Thomas G. Heintzman, O.C., Q.C.

McCarthy 1trau|t
1oronto Cntar|o
wwwmccarthyca
4163621812
the|ntzmQmccarthyca
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wwwhe|ntzmanadrcom

1homas PelnLzman ls counsel aL McCarLhy 1eLraulL ln 1oronLo Pls pracLlce speclallzes ln llLlgaLlon arblLraLlon and medlaLlon
relaLlng Lo corporaLe dlspuLes shareholder's rlghLs securlLles law broadcasLlng/LelecommunlcaLlons and class acLlons

Pe has been counsel ln many lmporLanL acLlons arblLraLlons and appeals before all levels of courLs ln many Canadlan provlnces
as well as Lhe Supreme CourL of Canada

1homas PelnLzman ls Lhe auLhor of ColJsmltb nelotzmoo oo coooJloo 8ollJloq coottocts 4
Lh
LdlLlon whlch provldes an
analysls of Lhe law of conLracLs as lL applles Lo bulldlng conLracLs ln Canada

ColdsmlLh PelnLzman on Canadlan 8ulldlng ConLracLs has been clLed ln over 183 [udlclal declslons lncludlng Lhe Lwo leadlng
Supreme CourL of Canada declslons on Lhe law of Lenderlng

MI8 otetptlses ltJ v uefeoce coosttoctloo (1951) 1999 1 SC8 619 and
uooble N ottbmovets ltJ v Jmootoo (clty) 2007 SCC3 2007 1 SC8 11620070123 Supreme CourL of Canada

