Symtech Innovations Ltd. v. Siemens Canada Limited: The Importance of Giving Timely Notice of Claims in Ontario

In Symtech Innovations Ltd. v Siemens Canada Limited (“Symtech”),[1] the Ontario Superior Court of Justice considered a series of arguments advanced by a party advancing a delay claim (Symtech Innovations Ltd. (“Symtech“)) in the context of a responding party (Siemens Canada Limited (“Siemens“)) seeking to resist based on strict notice provisions under standard-form contracts.

In construction claims, contractual notice provisions are sometimes overlooked, but can in certain circumstances prove fatal to the success of a claim. Symtech provides important reaffirmations with respect to compliance with contractual notice provisions, and the requisite precision in presenting evidence and articulating claims. Below, we discuss some of the key takeaways of this decision in the Ontario context (noting that notice provisions need to be considered carefully, as they vary from province to province and contract to contract).

Background

This matter arose due to a dispute between Symtech and Siemens over the performance of contractual obligations related to a Toronto Transit Commission (“TTC“) project, the Duncan Shop Ventilation Upgrade, Supply and Install Monorail Crane, and Bus Hoist Replacement Phase 1 (the “Duncan Shop Project” or the “Project“). This Project entailed, among other things, upgrading HVAC systems and the integration of a crane at the W.E.P. Duncan Building bus maintenance site in Toronto (the “Project Site”).

Black & McDonald Limited (“B&M“) was awarded the main contract for the Project. As general contractor, B&M subsequently retained Siemens (by way of subcontract) to furnish and integrate the building automation system.[2] Siemens then sub-subcontracted Symtech for the installation certain works related to the building automation system (the “Symtech Subcontract”). Siemens delivered the system components and issued a fixed-price purchase order to Symtech for installation of same. The base price agreed upon by the parties for the Symtech Subcontract was $583,059, plus HST, which was later increased to $664,981.89, plus HST (with Siemens’ approval).

Although the Project faced numerous delays, Symtech was not alleged to be responsible for any such delays. Symtech took the position that it was seriously impacted in its work by the delays to the Project and the ongoing disruptions. As a result of these delays and disruptions, and Siemens’ unwillingness to pay Symtech for any related costs, Symtech preserved a lien in the amount of $915,934.28.

Symtech commenced an action seeking to perfect and enforce that lien (the “Lien Action”), and claimed against Siemens for breach of contract. Siemens vacated Symtech’s lien by posting a security of $965,934.28, and then brought a third-party claim seeking contribution and indemnity from B&M for Symtech’s claim. Based on Symtech’s Scott Schedule, the lien was later reduced by Symtech to $859,942.49, which included a prolongation claim for alleged disruptions.[3]

Symtech also commenced a parallel breach of trust claim. However, the Court refused to grant any judgment on that matter due to the differences in the cause of action, the additional parties, and variances in jurisdiction.[4]

While Siemens acknowledged some liability in the matter, it asserted that such liability was restricted to an unpaid statutory holdback of $66,315.01 in respect of the base contract scope as increased by approval. Siemens did not agree that Symtech was entitled to the additional delay and disruption damages it claimed in the Lien Action. Siemens further claimed that the holdback funds were thereafter subject to set-off for Siemens’ costs of defending the action.[5]

Siemens moved for summary judgment within the Lien Action, claiming that there was no genuine issue for trial regarding its liability for Symtech’s prolongation claim as, among other things, there was no breach of contract by Siemens and Symtech failed to provide contractually required notices.

The ONSC’s Decision

Siemens submitted that there was no genuine issue requiring trial based on a number of different arguments:

1. Symtech’s prolongation claim did not comply with the notice requirements of the Symtech Subcontract;
2. Siemens did not cause any delay to Symtech’s work, so cannot be held liable for Symtech’s delay-related losses;
3. Symtech’s alleged prolongation losses and damages are not connected to any specific event(s) of delay;
4. Symtech’s prolongation claim is based on a global claim for costs incurred based on Symtech’s projected hours, despite the parties having a fixed price contract; and
5. Siemens did not breach the Symtech Subcontract and the only unpaid balance owing to Symtech is holdback funds that were not due or payable by reason of a pay-when-paid clause and are now subject to Siemens’ set-off rights.[6] (collectively in this article, the “Issues”)

The Court began by reviewing the applicable framework for summary judgment, then turning to two preliminary challenges to Siemens’ evidence, before ultimately reviewing each of the five arguments above.

