Refresher on Extras and Back Charges: Impact Painting Ltd v Man-Shield (Alta) Construction Inc

20 février 2018 | Leanna E. D. Olson, John MacKay

( Disponible en anglais seulement )

During the course of a construction project, the question often arises as to what is a valid extra and what is a valid back charge. These issues were discussed in some detail in the recent Alberta Court of Queen’s Bench decision in Impact Painting Ltd v Man-Shield (Alta) Construction Inc.[1]

Man-Shield was the general contractor for the construction of the Laurel Retirement Community in Edmonton. Impact was hired by Man-Shield as a painting subcontractor. Upon completion of the project, Impact issued invoices for extras, which were disputed by Man-Shield. Impact registered a builder’s lien and claimed $237,676.12. Man-Shield issued back charges to Impact that totalled $208,579.73. After calculating the amount already paid to Impact, the valid extras and the valid back charges, the court concluded that $57,397.86 remained payable to Impact, with interest from the date of the last invoice issued.

Extras

Justice Burrows adopted the test for determining the validity of extras from Kei-Ron Holdings Ltd v Coquihalla Motor Inn Ltd,[2] a case that dealt with extras charged by a general contractor to an owner. He found that essentially the same test applies for subcontractors, subject to some modifications. The test places the onus on the party asserting the validity of the extras to show, with respect to each disputed extra, on a balance of probabilities the following:

  1. The work was outside the subcontractor’s scope of originally contracted work;
  2. The subcontractor was either expressly or impliedly instructed by the general contractor to do the work;
  3. The general contractor was informed or would have necessarily known that the extra work would increase cost; and
  4. The general contractor waived or acquiesced in not following formal change order provisions.

Back charges for Deficiencies

The court in Impact Painting did not mention any authority as to the test to determine the legitimacy of a back charge. Justice Burrows at paragraph 28 found that the party claiming the back charge has the onus to prove that:

  1. The back charge is for an expense actually, necessarily and reasonably incurred by the party claiming it;
  2. By terms of the contract, or some other agreement between the parties, the charge related to a task for which the subcontractor undertook responsibility;
  3. The general contractor incurred the expense because of the subcontractor’s default to which the charge relates; and
  4. Prior to incurring the charge, the general contractor gave notice to the subcontractor of default and provided a reasonable opportunity to cure it.

Analysis of the claim for Extras

Step one of the test to determine if there is a valid extra requires that the scope of work be considered. The subcontract in this case contained only a brief summary of the scope of work. A more detailed description was meant to follow, but there was no evidence that this ever took place. Instead, the court determined that an older proposal drafted by Impact had been incorporated by reference. It read:

Project includes: All interior Finishes, as per specifications, architectural drawings & Addendums to date

Including:

  • 2 coat application system in interior of suites only – walls, doors & frames.
  • Common area chair rail support, crown moldings & feature trim work.
  • Exterior fence, trellis, and gazebo only – no painting on building exterior.
  • All ceilings to be primed & textured (by others)
  • All baseboard to be pre finished material only.
  • No Staining – all stain grade to be pre finished (by others)
  • No Wallpaper supply or Install.
  • Does not include any Special coatings (Epoxy).

Thus, any work that was an “interior finish” as qualified by the “Including” list was to be considered within the scope of work to be completed by Impact. There was one exception, in that there appeared to be no dispute that common area walls were to be painted by Impact, despite the list referencing “interior of suites only.”

Extra – Repaint Drywall Fixes – Valid extra

Impact invoiced Man-Shield on account of priming and painting drywall patches completed after the final coat of paint had been applied. A drywall application error was found to be the cause of the repairs.

This work was outside the scope of the subcontract; touch-ups as a result of deficient workmanship by other contractors was not covered by the subcontract. A chain of emails regarding the invoice was sufficient evidence to find that Impact had been instructed to complete the work, that Man-Shield was aware that such work would increase the cost and that it had waived any deviation from change order procedure. As a result, this work was found to be a valid extra for which Impact was entitled to payment.

Extra – Paint Basement Floors & Heaters – Invalid extra: within scope

The parties agreed that the work involved in painting the basement floors was outside the scope of work of the subcontract. The issue was whether the work had been requested by Man-Shield. No documentary evidence was provided, and the court found Impact’s oral evidence lacking in detail and insufficient. This claim was, therefore, disallowed.

With regard to the painting of the heaters, they were found to fall within “other mechanical equipment,” which was listed in the specifications. Further, the heaters did not appear to be excluded by the “including” section of the proposal. As such, this claim was not considered to be an extra.

Extra – Window / Door Fixes – Mixed: onus only met for main floor

Additional caulking and painting was required on some of the doors and windows. Again, there was no question that this was outside the scope of work. However, whether the work was actually done was at issue.

Both parties agreed that this work had been done on the main floor, but Man-Shield testified that it had not been needed on the other floors. The court was once again unsatisfied with Impact’s oral evidence on this point and found that some documentary evidence, such as time records of employees, should have been available to prove that the work had been done. The onus, falling on Impact, had not been met, except with regard to the main floor.

