interest (“RFEI”) for a major highway design-build project. Six teams of interested contractors made submissions, including Tercon Contractors (“Tercon”) and Brentwood Enterprises (“Brentwood”). After receiving the submissions the Ministry changed its mind and decided to perform the design function itself and issued a request for proposals (“RFP”) for the construction contract only.

The RFP was issued in January 2001 and included among its terms a provision that only participants in the original RFEI process were pre-qualified to bid. The RFP also included a broadly worded exclusion clause excluding liability on the part of the Province for any damage claims arising “as a result of participating in this RFP”. It was specifically worded as follows:
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Case Brief: Double N Earthmovers v Edmonton

January 22, 2011

Double N Earthmovers Ltd. v Edmonton (City), 213 AR 81 (ABQB), affd [2005] AJ No 221 (ABCA), affd 2007 SCC 3, [2007] 1 SCR 116, online: LexUM http://scc.lexum.umontreal.ca/en/2007/2007scc3/2007scc3.html This case is addresses the issue of compliance with the terms of a call for tenders. It was a five-four split at the level of the Supreme [...]

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Case Brief: Naylor Group v Ellis-Don

January 19, 2011

Naylor Group Inc. v Ellis-Don Construction Ltd., [1996] OJ No 3247, 31 CLR (2d) 195 (ON Gen Div), revd [1999] 119 OAC 182 (ONCA), vard 2001 SCC 58, [2001] 2 SCR 943, online: LexUM http://scc.lexum.umontreal.ca/en/2001/2001scc58/2001scc58.html This is not a tender dispute between an owner and a bidder, but between a general contractor and a subcontractor [...]

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Case Brief: Martel Building v Canada

January 16, 2011

Martel Building Ltd. v Canada, [1997] 129 FTR 249 (FCTD), revd [1998] 163 DLR (4th) 504 (FCA), leave to appeal refused, 2000 SCC 60, [2000] 2 SCR 860, online: LexUM http://scc.lexum.umontreal.ca/en/2000/2000scc60/2000scc60.html Facts Note: This case deals with the possibility of a tort action in negligence for breach of a duty of care during negotiation of [...]

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Case Brief: M.J.B. Enterprises v Defence Construction

January 14, 2011

M.J.B. Enterprises Ltd. v Defence Construction (1951) Ltd., [1994] 164 AR 399 (ABQB), affd [1997] 196 AR 124 (ABCA), revd [1999] 1 SCR 619, online: LexUM http://scc.lexum.umontreal.ca/en/1999/1999scr1-619/1999scr1-619.html Facts The respondent, Defence Construction (‘Defence’), invited tenders for construction of a water pumping and distribution system on a Canadian Forces Base in Alberta. It received four bids, [...]

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Case Brief: R. v Ron Engineering

December 6, 2010

R. (Ont.) v Ron Engineering & Construction (Eastern) Ltd., [1979] 24 OR (2d) 332 (ONCA), revd [1981] 1 SCR 111, online: LexUM http://scc.lexum.umontreal.ca/en/1981/1981scr1-111/1981scr1-111.html This case is understood to be the leading case on the law of bidding and tendering in Canada. Facts The province of Ontario (the “owner”) retained an engineering consulting firm to prepare [...]

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What is “construction law”?

November 22, 2010

Construction law does not refer to any specific area of the law. Instead, it is a shorthand way of referring to many different areas of law as they apply to the special context of the construction industry. That is, construction law is not a discrete area of the law; it is an area of legal [...]

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Newfoundland and Labrador announces deal with Nova Scotia for hydroelectric development on the Churchill River

November 18, 2010

Industrial activity in Newfoundland and Labrador has never been clearly focused in any one area. But the centre of gravity in recent years has definitely shifted away from the island and more in the direction of Labrador. Increased investments in mining exploration and development and the significant investments made in building the trans-Labrador highway are [...]

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Supreme Court Decisions on the Law of Bidding and Tendering in Canada

November 8, 2010

The legal rules of bidding and tendering in Canada consist primarily of judge-made law. In particular, the basic framework of bidding and tendering law in Canada was set out in a landmark Supreme Court decision in 1981 which fundamentally altered the common law of contracts as it had previously applied to analysis of tendered contracts. [...]

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