Preliminary Challenges to Siemens’ Evidence

Symtech challenged the admissibility of two aspects of Siemens’ evidence: namely, the affidavit of a lawyer, and Siemens’ reliance on the transcript from the examination for discovery of Siemen’s own representative.

Symtech challenged the admissibility of the lawyer’s affidavit on the basis of rule 20.02(1) of the Rules, which states that an affidavit used on a motion may be based on information and belief, but on the hearing of the motion, the court may draw an adverse inference if the evidence was not provided by someone with personal knowledge of the contested facts. Symtech alleged that the lawyer’s affidavit fell within the ambit of this subrule since she lacked personal knowledge of the dispute.

The Court rejected this argument, finding that the lawyer’s affidavit was factual in nature, confirmed procedural history, summarized the claims raised in the Scott Schedule, and summarized transcripts from examinations for discovery.[7]

Symtech also challenged Siemens’ reliance on the transcript of its own deponent’s examination for discovery on the basis of subrules 39.04(1)-(2) and 31.11(1), which generally preclude a party from using, in evidence on a motion, its own examination for discovery as evidence. The Court rejected this challenge as well, finding that the manner in which it was done was not a violation of subrule 39.04(2), as it was not tendered to avoid cross-examination. Symtech was free to cross-examine the representative, which they did.[8]

With these challenges addressed, the Court turned to Siemens’ submissions for summary judgment.

Issue 1: The Notice Issue

In assessing the notice issue, the Court was required to consider a number of different sub-issues:

• whether Symtech was required to provide notice of its claim;
• whether Symtech provided timely notice of alleged delays;
• whether Symtech provided timely notice of its prolongation claim; and
• whether Siemens waived the Symtech Subcontract’s notice requirements.

Sub Issue 1: The Court determined that there was no genuine issue for trial that the parties’ agreement – as set out in two relevant contract documents, being a purchase order and Siemens subcontract with B&M (the latter being incorporated by reference into the purchase order) – outlined Symtech’s obligations to notify Siemens of delays and of its intentions to claim compensation. In that regard, the Symtech Subcontract required not only that Symtech notify Siemens “forthwith” of any delay, but also to notify of Symtech’s intention to seek relief in relation to that delay (whether that be compensation or schedule relief).

Sub Issue 2: The Court determined that there was a genuine issue requiring trial. Specifically, it found that although there was ambiguity surrounding the “schedule of Siemens”, given that the Symtech Subcontract did not include a schedule for the performance of the work. It was therefore unclear what comprised the “schedule” that was meant to contractually govern Symtech’s work.

Sub Issue 3: The Court determined that there was no genuine issue requiring trial. The critical concern was whether Symtech had provided timely notice of its prolongation claim which, if Symtech had failed to do so, would make the previous issue of notice as to delay moot.[9] Here, the Court re-affirmed a number of key points on the law of notice including the following:

• Notice provisions in construction contracts are strictly enforced by courts, particularly for commercial construction projects where both contracting parties are sophisticated;
• The purpose of binding notice provisions is to provide the other party with sufficiently detailed information to allow it to consider its options and take corrective action before the contractor pursues a claim;
• Compliance with a notice provision has been held to be a condition precedent to maintaining a claim in the courts, even if the provision does not contain a “failing which” clause; and
• The “grumblings of a contractor” are not sufficient to constitute proper notice of a claim.[10]

With these principles in mind, the Court undertook a detailed review of the record before it.

Siemens claimed that it was not informed of Symtech’s potential claim for additional delay-related compensation until January 17, 2019. However, Symtech claimed that it was unaware of its losses until December 2018. Further, Symtech presented evidence of project delays, expert evidence, and details of disruptions such as delayed roof reinforcing work and late deliveries. Siemens, for its part, highlighted a lack of formal written notice from Symtech regarding these delays.

The core of this analysis concerned when Symtech was aware of its losses, and if it duly notified Siemens of its claim based on the date it knew or ought to have of those losses. In that regard, the Court accepted that there would arguably be a genuine issue on when Symtech knew it was suffering losses for which it was entitled to make a claim and when it ought to have given notice; however, this issue could be resolved on the record before the Court rather than requiring a trial, which is what the Court proceeded to do.

In that regard, the Court concluded that project delay was clear by July 2018, when Siemens provided Symtech with an updated schedule which showed significant delay as compared to the baseline schedule. There were notices from October 2018 onward, but these were notices in respect of claims for changes (i.e. extra work) rather than delay-related claims. Similarly, the Court rejected the argument that B&M giving general notice to TTC of project cost impacts on behalf of itself and its subcontractors satisfied Symtech’s notice obligations.

