BCCA Cautions That Delay Claims Must Be Managed In Real Time

A recent decision of the BC Court of Appeal provides important guidance on the narrow scope of appeals from arbitral awards and practical lessons for construction delay claims. In CIMIC Morningstar Investments Ltd. v. Chandos Construction Ltd., 2026 BCCA 2, the Court of Appeal dismissed CIMIC’s application for leave to appeal an arbitral award arising from a construction delay dispute. Although the Court did not decide the merits of the underlying delay claims, its reasons highlight recurring issues concerning contractual notice, change orders, estoppel, extension of time mechanisms, and the prevention principle.

Background

The applicant CIMIC Morningstar Investments Ltd. (“CIMIC”) engaged Chandos Construction Ltd. (“Chandos”) as the general contractor for the construction of a four-storey building (the “Project”) in White Rock, done in two phases. The parties entered a CCDC-2 stipulated price contract (the “Contract”). Chandos was to take over the project for phase 2 in October 2020, with an anticipated substantial completion date at the end of May 2022.

This arrangement between CIMIC and Chandos ultimately fell apart, as delays in the completion of the project began to build up. Each party blamed the other for the delays. CIMIC blamed Chandos for poor execution of its responsibilities under the Contract, and Chandos blamed CIMIC for design-related issues, including deficient and ever-changing design plans for the Project. Chandos terminated the Contract on July 21, 2023. Each claimed significant damages against each other.

The parties engaged an arbitrator, who undertook to determine, the cause of the delay, whether CIMIC was entitled to withhold payment for delay damages, and whether Chandos was entitled to terminate the Agreement in July 2023. The arbitrator largely accepted Chandos’ position. She found that Chandos complied with the contractual notice requirements regarding the delays and found CIMIC liable for delay and financing costs. The arbitrator also found that CIMIC was estopped from strictly relying on the “zero day” entries in the change orders to defeat Chandos’ delay claim, and rejected CIMIC’s reliance on the liquidated damages clause. In the final award, Chandos was awarded approximately $6.47 million in damages, plus approximately $1.62 million in costs and $1.01 million in interest.

The Appeal

CIMIC sought leave to appeal on four proposed grounds under the Arbitration Act, SBC 2020, c 2 (the “Act”). Under s. 59 of the Act, appeals are permitted only on questions of law, and only with leave (unless the parties’ consent). Leave may be granted where the importance of the result justifies intervention and the determination of the legal point may prevent a miscarriage of justice, or where the point of law is of broader importance.

The Court confirmed that three independent requirements must be met to obtain leave to appeal an arbitrator’s decision. As stated in MSI Methylation Sciences Inc. v. Quark Venture Inc., 2019 BCCA 448, these three requirements are:

1. the appeal must be based on one or more questions of law;
2. the justice must be satisfied that one of the circumstances identified in s. 59(4)(a) through (c) of the Act are present; and
3. the justice must be prepared to exercise the residual discretion implicit in the phrase “may grant leave” as set out in s. 59(4).

CIMIC’s Proposed Grounds for Appeal

CIMIC advanced four proposed grounds of appeal that it characterized as questions of law. In each instance, the Court rejected CIMIC’s attempt to recharacterize factual or mixed findings as extricable errors of law.

Ground 1: Interpretation of Notice Requirements

First, CIMIC argued that the arbitrator erred in law in her interpretation of the contractual notice requirements under s. 6.5.4 of the Contract. The arbitrator reviewed the law on sufficiency of notice and applied what she described as a purposive approach, asking whether a party had sufficient information to understand that there was a delay or that a claim would be made. She found that Chandos provided written notice once critical path delay became apparent.

CIMIC took the position that strict compliance with the notice provisions was a condition precedent to Chandos’ delay claims. Chandos argued that it did not issue notice until it used up the “float” and a “critical path” delay was evident. In seeking leave, CIMIC characterized the arbitrator’s treatment of the notice requirement as an extricable error of law.

The Court held that the arbitrator expressly considered the notice requirement under clause 6.5.4 of the Contract and appreciated that written notice was a condition precedent to Chandos’ delay claim. In substance, CIMIC was challenging the arbitrator’s determination that Chandos had complied with that requirement. The Court held that this was, at best, a question of mixed fact and law and did not raise an appealable question of law under s. 59 of the Act.

