Written By Brian P. Reid and David J. Wahl
The recent New Brunswick Court of Appeal decision in Brad Gould Trucking & Excavating Ltd v Bird Construction Co, 2015 NBCA 47 [Brad Gould], serves as a warning to contractors that a failure to understand the contractual allocation of risk and engage a qualified geotechnical expert may preclude a successful claim for increased costs caused by unanticipated site conditions, and expose the contractor to significant loss on a project.
In Brad Gould, the Province of New Brunswick issued a call for tenders for the construction of a courthouse in Saint John and retained an engineer to prepare a geotechnical report. Bird Construction relied on the Province's geotechnical report in preparing its successful bid. However, almost immediately after commencing work, Bird's subcontractor discovered that the bedrock could not be removed by digging as planned, but would require rock-breakers at a significantly increased cost. Bird convinced its subcontractor to continue the work in exchange for Bird's assistance in presenting a claim for a change in site conditions to the Province. However, the Province rejected this claim.
The trial judge found a change in soil conditions from those reasonably assumed to exist at the time of the bid and awarded damages to Bird in the amount of $713,808.19 plus interest and costs. The Province appealed and the Court of Appeal concluded that Bird failed to inform itself of the impact of the report's compression strength (Mpa) table, which listed all rock as greater than 1 Mpa. Expert evidence heard at trial confirmed that greater than 1 Mpa was not "diggable". In sum, the Court of Appeal held that the Province's geotechnical report described exactly what Bird encountered during excavation: some rock could be removed by excavators, while other rock required hydraulic breaking.
Bird argued that the costs of verifying the geotechnical report and informing itself of the proper interpretation were prohibitive and that such a requirement would result in less competitive bidding and increased costs to the Province. However, the Court of Appeal inferred that a large construction company like Bird could afford a $15,000 geotechnical report and that a summary review by a qualified geotechnical engineer would have been sufficient to identify the issues.
Claims for differing site conditions are a common source of claims on construction projects. It is therefore critical that in addition to carefully reviewing and understanding the allocation of risk in the contract, contractors must engage the necessary experts to ensure they properly review and understand all geotechnical reports. A failure to do so may result in a significant, non-compensable expense.This article is not intended to replace specific legal advice. Our lawyers at Bennett Jones LLP would be happy to provide you with legal advice particular to your circumstances.