International Construction Law Review
“PASS-THROUGH” CONSTRUCTION CLAIMS IN CANADA
HARVEY J KIRSH*
BA(Tor), LLB(Osg), LLM(Harv), C Arb Senior Partner, Osler, Hoskin & Harcourt, LLP, Toronto
For many years, the Canadian construction industry has witnessed a proliferation of claims for damages for delay, acceleration and other impact costs arising out of problems relating to the scheduling and co-ordination of design and construction. These types of damages are difficult to assess, from both factual and legal perspectives, and require an analysis of causation and responsibility. The review process may be further complicated where a contractor not only puts forward his own claim against the owner, but also seeks to “pass through” the claims of his subcontractors.
A “pass-through” claim may be defined as a claim by a party who has suffered damages (in this case, a subcontractor) against a responsible party with whom he has no contract (namely, an owner), and which is presented through an intervening party who has a contractual relationship with both (namely, a contractor).
The respective rights and obligations of both the contractor and the subcontractor, and the procedures for presenting a pass-through claim to an owner, are often contained in a “pass-through agreement”, which purports to allocate both the expenses incurred and the benefits derived when such a claim is advanced. Among other things, the terms of the agreement may provide specifics as to how the claim is to be presented to the owner, and how the obligation to pay legal fees is to be shared. The agreement may also deal with authority and control issues relating to the conduct of the litigation, including decisions regarding appeals; may outline settlement rights and obligations; and may establish terms as to how and when any monies recovered from the owner will be paid to the subcontractor. Significantly, the agreement may also contain an acknowledgment of the subcontractor’s claim, and often contemplates a preliminary partial payment by the contractor to the subcontractor.
The claim for damages
Consider this scenario: an owner is alleged to have caused delays to a project (e.g., failure to manage properly the change order process; failure to respond to shop drawings and submittals in a timely fashion, etc.), or to have
[2003
The International Construction Law Review
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