Ground 2: Application of the Doctrine of Promissory Estoppel

CIMIC argued that the arbitrator made an extricable error in law in her application of the doctrine of promissory estoppel. The arbitrator had found that, of the 134 change orders, 121 stated that the contract time did not increase, and 13 indicated that the time was “to be determined”. The arbitrator concluded that CIMIC gave assurance to Chandos that a global delay claim could be made later and was thus estopped from strictly relying on the “zero day” entries in the change orders.

CIMIC pointed to clauses 6.2.1 and 6.2.2 of the Contract, which sets out a mechanism for adjusting the contract price and contract time. Chandos, at the arbitration, presented evidence that it was told by CIMIC’s consultant and representatives not to claim specific time extensions, and instead advance a global delay claim later. CIMIC denied these allegations and argued in seeking leave that the arbitrator erred in holding that promissory estoppel applied because she did not consider whether it made a “clear and unequivocal” or “unambiguous” assurance.

The Court held that the arbitrator was not required to use the phrase “clear and unequivocal” in her reasons. She had considered the governing test for promissory estoppel, and CIMIC’s complaint was really about how that test was applied to the facts. The Court therefore held that the proposed ground was a question of mixed fact and law, not an appealable question of law.

Ground 3: Consideration of the Prevention Principle

CIMIC argued that the arbitrator erred in concluding that CIMIC was not entitled to withhold payment under the liquidated damages clause by relying on the “prevention principle”. The arbitrator concluded that CIMIC was the cause of the delay that prevented Chandos from completing on time. Relying on the prevention principle, the arbitrator held that where a fixed completion date is lost due to interference from the owner, the owner cannot then attempt to enforce liquidated damages for delay. The arbitrator noted that CIMIC’s own expert found that CIMIC caused at least 49 days of delay. CIMIC argued that the Contract’s extension provisions required Chandos to claim extensions and provide timely notice of delay.

The Court held that the arbitrator’s application of the prevention principle depended heavily on four factual or mixed findings: (i) CIMIC was responsible for significant portions of the delay; (ii) Chandos satisfied the notice requirements necessary to engage the Contract’s extension provisions; (iii) Chandos was entitled to a significant extension of time; and (iv) CIMIC refused to grant that extension. Importantly, the Court stated that merely including an extension of time clause does not bar application of the prevention principle. Whether the principle is displaced depends on the interpretation and application of the particular extension mechanism and the parties’ conduct. For example, it may be ousted where the contractor fails to satisfy applicable notice requirements or where the owner properly grants an extension that removes owner caused delay from the equation.

Ground 4: Misinterpretation of Material Evidence

In its final proposed ground, CIMIC argued that the arbitrator misapprehended material evidence concerning 114 days of delay in the first scheduling window. CIMIC maintained that mechanical and electrical rough-ins had not been included in Chandos’ baseline schedule. The arbitrator rejected that position, noting the lack of documentary support, finding CIMIC’s expert evidence equivocal, and accepting Chandos’ senior project manager’s evidence that the rough-ins were included within the “interior finishes” activity.

The Court held that this proposed ground of appeal did not raise a question of law. Instead, it was in substance a challenge to the arbitrator’s weighing of the evidence.

Takeaways

This decision illustrates how delay disputes are often decided long before the hearing begins. The contemporaneous management of notice, documentation, change orders, and communications may determine the outcome years later.

The treatment of the “zero day” change orders is instructive, but highly fact specific. A change order recording no time extension will not necessarily determine entitlement to a later delay claim where the contemporaneous record establishes that the parties agreed or understood that delay would be addressed through a separate process. Clear and consistent documentation of how time impacts are being handled is therefore critical.

The prevention principle analysis is similarly significant. An extension of time clause does not, by itself, preserve an owner’s right to liquidated damages in the face of owner-caused delay. The result will depend on the wording of the clause, whether the contractor complied with the applicable notice and extension procedures, whether an extension was granted when warranted, and the parties’ conduct.

Cases like this highlight the importance of managing delay as it unfolds, rather than attempting to reconstruct it after the fact. Timely and documented compliance with contractual notice requirements, disciplined recordkeeping, and clear, consistent communication about changes, time impacts, and extension requests are essential. By the time an arbitration award is rendered or leave to appeal is sought, the evidentiary record is largely set.

Our group has extensive experience dealing with delay claims and interpretation of CCDC contracts. If you have any questions or concerns regarding delay claims or CCDC contracts, or any other construction-related legal matters, please contact our Construction group for assistance.