In the Canadian Construction industry, we often refer to the
American litigation experience to identify potential project risks
which merit attention in contract drafting and project
administration. With the recent trend in Canada towards the
development of green projects, we continue to monitor how the
courts are dealing with the unique risks of green building
A recent U.S. court case is of some interest, not because it
identifies new risks, but since it highlights how the courts may
approach green projects generally.
In Destiny USA v. Citigroup,1 a New York
appellate court upheld a lower court decision which found that the
green elements of a project made it so unique that the developer of
the project would incur irreparable harm if the project's
lender was not ordered by the court to continue funding the
The project was touted to be a "groundbreaking new
financing paradigm for green economic development." It was a
massive 850,000‐squarefoot development located in
Syracuse, New York, that included retail and entertainment space, a
hotel and a scientific research facility. The extensive
incorporation of state‐of‐the‐art
green technologies attracted tax breaks and other incentives from
federal, state and municipal governments. The project even utilized
"green" financing through the use of the newly created
Federal Green Bonds to partially finance the project.
The project moved forward, apparently without significant
problem, until it was about 90% complete. At that point, and during
the midst of the depths of the market turmoil in early 2009, the
lender stopped funding the project, alleging that the developer was
in default for unresolved deficiencies. The developer sued the
lender and sought an injunction to force the lender to continue to
advance funds in order to complete the project.
The Court Decision
In granting the injunction, the court held that due to the
unique nature of the project, the developer would suffer
irreparable harm if the lender was not required to advance further
funds. The court specifically cited the utilization of
cutting‐edge green technology and green financing
mechanisms which made the project very unique. Due to this
uniqueness, in the view of the court, the value of the project was
While the legal context of the decision is somewhat unusual,
Destiny USA demonstrates that courts may consider
"green" elements of construction projects when
considering remedies and damages. We are not aware of any instances
of Canadian courts yet considering "green" building
issues in a similar manner; however, it is only a matter of time
before Canadian courts are forced to grapple with these issues. All
parties in the Canadian construction industry should continue to
consider the risks associated with green building projects, and how
those risks may best be allocated and mitigated in the current
uncertain legal environment.
1 Destiny USA Holdings, LLC v. Citigroup Global Markets
Realty Corp., 2009 WL 3790441 (N.Y.A.D. 4 Dept.). A copy of
the decision can be found athttp://www.nycourts.gov/ad4/
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.
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