est|tut|onary ayment May 8e Crdered Ior An "Ineffect|ve" Construct|on
Contract
wners and conLracLors should always avold underLaklng a pro[ecL wlLhouL a conLracL 8uL lf
Lhey do bulld Lhe pro[ecL wlLhouL a conLracL Lhe 8rlLlsh Columbla CourL of Appeal has recenLly
recognlzed ln lnfinity 5tee/ lnc v 8 c 5tee/ rectors lnc LhaL Lhe parLy whlch recelved Lhe
beneflL of Lhe work or supplles musL pay a falr amounL Lo Lhe parLy whlch provlded Lhem
1hls may noL be a novel proposlLlon 8uL whaL ls novel ls LhaL Lhe courLs now recognlze Lhls
slLuaLlon as an "|neffect|ve transact|on" whlch falls wlLhln a dlscreLe caLegory of un[ust
enr|chment
8ackground Informat|on
lnflnlLy made a Lender bld Lo Lhe general conLacLor 8lrd ConsLrucLlon for Lhe supply and
erecLlon of Lhe sLrucLural sLeel for Lhe Search and 8escue Panger aL Lhe Canadlan lorces 8ase ln
Comox 8rlLlsh Columbla lnflnlLy enLered lnLo dlscusslons wlLh 8 C for LhaL company Lo erecL
Lhe sLeel 1he companles exchanged wrlLLen documenLs whlch Lhey LhoughL consLlLuLed Lhe
conLracL buL each of Lhem had a dlfferenL vlew of Lhe prlce and oLher elemenLs of Lhe conLracL
When Lhe [ob was over 90 flnlshed lnflnlLy LermlnaLed lLs relaLlonshlp wlLh 8 C and had
anoLher erecLor flnlsh Lhe work LlLlgaLlon ensued and lL was lnflnlLy's poslLlon LhaL ln
deLermlnlng Lhe falr amounL Lo be pald Lo 8 C Lhe amounL whlch lL pald Lhe replacemenL
erecLor had Lo be Laken lnLo accounL
1he Lrlal [udge found LhaL Lhe parLles had noL agreed on Lhe fundamenLal elemenLs of Lhe
conLracL Accordlngly he was unable Lo order a conLracLual remedy elLher by way of damages
for breach of conLracL lf a prlce for Lhe conLracL had been agreed upon or by way of conLracLual
fnt erit lf no prlce had been agreed upon 1he [udge held LhaL a remedy ln resLlLuLlon
was avallable ln Lhese clrcumsLances and awarded compensaLlon Lo 8 C lnflnlLy appealed
argulng LhaL Lhe Lrlal [udge had noL Laken lnLo conslderaLlon Lhe amounL LhaL lL had pald Lo
compleLe Lhe erecLlon afLer 8 C was no longer on Lhe [ob
1here are Lwo lnLeresLlng aspecLs of Lhe declslon of Lhe 8C CourL of Appeal whlch largely
upheld Lhe Lrlal [udge's declslon
llrsL Lhe CourL of Appeal held LhaL Lhls slLuaLlon consLlLuLed an lneffecLlve LransacLlon" whlch
under a recenL declslon of Lhe Supreme CourL of Canada was a dlsLlncL ground for
resLlLuLlonary compensaLlon lL sald lL ls now flrmly esLabllshed LhaL a clalm alleglng un[usL
reLenLlon of a beneflL conferred ln an lneffecLlve LransacLlon ls a dlscreLe caLegory of Lhe
docLrlne of un[usL enrlchmenL whlch may aLLracL a personal moneLary remedy (kerr v
8frfnow 2011 SCC 10 (CanLll) 2011 SCC 10 aL para 31) and LhaL remedy musL maLch as besL
lL can Lhe exLenL of Lhe enrlchmenL un[usLly reLalned by Lhe defendanL (aL para 73)"
kerr v 8frfnow was a famlly law case noL a consLrucLlon law case 1haL case was noL abouL an
lneffecLlve conLracL and Lhe sLaLemenL aL para 31 ln Lhe Supreme CourL's [udgmenL had noLhlng
Lo do wlLh Lhe merlLs of LhaL case 1he Supreme CourL slmply sald ln a parL of a senLence
deallng generally wlLh Lhe clrcumsLances ln whlch a remedy ln un[usL enrlchmenL may be
ordered LhaL such a remedy could be awarded ln a case of an lneffecLlve conLracL"
Moreover lL ls noL clear from Lhe declslon ln ett v 8otooow whaL amounLs Lo an lneffecLlve
LransacLlon" ne mlghL have LhoughL LhaL Lhe Supreme CourL was Lhlnklng of deallngs whlch
are oLherwlse conLracLs buL lneffecLlve as conLracLs for legal reasons such as Lhe 5totote of
ltooJs or lack of conslderaLlon When Lhe parLles slmply fall Lo negoLlaLe a conLracL as
happened ln oflolty 5teel v 8 c 5teel tectots ls Lhls an lneffecLlve" LransacLlon? 1he 8C
CourL of Appeal has held LhaL lL ls
Whlle Lhls resulL may come ouL of lefL fleld so far as consLrucLlon law ls concerned lL ls a good
one for LhaL branch of Lhe law lL recognlzes LhaL an lneffecLlve LransacLlon" consLlLuLes a
comprehenslve classlflcaLlon Lo whlch Lhe prlnclples of un[usL enrlchmenL may be applled lL
should noL maLLer wheLher Lhe conLracL falled for legal or facLual reasons lf one parLy recelved
a beneflL Lhen Lhe oLher parLy should pay for lL nce Lhe beneflL ls accepLed Lhen Lhe only
quesLlon ls Lhe amounL LhaL Lhe beneflLLed parLy should pay and lf Lhe parLles cannoL agree on
Lhe amounL Lhen Lhe courL wlll have Lo flx lL lor Lhose proposlLlons we can now refer Lo Lhls
declslon as auLhorlLy
1he second lnLeresLlng aspecL of Lhe CourL of Appeal's declslon ls lLs compleLely openended
approach Lo assesslng Lhe approprlaLe compensaLlon Agaln Laklng a leaf from Lhe declslon ln
kerr v 8frfnow Lhe CourL re[ecLed any formullsLlc approach 1he CourL held LhaL once a Lrlal
[udge re[ecLs a conLracLual remedy and flnds un[usL enrlchmenL Lhe Lrlal [udge's Lask ls Lo
deLermlne whaL measure ls approprlaLe Lo remedy Lhe un[usL enrlchmenL ln all Lhe
clrcumsLances of Lhe case ln Lhe llghL of ett Lhe approprlaLe measure for resLlLuLlonary
poootom metolt ls Lo be selecLed Lo meeL Lhe clrcumsLances of Lhe parLlcular case lmporLanL
facLors wlll lnclude buL noL be llmlLed Lo Lhe course of deallngs beLween Lhe parLles any
esLlmaLes obLalned Lhe cosLs lncurred Lhe scope of work Lhe acLual work done Lhe markeL
value of Lhe servlces provlded"
1hese are sweeplng conslderaLlons whlch wlll glve Lhe CourL an unfeLLered power Lo award Lhe
amounL of compensaLlon LhaL ls falr ln all Lhe clrcumsLances
So far as Lhe amounL Lo whlch 8 C was enLlLled for Lhe work lL had done Lhe CourL of Appeal
held LhaL Lhe Lrlal [udge had Laken lnLo accounL Lhe cosL of compleLlon by Lhe replacemenL
conLracLor and aparL from a sllghL ad[usLmenL lL upheld Lhe award of Lhe Lrlal [udge
ln Lhe resulL Lhls declslon of Lhe 8rlLlsh Columbla CourL of Appeal provldes a comprehenslve
basls for a courL ln Canada Lo assess equlLable compensaLlon lf a consLrucLlon conLracL ls
lneffecLlve for any reason
Construct|on |aw est|tut|on ;fnt Merit Ineffect|ve 1ransact|on
lnfinity 5tee/ lnc v 8 c 5tee/ rectors lnc 2011 8CCA 21S
1homas G ne|ntzman CC C Cctober 30 2011
wwwconstruct|on|awcanadacom
wwwhe|ntzmanadrcom