Ultimately, and although Siemens did not tender any evidence supporting that Symtech knew it was suffering losses before December 2018, the Court found on the totality of the evidence that Symtech ought to have been aware of its losses – including loss of productivity and additional labour hours, as a direct result of the ongoing delays and disruptions to its work – well before January 2019, when it actually delivered what could be construed as a formal notice.

Furthermore, the Court rejected Symtech’s argument that nothing in the Symtech Subcontract stipulated that failure to provide timely notice of a claim meant that a claim could not still be advanced. This argument was contrary to the relevant case law, which rejected this proposition on the basis that it would deprive the notice recipient of the benefits of the notice provision (i.e. the opportunity to consider its position and choose a course of action).

Accordingly, and as noted above, the Court concluded that there was no genuine issue for trial that Symtech had failed to provide timely notice of its prolongation claim.

Sub Issue 4: The Court determined that there was no genuine issue requiring trial. Here, the Court similarly rejected the argument that Siemens had waived the notice requirement.

Waiver, as the Court explained, will be found only where the evidence demonstrates that the party waiving had (i) a full knowledge of the right or of the other party’s deficient performance of an obligation, and (ii) an unequivocal and conscious intention to abandon the right to rely on it.  The intention to relinquish the right must be communicated; communication can be formal or informal, and it may be inferred from conduct.[11]

In this case, Siemens had expressed challenged Symtech’s January 17, 2019 letter on the basis of a lack of prior, timely notice. Similarly, the fact that Siemens had advanced a claim to B&M on behalf of itself and Symtech for compensation (including Symtech’s prolongation claim) was not sufficient to prove waiver of the notice requirement; in that regard, agreeing to assist Symtech in recovering against B&M was not the same as acknowledging the timeliness of Symtech’s claim.

Finally, the Court concluded that the fact Siemens did not reply to Symtech’s claim within the time required by the Symtech Subcontract was not proof of waiver. To the contrary, the Court observed that this argument essentially amounted to the proposition that failing to expressly deny a claim somehow validates it. This proposition had no supporting case law, and commercially unreasonable insofar as it would substantially weaken (if not vitiate) the express requirement for timely notice.

Accordingly, the Court concluded that there was no genuine issue for trial and on the basis of the record before it, concluded that Siemens had not waived the notice requirement.

Issue 2: Is there a viable claim against Siemens if it did not cause Symtech’s delay?

Siemens acknowledged that Symtech worked on a portion of its scope of work, and that Symtech was on-site before Siemens. However, Siemens argued that it was not responsible for the delays alleged by Symtech and as such, there could be no triable issue that Siemens was liable for the prolongation claim.

The Court was not convinced of Siemens’ argument on this issue, but declined to address the argument given its finding on Issue 1.[12]

Issues 3-4:  Is there a genuine issue for trial on Symtech’s prolongation claim quantification?

Siemens challenged the prolongation claim on the basis that (i) it failed to connect the losses and damages to any specific events of delay, and (ii) it was based on a global claim for costs incurred by Symtech divorced from the fixed price nature of the Symtech Subcontract relationship.  The Court found that these were both essentially challenges to the methodology behind Symtech’s claim quantification.

However, similar to issue 2, the Court did not address these arguments given its findings on Issue 1 regarding notice.

Issue 5:    Is there a genuine issue requiring a trial on whether Siemens breached the Symtech Subcontract and the quantum of unpaid amounts owing under the Symtech Subcontract ?

Symtech claimed that Siemens breached the Symtech Subcontract by not managing the project effectively, and by not paying the holdback that Symtech believed it was owed. However, Siemens claimed that there was no evidence of such breaches. The Court found that the core issue revolved around Siemens’ responsibility to supervise Symtech’s work, and whether Siemens was in breach for non-payment of the holdback.

Further, Symtech referenced specific clauses in the Symtech Subcontract which mandated that Siemens supervise and manage the project. They provided evidence through emails and testimonies that Siemens was aware of project issues but failed to address them. Siemens disagreed, emphasizing Symtech’s status as an independent contractor, thus bearing the responsibility to supervise its own work.

On this issue, the Court found a lack of clarity on the supervisory obligations and the unpaid amount under the Symtech Subcontract, both being genuine issues necessitating a trial.

Issue 6: Is partial summary judgment appropriate?

In view of all the foregoing (i.e., a mix of issues and sub-issues where some were and were are not appropriate for summary judgment), the Court granted partial summary judgment. In this regard, genuine issues requiring a trial were found to exist, especially concerning Siemens’ purported breach of contract and the quantification of Symtech’s claims; however, the Court found no merit to Symtech’s prolongation claim, finding that Symtech failed to provide timely notice.