Extra – Repaint Suite Doors – Mixed: onus only met for five doors

Impact claimed that 40 doors arrived on site in a damaged state and that it was instructed to repaint the doors after they had been repaired. Man-Shield asserted that this applied to only five doors. The court was not satisfied Impact’s oral evidence on this point and disallowed this claim save the five acknowledged by Man-Shield.

Extra – Paint Offsite Doors – Valid extra

Impact claimed that it painted 400 doors in excess of those needed for this project. It did so on the understanding that the excess doors would be sent to another project, for which Impact was to be hired as the painting subcontractor, and it would be paid under that subcontract. Impact was not hired to complete the other project.

This work was found to be outside the scope of the subcontract. The fact that they were surplus doors meant Man-Shield would have known that this work would increase cost. The court also found that the change order procedure was waived. One Man-Shield witness confirmed that doors had been painted by Impact at Man-Shield’s request and sent to another site but was unable to specify an exact number. The principal of Impact testified that he counted 400 doors, and the court preferred this specific evidence over the low rough estimate provided by Man-Shield.

Extra – Paint Exterior Vents – Invalid extra: did not know work would increase cost

Impact acknowledged that it had not requested payment for painting exterior vents initially because they were attempting to “court” Man-Shield, and this was a gesture of goodwill. The understanding was that the work would be completed and Man-Shield would not be charged. Thus Man-Shield would not have expected this work to increase its costs, and as a result, this claim was an invalid extra.

Extra – Paint Common Area Ceilings – Invalid extra: within scope

The subcontract read “All ceilings to be primed & textured (by others).”  The court found that this text meant all ceilings that were to be primed and textured were to be done by others. The common area ceilings, however, were not textured, and as such, this claim fell within the scope of work of Impact and was not an extra.

Extra- Paint Exterior Doors – Valid extra

Man-Shield’s witnesses did not dispute Impact’s evidence that it was required to paint replacement doors. The court found that all necessary elements of a valid extra existed and allowed the claim.

Extra – Paint Around Medicine Cabinets – Invalid extra: within scope

The extra claim for Paint Around Medicine Cabinets involved work within the “DAL wing.” When the additional DAL renovation was approved, Impact and Man-Shield entered into a second subcontract for the repainting of this wing. This subcontract described the scope of work as “All interior Finishes, as per specifications, architectural drawings, and Addendums to date.” The court found that a second subcontract accounted for the repainting of this wing, and this work was, therefore, not a valid extra.

Analysis of Back Charges

Back Charge – Hays Decorating – Valid

Man-Shield had determined that Impact required assistance to complete its work and issued a notice to Impact stating so before hiring additional painters from Winnipeg. Impact agreed to this course of action and that the cost, plus 10% would be deducted from the amount owed to Impact under the subcontract.

Impact denied that it needed assistance and argued that the need for additional painters arose due to Man-Shield’s own unreasonable deadlines and that the charges included unnecessary travel time.  However, the court found that Impact agreed to the notice and to the back charge. If Impact had truly disagreed, they would have raised these issues long before the expense was incurred by Man-Shield. Man-Shield had met its onus.

Back Charge – Cleaning Overspray – Valid

Impact and Man-Shield agreed on a back charge for Cleaning Overspray after the initial amount was reduced. As a result of Impact’s acceptance, the court allowed the back charge.

Back Charge – Second Final Cleaning – Invalid: insufficient evidence of breach

The subcontract provided that subcontractors were to keep the site clean, and that failure to do so may result in Man-Shield performing cleanup and back charging the costs, plus 10% in administration fees.

No evidence was provided by Man-Shield as to how the cleaning fee was allocated amongst the six subcontractors. There were 27 hours of cleaning not attributed to specific subcontractors, which were simply split equally amongst the six subcontractors. Essentially, the evidence was merely the bare assertion that Impact had not cleaned up. As a result, the court rejected this back charge.

Back Charge – Final Deficiencies – Invalid: no evidence expense incurred

Man-Shield claimed that there were remaining paint deficiencies. No documents were provided showing that these deficiencies had been remedied and, if so, at what cost. There was no supporting documentation to indicate how the amount of the back charge had been determined.

Further, the last communication between the parties regarding deficiencies was that Impact had completed the deficiencies and Man-Shield extended their thanks. No notice was provided to Impact that deficiencies remained outstanding.

As such, the onus had not been met. The lack of evidence of Man-Shield incurring the expense alone was sufficient to make this finding.

Back Charge – Bonding Costs – Invalid

Bonding costs for lien removal should not be dealt with as a back charge. Reimbursement depends on the validity of the lien, which should be dealt with differently.

Back Charge – Cleanup and Bin Removal – Invalid

Man-Shield claimed for cleanup and bin removal, claiming that this back charge was agreed to in the subcontract, though no such provision existed. No evidence was provided to demonstrate how the cost of housekeeping was divided amongst all the contractors, and there was no notice that it would be charged.  This back charge was disallowed.

Conclusion

When considering claims for extras and back charges on your projects, this case may be helpful to keep on hand and reference for the test and the considerations a court may have in assessing the claims.


 

[1] Impact Painting Ltd v Man-Shield (Alta) Construction Inc, 2017 ABQB 743 [Impact Painting].

[2] Kei-Ron Holdings Ltd v Coquihalla Motor Inn Ltd, 1996 CanLII 3443 (BC SC) at para 41.

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