Canada: COVID-19: Be Wary Of Purported ‘Change In Law' Claims

Determining whether purported “change in law” claims resulting from the COVID-19 pandemic will be successful is not straightforward. Some construction contracts (for example, GC 10.2.7 of CCDC 2) permit claims where changes are made to laws, rules, regulations or codes that affect the cost of work under that contract. Parties may therefore try to argue that certain provincial COVID-19-related Orders and/or legislation are caught by these types of “change in law” provisions in their construction contracts, triggering a potential entitlement to a claim for monetary compensation. In many circumstances, however, the better view may be that this is not in fact the case. Any analysis will ultimately hinge on whether or not a “change in law” has in fact occurred.

For example, on March 24, 2020, the Ontario provincial government passed Ontario Regulation 82/20 (as amended). This regulation ordered the closure of all “non-essential businesses,” while providing that the supply chain with respect to essential goods, services and resources should continue to function to the full extent possible, subject to the Occupational Health and Safety Act and the “advice and recommendations” of public health officials, including recommendations about physical distancing. To that end, Section 1 of Schedule 3 of Ontario Regulation 119/20 (which amended Ontario Regulation 82/20, effective April 4, 2020) directed that persons responsible for places of business that remained open had to operate them in compliance with the “advice, recommendations and instructions” of public health officials, including relating to physical distancing, cleaning or disinfecting.

Parties should avoid simply assuming that Orders such as these would constitute a “change in law” in their construction contracts. It could be argued that the advice, recommendations and instructions of public health officials in this context serve to elaborate on already existing law — not to change it. For example, one can look to the pre-existing duty and obligation of “constructors” to ensure that the health and safety of workers on the project is protected and the pre-existing duty and obligation of “employers” to take reasonable precautions to protect workers, under sections 23(1)(c) and 25(2)(h), respectively, of the Occupational Health and Safety Act. Given the unique and unprecedented threat to public health caused by the COVID-19 pandemic, in the absence of guidance, many “constructors” and “employers” might not know what the “reasonable precautions in the circumstances” are. The recommendations of public health officials may articulate the benchmark or standard for reasonable precautions for “constructors” and “employers” across the province — but they may not fundamentally alter their pre-existing duties and obligations at law.

Indeed, as the Government of Ontario has itself noted on its “Construction site health and safety during COVID-19” resource page:

Parties should not, therefore, presuppose that public health instructions are necessarily a change in law. Instead, as outlined above, a position could be taken such that instructions merely elaborate on existing law, not change the law.

Any analysis in respect of change in law claims will ultimately, therefore, include a two-step approach. First, parties will need to address whether or not the supposed change is in fact a change in law. Second, even if the supposed change is a “change in law,” parties will need to examine their contracts to determine the extent to which, if any, the contract provides for entitlement to relief as a result of such change. Before accepting “change in law” claims at face value — parties to construction contracts should carefully evaluate the purported change in law and the terms of their contracts, and if in doubt as to any analysis, seek advice.

Originally published by Osler, June 2020

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.