As such, the Court dismissed the prolongation claim and directed the remaining issues to proceed to trial.[13]

Commentary

Given that Symtech essentially ran the gamut of notice arguments typically advanced by a claiming party in circumstances. where their contracting party resists on the basis of a notice defence, Symtech therefore offers a comprehensive articulation of many of the relevant principles that apply in such a scenario.

First and most obviously, this case emphasizes the importance of adhering diligently to notice requirements and otherwise ensuring timely and comprehensive communication. Proper communication (including by following information requirements of contractual notices, aside from timing) ensures that all parties are aligned and aware of potential or actual claims, reducing the potential for unexpected legal challenges.

Second, Symtech reaffirms the importance of providing timely notice in the proper form and substance. The Court notably rejected Symtech’s argument that its notice(s) of change-related claims were sufficient notice of its delay claim, which conclusion makes good sense insofar as these types of claims are fundamentally different in nature. Similarly, a general contractor giving notice to an owner on behalf of itself and its subcontractors does not satisfy the subcontractor’s notice obligation; that onus rests with subcontractor, and cannot be satisfied by another party (unless, presumably, the applicable subcontract suggests otherwise). Again, the best practice is the most obvious – provide timely, clear notice that is formally and substantively rigorous.

Third, and although again not a novel proposition, the threshold remains high for demonstrating waiver of a party’s right to rely on a notice provision. It is common in the construction industry for a contractor to pass through a subcontractor’s claim even in circumstances where the contractor is relying on a notice defence against the subcontractor; this makes good sense insofar as the notice defence applies as between the contractor and subcontractor, not the contractor and the owner. Accordingly, and although it would presumably not be impossible to prove waiver in such circumstances, it remains a steep hill to climb absent very clear facts.

Fourth and finally, in the post-Hyrniak era, parties involved in construction disputes seeking summary judgment need to be particularly attentive to several principles under the Rules as it relates to the admissibility of evidence. Use of an affidavit from a lawyer on a summary judgment motion may be permissible, but parties will wish to be careful of the evidence it presents lest a court draw an adverse inference from a failure to provide the evidence of any person having personal knowledge of contested facts. Similarly, the Court’s affirmation that a party can use its own discovery evidence on a motion, assuming the deponent is available for cross-examination, is a welcome clarification for parties in determining who should be their affiant on a motion.

Importantly, if you are a contractor working in Ontario, consider seeking legal advice early in respect of claims and notice requirements. Some notice requirements are incredibly tight (e.g., within 24-48 hours) and need to be taken seriously. Waiting for a claim to “crystalize” may prejudice you in future efforts to collect. Similarly, despite best intentions not to “rock the boat”, it may be the case that your claim is invalid if you do not provide owners with clear update information on claims and potential claims – which is a key reason for the notice provisions themselves. Every party to a construction project should work collaboratively through claim processes and processing to ensure that claims are properly presented, and that opportunities to mitigate such claims are available early and often.

For owners, encouraging open dialogue of claims and working with contractors on notices may prevent end-of-project claims from arising, and thereby mitigate against significant litigation risk. There are plenty of opportunities to work with contractors early to ensure that mitigation opportunities are available and appropriate resources can be engaged earlier. That said, owners should also engage legal services early and often to ensure that any communications are fair, reasonable and in accordance with the contract and the law. In particulars, owners need to be cautious in promoting any extra-contractual claims processes that may, for example, waive existing notice requirements which may have been carefully negotiated for good reason.

Notice of claims remains a tricky part of construction projects. All parties should therefore take care to ensure that they are aware of specific contractual requirements and understand the manner in which the courts treat these requirements, such as how the court in Symtech has done here in Ontario.

As a final reminder, notice requirements differ depending on the contract in question, and their treatment differs in various jurisdictions (i.e., by province and certainly internationally). Feel free to reach out to the authors if you have any questions about the notice provisions in your contract.

[1]  2023 ONSC 5795

[2] Ibid at paras 1-3.

[3] Ibid at paras 4-6.

[4] Ibid at paras 129-132.

[5] Ibid at paras 6-7.

[6] Ibid at para 11.

[7] Ibid at para 26.

[8] Ibid at para 28.

[9] Ibid at paras 45-46.

[10] Ibid at paras 47 and 78.

[11] Ibid at para 87.

[12] Ibid at paras 104-109.

[13] Ibid at paras 125-128.

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