On July 26 2023, the Court of King’s Bench of Alberta released its decision of Tempo Alberta Electrical Contractors Co. Ltd. v Man-Shield Construction Inc., 2023 ABKB 44 (“Tempo”), wherein the Court ruled that a general contractor had no genuine defence against an electrical subcontractor’s claim for outstanding payment and upheld a partial summary judgment of $678,261.00 in favour of that electrical subcontractor.
The dispute in Tempo dates back to 2014 when Man-Shield Construction Inc. (“Man-Shield”), the general contractor for the construction of a residential condominium project, entered into a subcontract with Tempo Alberta Electrical Contractors Co. Ltd. (“Tempo”) to provide electrical work for the project. The project was significantly delayed, and the parties disagreed on who was responsible for the delays and what damages each party suffered as a result. Jose Delgado, a partner at Bishop & McKenzie LLP and counsel for Tempo, explains that the parties initially engaged in litigation because of Man-Shield’s failure to pay Tempo pursuant to the subcontract.
In April 2021, Applications Judge Summers granted Tempo partial summary judgment in the amount of $678,261.00 with respect to outstanding progress invoices, a 10% holdback, and unpaid change orders. The judgment did not include any damages for delay, as both parties acknowledged that the issues of delay required a trial to be resolved.
On appeal, Man-Shield argued that the test for summary judgment had not been met, and that it had a valid defences to Tempo’s summary judgment application.
First, and with respect to the amounts owing to Tempo pursuant to the unpaid change orders, Man-Shield submitted that changes to the subcontract were only permitted where there was a change of intent to the building and that a clause in the subcontract required a written change order from Man-Shield. However, Justice Bercov rejected this argument, noting that reading the subcontract as a whole, “I am satisfied that changes to the work can be made where the intent of the building is not changed”. There was also uncontradicted evidence that several change orders were paid by Man-Shield.
Man-Shield further contended that the subcontract only allowed for changes by written change order and that there were none made. However, the requirement that there be a written change order can be waived if the test in Impact Painting Ltd. V Man-Shield (Alta) Construction Inc.,  AJ No 157 (“Impact”) is met. In particular, a written change order is not required if it can be established that:
- The work was in fact extra work and did not fall within the scope of the original contract;
- The owner gave express or implied instructions that the work be done or otherwise authorized it;
- The owner was informed or made aware that the extra work would increase the cost; and
- The owner waived the provision requiring changes to be made in writing, or acquiesced in ignoring those provisions.
Ultimately, the Court held that the test set out in Impact was met, as Man-Shield had instructed Tempo to complete the work, Man-Shield was aware that the work would increase the cost, and Man-Shield conceded that it had ignored the requirement that the change be made in writing. The Court further held that Tempo met its burden to show the amount it claimed was owing in relation to the change orders.
Second, Man-Shield claimed that it was entitled to chargebacks against Tempo in relation to temporary power charges, insufficient manpower throughout the project, and alleged deficiencies in Tempo’s work. However, in order to be successful with this argument, Man-Shield had to demonstrate that it provided written notice to Tempo with respect to any of the alleged deficiencies, including specifications of the deficiency and a reasonable opportunity to cure it, which it did not do. In particular, the Court held that none of the emails exchanged between the parties or the meeting minutes that demonstrated the project delays and outlined costs and liabilities constituted written notice as they did not specifically state how Tempo was in breach of the Subcontract and did not provide Tempo with notice to cure any deficiency or an opportunity to correct it.
The Court also held that Man-Shield’s claim for damages with respect to temporary power charges was overstated and that Man-Shield’s evidence with respect to the other claims lacked details of the damages suffered and how they were caused by Tempo’s breach of contract.
Last, Man-Shield argued that summary judgment was inappropriate given that it was entitled to equitable set-off against Tempo in relation to a counterclaim it filed for delays associated with the project. However, the Court disagreed and held that there is a difference between a true defence and a set-off such that, with respect to the former, awarding summary judgment when there is a true defence to the claim would result in the moving party receiving a judgment that it is not entitled to. Comparatively, with the latter, granting summary judgment to the moving party does not deprive the responding party the opportunity to prove set-off at trial.
As a result, the Court concluded that it would be just for it to grant Tempo the partial summary judgment that it sought, as Man-Shield raised no genuine issue to be tried. In particular, Justice Bercov stated, “In these circumstances I conclude that it is not unjust to award Tempo partial summary judgment for the payments outstanding before Man-Shield’s claims for damages are adjudicated. Tempo has waited for six years to be paid. To require Tempo to wait another several years based on Man-Shield’s questionable claims does not achieve a just result”.
Jose Delgado says that this decision is an example of the Court of King’s Bench in Alberta applying the cultural shift that the Supreme Court of Canada called for in Hryniak v Mauldin, 2014 SCC 7, which recognizes that the conventional resolution of litigation by a conventional trial must be adjusted in favour of “more proportionate, timely, and affordable procedures”.
Jose Delgado further explains that the success was partly a result of the fact that Tempo was able to show the Court that it had carried out its work under the subcontract in a good and workmanlike manner and was entitled to be paid for the labour and materials that it provided, that there were serious questions regarding the nature of the chargebacks raised by Man-Shield, and that Man-Shield had little evidence to support that Tempo was responsible for the delay and no evidence to support the quantum of its delay claim against Tempo.
Commenting on the cultural shift introduced by the SCC, Jose Delgado says, “Construction disputes often involve technical issues relating to legitimate disputes around deficiencies. However, it is also not uncommon for a construction dispute to involve one party seeking to foist costs onto another party in hopes that the cost of a trial will make pursuing the claim uneconomical. In those circumstances, the cultural shift that the SCC called for in Hryniak allows parties who carefully assess the evidence to create an evidentiary record that is sufficient to avoid the time and expense of a trial”.
Speaking on this case specifically, Jose Delgado explains, “Man-Shield’s attempts to obfuscate the evidence were not enough to change the reality that Tempo had completed its scope of work in a good and workmanlike manner. This allowed Tempo to create the evidentiary record that allowed the Court to conclude it was just to grant Tempo summary judgment”.