Aird & Berlis Secures Complete Dismissal of $2.1-Million COVID-19 Cost Claim for Municipality
Aird & Berlis was recently successful in defending a $2.1-million claim brought against an Ontario municipality for increased material and labour costs arising in the context of the COVID-19 pandemic. Just 37 days after the adjudication process began, the claim was entirely dismissed following an interim binding decision under the Construction Act, R.S.O., 1990, c. C.30.
The dispute arose when a contractor, who was awarded a multi-year road-widening contract during the pandemic, sought additional compensation two years into the project. The contractor’s claim focused on specified material costs which had increased by more than 100 per cent and for labour costs that had spiked.
The matter was one of contractual interpretation of a clause included in an addendum to a request for tender that stipulated:
[the bid price shall include] …any other costs related to COVID-19 that can be reasonably anticipated at the time of Bid submission [emphasis added]
The crux of the contractor’s argument was that the addendum supplanted the standard terms and conditions of the contract, and the clause signalled to bidders that a contractor would be able to recover costs arising from COVID-19 that were unreasonable and unanticipated at the time of tender. The contractor also sought to establish a monthly compensation system for future incurred costs.
Relying on the law governing fixed-price contracts and several contract provisions, Aird & Berlis countered this position, asserting that the claim attempted to rewrite the contract by reading one provision in an addendum to the exclusion of others.
The adjudicator agreed that the provision in the addendum related to costs associated with the COVID-19 pandemic was in consideration of costs to administer government-imposed health and safety protocols. The clause was not a loophole that served to nullify the premise of a lump-sum contract or other provisions that set an upset limit for the term of the contract.
Having determined that the claimant had no valid argument, the adjudication was dismissed.
Aird & Berlis represented the respondent municipality with a team including Vedran Simkic and Danielle Muise.
